Strategic Cascading of RTSR Aspirations PPT

This PPT slide, part of the 28-slide Value Creation Framework Series: Primer PowerPoint presentation, outlines 2 critical decisions that leadership must make after establishing a Relative Total Shareholder Return (RTSR) aspiration. The first decision involves whether to de-average the overall RTSR target. This means assessing if different business units or product lines should have distinct targets based on their specific circumstances and potential. For example, if the overall RTSR target is set at 16%, a struggling unit might have a target of 12%, while a newly successful unit could be assigned a target of 20%. This decision is influenced by the company's cultural norms and management philosophy, indicating a need for alignment between strategic goals and operational realities.

The second decision focuses on determining the internal measures that will quantify each unit's contribution to the RTSR goal. A suggested approach is to utilize the Total Business Return (TBR) metric, which simplifies the evaluation by capturing both capital gains and dividend yields from each unit or product line. The TBR is calculated using growth in Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA), which serves as a key driver for assessing capital gains.

This framework emphasizes the importance of tailored targets and measurement systems that reflect the unique dynamics of different business segments. It encourages leaders to think critically about how to align aspirations with actionable metrics, ensuring that all parts of the organization are working towards a cohesive goal while recognizing their individual contributions.

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Shareholder Value Value Based Management Value Creation Dividend Yield Leadership