Strategic Decisions for Cascading RTSR Aspirations PPT
This PPT slide, part of the 101-slide Complete Guide to Value Creation PowerPoint presentation, outlines 2 critical decisions that leadership must make after establishing a Return to Shareholders (RTSR) aspiration. The first decision involves whether to de-average the overall RTSR target, allowing for a more nuanced approach that considers the near-term potential of individual business units or product lines. For example, if the overall RTSR target is set at 16%, leaders must decide if a struggling unit should have a lower target, such as 12%, while a unit with a new product could have a higher target of 20%. This decision hinges on the organization's cultural norms and management philosophy. It's noted that many firms typically opt for a uniform target across all units.
The second decision focuses on how to measure each unit's or product line's contribution to the RTSR goal. A recommended approach is to use the Total Business Return (TBR) measure, which quantifies the capital gain and dividend yield contributions in a straightforward manner. This measure simplifies the calculation by leveraging Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) as the primary driver of capital gains.
Understanding these decisions is crucial for leaders aiming to align their organizational strategy with financial performance. The choices made here can significantly impact how effectively the company can pursue its RTSR aspirations while ensuring that each unit is held accountable based on its unique circumstances. This slide serves as a guide for executives to navigate these strategic considerations effectively.
This slide is part of the Complete Guide to Value Creation PowerPoint presentation.
This presentation is created by former McKinsey, BCG, Deloitte, EY, and Capgemini consultants. It covers multiple Value Creation frameworks utilized by global strategy consulting firms.
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