This PPT slide, part of the 106-slide Corporate Performance Measurement PowerPoint presentation, presents a framework for corporate performance measurement through the lens of Economic Profit (EP). It emphasizes how evaluating managers based on EP can drive their focus toward value-creating projects. The graphical representation illustrates a two-dimensional plot with Net Present Value (NPV) on the vertical axis and Return on Equity (ROE) on the horizontal axis.

The key takeaway is the delineation of project decisions based on the EP metric. Projects yielding an EP less than zero are advised against, while those with a positive EP should be pursued. This creates a clear decision-making pathway for managers, aligning their incentives with the organization's goal of maximizing value. The note at the bottom suggests that some projects might initially exhibit negative EP, but can generate significant positive EP in later years, indicating a need for a longer-term perspective in project evaluation.

The slide also hints at the behavioral implications of this evaluation method. By linking manager assessments to EP, organizations can influence managerial behavior to prioritize projects that meet or exceed a certain NPV threshold. This strategic alignment ensures that resources are allocated efficiently, focusing on initiatives that promise sustainable financial returns.

Overall, the slide encapsulates a structured approach to performance measurement, advocating for a shift in managerial focus toward projects that not only meet immediate financial metrics, but also contribute to long-term organizational success. This framework could be a valuable tool for organizations looking to refine their project selection processes and enhance overall performance.

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Performance Management Shareholder Value Performance Measurement