Orkla to implement the EVA®-based management system

Orkla has decided to introduce the EVA framework as a new business management system in the Group. The aim is to further ensure that all parts of the organisation focus on improved value creation for Orkla’s shareholders.

The consulting firm Stern Stewart & Co., which developed the EVA concept and has implemented it in a number of internationally well-known companies, has been employed to assist the Group in this process, which will continue throughout the year 2000. The EVA system will strengthen the organisation’s orientation towards shareholder value through the further development of traditional management systems based on key figures such as operating profit, operating margin, return on capital employed and earnings per share. At the same time it will enable all operating managers to make better decisions that focus on value creation.

EVA measures the creation of value during a given period of time at various levels of the organisation. At the same time the EVA model is designed to motivate the entire organisation, not just senior management, to make decisions that promote greater shareholder value. Consequently, the framework also includes an incentive and compensation system based on value creation. Orkla will therefore adapt and further develop its present management incentive systems to bring them in line with the EVA concept. It is Orkla’s intention that a wider group of managers will eventually be rewarded directly on the basis of their contribution to EVA improvements and thereby to greater shareholder value.

EVA® is a registered trademark of Stern Stewart & Co