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Quality in 3D: EVA, CVA, and employees.

What's the best corporate triple play for the 1990s? For Robert M. Kavner, group executive of communication products at AT&T, it's economic value-added, customer value-added and employee satisfaction, the stars of the quality agenda driving his corporation in the 1990s. Kavner told a group of FEI members that this program will enable AT&T's individual business units to maintain their autonomy but retain the "well-defined strings that bind us together."

AT&T began quantifying economic value-added, an increasingly popular measurement of shareholder value, in 1992, making it possible not only "to measure the business unit, but for the business unit to use that measure," Kavner explains. However, EVA's significance stretches beyond profitability measurements, he notes, adding, "We are using it to measure our next decision." For instance, a unit trying to sell a switching system in the Philippines must evaluate the project for its EVA, he says.

Interest in EVA has filtered down to every area of AT&T. Not only has the financial organization adopted EVA as a measurement technique, Kavner says, but "our product management, our development people, our market management and our sales people are highly EVA-focused."

He predicts the focus on shareholder value will mean a big change in the way AT&T makes decisions. As a result, ideas that management would have considered feasible in the past may not measure up to new EVA criteria. Moreover, all AT&T business units with negative economic value-added have been told to improve their measurement by 1994, Kavner disclosed, or face the prospect of new management. But AT&T is not simply revamping current operations. When acquiring new businesses, management seeks companies with a long history of positive EVA.

The company is going one step further with the addition of customer value-added, Kavner reports. CVA reflects a customer's belief that an AT&T product is worth its price. To accurately gauge customer attitudes, "We have put in a fairly rigorous measurement mechanism," he says, explaining that each of AT&T's businesses devotes a great deal of time to thoroughly surveying customers and analyzing the results. Overall, the units have shown mixed results, he observes, attributing the poorer performances to a lack of impetus and vision in some of the units' corporate cultures.

Employee satisfaction is the third performance facet, according to Kavner. In redefining the financial organization, AT&T's management is working with employees to better understand how financial decisions affect the customer, and ultimately how these changes affect the employee.

EVA, CVA and employee satisfaction measures are tailored to each unit's products and operations. For instance, Kavner explains, "If you were a branch manager in Hartford and were providing communication product solutions to the customer, you would have your set of financial measures for Hartford, as well as your customer satisfaction and associate |employee~ satisfaction measures." However, that doesn't mean each unit operates in a vacuum. "It's not a free-for-all .... We have told everyone what percentage of increase we want in these measures year after year," he emphasizes. To support the shift in corporate values, the company has instituted an incentive-compensation program, because "putting in a measurement system without changing the culture .... doesn't work," Kavner points out.

In 1990, AT&T decided to use the Baldrige Award criteria as its benchmark for the goal of "full quality deployment." To highlight its efforts, it implemented a recognition program called the Chairman's Award within each business unit. The company won two Baldrige Awards in 1992, two years ahead of its 1994 target date. It also set a corporate goal of wining one for the entire company, something that has never been done.

Today, AT&T is focusing on "creating our future and redoing our company and our executive committee," Kavner says. He adds that the committee members, because of their diverse backgrounds and experiences, "recognize that today's successes will be tomorrow's failures," a perspective crucial to AT&T's three-pronged quality program.
COPYRIGHT 1993 Financial Executives International
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Copyright 1993, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
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Title Annotation:From FEI; economic value-added, customer value-added
Author:Ferling, Rhona L.
Publication:Financial Executive
Date:Jul 1, 1993
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