How to Move Up in the Rankings
In publishing this list, Chief Executive aims to show CEOs both where they stand with respect to their peers (awareness being the mother of improvement) and to make clear how to go about improving one’s standing. Improving will require several actions that the company’s CEO, division heads and general managers can take:
At the corporate level:
- Use EM to measure wealth creation throughout the company.
- Manage your portfolio of businesses from a wealth-creation perspective. This includes opportunity sensing—entering lucrative or fast-growing businesses, as well as putting businesses making sub-par contributions into other hands or shuttering them.
- Set the contribution hurdle rate to maximize economic-value creation.
- Ensure that the company’s capital structure is right. This affects the capital charge and invested capital. Equity is more expensive than debt, but too much debt can kill a company.
- Avoid overpaying for acquisitions or buying back stock at its peaks.
At the business unit level:
- The general managers of businesses need to find the best things they can do to boost operating results.
At all levels:
- Put together a prosperity design for your company. How, exactly, will you achieve uncommon success? How will you improve: customers’ feelings about your company and its offerings, your value propositions, the promises your brands represent, etc.? How will you get all you can out of your assets, include your intangible assets? (For more, see, “The Economic Stimulus Package Inside Every Business,” Chief Executive, Jan./Feb. 2009 online.)
- Manage internal and external risks across the company and its aggregate risk-reward profile by taking a wide-angle lens to what could happen.
For more on how to move up in the rankings, please contact the authors.
Drew Morris ([email protected]) is the founder and CEO of Great Numbers! The company helps executives find the various dimensions of the upside in their businesses and mold it into a prosperity design—a blueprint for delivering that upside. He has no stake in any of the companies mentioned.
Michael Burdi is senior analyst at The Applied Finance Group. AFG is a Chicago-based independent equity-research advisory firm specializing in performance and valuation measurement using Economic Margin.
Acknowledgement: We thank Spencer Stuart for their helpful information on CEO tenure.
Disclaimer: AFG, its owners, employees and/or customers may have positions in the securities listed in this article. The information provided is based on material AFG believes to be accurate and reliable. However, its accuracy and completeness and conclusions derived there from, are not guaranteed.