stakeholder value metrics

8/3/2019 Stakeholder Value Metrics

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STAKEHOLDER VALUE METRICS

Module to Support Team Assignment

in Course 16.852J/ESD.61.J Fall 2002

Integrating the Lean Enterprise

August 2002

Prepared by:Joe Mize

Cory Hallam

Deborah Nightingale 2002 Massachusetts Institute of Technology 1


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STAKEHOLDER VALUE METRICS

Joe Mize, MIT

Cory Hallam, MIT

Most of the published literature pertaining to lean manufacturing, or more

broadly, to lean thinking, places great emphasis on customer value (e.g., Womack and

Jones, 1996). Focusing on delivering value to customers is very important in the leanparadigm. However, there are other stakeholders that are also very important to business

enterprises. In managing such enterprises, managers must continuously strive to strike abalance between the competing priorities of all its stakeholders. In the book The Value

Enterprise (Donovan, Tully and Wortman, 1998), an Enterprise Value Scoreboard is

proposed which attempts to guide an organization to decisions which achieve anoptimal balance among three stakeholders: customers, shareholders, and employees.

The purpose of this approach is to balance tradeoffs company-wide, such that cross-

organizational impacts are considered.

This paper expands the list of stakeholders to include the following:

Customer/End Users

Suppliers/Partners

Shareholders

Employees

Union (if any)

Society

In the taxonomy of Stakeholder Value Metrics shown in Attachment A, an all-encompassing chart represents Corporate Value.

For each of the stakeholders, the major factors contributing to long-termstakeholder satisfaction (value) were determined. Several metrics, or performance

factors, were identified for each factor.

This taxonomy (Attachment A) is intended to be generic and not specific to a

particular industry or type of product. It can and should be modified to fit a particular

situation.

A methodology for analyzing how an organization is performing relative to thevalues desired by all stakeholders is presented in Attachment B. A set of Value

Comparison templates is presented for this purpose. The vertical axis of each templatemaps Current Performance and the horizontal axis maps Relative Importance. A

generic template is shown on the following page.



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High

Current

Performance

LowLow High

Relative Importance

Stakeholder: ____________



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A Value Comparison Chart is created for each stakeholder. The major factors

contributing to that stakeholders value are listed at the top. Each factor is to be placedwithin the chart depending on an assessment of 1) the relative importance of that factor

and 2) the enterprises current performance on that factor.

Attachment B contains two sets of charts. The first are the blank templates for theseveral stakeholders. The second are completed templates for a hypothetical situation, to

serve as an example. Again, for a particular company, the major factors may be

customized to fit that situation.



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ATTACHMENT A

TAXONOMY OF STAKEHOLDER VALUE METRICS



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2 - Team Initials/Presenter - 041001 2001 Massachusetts Institute of Technology

LeanAerospace

InitiativeCustom

Function to Requirements

ReliabilityAvailability Product Performance Product /

Defects Service

Failure Rate, MTBF Quality

Responsiveness

Early Involvement

Quality of Support

Open Communications Relationship

Trust with

Risk Sharing Corporation

Benefit SharingViability of Enterprise

Product Development Cost

Acquisition Cost

Operating Cost Cost of

Support Cost Ownership

Retirement Cost

Retention of Resale Value

Order Lead Time

Product Development Time

Maintenance/Repair/Overhaul Time Cycle

On-Time Delivery Time

Just in Time Capability

** Includes Acquisition Community, End User, and System Bene

Deborah Nightingale 2002 Massachusetts Institute of Technology


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LeanAerospace

Initiative

Supp

Training/Assistance with Process Improvement

Market Information Supplier Certification Relationship

Demand Information Early Involvement (design, development, production) with

Design Information Information Sharing Corporation

Production Information Technology Sharing

Product/Process Improvement Viability of EnterpriseLong Term Relationship

Corporation's Market Reputation

Fair Pricing

Risk Sharing

Equitable Benefit Sharing Financial

On-Time Accounts Receivable

Growth in Market Share



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LeanAerospace

Initiative ShareholdEarnings/Share

Financial Ratios

Corporate Profit Return

Share Price

Bond Interest Rate

Corporate Debt

Corporate Equity Risk

Bond Rating

Share Rating

Barriers to Entry

Market Share Market

Competitors Position

Substitutes

Branding

R&D Investment Growth SHAREHOLDERNew Product Successes Potential SATISFACTION

Track Record

Vision Expression Executive

Respect (internal and external) Leadership

Perception of Ability to Perform

Information Availability

Goodwill External

Reputation Relations

Regulatory Compliance



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LeanAerospace

Initiative Employe

Salary

Benefits Compensation

Individual Bonus

Team

Skills are valued

Lost Time Incident Rate Safety

Environment/OSHA Work

Ergonomics Environment

Employee Empowerment Good Management Relations

Timely Communications

Two-way Communications

"Cool" place to work

Job Security

Training Career

Potential for Career Advancement

Employability

Community Relations ExternalCompany Reputation/Personal Pride Factors

Quality of Life



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LeanAerospace

Initiative

Societa

Corporate Tax on Profits

Property Tax

Income Tax of Employees Tax Revenue Financial

Local Sales Tax Charitable Contributions

Suppliers

Supporting Commerce Secondary and Tertiary Industry Economic

Job Potential AttractivenessJob Security of Industry

Reduction of Emissions Voluntary Efforts

Waste Reduction Environmentally Friendly Practices Corporate

Quality of Work Environment Citizenship

Adherence to Regulations

Universities Affiliated

Professional Societies Organizations

Industry Associations



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LeanAerospace

Initiative

Unio

Headcount Protection

Position Protection Job Security

Compensation

Benefits

Safety Employment

Job Classifications

Seniority Rights

Sharing in Decision Making

Contribution to Long-term Corporate Success

Instill Sense of Pride in Workforce Influence

Strike Threat Capability

Encourage Involvement in Innovation

Union Teaming with Corporate Leadership

Political

Action

Committees



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LeanAerospace

InitiativeCorpora

Revenue

Expenses Profits

Growth in profitsOther financial ratios Financial

Cash flow

Stock rating Ability to raise capital

Bond rating

Market Share

Barriers to Entry

Competition Market Position

Substitutes

Branding

New Product Development Growth Potential Sustainability

New Market Development

Continuous Improvement

Knowledge Management

Contribution to Innovation

Productivity

Turnover

Cost (Salaries & Benefits) Employees CORPORATESafety SATISFACTIONSick/Absent days

Loyalty

Customer satisfaction

Loyalty Customers

Sales

Timely Accounts Receivable

High Quality Stakeholder

Low Cost Suppliers

Timely Delivery

Fewer Conflicts Unions

Infrastructure Support SocietyLong Term Partnership

Political/Public



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ATTACHMENT B

STAKEHOLDER VALUE COMPARISON CHARTS

Relative Importance

compared to

Current Performance



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High

Current

Performance

LowLow High

Relative Importance

Stakeholder: Customer

Major Factors Contributing to Customer Value:

Product/Service Quality

Relationship with Corporation

Cost of Ownership

Cycle Time



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High

Current

Performance

LowLow High

Relative Importance

Stakeholder: Supplier

Major Factors Contributing to Supplier Value:


Financial



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High

Current

Performance

LowLow High

Relative Importance

Stakeholder: Shareholder

Major Factors Contributing to Shareholder Value:Return

Risk

Market Position

Growth Potential

Executive Leadership

External Relations



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High

Current

Performance

LowLow High

Relative Importance

Stakeholder: Employee

Major Factors Contributing to Employee Value:Compensation

Work Environment

Career Advancement

External Factors



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High

Current

Performance

LowLow High

Relative Importance

Stakeholder: Society

Major Factors Contributing to Societal Value:Financial

Economic Attractiveness

of Industry

Corporate Citizenship



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High

Current

Performance

LowLow High

Relative Importance

Stakeholder: Union

Major Factors Contributing to Union Value:

Employment

Power



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High

Current

Performance

LowLow High

Relative Importance

Stakeholder: Corporate


Financial

Sustainability

StakeholdersPublic



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HYPOTHETICAL EXAMPLES

OF

STAKEHOLDER VALUE COMPARISON CHARTS



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High

Current

Performance

LowLow High

Relative Importance

Stakeholder: Customer


Product/Service Quality


Cost of Ownership

Cycle Time

Cost Of

Ownership

Product

/Service

Quality

Relationship

with Corp.

Cycle

Time



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High

Current

Performance

LowLow High

Relative Importance

Stakeholder: Supplier

Major Factors Contributing to Supplier Value:


Financial

Relationship

with Corp.

Financial



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High

Current

Performance

LowLow High

Relative Importance

Stakeholder: Shareholder

Major Factors Contributing to Shareholder Value:

Return

Risk

Market Position

Growth PotentialExecutive Leadership

External Relations

External

Relations Risk

Return

Executive

LeadershipMarket

Position

Growth

Potential



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High

Current

Performance

LowLow High

Relative Importance

Stakeholder: Employee

Major Factors Contributing to Employee Value:

Compensation

Work Environment

Career AdvancementExternal Factors

Career

Advancement

External

FactorsCompensation

Work

Environment



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High

Current

Performance

LowLow High

Relative Importance

Stakeholder: Society

Major Factors Contributing to Societal Value:

FinancialEconomic Attractiveness

of Industry

Corporate Citizenship

Corporate

Citizenship

Financial

Economic

Attractiveness



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High

Current

Performance

LowLow High

Relative Importance

Stakeholder: Union

Major Factors Contributing to Union Value:

EmploymentPower

Employment

Power



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High

Current

Performance

LowLow High

Relative Importance

Stakeholder: Corporate


Financial

Sustainability

StakeholdersPublic

Political /

Public

Financial

Stakeholders

Sustainability



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stakeholder value metrics

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