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

• Author: Ferling, Rhona L.
• Position: Economic value-added, customer value-added - From FEI

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...