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The Balanced Scorecard & EVA

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One of the strengths of the Balanced Scorecard is its ability to work well in conjunction with existing management processes. Economic Value Added (EVA) is a composite measure of financial performance. EVA measures the difference between the return on a company’s capital and the cost of that capital.  A positive EVA indicates that the company’s activities have generated ‘shareholder value’ over the period of measurement.

EVA has advantages over other measures of financial performance but has limitations as a measure to promote strategic alignment or drive strategy implementation. Nonetheless, we suggest that a hybrid tool combining EVA with the Balanced Scorecard would by comparison be a powerful basis for encouraging organisational change and performance improvement.