Do We Need A Revolution In Management?

By Steve Denning – “Over and over, the higher value placed on ROA, IRR and earnings per share over other metrics has led to innovations that squeeze costs and noncash assets.

“As a result, investing to create growth and jobs is a third-best option, behind efficiency innovations (first) and doing nothing (second).”

The calculation of the IRR and the ROA based on a narrow view of costs and benefits assumes that the firm’s ongoing business will continue as is, ad infinitum and that these other costs are insignificant. The narrowly-defined IRR thus misses the costs and benefits of the actions that it is now taking that will systematically destroy the future flow of benefits. The use of IRR with the full costs and benefits included would reveal the true economic disaster that is unfolding. more>


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