The last question asks whether Duckworth Industries adopt the proposed EVA system and to explain reasons why. The EVA system is another way of determining the status of the company. Like any other systems, it has its positives and negatives. Since the system ties compensation to company performance, the only way the system can be optimized is if it is shared equally by all members and is based on total system performance. A system based on total performance seems to only have a shelf live about three years until it needs readjusting (EVA System 2002). It seems that the EVA system takes the motivation out of work because the system naturally assumes that people are not self-motivated to do adequate work but must be motivated using incentives. In addition, continual use of external motivators dampens the internal motivation and eventually, the company will have to resort to higher incentives just to maintain same level of performance.
Despite the obvious drawbacks of the EVA systems, we as a group feel that the advantages far outweigh problems that may arise during the implementing and maintaining of the EVA system. Since Duckworth's acquisition of companies in the service industries, the companies have produced inadequate performance levels. Therefore, a major transformation needs to take place to avoid future loss of market share and what better way to achieve success than by emulating the methods of other companies that were in similar situation as Duckworth? Companies such as Coca Cola, the US Postal System, and Ellie Lilly have been searching for just the right performance measure to drive compensation and motivate behavior that boosts the stock. By using the EVA system, they determined whether their business was earning more than its true cost of capital and it gave the companies a clearer idea of whether they were creating or destroying shareholder wealth. Coca Cola underwent an enormous change with the arrival of their CEO, Mr. Goizueta, an enthusiastic supporter of the EVA system in 1987 (Coca Cola 2003). Since then, his company has become #1 America Big Companies with $61 billion in MVA (the measure of how efficiently the chief executive is to use capital entrusted to him).
