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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
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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
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3 - Team Initials/Presenter - 041001 2001 Massachusetts Institute of Technology
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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4 - Team Initials/Presenter - 041001 2001 Massachusetts Institute of Technology
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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5 - Team Initials/Presenter - 041001 2001 Massachusetts Institute of Technology
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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6 - Team Initials/Presenter - 041001 2001 Massachusetts Institute of Technology
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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7 - Team Initials/Presenter - 041001 2001 Massachusetts Institute of Technology
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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8 - Team Initials/Presenter - 041001 2001 Massachusetts Institute of Technology
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:
Relationship with Corporation
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
Major Factors Contributing to Customer Value:
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
Major Factors Contributing to Customer Value:
Product/Service Quality
Relationship with Corporation
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:
Relationship with Corporation
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
Major Factors Contributing to Customer Value:
Financial
Sustainability
StakeholdersPublic
Political /
Public
Financial
Stakeholders
Sustainability
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