EVA and HR Decisions: A Need for Linking HR Decisions

Abstract

EVA is an innovative tool in contemporary environment to motivate human resources in an organization to increase productivity. EVA as an effective instrument may ensure better capacity utilization resulting in enhanced productivity .EVA may be used for financial incentive compensation that directly or indirectly links each and every employee to create additional shareholder value and managers work as owners. Proper motivation of human resource is a complex task. A number of incentive strategies are launched to motivate workforce to ensure better capacity utilization and productivity.EVA works as an effective tool for rendering compensation to all employees in an organization. Conventional incentive schemes or bonus systems largely depend on profitability and such benefits are highly sensitive and responsive to profitability fluctuations .Even Bonus may be Zero which may give a negative message. On the other hand EVA may be continuously rising, hence compensation- incentives may also increase accordingly. Thus, EVA is an emerging tool in India which may be used for compensation-incentives to reward all employees at all level of an organizational hierarchy. The paper formulates an EVA-HR Incentive model for better productivity and performance.