Measuring performance is all about determining how well organizations are

managed and the value they deliver to customers and stakeholders.

Organizations use performance measure as a progress indicator to determine
whether or not they are making progress towards their goals and objectives.
Performance measurements should be evaluated based on their
characteristics that make them a good indicator of congruence with goals. A
good performance measurement system will align the goals of management
with the goals of the corporation and ensure success for both parties.
Economic value added (EVA) shows how successful a company is based on
the return on invested capital compared to the cost of capital. It is a measure
of its financial success. An EVA that is positive indicates a company is
creating value for its shareholders, while an EVA that is negative indicates
that it does not generate returns above its cost of capital. If a company wants
to improve its EVA, it can either increase revenue by raising its prices for its
goods or services, or it can sell more goods. Additionally, the company's EVA
can be increased by improving efficiency and reach economies of scale in
order to reduce capital costs. Since EVA considers the cost of capital and,
therefore, the riskiness of a firm's operations, it is used as a better alternative
to accounting profits as a measure of value creation. The use of EVA in
performance evaluation brought about a fresh approach as to how
management should think. When evaluating EVA, actual figures are
compared to target figures and deviations are examined in order to determine
the reason for the deviation and to take appropriate corrective measures if
necessary. In this regard, Economic Value Added is considered to be a
superior management tool for assessing managerial performance.