In this exclusive series, FTI Consulting experts interview industry executives to explore how innovative leaders are adopting new strategies to drive value creation.
Question: Over the course of your career, how have you seen the definition of “value creation” evolve? What does the uncertainty of the last two years mean for the future of value creation?
Rob: Organizations now take a more holistic approach to value creation. Often, in the past value creation was code for a playbook focused on cost reduction. Sustainable, long-term growth and prosperity come from taking a broader perspective to creating stakeholder value.
As things have evolved, boards and CEOs now explicitly recognize that they need to employ a consistent framework focused on two critical issues which both fall under the category of resource optimization – specifically the allocation of financial capital and human capital.
Organizations are finding that consistent focus on measuring, monitoring and incentivizing behaviors that underlie value creation go a long way to driving the right outcomes. Successful companies prioritize these areas; in summary, activity is nice, but outcomes are what count.
Regarding the future of value creation, the last few years were difficult for many companies. However, any crisis tends to bring more focus and realization that financial capital and human resources are not infinite.
With a once-in-a-lifetime crisis like the pandemic, leaders of all types of enterprises are forced to make difficult decisions. In addition, institutional investors have now incorporated measures of environmental, sustainability and governance (ESG) – including diversity – into the value creation framework.
All of this is part of their assessment of performance, as it should be. ESG, organizational values and value creation are connected, are here to stay and will pay off in tangible results.