Explore the Fundamental Connections Between Stock Value and Project Management
By Melissa Centurio Lopes on Oct 08, 2013
Senior executives are today more accountable, even vulnerable, than ever before to poor share price performance. There are numerous reasons for this, but the increasing negative impact for organizations means that senior executives need to take a more active role in making the right decisions throughout business operations. According to research conducted by the global consulting firm Booz & Co.1, over the last decade the average tenure of a global chief executive has dropped from 8.1 years to 6.3 years. This analysis of the world’s top 2,500 publicly listed companies found that executive turnover had increased from around 12% in 2000 to 14.3% in 2009, with more than a third (36.7%) of departures in 2009 being dismissals rather than part of a planned succession.
For project-intensive organizations, there is even more intense pressure on executives to deliver forecasted returns on investment (ROI). With the current economic climate, shrinking margins and increased global competition, the impact of huge capital investment projects extending beyond their scope and budget carries significant consequences. This places even greater emphasis on capital planning, a core business process that remains fraught with difficulties. In a survey conducted by the Economist Intelligence Unit in October 20102, only 11% of companies could claim they delivered expected ROI on major capital projects 90-100% of the time, and 12% reported planned ROI delivery less than half the time. These results highlight that organizations – irrespective of industry sector – are still struggling to manage risks, accurately predict levels of ROI and consistently deliver bottom line growth from their major capital investments. Bad investment decisions can lead to huge financial losses, which serves to place the spotlight firmly on the capital planning process. It also places greater emphasis on executive decision-making capabilities to determine which potential investments deliver the greatest value and reliability, as well as providing the financial stability to attract funding.
The danger of poor evaluation can quickly lead to a significant reduction in the value of the organization’s overall portfolio and compromise long range capital planning goals. From here, it is a short journey to poor share price performance.
Click here and read this full complimentary paper that looks at the intrinsic connection between long-term capital investment and short-term market performance, and how this can in turn affect the profit outlook for project-intensive organizations. Discover existing research undertaken in this area, and highlight case examples where project management performance has impacted – whether positive or negative – the stock price and, in turn, the overall image of both the company and those in the C-suite of these organizations.
1Favaro, Ken et al, CEO Succession 2010: The Four types of CEOs. Issue 63 2011. Booz & Co
2“Prepare for the unexpected: investment planning in asset-intensive industries,” Economist Intelligence Unit, January 2011