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  • Harvard Business Review

A Better Way to Assess Managerial Performance

By: Mihir Desai, Mark Egan and Scott Mayfield
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Abstract

Total shareholder return (TSR) has become the definitive metric for gauging performance. Unlike accounting measures such as revenue growth or earnings per share that reflect the past, TSR is based on share price and thus captures investor expectations of what will happen in the future, which is its chief attraction.
The problem is that TSR conflates performance associated with strategy and operations with that arising from cash distributions (dividends and buybacks). In this article, the authors discuss the distortions embedded in TSR and propose a new metric, core operating shareholder returns, that emphasizes operational performance. It also provides a comprehensive assessment of the buyback revolution—and the verdict is quite damning.

Keywords

Total Shareholder Return; Buybacks; Core Operating Shareholder Return; Management; Operations; Performance; Measurement and Metrics

Citation

Desai, Mihir, Mark Egan, and Scott Mayfield. "A Better Way to Assess Managerial Performance." Harvard Business Review 100, no. 2 (March–April 2022): 134–141.
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About The Authors

Mihir A. Desai

Finance
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Mark L. Egan

Finance
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E. Scott Mayfield

Finance
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More from the Authors
  • Launching Egypt’s First Digital Banking Platform: QNB Bebasata By: Mark Egan, Billy Chan and Ahmed Dahawy
  • Graphic Packaging: Project Cowboy (A, B, C, & D) By: Benjamin C. Esty and Scott Mayfield
  • Graphic Packaging: Project Cowboy (D) By: Benjamin C. Esty, Scott Mayfield and Philipp Chvanov
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