Rediff On The Net, Infotech: NIIT begins new incentive scheme


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November 26, 1997

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NIIT begins new incentive scheme

The New Delhi-based software training and development major NIIT will be linking the performance incentive of its employees to the incremental contribution they make to the company's performance according to the 'economic value added concept' developed by the US based Stern Stewart and Company.

NIIT is the first company in India to adopt the EVA concept and implement it in the company and also use it as a performance measurement toll.

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EVA is used as a performance indicator for the return that a company earns for the capital that it has deployed.

NIIT will be implementing the EVA concept across 125 business centres that encompass its software training, development and multi-media business.

According to calculations of Stern Stewart and Company, which is assisting NIIT in the implementation of the EVA concept, NIIT's EVA is Rs 219 million for financial year ended September 1997.

EVA is computed by adding the interest burden to the net profit recorded by a company and from this total subtracting the weighted average cost of the total capital employed by the company during the year.

If the final figure on completion of this computation is positive it indicates that the company is earning a higher return on the capital that it is deploying and not destroying the wealth of the company.

This is, however, to the capital employed, particularly to the equity and reserves component, as against debt whose cost is known.

"The implementation of the EVA concept at NIIT is not a display function. We are looking at using it to bring about a higher employee association with the performance of the company. This will be done through the implementation of the concept at 125 centres. Their performance incentive is also linked to their contribution to the total incremental EVA that they help generate. This concept is also assisting us in our investment decisions," said NIIT President and CEO Vijay Thadani.

"We have seen this concept help many companies globally to build entrepreneurship and change the way the employees work," said Joel Stern, managing partner, Stern Stewart and Company.

- Compiled from the Indian media

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