The Book Corner - Review
2006 Volume 9 Issue 1

The Book Corner

The Book Corner

Featured in this issue:

CFROI Cash Flow Return on Investment Valuation: A Total System Approach to Valuing the Firm

By Bartley Madden
Butterworth-Heinemann, 1999

Recommended by Steve Ahn, Adjunct Professor, Finance

Madden’s “CFROI Valuation” is a good primer on valuation, especially for non-financial practitioners, managers, and executives of public firms who have been pounded in the last decade with the goal of maximizing shareholder value today – even at the risk of tomorrow. A cursory review of numerous other books and articles on valuation shows that the topic has become somewhat of an art-meets-science cliché. Madden provides a relatively fresh approach on the topic using the cashflow return on investment (CFROI) perspective.

Standard valuation is largely driven by a measure of cashflows, the long-term and short-term capital investment required to achieve such cashflows, the growth and sustainability of such cashflows, and a cost of capital used to fund such activities. Here the science begins to shift into art – to determine what to do with the cashflows – usually to discount them and/or to apply some metric to arrive at value.

Similar to other widely read valuation books such as Koller’s “Valuation” published by McKinsey & Co. and “Damodaran on Valuation,” I would recommend this book, especially to non-financial managers and executives. It is an informative, introductory primer on valuation. Madden provides easy-to-understand, step-by-step guidance on valuing a company, including analytical assumptions. Though much of the book is presumably written from the perspective of an institutional investor analyzing stocks, Madden delves into CFROI with enough breadth to make valuation and other financial professionals ponder its broader applications.

With that said, I think practitioners–including investment bankers, business appraisers, and valuations consultants as well as CFO’s and heads of corporate development–may find Madden’s “CFROI Valuation” a fun workout for the mind. The book provides useful frameworks in light of which to ponder current events and trends with a less conventional valuation approach.

In suggesting expanding one’s mind regarding traditional valuation methods and practices, Madden helps to remind, though not explicitly stating such, that formulas and technical analysis may measure value, but they don’t determine value.

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Organizational Behavior

By Michael R. Carrell, Daniel F. Jennings, and Christina Heavrin
Atomic Dog Publishing, 2006

Recommended by Carol Sexton, PhD, Practitioner Faculty, Applied Behavioral Science

With hundreds of organizational behavioral texts published each year, newcomer authors need to offer exceptional features to stand out from the crowd. This new addition has two: it costs less than half the price of traditional textbooks, and it is available for even less in a complete online edition that is highly interactive for teachers, students and business managers.

The paperback edition, a hefty 680 pages, is packed with content, case studies and experiential activities similar to that found in many other texts. In addition to traditional organizational behavior concepts and theories, the authors provide up-to-date coverage of innovative approaches to managing people at work. The book’s information is long on text and light on graphics, but it is enlivened by real world examples and personal profiles of managers. For those who prefer hard copies of books, the price makes the paperback Organizational Behavior a valuable alternative to other such books.

Furthermore, with the purchase of the book, readers will have access to the online version as well, and the online version is a real value because it is not merely supplemental to the hard copy. Readers may customize the material, highlight text, and add notes. Interactive glossary and footnotes allow speedy further research. Cases are illustrated, and exercises provide instant feedback. The authors should be able to update editions easily, and with the book’s low cost, provide each user of the book the latest material possible. In the age of laptops and wireless connections, this book is definitely an idea whose time has come.

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Recruiting, Interviewing, Selecting and Orienting New Employees

By Diane Arthur
Amacom, 2005

Recommended by James C. “Chip” Moore, Chief Human Resources Officer, Pepperdine University

The number of times that you need to fill a position in your area with someone new may be an indicator of the number of times you will want to access Diane Arthur’s book Recruiting, Interviewing, Selecting and Orienting New Employees. If you are interested in a full complement of step-by-step guidelines, ready-to-use interview questions and scripts, forms and checklists and other hiring tools that will help you “find top-notch employees and get them on board quickly and effectively,” this will become a reference book on your desk.

In its fourth edition, this book claims to be as authoritative as the first three editions, while adding important new topics and giving the reader a practical and user-friendly guide to the entire employment process. In just over 350 pages, the author has managed to do exactly that using an arrangement of a hundred or so topics that will allow the reader to:

  • weigh the pros and cons of traditional and cutting edge recruiting strategies;
  • write comprehensive job descriptions and powerful ads that attract attention in print and online;
  • keep hiring programs consistent with EEO and federal record-keeping requirements;
  • determine the competencies required for optimal job performance and use a powerful mix of question types (which are competency-based hypothetical, probing and open-ended as well as closed-ended) to learn what you need to know about the applicants you interview;
  • encourage applicants to talk while keeping them on track during the interview;
  • screen applicants via video and telephone interviews;
  • set goals and parameters for both HR and departmental interviews;
  • hold effective peer and panel interviews;
  • use pre-employment testing effectively and fairly;
  • conduct thorough and revealing reference checks legally and ethically;
  • create truly helpful departmental and organizational orientation programs.

One of the strengths of the author’s approach is that it gives the reader examples of not only what to do, but also what not to do. Each of her topics has both legal and practical pitfalls that can be readily sidestepped by the information provided. Arthur is right when she asserts that the employment process, when done well, allows the hiring manager to play a key role in the organization’s long-term success.

In my experience, hiring can be one of the most challenging, stressful, fun and exhilarating parts of any manager’s job. Whether it’s a daily or annual or even biennial occurrence, finding and orienting a new employee requires technical skills and common sense approaches that are provided here. Since hiring and on-boarding processes are rapidly evolving areas (or should be), I hope that the author, an experienced consultant in the field, considers a fifth edition in which on-boarding is discussed in detail.

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