FORTUNE Magazine masthead SEPTEMBER 20, 1993 VOL. 128, NO. 6

(FORTUNE Magazine) – 38 THE REAL KEY TO CREATING WEALTH Rewarded by knockout results, managers and investors are peering into the heart of what makes businesses valuable by using a tool called Economic Value Added. It posits that you can't know if an operation is really creating value until you apply the true cost of capital to all the capital employed. by Shawn Tully

44 WHAT'S YOUR EVA? The answer is fascinating and often startling.


THE ECONOMY 54 WHEN WILL THE LAYOFFS END? Not soon, and maybe never. For many big companies in the Nineties, eliminating workers -- ''decruiting'' -- has become not a one-time event but a way of life. by Louis S.Richman

COMPETITION 60 WHY MERCK MARRIED THE ENEMY Discounters, led by Medco, were revolutionizing its market and undermining margins. Roy Vagelos, CEO of the undisputed champ of the pharmaceuticals industry, concluded: If you can't beat 'em, buy 'em. by Brian O'Reilly

SELLING 68 MARY KAY'S LESSONS IN LEADERSHIP Nobody knows better than Mary Kay Ash how to motivate a sales force. She masters the true power of employee recognition. by Alan Farnham

CORPORATE PERFORMANCE 79 NEW LESSONS IN CUSTOMER SERVICE KinderCare, the biggest player in child care, is moving up by heeding clients. by Susan Caminiti

80 MAKING MONEY LIKE CLOCKWORK ADP increases earnings per share as steadily as it processes payroll checks and W-2s. by Peter Nulty

82 THE TRICK TO SELLING IN EUROPE Frustrated by customers' national tastes, Swedish appliance maker Electrolux has had to scale back its global strategy. by William Echikson


HEALTH 86 ONE MAN'S TOUGH CHOICES ON PROSTATE CANCER It's the No. 2 cancer killer in men -- and it will strike almost every male who lives long enough to get it. But when a seasoned science journalist was diagnosed with it, doctors gave him confusing and contradictory advice. In his painful journey through the maze, he learned that where doctors disagree -- as they do over how to treat many life-threatening diseases -- an educated patient can help educate them. by Tom Alexander

INFORMATION TECHNOLOGY 103 WHY KIDS LOVE COMPUTER NETS Using technology to escape the bounds of the classroom, children are learning to work and communicate in ways you never dreamed of when you were their age. by Elizabeth Corcoran

ASIA 112 INDONESIA ON THE MOVE With a growing middle class, plentiful workers, vast petroleum and mineral resources, and political stability, it's Asia's next big growth market. Sprawled over 13,000 islands spread along the equator, the country is a promising place to do business -- if you can handle a tricky web of Third World risks. by Louis Kraar

EXECUTIVE LIFE 118 UNSUIT YOURSELF: MANAGEMENT GOES INFORMAL The men's clothing business is looking ragged these days, much like the executive class. New codes for what to wear at work are causing consternation among retailers and designers. by Bill Saporito

DEPARTMENTS 4 EDITOR'S DESK 8 INDEX 12 NEWS/TRENDS Computer makers want your living room, a jolt for Japan, haute discount, dangerous times for trade treaties, Clinton gets technical (slowly), and more.

19 FORTUNE FORECAST FORTUNE's economists look at how consumers will fare under Clinton's new tax bill. by Joseph Spiers

Economic Intelligence: The exchange rate won't do it, health reform's regional ripples, and more.

27 PERSONAL INVESTING Smart strategies that will soothe the sting of higher taxes. by Susan E. Kuhn

Also: Buying gold through the back door, and Portfolio Talk with Richard Huson of the Crabbe Huson Equity Fund.


157 PRODUCTS TO WATCH Olympus's all-in-one zoom camera, a compact jumper cable, and more. by Alison Sprout

159 BOOKS & IDEAS How to seize -- or blow -- your big chance: Ruthlessness worked for the diamond cartel; teams work for the NBA. But IBM met itself to death. Three new books tell all.

162 ENTREPRENEURS What do you do when the acquisition that you counted on falls through and you're running out of capacity? by Charles Burck

COVER: Bard Martin photographed the CEO of AT&T, which this year will make EVA the primary measure of managers' performance.

ABOVE: Spurred by orders to get EVA up to breakeven, CSX managers started seeing containers and trailers as expensive, idle capital, and cut their downtime. Photo by Michael L. Abramson.

FORTUNE (ISSN 0015-8259). Published biweekly, with three issues in October, by Time Inc. Principal office: Time & Life Building, Rockefeller Center, New York, NY 10020-1393. Reginald K. Brack Jr., Chairman; Don Logan, President; Joseph A. Ripp, Treasurer; Harry M. Johnston, Secretary. Subscriptions: U.S., possessions: one year (27 issues) $52.95; Canada: one year (27 issues) $53.73. Second-class postage paid at New York, NY, and at additional mailing offices. Authorized as second-class mail by the Post Office Dept., Ottawa, Canada, and for payment of postage in cash. Member, Audit Bureau of Circulations. POSTMASTER: Send address changes to FORTUNE, P.O. Box 30604, Tampa, Fla. 33630-0604. Customer inquiries: FORTUNE, P.O. Box 60001, Tampa, Fla. 33660-0001. Phone: 1-800-621-8000. ) (c) 1993. Time Inc. All rights reserved. FORTUNE is a registered mark of Time Inc. For subscription queries, call Customer Service at 1-800-621-8000. Time Inc. GST R122781974.