2. Definition for Value based
management
VBM is a managerial process which
effectively links strategy, measurement
and operational processes to the end of
creating shareholder value (CIMA,
2004) .
3. What is VBM?
A discipline that focuses on the management of the
organization holistically.
Emphasizes the creation of value as defined by its
stakeholders and priorities defined by management.
Focuses on the deployment of strategy and value
creation by managing processes, activities, jobs,
compensation and organization structure.
Uses analytical methods, facts, computing
/communications technology in an integrated
framework.
4. Why Value?
The creation of value is the primary goal of managers in
leading companies.
Organizations exist to create value for all constituencies
/ stakeholders.
Stakeholders include customers, owners, managers,
employees, suppliers and society in general .
Organizations determine the degree to which they will
prioritize the interests of each stakeholder group and
will therefore balance performance goals accordingly.
5. What Values?
Values depend on the stakeholder, however, examples
might be:
Markets and owners expect that economic value be
created.
Customers may expect to obtain desired goods and
services on time and at competitive prices.
Employees may expect a substantive and
meaningful job with commensurate compensation.
Suppliers may expect to be paid on time.
Society may expect that their environment will be
improved.
6. Behavioural -such as getting managers to understand
the new measures and avoiding complexity.
Technical - getting the right data, volatility in WACC,
the reliability of assumptions .
Organisational - overcoming internal resistance, the
significant effort and time required for implementation.
Managerial – support from Top Management.
VBM – The Challenges
7. Conclusion
Implementation of VBM by various Fortune 100
companies has proven the effectiveness of VBM in
creating and increasing firm’s value.
Companies need to adopt VBM with performance
measures that is relevant and suitable to their
organisations’.
Top management support and commitment will ensure
‘smooth’ implementation of VBM.
To maintain the competitive edge and continue to create
value performance metrics adopted need to be constantly
monitored and assessed.
