Definition 1: Value Based Management (VBM) is the management approach that ensures corporations are managed consistently on value (normally: maximizing shareholder value).
Definition 2: Value Based Management aims to provide consistency of:
• the corporate mission (business philosophy),
• the corporate strategy to achieve the corporate mission and purpose,
• corporate governance (who determines the corporate mission and regulates the activities of the corporation),
• the corporate culture,
• corporate communication,
• organization of the corporation,
• decision processes and systems,
• performance management processes and systems, and
• reward processes and systems,
with the corporate purpose and values a corporation wants to achieve (normally: maximizing shareholder value).
THE THREE ELEMENTS OF VALUE BASED MANAGEMENT
1. Creating Value. How the company can increase or generate maximum future value. More or less equal to strategy.
2. Managing for Value. Governance, change management, organizational culture, communication, leadership.
3. Measuring Value. Valuation.
Value Based Management is dependent on the corporate purpose and the corporate values. The corporate purpose can either be economic (Shareholder Value) or can also aim at other constituents directly (Stakeholder Value).
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