We help our clients with their initiatives to maximize value creation. In these projects, we help them achieve value maximizing mentality, and design and implement management procedures and processes that support turning this mentality into action.
Value Based Management is an efficient way of managing a business that places value creation at the top of the company’s system of objectives. It arranges the company’s activity structure, organization, measurement and control systems around the selection and development of value creating activities and factors.
Value Based Management can be interpreted as the sum of a value maximizing mentality and the management processes and procedures that help turn this way of thinking into action. None of these elements is sufficient on its own but together as a whole they can make a significant and lasting impact.
Value Based Management is an integrated process its objective being to raise the strategic and operational decision making to a higher level within the organization by focusing on key value creating factors and value drivers.
In order for the management to be able to define the factors that have the biggest impact on the company’s value, reliable analytic methods and tools are necessary. In practice, for analytic purposes these factors should be divided into the following groups:
- Strategic value factors
- Financial value factors
- Operational value factors.
Value based management processes and systems encourage managers and employees to behave in a value maximizing way. These processes and systems cover planning, setting of objectives, performance measurement and incentives, etc. These procedures are efficient if intra-organizational communication is aligned to value creation during planning, budgeting and other decision making processes.
Based on our approach, the most efficient method of defining the factors of most impact on the company’s value, and of performance measurement along the value creating process is the Balanced Scorecard. This method groups the relevant value creating factors around four perspectives.
- Financial performance perspective: activities, events relating and closely linked to financial results
- Customers’, markets’ and products’ perspective: activities, events relating and closely linked to customers, markets and products
- Operational processes’ perspective: activities, events relating and closely linked to operational processes
- Learning and development perspective: activities, events relating and closely linked to organizational learning and development – of people, skills, culture, structure and infrastructure