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What is Value Based Management - Definition

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What is Value Based Management? Definition.

 

Definition 1: Value Based Management is the management approach that ensures corporations are run consistently on value (normally: maximizing shareholder value).

 

It is useful to understand that Value Based Management includes all three of the following:


  1. Creating Value (ways to actually increase or generate maximum future value ≈ strategy).Value Based Management VBM

  2. Managing for Value (governance, change management, organizational culture, communication, leadership), and

  3. Measuring Value (valuation).

Definition 2: Value Based Management aims to provide consistency of

  • the corporate mission (business philosophy), 

  • the corporate strategy (courses of action to achieve 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).

 

Note 1: Value Based Management is dependent on the corporate purpose and the corporate values.


Note 2: The corporate purpose can either be economic (Shareholder Value) or can also aim at other constituents directly (Stakeholder Value).

 

Compare: Clarkson Principles  |  History of Value Based Management  |  Benefits of Value Based Management  |  Intrinsic Stakeholder Commitment  |  Strategic Stakeholder Management  |  Seven Surprises  |  Strategic Intent

 

“Everything that can be counted does not necessarily count; everything that counts cannot necessarily be counted”.

(Albert Einstein 1879 - 1955, American theoretical physicist)

 

 

 

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