Ingredients for the success of VSM - Strategic Management

In order to gain a better insight into Value Based Management itmay be helpful to Analyse its three notions of value:

  • Shared ethical values include the trust and confidence in the inbuilt and intrinsic value of each individual associatedwith the company; be it the worker, customer or supplier.
  • Ability to successfully deliver maximum value (higher quality at a lesser price)to the customer.
  • The outcome gained in the form of rewards based on the value people have contributed tothe organization. This contribution to the company could have been done as a part of a team, as a worker, or even as an owner.;

Benefits of Value Based Management
It has been signified that the greater the self-interests of people have been unified by a management-following-VBM-principles, the greater an employee and customer satisfaction will be experienced. Thus, resulting in improved sales, greater cost savings and increased profit ratios.

  • Benefits for Management: Transformation from an authoritarian mode to a more participatory, value-based mode could help managers distribute their archetypical operational problems. This in turn leaves them with more time to concentrate on the organization’s more pressing issues.
  • Benefits for Employees: VBM can succeed when everyone linked with the company (the owners, the employees, the workers, etc.) feel that they are also responsible and accountable for the process and share the outcome as a member of the VBM team. Using Value Based Management principles gives rise to a comfortable, satisfying and economically rewarding ambience for its employees.
  • Benefits for Labor Unions: In addition to transforming various other sections of the organization for the better, VBM can also be held responsible for modifying labor unions within a company. This new transformation allows the union representatives to play roles greater than what they had played before in the system.

A number of factors were discovered to be essential for the successful use of the value approach.

Acceptance at director level
A prime ingredient for success is the acceptance of value theory at director level. All responding companies felt that they had the full support of the chief executive and the board.

Understanding of senior management teams
It was felt that senior management teams must understand the relationship that exists between their strategic announcements (not short-term performance results) and their share price (evidence of financial market response). Management teams, both staff and line, must also understand the benefits of shareholder value analysis, such as the linkages between it and product – market strategies. Value must be embedded in the culture of the organisation or it will not survive.

Is the culture right?
Having the right culture was also seen as important to the successful implementation of value at the business unit level, although there seemed to be little awareness among managers as to what that correct culture should be.

Value sharing: motivating managers for value creation
One of the most important goals for the value company is finding the best way of putting value theories into practice. Rewarding managers and staff for making the best long-term value decisions instead of just traditional short-term performance rewards becomes a perplexing, but not insurmountable problem.

Training for VSM
Training for value is a cardinal rule for those in the United States who have successfully used the techniques.


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