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