VBM can create long-term value for your organization.
The first decade of the 21st century saw two economic downturns, and quite a few corporate failures.
This has caused corporate leaders to examine how to guide their organizations through these times effectively, so that they continue to be successful.
But what does "success" really mean? Does it mean high profits, or high dividends for shareholders?
Or does it mean being more efficient, building for the future, and operating with a structure that will survive the difficult times?
If your success strategy is primarily based on profit, it probably won't provide enough incentives to consider the long-term impacts of your decisions.
For example, you could increase your prices to increase profits, or you could choose to cut costs dramatically, and increase your quarterly earnings to satisfy your investors. However, this approach is likely to affect your market share, and your ability to compete in the long term. It may also have an impact on quality, and affect your ability to attract and retain talent.
Everyone wants to operate profitably and efficiently, with cost-effective teams, projects, and organizations. You don't want to ignore your short-term goals, but sacrificing long-term profitability for short-term profits isn't a sustainable strategy. Ultimately, you want to build and maximize your ability to be profitable in the long term. One way of doing this is to use Value-Based Management (VBM).
In this article, we'll look at the ideas behind VBM, and
highlight strategies that you can apply to boost the overall value
of your organization. We'll also identify the drawbacks to VBM, and
look at situations where VBM may not be suitable.
This article focuses on applying Value-Based Management in an organizational context. But you can also apply the ideas behind it to a department or small team, if this fits with your organization's overall objectives.
In a Value-Based Management (VBM) approach, your overall goal is
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