Description: A company's main objective is to maximize shareholder wealth. Value is created only when the rate of return is higher than the cost of capital. VBM is a managerial process that effectively links strategy, measurement, and operational processes to the end of creating shareholder value.

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Value-Based Management
VBM is the management approach or philosophy
whereby top executives and managers focus on the creation,
management, and measurement of corporate value. The
value of a company is determined by its discounted future
cash flows (DCF). Value is created only when companies
invest capital at returns that exceed the cost of that capital.
VBM focuses on how companies maximize their discounted
future cash flows in both major strategic and everyday
operating decisions.

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The generic VBM framework encompasses the
processes for creating, managing, and measuring value.
Value
Corporate
Governance
Financial
Strategic
Strategic

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Few Critical Benefits of Value-Based Management
Can maximize value creation consistently.
It increases corporate transparency.
It helps organizations deal with
globalized and deregulated capital markets.
Aligns the interests of (top) managers with
the interests of shareholders and stakeholders.
Encourages value-creating investments.
Improves the allocation of resources.
It helps to better manage increased complexity
and greater uncertainty and risks.

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Pipeline for the Value-Based Management Process
Develop strategies &
develop organization design
Develop action plans,
select measures & set targets
Increase shareholder
value
Identify value drivers
Evaluate performance
Identify organization
objectives