A management approach that has gained considerable momentum in recent years, value-based management (VBM) can help executives maximize profitability in the long term. At its most basic level, VBM seeks to maximize organizational value. Instead of thinking about short-term profits, executives using a VBM strategy carefully consider the effects of business decisions on sustainability and future cash flows. As such, VBM treats future cash flow and growth as the primary factors underlying a company’s value.

1. AN INTRODUCTION TO
VALUE-BASED
MANAGEMENT
Ehab Al Shihabi

2. Introduction
 A management approach that has gained
considerable momentum in recent years,
value-based management (VBM) can help
executives maximize profitability in the long
term. At its most basic level, VBM seeks to
maximize organizational value. Instead of
thinking about short-term profits, executives
using a VBM strategy carefully consider the
effects of business decisions on sustainability
and future cash flows. As such, VBM treats
future cash flow and growth as the primary
factors underlying a company’s value.

3. Value-Based Management
 When implementing a VBM philosophy, executives
must be willing to fundamentally alter organizational
strategy when the situation calls for it. If a national
growth program fails to increase future cash flow,
executives must consider narrowing the scope of the
program, even if it means sacrificing returns in the
short term.
When identifying opportunities for long-term growth,
executives often use performance metrics to balance
short-term interests against long-term growth
prospects. Instead of relying on a top-down
management approach, VBM requires sound decision
making at all levels of the organization.