Value Based Management
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Transcript Value Based Management
Value Based Management
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Drive value for key stakeholders
Focus your business on what counts - relentlessly
Facilitate deployment of strategy and management philosophy
Establish accountability at all levels
Paul A. Sharman, President
Focused Management Information Inc.
©Focused Management Information Inc. August 1999 (Rev 4)
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Agenda
How do you
implement
Value Based
Management?
What should
you do next?
Introduction /
Why and What
Is
Value Based
Management
©Focused Management Information Inc. August 1999 (Rev 4)
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The Problem(s)
Shareholders want bigger returns
We are losing business to competitors on price and on performance
Customer expect high quality at low price
We are not ‘easy to do business with’
We don’t pay enough attention to our ‘important’ customers
Today’s structure does not support the segmentation strategy
Financial information gets attention, but it isn’t enough
Our employees understand the need to change, but they don’t
Customers want a single problem owner
We are not able to adapt quickly to new business opportunities
There are many complex and inter-related
concerns. The combination is killing us!
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Why VBM? - Because organizations have to
change constantly in order to meet expectations
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Superior executive performance is defined by delivery of value - to
investors, customers, employees and others who have material influence
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Growth in market value is a key to executive survival and the winning
organization
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Executives need new skills, new tools and a responsive organization to
deliver value
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Possession of facts is critical when making high risk decisions
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Information Portals provide consistent communication to employees and
other stakeholders
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Benefits of VBM
• Focus the efforts of people in the organization on
driving to achieve what’s important in a holistic
manner:
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satisfied customers
correctly assigned resources
growing profits / SVA/ CFROI, etc.
streamlined processes that deliver
business facts to manage the business
motivated and accountable people
waste eliminated
The bottom line: VBM = Performance
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What is VBM?
Value-based management (VBM)
A discipline that focuses on the management of the
organization holistically
Emphasizes the creation of value as defined by its
stakeholders and priorities defined by management
Focuses on the deployment of strategy and value
creation by managing processes, activities, jobs,
compensation and organization structure
Uses analytical methods, facts, computing
/communications technology in an integrated
framework
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Why Value?
• The creation of value is the primary goal of managers
in leading companies
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Organizations exist to create value for all
constituencies / stakeholders
• Stakeholders include customers, owners, managers,
employees, suppliers and society in general
• Organizations determine the degree to which they will
prioritize the interests of each stakeholder group and
will therefore balance performance goals accordingly
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A new Manifesto for Management, Sumantra Ghoshal, Christopher A. Bartlett & Peter Moran. Sloan
Management Review Spring 1999, Vol. 40, Number 3
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What Values?
Values depend on the stakeholder, however, examples
might be:
• Markets and owners expect that economic value be created
• Customers may expect to obtain desired goods and services
on time and at competitive prices
• Employees may expect a substantive and meaningful job
with commensurate compensation
• Suppliers may expect to be paid on time
• Society may expect that their environment will be
improved
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Value Based Management Framework
Strategy
Stakeholder Needs / Values
Customers
• Employees
• Regulators
• Owners
• Investors
Activity Based
Costing/
Budgeting
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Organization
• Values
• Goals
• Results
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Step1
CUSTOMER
Step 2
Process Management
Objective
Process
• Goals
• Results
Behavior
Consequences
Performer
Activities
• Goals
• Results
Feedback
Performance
Measurement
/ Scorecard
Best Practices
Organization
Design &
Compensation
Human Performance
PERFORMANCE
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VBM and Measurement
• People behave as they are measured
• The only purpose for measurement is to influence
human behavior
• The emphasis in measurement must be
New Conditions, Future State and Desired
Performance
Therefore, disciplined application of defined
measurements and goals is critical to
accomplishment of the desired values / goals
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Agenda
What should
you do next?
How do you
implement
Value Based
Management?
Introduction /
Why and What
Is
Value Based
Management
©Focused Management Information Inc. August 1999 (Rev 4)
11
Two Cycles in VBM
Foundation / Planning Cycle
On-Going Management Cycle
Strategic Plan
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Organization
• Values
• Goals
• Results
Rapid
Prototype
VBM
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Detailed
Analysis
Design
Implementation
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Process
• Goals
• Results
Activities
• Goals
• Results
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Performance
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VBM Implementation
Stages
Rapid
Prototype
VBM
Detailed
Analysis
©Focused Management Information Inc. August 1999 (Rev 4)
Design
Implementation
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VBM Rapid Prototype
Delivers
• A complete status report
• Gaps identified
• Actions and plans agreed
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VBM Rapid Prototype
Involves
Rapid
Prototype
VBM
Detailed
Analysis
What it is:
• 3-4 week analysis
• Situation analyzed
• Values, directions and priorities agreed
• VBM plan developed and agreed
©Focused Management Information Inc. August 1999 (Rev 4)
Design
Implementation
What you have to do:
• Executives provide 4 hours up front
• Provide access to key staff
• Provide access to data
• Attend 2 executive workshops (4-6 hours)
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VBM Analysis
Delivers
• Economic profile linking SVA to processes
• Processes analyzed / disconnects identified
• Profitability by segment / cost of processes
• Design options defined and approved
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VBM Analysis
Involves
Rapid
Prototype
VBM
Detailed
Analysis
What it is:
• 3-6 month analysis of performance
of key aspects of the business
• Design assumptions established
• Design specifications created / approved
©Focused Management Information Inc. August 1999 (Rev 4)
Design
Implementation
What you have to do:
• Provide teams of employees / data
• Set goals
• Participate in steering team meetings
• Attend 4 executive workshops (4-6 hours)
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VBM Design
Delivers
• Detailed process & organization specifications
• Scorecards developed at all 3 levels:
Org’, Proc’, Job
• Change management planned
• Detailed specifications for data
• Information Portal specifications
• Activity & process budgets developed
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VBM Design
Involves
Rapid
Prototype
VBM
Detailed
Analysis
What it is:
• 2 month design processes and
organization
• Detailed design recommendations
• Implementation plan agreed
©Focused Management Information Inc. August 1999 (Rev 4)
Design
Implementation
What you have to do:
• Provide teams of employees
• Participate in steering team meetings
• Attend 1 management workshop (2 days)
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VBM Implementation
Delivers
A completely aligned organization, measurement
and management system including some or all
of the following:
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Process owners assigned
Change management implemented
Process changes implemented
Process Scorecards implemented
Individual Scorecards implemented
New computer and communications
software implemented
©Focused Management Information Inc. August 1999 (Rev 4)
• Organization design implemented
• New job descriptions developed
• Training requirements identified and
conducted
• Incentive compensation changes
implemented
• Activity and process budgets implemented
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VBM Implementation
Rapid
Prototype
VBM
Detailed
Analysis
What it is:
• 4+ month implementation of new
measures / processes / organization
• New measures and goals accepted
• Employees in different jobs
©Focused Management Information Inc. August 1999 (Rev 4)
Design
Implementation
What you have to do:
• Provide teams of employees
• Assign employees to new roles
• Participate in steering team meetings
• Drive implementation
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VBM Information Portals for
Communicating with all Constituencies
• Distribution of consistent and appropriate
measurement information to everyone in the
organization is fundamental to execution of VBM
Sample Measurement
Scorecard / Dashboard
• Use of computer technologies - data warehouse,
OLAP and presentation layer software provide
the “media” of distribution
• It is the media that facilitates organization change.
The marriage of management philosophy with
technology and the imperative to create value
• The media is represented by the presentation of
current measures and performance information on
computer screens to all accountable parties
• The suite of tools includes software to perform
simulation modeling of processes and economic
performance
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Agenda
What should
you do next?
How do you
implement
Value Based
Management?
Introduction /
Why and What
Is
Value Based
Management
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23
Next Steps
• Complete a simple series of self assessment questions
• Review results with an FMI representative
• Undertake initial review of VBM with sponsor executives
• Launch Fast Track VBM
Visit our WEB SITE or contact us at:
www.FocusedManagement.com
[email protected]
Phone (905) 829-2658
[email protected]
Phone (613) 230-9379
©Focused Management Information Inc. August 1999 (Rev 4)
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