1. Value Based Management
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.

2. Agenda What should you do next? How do you implement Value Based
Management?
Introduction /
Why and What Is
Value Based
Management

3. 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!

4. Why VBM? - Because organizations have to change constantly in order to meet expectations
Superior executive performance is defined by delivery of value - to investors, customers, employees and others who have material influence
Growth in market value is a key to executive survival and the winning organization
Executives need new skills, new tools and a responsive organization to deliver value
Possession of facts is critical when making high risk decisions
Information Portals provide consistent communication to employees and other stakeholders

5. Benefits of VBM The bottom line: VBM = Performance
Focus the efforts of people in the organization on driving to achieve what’s important in a holistic manner:
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

6. 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

7. Why Value?
The creation of value is the primary goal of managers in leading companies
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
A new Manifesto for Management, Sumantra Ghoshal, Christopher A. Bartlett & Peter Moran. Sloan Management Review Spring 1999, Vol. 40, Number 3

8. 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

9. Value Based Management Framework
Strategy
Activity Based
Costing/
Budgeting
Stakeholder Needs / Values
Customers
Employees
Regulators
Owners
Investors T I M E
Organization
Values
Goals
Results Q U A L I T Y
Performance
Measurement
/ Scorecard F I N A C L
Process
Goals
Results
CUSTOMER
Step1
Step 2 Q U A N T I Y
Process Management
Best Practices
Objective
Behavior
Consequences
Activities
Goals
Results
Performer
Organization
Design &
Compensation
Feedback
Human Performance
PERFORMANCE

10. 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

11. Agenda What should you do next? How do you implement Value Based
Management?
Introduction /
Why and What Is
Value Based
Management

12. Two Cycles in VBM Foundation / Planning Cycle
On-Going Management Cycle T I M E Q U A L Y F N C
Strategic Plan
Process
Goals
Results
Organization
Values
Activities
Implementation
Design
Detailed
Analysis
Rapid
Prototype
VBM
Performance

13. VBM Implementation Stages
Rapid
Prototype
VBM
Detailed
Analysis
Design
Implementation

14. VBM Rapid Prototype Delivers
A complete status report
Gaps identified
Actions and plans agreed

15. VBM Rapid Prototype Involves
Detailed
Analysis
Design
Implementation
What it is:
3-4 week analysis
Situation analyzed
Values, directions and priorities agreed
VBM plan developed and agreed
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)

16. VBM Analysis Delivers Economic profile linking SVA to processes
Processes analyzed / disconnects identified
Profitability by segment / cost of processes
Design options defined and approved

17. VBM Analysis Involves Rapid Prototype VBM Detailed Analysis Design
Implementation
What it is:
3-6 month analysis of performance of key aspects of the business
Design assumptions established
Design specifications created / approved
What you have to do:
Provide teams of employees / data
Set goals
Participate in steering team meetings
Attend 4 executive workshops (4-6 hours)

18. 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

19. VBM Design Involves Rapid Prototype VBM Detailed Analysis Design
Implementation
What it is:
2 month design processes and
organization
Detailed design recommendations
Implementation plan agreed
What you have to do:
Provide teams of employees
Participate in steering team meetings
Attend 1 management workshop (2 days)

20. VBM Implementation Delivers
A completely aligned organization, measurement
and management system including some or all
of the following:
Process owners assigned
Change management implemented
Process changes implemented
Process Scorecards implemented
Individual Scorecards implemented
New computer and communications
software implemented
Organization design implemented
New job descriptions developed
Training requirements identified and
conducted
Incentive compensation changes
implemented
Activity and process budgets implemented

21. VBM Implementation Rapid Prototype VBM Detailed Analysis Design
What it is:
4+ month implementation of new
measures / processes / organization
New measures and goals accepted
Employees in different jobs
What you have to do:
Provide teams of employees
Assign employees to new roles
Participate in steering team meetings
Drive implementation

22. 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
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
Sample Measurement
Scorecard / Dashboard

23. Agenda What should you do next? How do you implement Value Based
Management?
Introduction /
Why and What Is
Value Based
Management

24. 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:
Phone (905)
Phone (613)