How to add value in value based management?

Value Based Management is the management philosophy and approach that enables and supports maximum value creation in organizations, typically the maximization of shareholder value. VBM encompasses the processes for creating, managing, and measuring value.

Adding value to your business is very important for better profits. Recent years have seen a phase of new management approaches for improving organizational performance like flat organizations, profit driven organisation, total quality management, empowerment, continuous improvement, team building, and so on.

Many have succeeded - but quite a few have failed. Often the cause of failure is not meeting the targets that were unclear or not properly aligned with the ultimate goal of creating value. Value-based management is the solution for this problem. The thinking behind VBM is simple. The value of a company is determined by its discounted future cash flows. Value is created only when companies invest capital at returns that exceed the cost of that capital. It provides a precise value upon which an entire organization can be built leading it towards profitability.