Contemporary Management-Assignment 4

Contemporary Managment

4th Assignement

AAGSB - MBA

Prepared By :

Hazem Saeed Ahmed

Value Based Management

Schneider Electric 2- Division - Name – Date

Agenda

Introduction /Why and What

IsValue Based Management



How do youimplement

Value Based Management?

How do youimplement


• Drive value for key stakeholders• Focus your business on what counts - relentlessly• Facilitate deployment of strategy and management philosophy• Establish accountability at all levels


The Problem(s)

Shareholders want bigger returnsWe are losing business to competitors on price and on

performanceCustomer expect high quality at low priceWe are not ‘easy to do business with’We don’t pay enough attention to our ‘important’ customersToday’s structure does not support the segmentation strategyFinancial information gets attention, but it isn’t enoughOur employees understand the need to change, but they don’tCustomers want a single problem owner We are not able to adapt quickly to new business opportunities


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


Benefits of VBM

●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


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


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


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


PERFORMANCE

Stakeholder Needs / ValuesCustomers• Employees• Regulators• Owners• Investors

Objective Behavior

Consequences

Feedback

Performer

CUSTOMERStep1 Step 2

Best Practices

Activity BasedCosting/

Budgeting

Performance Measurement/ Scorecard

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Q

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FINANCIAL

Strategy

Process• Goals• Results

Organization• Values• Goals• Results

Activities• Goals• Results

QUANTITY

Value Based Management Framework

Process Management

Human PerformanceOrganization

Design &Compensation


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 definedmeasurements and goals is critical to

accomplishment of the desired values / goals


Agenda





How do youimplement


How do youimplement



Two Cycles in VBM

Implementation Design DetailedAnalysis

Rapid Prototype

VBM

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U

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FINANCIAL

Strategic Plan

Process• Goals• Results

Organization• Values• Goals• Results

Activities• Goals• Results

QUANTITY

Foundation / Planning Cycle On-Going Management Cycle

Performance


VBM Implementation Stages


Rapid Prototype

VBM


VBM Rapid Prototype Delivers

• A complete status report • Gaps identified • Actions and plans agreed


VBM Rapid Prototype Involves

Implementation Design Rapid

PrototypeVBM

DetailedAnalysis

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)


VBM AnalysisDelivers

• Economic profile linking SVA to processes• Processes analyzed / disconnects identified • Profitability by segment / cost of processes• Design options defined and approved


VBM Analysis Involves


Rapid Prototype

VBM

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)


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


VBM Design Involves


Rapid Prototype

VBM

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)


VBM ImplementationDelivers

• 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

A completely aligned organization, measurementand management system including some or all of the following:


VBM Implementation


Rapid Prototype

VBM

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


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

Contemporary Management-Assignment 4

Documents

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