The method (Value Based Management)

Sustainable growth of enterprise value should be the most important purpose of its operation. Currently, many practitioners admit that companies which apply the concepts of value based governance (Value Based Management - VBM) stand much a better chance to build sustainable competitive advantage on the market and thereby provide above-average return on capital for their owners. The outcome is also value growth, above the expectations of investors, or effective defence against a possible hostile business takeover. Inefficiently managed companies are characterized, as a rule, by a low order status and thus become an attractive target for competing companies or capital market investors.

The foundation of the VBM method is to seek value and effectively manage the company in every aspect of its activities. Financial and strategic business value creation (in a long-term perspective) is the primary aim of this concept. This basic goal is superior to the others (except for financial ones) defined for different levels of an organization.

VBM philosophy assumes that the plans for organization growth should be the basis for training and conduct of all employees and be reflected in each of the areas of business. To achieve this goal, it is often necessary to introduce many, often profound changes in the organization. This results from the fact that appropriate delegation of decision-making powers must be made before shifting the burden of responsibility for performance to individual employees, otherwise the implementation of the VBM idea would not be possible at all.

In addition, the objective, which is value growth of each functional area of the organization, must be a quantified indicator, subject to periodic measurements, and the measurement results should be closely linked to the workers' compensation system. The above assumption implies the need to implement an efficient controlling system examining internal processes in an enterprise, which would enable both the measurement of outcomes, as well as represent a fundamental tool to support decision-making processes at all levels of an organization.

When designing and implementating a comprehensive value management system, one should recognize and apply many management methods, among others:
• Balanced Scorecard
• Activity-Based Costing - ABC
• Time Driver Activity-Based Costing TDABC
• Business Process Management - BPM
• Project Management - PM
• Intellectual Capital Management - ICM
Value creation concepts are already quite common in companies using management by projects, and there is widespread acceptance for the evaluation of investment projects. Unfortunately, in the Polish reality one can rarely meet practical application of such methods of strategic management and performance evaluation in enterprises as a whole or in individual strategic business units operating within larger business organizations. It is true that the majority of executives declare that the primary objective of business operations should assume an attitude of appreciation and understanding for value, however, its measurement is very diverse and often different from the assumptions of the VBM approach.