VALUE-BASED MANAGEMENT: AN INTEGRATED APPROACH TO VALUE CREATION A LITERATURE REVIEW
ANNE AMEELS e-mail: firstname.lastname@example.org PROF. DR. WERNER BRUGGEMAN e-mail: email@example.com GEERT SCHEIPERS e-mail: firstname.lastname@example.org
Geert Scheipers Geert Scheipers holds a Master in Commercial & Financial Sciences, special topics on banking & finance. He is guest lecturer at the VLGMS, is member of the editorial staff of the Belgian Institute of Management Accountants & Controllers and is author of a number of articles and papers within the field of ‘Strategy’ & ‘Control’.
Anne Ameels Anne Ameels is research assistant Management Accounting & Control at the Vlerick Leuven Gent Management School.
Werner Bruggeman Werner Bruggeman is Professor in Management Accounting and Control at the Ghent University and at the Vlerick Leuven Gent Management School. He is Partner at the Vlerick Leuven Gent Management School and Managing Partner at B&M Consulting, specialized in implementing Integrated Performance Measurement and Activity-based Cost Management Systems. His research concentrates on the relation of strategy, organization and management control.
ABSTRACT In the last decades, management accounting faced increasing challenges to adopt new approaches, designed to fit the changes in the economic environment and to correct perceived inefficiencies in existing controlling structures. This paper focuses on one of those recent developments, viz. value-based management (VBM). Since VBM is claimed to be changing financial management at the highest level in some of the world's largest companies, this literature review compares the value-based management approaches of six consultants, viz. Stern Stewart & Co, Marakon Associates, McKinsey & Co, PriceWaterhouseCoopers, L.E.K. Consulting and HOLT Value Associates and tries to assess the potential of their management frameworks. Value-based management can be defined as an integrated management control system that measures, encourages and supports the creation of net worth. Although VBM is more than metrics, we first focused on a non-exhaustive number of value-based metrics, divided in two segments, the listed perspective-segment and the non-listed perspective. Since metrics are a means and not the goal of a VBM-program, we compared not only the metrics used by the six consultants, but also analysed their value-based management constructs as a whole. This analysis was based on the fundamental components of a holistic VBM-program, as defined by several researches on value-based management. This comparison revealed some clear similarities between the approaches, but also demonstrates distinctions and different accents. There is for instance a clear unanimity about the focus on maximizing shareholder value, about the conviction that the interests of all stakeholder groups are best served when putting the shareholder first and about the impact of value-based management on collaboration. Notwithstanding the similarities, they all six suggest using different types of measures, combine different systems and processes, have other views on strategy development and advocate their own training & education program.
In the last decades, management accounting faced increasing challenges to adopt new approaches, designed to fit the changes in the economic environment and to correct perceived inefficiencies in existing controlling structures. In the 1950s and 1960s an important debate focussed on the character of information for decision-making. Another group of scholars addressed the issue whether the contribution margin approach was superior to systems that fully allocated...