Value-based management provides a clear metric – discounted future cash flow – to guide decisions at all levels of an organization: a business unit leader using this approach may pursue value in financial terms; a functional manager could concentrate on customer service, market share, product quality, or productivity; and a manufacturing manager might focus on costs per unit, cycle times, or defect rates.
But this article, based on a chapter from the second edition of Valuation: Measuring and Managing the Value of Companies, argues that all value-based managers should focus on changing the corporate culture, not on methodology. They ought to be no less interested in organizational behavior than in using valuation as a performance metric and a decision-making tool.
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