Shareholders employ managers with specific skills to run businesses on their behalf. Their expectation is that the management teams will increase the value of their interest and generate wealth. It is as simple as that. Non-profit organisations have the same requirements in many instances where the management teams are required to maximise the available funds to the benefit of the beneficiaries. The overall objective remains to increase the value of the organisation.
To create sustainable increasing shareholder value can only really be achieved by managing the business performance on an ongoing basis. It requires a strategic approach to identify the functions required in the business to consistently deliver the desired business outputs that will in turn increase the value of the business. It requires the identification of the business critical outputs of each function and the subsequent continuous monitoring of those outputs. It is business performance management that ensures sustainable increase in shareholder value of an organisation.
There are 6 business value drivers identified by Jack Alexander in his book Performance Dashboards and Analysis for Value Creation that are under management’s control to influence.
- Sales Growth
- Relative Pricing Strength
- Operating Effectiveness
- Capital Management
- Cost of Capital
- Intangibles, Credibility, Future Expectations
These business value drivers can be influenced through a pro-active performance management approach. Improving the business performance can be achieved through a number of mechanisms both hard and soft in the organisation. Business processes are one of the tangible mechanisms that can easily be addressed to impact business performance. Pro-active process management impact most of the value drivers in a direct fashion. It can influence sales growth, drive and manage operating effectiveness, assist with capital management and manage intangibles.
Business Process Management is the one business methodology that can have a significant impact on business performance and value. I will address the concept of effective performance management through business process management in future posts.
Filed under: Performance Management
[...] an economic downturn Posted on November 20, 2008 by Pieter van Schalkwyk As mentioned in a previous post in this blog, Business Process and Performance Management (BPPM) support the business value drivers [...]
I like this approach. Here we have a BPPM approach where the crucial variables for a company is actively engaged. It is also closely linked to the financial drivers of value that drive company valuation. At last an approach in the field of processes that is linked to the strategic goals of the company and the other key processes required to implement strategy! Thanks for the reference to Jack Alexander’s book.
[...] mentioned in a previous post in this blog, Business Process and Performance Management (BPPM) support the business value drivers [...]