Value-based management
Value-based management aligns objectives, decisions, measures and incentives with creation of long-term economic value, commonly sustainable shareholder value in a commercial organisation. It uses value drivers and the cost of capital rather than treating accounting earnings growth alone as sufficient. Implementation requires meaningful operational links and attention to stakeholders, risk and sustainability. A value metric can support the approach, but simply reporting EVA or a share price does not establish a value-based management system.
Worked example
Managers evaluate investment returns after capital cost and link service reliability and retention to long-term cash generation rather than maximise current accounting profit alone.
Common mistake
Do not confuse value-based management with increasing revenue at any cost or assume every accounting-profit increase creates economic value.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | APM | Direct | September 2026–June 2027 |