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Step 1 in Value Management is to build a business plan based on
the chosen and generally value maximising strategy. This plan
must perform two roles. It must serve as a roadmap for the
business. It must also act as a prospectus for capital and
other resources required to implement the proposed strategy.
Step 2 is resource allocation. This is the point at which
capital and other resources are allocated to strategies. A
business unit management team promises a particular value outcome
in return for the resources required to deliver it. Corporate
commits the resources in return for the value promised. There
are a number of benefits to strategy-based rather than
project-based capital outlays.
Step 3 involves budgeting and target setting. Generally,
it is best to set up performance management systems to answer two
questions. Is the business on track with its proposed
strategy so that the value promised in the business plan is
secure? Is the business delivering sound operating
performance regardless of the strategy?
Step 4 involves both monthly and quarterly reporting and
monitoring. The drivers used to develop valuation models in
both Value Measurement and Value Creation are fundamental building
blocks in designing the necessary reporting and monitoring
systems.
Step 5 is executive reward. This is an often contentious
area in which KBA has developed a number of innovative approaches.
Recent publications on this topic can be found here.
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