Value based management (VBM) is a business' strategic directive to represent the bridge between its business value and the actual work from within its business units and personnel. The VBM directive's approach is geared toward an organizational wide step towards its stock value; the characteristics of value and how it is created and destroyed; and organization and personal incentives that leads to more morale and increases stock value (McKeen & Smith, 2009).
Therefore, VMB is a measurement system that scores overall business performance provided by individuals and their business units with the strategies and overall mission of the rganization. Several business metrics for IT include using a modified scorecard and balanced scorecard approach. In a modified scorecard, a business uses five key measures: Customer loyalty index, associate loyalty index, revenue growth, operating margin, and return on capital emp
...loyed (McKeen & Smith, 2009).
These measures are reported quarterly and reviewed with each business unit within the organization to give insight to all personnel on the overall business value. Then the business line will create several other key measures for their individual business nits and individual teams within each that will ultimately represent the organization and be part of the firm's bonus program.
Certain percentages of influence toward the enterprise's earnings target are provided based on personnel performance and their level within the organization. Twenty five percent of an individual's bonus comes from meeting the target earnings, which means all personnel, must strive and work as a whole to meet the goal to receive their bonus. This gives a sense of self establishment within the organization. The balanced scorecard approach is similar to the modified scorecard but without the incentive
program to follow.
A scorecard has measures from financial, customer, operations, and growth dimensions that show metrics of progress towards the enterprise business' plan (McKeen & Smith, 2009). The scorecards are then developed for each business unit and then for individuals within. The scorecards are maintained in a visible manner within the organization for all to see. This allows employees to see how their individual role affects the overall business value and metrics.
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