The concept of ‘value’ has been around for awhile, but currently is one of the hottest topics in Performance Management. By ‘value’ we mean ‘increasing shareholder value’. The Lawrence D. Miles Value Foundation defines ‘Value Methodology (VM) as a systematic approach that seeks to improve the value of a project, product, or service by providing the necessary functions to meet the required performance at the lowest overall cost’.
I was introduced to the topic by Alan Dunn with Value Imperative by James McTaggart, and now our bookstore has this and many other books on Value, including a couple of Featured Books in the coming months.
Shouldn’t cost management professionals be interested in value? Shouldn’t we be the ones to drive value in the organization, whether or not it is a companywide initiative?
I remember sitting in one of Peter Drucker’s classes at Claremont, when he was discussing how at one time he thought that it was important for a business to be a good citizen in the community as one of their goals. Sometime later (and prior to the class I was in), he reconsidered his aforementioned idea. If a business brings value to its shareholders, then one of the things it must do is be a good citizen in the community. So driving value to
shareholders must always come first.
At the Society of Cost Management, we believe that one of the concepts vital to Cost Management professionals in the future, will be that of Value.
An important element of Value is EVA, or Economic Value Added, which is a measure the true economic profit of a business. This and other measures of value are key to the methodology.
* ‘TOTAL COST’, Coming in 2014