Building Company Value and Restructuring

The main task of a well-functioning company is to increase its value to the owners, what is more – changing market conditions and dynamic business environment increases the risk of generating new business risks, thus managing organizations, managers must seek modern solutions to meet new challenges and enable the management control over the creation of by the company. The last years were characterized by a multitude of modern methods and management methods such as TQM, Lean Management, Kaizen and others. Some of them brought positive results, while others proved to be short-lived fad that does not allow for the efficient growth of the organization, mainly due to incorrectly defined goals that do not support growth of shareholder value. Approach that allows you to avoid such mistakes and that especially recently gaining popularity is Value Based Management. Management based on the value in a comprehensive manner is recognized all activities in support of the creation of the company and thus allows to achieve a dominant position not only in the products and services offered by the company but also in the employee market, capital and corporate control.

Value Based Management is a comprehensive approach to managing for value creation in the company, which breaks the vertical flow of information “from top to bottom” and in return requires the managers to continuously monitor the formation of values in each cell of the organization and identify and support all sources of this value – so-called “media value”, such as for example expansion of the area of activity, geographical expansion, improve competitiveness, increase operational efficiency and organizational as well as the proper allocation and structuring of capital. Identification of carriers is not an easy task and the traditional methods of management and reporting based on available data and financial gauges do not allow precise identification and monitoring media. Therefore, the implementation of VBM is supported by the most significant changes in organizational culture introducing and defining principle of the responsibility for building and which assume the implementation of information systems supporting these activities. Moreover, the management company based on VBM requires the use of complex analytical tools for managing the operational dimension of financial and strategic at the same time. One of the tool that allows controls creating value in each of the business units (center value) is a map of values, allowing to analyze the return on invested capital (ROIC – Return on Invested Capital) in the statement of the cost of the weighted average cost (WACC – Weighted Average Cost of Capital) for each value chain and what this allows an assessment of whether the data in the central value is created (ROIC > WACC) or destroyed (WACC > ROIC). The positive difference between the return and the cost involved in undertaking informs about generating residual income which are the source of generating economic value added (EVA – Economic Value Added), so the value for the owners.

The implementation of the management system based on the value of the enterprise is a complex and often giving results in the long term. This process can be divided into six stages:

  • Determination and selection of the strategic objectives of the organization to create value,
  • Developing strategies and organizational structure to effectively support the creation of value,
  • Identification of all media and shopping value and building value maps,
  • Developing an action plan by designating specific initiatives and measures to monitor their implementation,
  • Continuous evaluation and monitoring of the implementation of plans and results.

Monitoring and reviewing the strategy, taking into account past performance and changing environment.