A CRITICAL REVIEW ON SURVEYS OF VALUE-BASED MANAGEMENT - Research Paper Example

VBM has come to replace them all as a better management technique (Brigham, and Houston, 2009). though there is still something that cannot be taken for granted in any such novelty, i.e. the degree of efficacy in real world business contexts. It’s all the more imperative to consider this sudden spurt of interest in VBM as against profit-based approaches that were hitherto adopted by both small and big companies in order to measure financial performance of the company (Brigham, and Ehrhardt,2007).

According to those vociferous critics of the method this annual ritual has had very little success by way of a system of acceptable metrics that truly demonstrated real or discounted cash flows of the company. Such palliatives are to be abandoned now and a more realistic system of metrics based on verifiable and measurable concepts ought to be adopted. It’s here that VBM comes as both a reliable tool and a systematic approach. Capital structure of the firm as divided into equity and debt has been of little significance to an outsider except for an investment consultant and a professional investor because the bewildering system of metrics doesn’t mean anything to the layman.

This particular instance of failure associated with many other approaches to management has oft been cited as one of the very sound bases for a new management approach by critics. Thus the concept of VBM has come handy in this context too, owing to the fact that orthodox management approaches are all none too well defined to include performance related dynamics (Copeland, and Dolgoff, 2005). In other words capital must be invested in the business only when its rate of return exceeds the cost of it.

Value parameters of VBM are quite well defined to include such variables as tax exemptions on capital investment and the corresponding value gains in alternate investments. Net returns on investment ought to be predictable and therefore uncertainty