Value Based Management Practices—Some Evidence from the Field
Опубликовано на портале: 21-06-2006
Management Accounting Research.
P. 235-254 .
Value Based Management (VBM), and especially Economic Value Added (EVA™),1
has attracted considerable interest among organisations in recent years. These concepts
can be applied to capital budgeting, valuation, management control, and incentive
compensation. Despite the growing number of applications, we have only limited independent
research-based evidence on how these concepts are actually applied. However, this
can be considered not only an essential step in research investigating the benefits
of VBM [cf. Ittner, C.D., Larcker, D.F.,1998. Innovations in performance measurement:
trends and research implications. Manage. Acc. Res. 10, 205–238], but also
on its limitations. With the aid of six Finnish-based organisations from five different
industries, we illustrate the diversity of actual use of VBM. Our results indicate
that for some organisations VBM is merely rhetoric, while for others it seems to
have an impact on both decision making and control system, taking various forms from
one firm to another. In some organisations, application of VBM is restricted only
to the highest levels of hierarchy, whereas in others it covers the whole organisation.
However, in none of the studied organisations is VBM applied in as comprehensive
a manner as suggested in the normative literature. This multitude of different ways
in which VBM is actually used in practice raises some problems regarding the study
of VBM and its benefits. In particular, the adoption of EVA™, as measured with
EVA™ based bonuses [see e.g. Wallace, J.S., 1997. Adopting residual income-based
compensation plans: do you get what you pay for? J. Acc. Econ. 24, 275–300;
Kleiman, R., 1999. Some evidence on EVA companies. J. Appl. Corp. Finance 12, 80–91],
is seriously challenged.