The Origin of Value Based Management: Five Interpretative Models of an Unavoidable Evolution

By Piero Mella and Michela Pellicelli.

Published by The Organization Collection

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Article: Print $US10.00
Article: Electronic $US5.00

This conceptual paper seeks to identify the factors external and internal to growing firms that make it necessary – in fact, inevitable – to change the traditional managerial perspective that aims at profit maximization – which is valid for small firms in the immediate start-up period and for family-run enterprises – in favor of the new approach that views the production of shareholder value as the primary objective of management. The basic thesis is that Value Based Management does not respond to tendencies in the capital market which reward companies with higher profits, but rather is the result of intrinsic needs in expanding organizations.

As companies expand in size and complexity, and as the formation of diversified business portfolios becomes more frequent, it becomes natural and inevitable to introduce Value Based Management as a normal management approach. In order to take account of this assumption we have considered five sources of explanation: the stimulus of economic growth, the genesis of the managerial firm and the separation of ownership and control, and the models elaborated by Flamholtz, Greiner and Mella.

Keywords: Value Based Management, Flamholtz Model, Greiner Model, Mella Model

International Journal of Knowledge, Culture and Change Management, Volume 8, Issue 2, pp.23-32. Article: Print (Spiral Bound). Article: Electronic (PDF File; 972.628KB).

Prof. Piero Mella

Chair of Business Administration, Department of Management Research, Faculty of Economics, University of Pavia, Pavia, Italy

Born in Pavia, graduated in March 1969 with a first class degree in Industrial administration, in 1985 I won a chair as a full professor and lectured in Business Economics and Administration at the Faculty of Economics of Pavia. In 1986 I was elected Head of the Department of Business Research at the University of Pavia. From 1987-88 to 1992-93 I was Dean of the Economics Faculty at the University of Pavia. Since it was founded in 1990 I have been the scientific Director of the Masters in Accounting, Budget and Financial Control in profit organizations, set up by the University of Pavia. In 1997 I became Co-ordinator of the Doctorate in Business Research at the University of Pavia. In 2000 I created the scientific web site www.ea2000.it. My interests also deal in the fields of Complex and Holonic Systems and of Networks. In 1997 I have proposed the Combinatory System Theory, described at the web site: www.ea2000.it/cst.

Dr. Michela Pellicelli

Lecturer, Faculty of Economics, University of Pavia, Department of Business Research, University of Pavia, Pavia, Italy

Born in Turin in 1972, I graduated cum laude in Business Administration from the University of Turin in 1997 and PhD in Business Administration from the University of Pavia in 2003. Today I’m Research Assistant in Business Administration at the Faculty of Economics at Pavia University. I’m particurarly interested in Shareholder Value, Value Based Management.

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