TERM PAPER OF MANAGEMENT

PRACTICES AND
ORGANISATIONAL BEHAVIOR

VALUE DRIVEN ORGANIZATION

Submitted To:
Ms. Kuldeep Kaur
ACKNOWLEDGEMENT
The satisfaction that accompanies the successful completion of the task would be

incomplete without the mention of the people whose ceaseless cooperation made it

possible, whose constant guidance and encouragement crown all efforts with success. I

am grateful to my lecturer for the inspiration and the constructive suggestions that

helped us in preparation of the report on VALUE-DRIVEN ORGANIZATION.

CONTENT
 INTRODUCTION
 Objectives
 Rationale
LITERTAURE REVIEWS
DETAILED DESCRIPTION OF REPORT
 Need for value
 Importance of value
 Importance of Value driven management
 Value Creation
 Value Delivery
STRATEGIES FOLLOWED BY VALUE-DRIVEN ORAGNIZATIONS
VALUE-BASED STRATEGIES
ADVANTAGES OF VALUE-DRIVEN ORGANIZATIONS
DISADVANTAGES OF VALUE-BASED ORGANIZATIONS
CONCLUSION
REFERENCES

INTRODUCTION
Value1 is the basic convictions that a specific mode of conduct or end-state of existence
is personally or socially more preferable to an opposite or converse mode of conduct or
end –state of existence.

Relating the concept of value to the modern business arena, we say that every business
is selling value and every customer is looking for value.

Benefits-Cost=Value

The benefits include the tangible needs and the intangible wants along with quality and
other positive aspects associated with the purchase. The costs include both actual and
circumstantial costs. Hence, value which is the net difference perceived both in
monetary and non-monetary terms by the customers; according to the above formula is
the difference of benefits and costs.

The organization must deliver value exactly when it is needed in the marketplace to
those that place the highest value on it so that the organization maximizes its revenues.
So, value-driven commands continual assessment of the manner in which value can
be increased through the optimization of products, services and projects that the
organization delivers keeping in mind the perspectives of internal and external
stakeholders.

Organization2 is defines as a consciously coordinated social unit composed of two or

more people that functions on a relatively continuous basis to achieve a common goal
or set of goals. In other words, organization 3 is the deliberate arrangement of people to
accomplish some specific purpose.

Hence, Value-driven organization can be defined as the social group of people

making up an organization based upon the management approach that ensures the
organization run consistently on value so that the goals of the organization are met. It
includes creating a value, managing for value and measuring value. Value-driven
organization provides consistency of the corporate strategy, the corporate mission,
corporate governance, corporate communication, and organization of the corporation,
decision processes and systems, performance management processes and systems
and reward processes and systems.

1
Robbins Stephen P., Judge Timothy A,. Sanghi Seema, Pearson Education Inc., Organizational
Behavior,13th edition, Page No. 126
2
Robbins Stephen P., , Judge Timothy A,. Sanghi Seema, Pearson Education Inc. Organizational
Behavior,13th edition, Page No. 07
3
Robbins Stephen P.,Coutler Mary, Pearson Education Inc, Management, 9 th Edition, Page No.17
Richard Barett4, founder and Chairman of the Cultural Values Centre, thinks that
the businessmen should really operate for the best for the common world and this is the
shift of the organizations from being the best in the world to be the best for the world.

Referring to Dr. Dawna Markowa 5, Neuroscientist and CEO Thinking Partner,

leadership should be value based because soul cannot be separated from the self of
leaders. That creates a major shift from being the best in the world to being the best for
the world. She further says that there are two mental models. One mental model says
that a person does a work to get that better grades, to get more money, to, to make a lot
of profit and people with this mental set have less perceiving options and their capacity
to think diminishes. People with another mental set called growth mind set does
something to take challenges and face challenges and to grow their capacity and
capacity of the society. Their capacity to think expands and they perceive more actions
in the world. Hence she concludes that people with growth mind set are worthy leader
because they have more value-orientation.

OBJECTIVES

The objective of this report is to focus on the various aspects of an organization that is
value-driven. It aims to focus on the various aspects of such an organization like the
reason for adopting this management approach and the actual benefits perceived from
this approach. It also focuses on the strategies adopted by such an organization to face
the ever-growing competition among the organization to maintain their market share
and earn substantial profits while being in sync with the social, environmental, and legal
expectations of the customers.

RATIONALE

The rationale for undertaking this project is to gain an insight into this management
approach which is adopted by almost all the leading organizations which spans over
almost all the industries. Referring to the well-said statement by Richard Barett, the
founder and Chairman of the Cultural Values Centre, the organization with the current
culture with a set of values which is aligned with values of the people and also with their
dream culture is the one that produce high returns, high performance and is simply the
best company in the planet.

4
http://www.youtube.com/watch?v=a84YVfzo07U

5
http://www.youtube.com/watch?v=a84YVfzo07U
LITERATURE REVIEWS
 The Apparel Value challenge 6 written by Robert J. Frank, Elizabeth A. Mihas,
Laxman Narasimhan, Stacey Rauch.

Absract: This article highlights the progresses made by some value-driven

organizations in a number of apparel categories comprising basic categories like
underwear, hosiery and fleece and categories like jeans, casual pants, daywear and
some outwear categories are on the verge of going-to-value. This article concludes
with the suggestions for traditional retailers to become value-driven organizations so
that they are able to capture and retain a substantial market share in the apparels
industry in the face of changing trends of customers’preferences.

 The Grocery Value challenge 7 written by Robert J. Frank, Elizabeth A. Mihas,

Laxman Narasimhan, Stacey Rauch.

Absract: This article highlights the performance progresses of some-value driven

organizations in a number of grocery categories consisting of non-food categories like
baby products, pet food, food storage, paper products are going-to-value. This article
recommends that the traditional retailers should consider the fact that customers
increasingly perceive the importance of freshness and price-quality trade-offs which the
value-driven organizations are very well able to manage and hence capture a sufficient
market share.

DETAILED DESCRIPTION OF REPORT

NEED FOR VALUE

Few management principles which focus value as the chief attribute are:

 For example, Drucker's "Find a Need and Fill It" is all about creating and
delivering distinct value.

 Approaches to strategic positioning (by Porter, Treacy & Wiersema, etc.) are
characterized by the organization's distinct value.

 And Porter's "Five Forces" help assess the probability of long-term delivery of
distinct value in any given marketplace and so on.

6
http://www.mckinsey.com/practices/retail/knowledge/articles/competinginavaluedrivenworld.pdf
7
http://www.mckinsey.com/practices/retail/knowledge/articles/competinginavaluedrivenworld.pdf
According to Michael Porter, value is considered as a vertical chain of players extending
from the suppliers, to firms to buyers. The value clarity should be focused intently by the
executives of the organization so that they are able to address values from the
customer’s viewpoints and hence maximize the customer value achievements in
tangible and relevant mechanisms. This means that throughout all the process involved
in creating, exploring and delivering value, the value should be addressed and
concentrated on the customer’s perspectives.

All the procurement, human resource management, firm infrastructure and technology
which constitute the secondary components of the supply chain along with the primary
components of inbound logistics, operations, outbound logistics, manufacturing and
sales should be accomplished keeping in mind the preferences and tastes of the
customers. This is because sales is a short term goal which cannot ensure that the
customer has experienced the value they have purchased and hence it is the marketing
of the value which ultimately guarantees the value satisfaction by the customers and
help build the organization’s brand loyalty and brand equity.

The erosion of value should be prevented at all costs and value-driven organization
accomplishes this by placing the customers at the focal point of all the activities involved
in the value delivery process and business performance is chiefly driven by customer’s
value.

For a value-driven organization to be successful, each individual connected with the

organization directly or indirectly should understand the specific requirements of the
organization’s prospective customers, and the exact mechanism by which these
requirements are linked to the value capabilities of their marketed solutions and the toll
it takes for the company to achieve its value in sync with the customer’s value. This
becomes the differentiating criteria for the organization with its competitors.

IMPORTANCE OF VALUE

There is a rapid change in the personal and societal context of the operation of the
business due to the changing technological and other preferences of individuals. Hence,
it holds an extreme importance to recognize the identity and importance of the
organization.

The stakeholders like society, shareholders, potential employees and existing

employees are affected indirectly or directly by the value the organization relies
upon.

SHAREHOLDERS: The new variant of shareholders who are solely interested in

undertaking investments in companies which aims to meet socially responsible
investment criteria and which strives for quality excellence as the best organization.
SOCIETY: The society expects a certain degree of environmental concern from the
organization along with the social responsibility concerns. Hence, the organization
should focus to stand up to the society’s expectations. The organization’s failure to fulfill
the society’s expectation can cost it to suffer from high degree of effect on its financial
performance.

EXISTING EMPLOYEES: The organizational culture should be such that it supports the
existing employees in determining their personal satisfaction from the work and meets
their needs.

POTENTIAL EMPLOYEES: The organization must aim at aligning the personal values
of the individual prospective employees with the organization’s culture. This would aid
the organization to attract and retain the best people of the industry into itself.

Hence, to strengthen human capital, it is the absolutely necessity of the organization to

improve its culture capital. In other words, the organization should build a value-driven
culture where employees feel the alignment of their personal values and the
organizational values.

According to Mal Warwick & Ben Cohen 8, the co-authors of Values-driven business
published by Berhett-Koehler Publishers, Inc, value driven approach is all about how to
change the world, make money and have fun. The true purpose of the business is to not
just to transform raw materials into goods and provide services, but also add value to
the lives of employees, adding value to the life of community, adding value for the sake
of the life of future generations by trading as lightly as possible on the planet. This book
directs people who are running or starring small and medium sized businesses about
how they could incorporate their values into the way they make core business decisions
in their businesses and achieve great benefits by taking the broad based stakeholders
view as responsibility of the business owner where employees, clients, the community
and environment are equally important.

For the values to be effective, following conditions must be considered:

 People must demonstrate and model the values in action in their personal work
behaviors, decision making, contribution, and interpersonal interaction.\
 Only the active participation of all members of the organization will ensure a truly
organization-wide, value-based, shared culture.
 Rewards and recognition within the organization must be such that they
recognize those people whose work embodies the values the organization
embraced
8
http://www.youtube.com/watch?v=xMK6SH9HuOw&feature=related
  Values should be able to guide every decision that is made once the organization
has cooperatively created the values and the value statements.
 . People hire and promote individuals whose outlook and actions are in sync with
the values
 Organizational goals are grounded in the identified values.
 Adoption of the values is consistently recognized in regular performance
feedback.
 Organizational values must be ensured to help each person establish priorities in
their daily work life.

IMPORTANCE OF VALUE-DRIVEN MANAGEMENT

A company operates and competes in a number of markets:

 The market for its products and services.

 The market for corporate management and control (threat of takeover,
competition on determining the exact in-charge of the organization, etc.)\
 The capital markets(competing for the investors’ favor)
 The employees and manager markets(competing for the company’s image and
attracting top talents towards itself)

The survival chances of an organization may be jeopardized by its failure to compete in

any of the above four markets and hence the concept of value-driven organizations
stand at par with these problems and enable an organization to excel in each of the
above four markets.

VALUE CREATION

In today’s context all the organizations are value-driven. The values may be conscious,
shares and lived or may be undiscussed and unconscious.

In the case when the values are conscious and discussed, then there is a maximum
probability of them being shared and lived. Hence, it implies a stronger chance of the
alignment of the organizational values with each employee’s personal values.

In case the value is undiscussed and unconscious, the culture of the organization is
reflected by the personality of the leader. The possibility of alignment of the
organizational values with the individual employee’s values is decreased to a great
extent unless the leader is very effective. This is because the organization develops a
set of values that are selected by the leaders of the organization. The leaders believe
that the values they choose will resonate with both the organization and the employees.
Although the leaders try to the core of their efforts to choose the values they perceive
important on the basis of the organization and their subjective beliefs. Since the leaders
seldom have the time to measure the employees’ personal values, employees’
perceptions of the organizational values and the desired organizational values in a
structured and organized manner and to account for the needs of stakeholders, the
leader usually meet with the failure to design a set of values for the organization which
is in alignment with the employees’ personal interests.

The amount of money that leads the buyer to gauge the new situation(money minus
products/services) as equivalent to the original status quo defines the buyer’s
willingness to pay. The amount of money that leads the supplier to gauge the new
situation (money minus resources) as equivalent to the original status quo defines the
supplier’s opportunity cost.

Hence, value creation by the chain of players may be defined as:

Buyers

Products/Services
Firms

Resources

Suppliers

Value created = Willingness to pay- Opportunity Cost

VALUE DELIVERY

For delivering value, the organization may use six key constructs comprising
assessment, alignment, achievability, accessibility, agility and accountability. The scope
of the defined products or services must remain in sync with the most valuable qualities
for the target customers. The organizations must focus on the governance initiatives to
protect the shareholders views.

Assessment involves gaining an assessment of what the market values today and
what it is going to market in future so that the organization can meet the current and
latent needs at the time when they arrive. The portfolio and needs analysis, carried out
to determine the market’s pleasure and pain details, should be complemented with
value analysis comprising of both the customer value analysis(which includes the
appraisal and prioritization by the customers) and the internal value analysis(which
includes the needs from the organization’s perspectives).

Alignment ensures that the product plan points in the direction which delivers the
product and the organization in the right direction as intended. The goals and objectives
of individual product line must be aligned with the larger context that is the organization.

Achievability represents a high level estimate of the time, costs and benefits to
determine the degree of its alignment with the strategic goals.

Accessibility includes making all the information related to the product life cycle
available to the person making a decision so that he understand the value of the
product portfolio along with the product and product requirements so that the value is
properly communicated and delivered.

Agility encompasses conducting intelligence gathering in the market by visiting the

customers and speaking with them about the prospects of products, collecting details
about the products failure or successes, and understanding the competitive markets so
that the organization is more responsive which enables it to be value-driven.

Accountability focuses on delivering values through the organization’s activities and

discarding those things which do not add value to the products and services and hence
explores on the ways to deliver values in the future in a better way.

There is a substantial number of organizations who have adopted value-driven

strategies to implement quality programmes and pursue manufacturing excellence and
also to adopt environmentally and socially responsible solutions. For instance,
according to Jeff Dunn9, the former President of Coca Cola, when he was in Brazil
thinking about the 250 million people who live in poverty to launch the products of Coca
Cola in that region and discussing about the different packages of small sizes to make it
affordable for the poor people. he decided that the residents of Brazil require their
fundamental needs to be met more than coke because it did not seem right to Jeff Dunn
that to have influence in power and distribution in marketing, he should not think about
the long way. Thus he prioritized the social obligation of an organization more than its
financial achievements and concentrated on the long term goals of uplifting the quality
of the life of public in Brazil who could subsequently afford Coke in years to come.

Another instance can be sited by considering a joint car making venture created by
Toyota and General Motors, which is recognized as an industry leader in quality
management, and has the goal of building high quality products while ensuring that

9
http://www.youtube.com/watch?v=a84YVfzo07U
costs are the most competitive of any manufacturer so that it is able to render maximum
value to the customers and the organization.

STRATEGIES FOLLOWED BY VALUE-DRIVEN ORGANIZATIONS

Once when an organization is committed to the position that a successful business has
to create and deliver distinct values, a logical but simple approach to strategic
management must be planned and implemented.

There are three types of strategy for value-driven organizations:

 Value Creation Strategies;

 Value Delivery Strategies; and
 Support Strategies

Value Creation Strategies are based upon the understanding of the needs and
opportunities in the marketplace and synchronizing them with the capabilities and core
competencies of the business. They focus upon things like whom to serve, what to offer,
what is the exact distinct value and what is the ultimate impact of all the activities. This
value creation must be followed by ensuring that the value is realized by the customer.

Value Delivery Strategies are concerned all about producing the offering, getting a
commitment from the customer to purchase it, delivering it into the customer's hands
and assisting the customer to use it in such a way that the value is realized. These
strategies deal with the queries like what is the mode of offering in terms of build, buy,
assemble, package, and what is the price of offering, how to communicate the value,
how to receive commitment to value, how to reach to the customer with the offering,
how to enable the value in terms of installation, activation and training the customers
and how to ensure the maintenance of the value.

Support Strategies are the strategies that deal with information technology, financing,
organization, facilities, etc. They are the specialized strategies and disciplines that
reside within the business. They can be critical to the creation and delivery of value.

VALUE BASED STRATEGIES

The four value-based business strategies are shown below.

Firm Competitors
Willingness-To-Pay 1 3
 Opportunity Cost 2 4

Box no.1 represents the strategy of raising the willingness-to-pay of the buyers so that
the buyer’s needs are well understood and this is the differentiation strategy of the firm.

Box no. 2 represents the strategy of lowering the opportunity cost of suppliers of
providing resources to the firm by establishing value-based partnerships with the
suppliers and by offering non-salary benefits to the employees which is difficult for other
firms to imitate.

Box no. 3 represents the strategy of lowering the willingness-to-pay of the buyers for
other firms’ products by negative advertising about the competitors and creation of
switching costs for buyers(retaining costs associated with switching costs of competitors
products and hence the lower willingness to pay for competitors products).

Box no. 4 represents the strategy of raising the opportunity cost of suppliers of providing
resources to competitors firms through the creation of switching costs for suppliers.

ADVANTAGES OF VALUE-DRIVEN ORGANIZATIONS

 Value-driven organizations can maximize value creation consistently.
 Value-driven organizations are able to deal with globalised and deregulated
capital markets with greater ease.
 Such organizations have an improved and optimal allocation of resources.
 Value- driven organizations have an enhanced communication on strategies.
 Such organizations have enhanced transparency.
 Value- driven organizations have an implied alignment of the interests of the top
managers with the interests of the stakeholders.
 Such organizations have proper communication with the investors, analysts and
stakeholders.
 Value- driven organizations facilities improved decision making.
 The targets set by such organizations are effective and realistic for
compensation.
 Such organizations have a streamlined planning and budgeting.
 Value- driven organizations are able to balance the trade-offs between the short
term, medium term and long term.
 Such organizations encourage investments that are value-creating.
 Value- driven organizations have a greater degree of comfort while dealing with
uncertainties and risks.
  Value- driven organizations normally have lesser chances of under evaluation of
stocks.
 Value- driven organizations have a clearly set management priorities.
 Value- driven organizations have clearly defined management priorities.
 Such organizations are usually prevented from any acquisitions or takeovers.

DISADVANTAGES OF VALUE-DRIVEN ORGANIZATIONS

 Value-driven management is an all-embracing, holistic marketing philosophy
which often command cultural change and hence it takes considerable time,
resources and patience for the organizations to become value-driven.
 Value creation is just as complex as corporate strategies and requires equal
efforts for its implementation.
 Measurement of value through the use of tools and processes like performance
management and balanced scorecard is effective but these tools and processes
have a high cost of their own which bounds the organization from going into its
deep details.
 Extreme caution is needed to concentrate only on the most important factors so
that it does not lead to value destruction.
 Comprehensive training and consulting support is an absolute necessity which
may be very costly for the organization.
 This management concept commands high degree of support from the top level
of management.

CONCLUSION

It is absolutely necessary for a successful organization to provide distinct value to its

customers. In case of failure to provide distinct value, there is absolutely no reason to
buy - or to exist. Then in that case, there will be no competitive advantage, no
positioning and no message communication.

Hence, for long term success, it is necessary for an organization to be driven by the
desire to provide value to the customer. In addition to conformance to individual’s
personal values, having an organization that is based on a sound moral and ethical
footing is good for business. It builds trust and relationships with all the stakeholders,
which is critical to long term success. It also paves the path for a more fulfilling working
environment, increasing the level of employee satisfaction and motivation

If pursued successfully, the outcome is that the value-driven organization can maintain
a substantial competitive advantage and pursue value-based pricing, which are the keys
to growth and profitability and almost all the leading organizations around the globe are
value-driven organizations.

REFERENCES
http://www.softwaremag.com/pdfs/whitepapers/Telelogic_WP3.pdf?
CFID=29252352&CFTOKEN=47507440

http://www.softwaremag.com/pdfs/whitepapers/Telelogic_WP3.pdf?
CFID=29252352&CFTOKEN=47507440

http://www.valuebasedmanagement.net/faq_why_value_based_management.html

http://www.valuebasedmanagement.net/faq_disadvantages_of_vbm.html

http://www.interactiveinsights.com/

http://pages.stern.nyu.edu/~abranden/ValueBasedStrategy2.pdf

http://www.mckinsey.com/practices/retail/knowledge/articles/competinginavaluedrivenworld.pdf

http://www.12manage.com/methods_value_based_management.html

http://humanresources.about.com/od/strategicplanning1/a/organizvalues_2.htm

http://www.valuebasedmanagement.net/faq_what_is_value_based_management.html

VIDEOS

http://www.youtube.com/watch?v=a84YVfzo07U

http://www.youtube.com/watch?v=xMK6SH9HuOw&feature=related

BOOKS

 Organisation Behavior by Stephen P.Robbins,Timothy A. Judge and Seema

Sanghi, 13th Edition published by Pearson Education, Inc.
 Management by Stephen P.Robbins and Mary Coutler,9 th Edition published by
Pearson Education, Inc.
 Values-driven business by Mal Warwick & Ben Cohen published by Berhett-
Koehler Publishers, Inc.