Methods and concepts for Value Based Management (VBM)
CGE&Y Value Creation Indices
The Value Creation Index (VCI) is a tool designed to quantify the link between an organizations non-financial performance and its
valuation in the markets. Traditional methods of assessing organizational performance are no longer adequate in today's
economy. Stock price is less and less determined by earnings or asset base. Value Creation in today's companies is increasingly
represented in the intangible drivers like innovation, people, ideas, and brand.
Yet these non-financial factors for creating value are difficult to quantify, rarely acknowledged in accounting methods, and are not
adequately measured, managed or reported on by organizations.
We created a tool to quantify the link between an organization's non-financial performance, creating value and a firm's valuation in
the markets. The Value Creation Indices not only quantify the impact of non-financial performance on market value, but also
identify the specific intangibles that drive value for a given industry. Models have been created for a number of industries including
financial services, airlines, pharmaceuticals, telecommunications, and others.
While the crucial non-financial value drivers vary by industry, we have settled upon some critical categories of intangible
performance that determine corporate value creation:
- Innovation
- Customer relations
- Management capabilities
- Alliances
- Technology
- Brand value
- Employee relations
- Environmental and community issues