VALUE-BASED MANAGEMENT:

A System for Transforming the Corporate Culture

 
Work in most companies today follows the philosophy of Frederick Winslow Taylor, who proposed that systemizing efficiency should be the primary focus of corporate managers. Writing in 1911 Taylor declared:

"In the past, man was first. In the future, the system will be first."

Thus, Taylor's "scientific management" system was launched--turning the worker into a mere cog in the system, a disposable human tool, a worker-for-hire, a wage serf. As satirized in Charlie Chaplin's classic movie, "Modern Times", Taylor's assembly-line system dehumanized the worker and the culture of work, pitting workers against technology.

Taylor was also oblivious to another danger inherent in his system: it left ownership, control and the distribution of profits in the hands of a small elite of managers, time-study engineers and owners. His system offered once self-reliant workers higher wages in exchange for their loyalty to what many consider a modern form of feudalism. Most companies today still operate according to Taylor's top-down vision of the workplace.

The era of robotics, advanced informational systems, and the globalization of production, marketing and distribution is forcing a basic shift in how we view the role of the worker and the nature of the workplace. Businesses are recognizing that, for their own survival, they must find new, more flexible ways of rewarding and motivating their workers, while controlling costs and delivering ever-higher levels of value to their customers. They are realizing that these objectives are impeded by the adversarial nature of the surrounding economic and cultural environment, a by-product of Taylor's philosophy of work and the inherent instability of the wage system. They are also coming to see that what is needed is a new way of thinking.

This new way of thinking would not reject the importance of systems, but would redesign systems to put people first. It would create a new system of management that rehumanizes the workplace. It would shift power, responsibility and control over modern tools and advanced organizational systems from the few to all those affected by the process. The new system would combine principles of equity (justice and ownership) with principles of efficiency, in order to raise the performance of an enterprise and its workers to their highest potential, to better serve their customers and other stakeholders. Instead of tapping into the wisdom, knowledge and creativity of only the few, the new system would recognize the advantages of drawing out and combining the wisdom, knowledge and creativity of all workers.

Some of the most progressive private sector firms have begun to implement successful new approaches for motivating workers, improving productivity and quality, facilitating changes and maintaining continuity in their organization's culture. A comprehensive approach developed by CESJ is called "Value-Based Management (VBM)"--a business philosophy and management system for competing effectively in today's global marketplace, centered around the inherent value and dignity of every person.

What is Value-Based Management?

Value-Based Management (VBM) is a customer-focused system built upon shared principles and core values, which is designed to instill an ownership culture within an organization. VBM is catalyzed by "authentic leaders" who actively seek to empower others; it is developed and sustained from the ground-up. Value-Based Management follows the market-oriented theory of economic justice first advanced by the ESOP inventor Louis Kelso and the philosopher Mortimer Adler. (See chapters 4 and 9 in CESJ's Curing World Poverty: The New Role of Property.)

Value-Based Management offers workers an opportunity to participate as first-class shareholders in the company's equity growth, and in monthly and annual profits on a profit center basis. Experience has shown that where reinforced by a VBM culture, people become empowered to make better decisions, discipline their own behavior, and work together more effectively as a team. Because each person contributes, risks and shares as an owner, as well as a worker, VBM helps unite everyone's self interest around the company's bottom-line and corporate values.

Value-Based Management calls for a new philosophy of leadership. It holds that a genuine leader sees himself or herself as the ultimate servant and a teacher, one who empowers others to realize their hidden potential, not one who rules by fear or refuses to be accountable to others.

A well-designed Value-Based Management system sharpens and crystallizes the leader's philosophy around a set of universal moral principles. Through a participatory, company-wide process, the foundation is laid for an ongoing ownership sharing culture within the company. Such a culture typically incorporates an employee stock ownership plan (ESOP), individual and team performance feedback (i.e. formula-based cash profit sharing), ownership education and sharing of financial information, and structured participatory management and governance. VBM builds checks-and-balances in the governance and accountability system to allow executives flexibility to make traditional executive decisions, while avoiding unworkable "management by committee."

A Free Enterprise Approach to Economic Justice

In its deepest sense, management science can be understood as a branch of social morality--how our institutions can be organized to promote the dignity and empowerment of each person affected. Reflecting this, Value-Based Management embodies the interdependency between universal moral values and material values. VBM offers a set of principles and a system for promoting a free enterprise version of economic justice within the emerging global marketplace.

Value-Based Management starts with a recognition of the value of each person--each customer, each supplier and each worker. Value-Based Management respects the dignity of all forms of productive work and recognizes that, regardless of a person's function or role in the company, we are all workers.

The economic purpose of Value-Based Management is to help empower people and raise their human dignity and quality of life. Its principal means for achieving this end is expanded capital ownership.

The ESOP: A Vital Key to a VBM Culture

Value-Based Management is designed to provide every worker with the most effective means to become a co-owner of the place where he works. The Employee Stock Ownership Plan (ESOP) was created to provide workers with access to capital credit--previously available only to those with significant accumulated assets--and to pay for their shares out of future corporate profits which they help the company to earn.

 
In terms of Value-Based Management, the ESOP, by itself, is insufficient. Without a clear articulation of shared moral values and the systematic dispersion of power and accountability in a company, the ESOP can been used as a tool to exploit workers and deprive them of their ownership rights, thus violating the fundamental principles of justice underlying Value-Based Management. An ESOP based on VBM principles respects the property rights of every shareholder.

The Basic Elements of Value-Based Management  

Value-Based Management is an ethical framework for succeeding in business. As such, VBM balances moral values with material values.

VBM's three notions of value are:

1. A foundation of shared ethical values--starting with the belief in the intrinsic value of each person (each employee, customer and supplier).

2. Success in the marketplace based on delivering maximum value (higher quality at lower prices) to the customer.

3. Rewards based on the value people contribute to the company, as individuals and as a team, as workers and as owners.