Creating Value in Organizations
New Horizons in Management series
Chapter 2: Clarifying the Meaning of Value
Before we continue with our discussion of the underlying structure and implications of the Competing Values Framework, we want to brieﬂy discuss what we mean by value creation. Because creating value is the ultimate objective of leadership and eﬀective organizational performance (illustrated by Figure 1.1), clarifying the meaning of value and explaining how the framework is used by leaders to enhance value creation is necessary. In other words, we must address the question, ‘What is value, and why must leaders care about value creation for their organizations?’ The chief reason that people are employed by the organizations in which they work is because the beneﬁts they produce for their organizations exceed the cost to the organizations of producing those beneﬁts. Viewed from this perspective, people are value creators in organizations when the value of what they generate exceeds the value of what they consume. They create value when they increase the ﬂow of beneﬁts being produced for organizations, or when they reduce the amount of resources being consumed to produce those beneﬁts. Producing more beneﬁt than cost makes them value creators. This value may take the form of products or services, meaningfulness in work, expanded opportunities, personal energy, positive example, interpersonal support, and so forth. Similarly, organizations create value when the products and services being produced provide greater beneﬁts to customers than the costs of producing those products and services. When organizations achieve the goals expected by shareholders, sponsors, customers, and...
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