Quality, a Key Value Driver in Value Based Management

Abstract

VBM recognizes that financial performance – based on profit and the value of capital – depends in a causal way on the level of quality of products and processes, and that therefore quality is the condition for producing value for the client and financial value for shareholders. Quality is an “elusive” concept, but for VBM I hold there are three notions of quality to consider in the value production process:

– functional quality, according to which the product must be appropriate for satisfying the needs and aspirations of the clients;

– design-based quality, according to which the product must, in any case, conform to a design, prototype, or standard;

– environmental quality, according to which the product must not only satisfy the clients but be compatible with the environment.

This paper has a twofold objective.  It seeks above all to analyze the different ways VBM must use to consider quality as a value driver; and, secondly, to indicate the guidelines based on which VBM can develop a strategy of Total Quality Management, or Company-Wide Quality Control, which is integrated with the other “value creating strategies”.