Regulating Shareholder Value: A Case Study of the Introduction of Value–based Measures in a Water Company
| Author | C. Minchington,G. Francis |
| Date | 01 December 2002 |
| DOI | http://doi.org/10.1111/1467-8551.00240 |
| Published date | 01 December 2002 |
Introduction
This case study is based around a series of semi-
structured interviews with accountants and man-
agers within a privatized UK regional water
company. The interviews took place prior to, and
during the implementation of, a new value-based
management (VBM) system. The paper describes
how the system was developed within the context
of a regulatory environment that presented special
considerations and challenges to the company
in designing an appropriate system. The move to
a VBM system presented a step change in finan-
cial accountability for managers who, until only
recently, were still operating with cash and capital
budgets. A particularly notable characteristic of the
VBM system was the pragmatic way in which the
accounting technicalities were treated in order to
motivate the managers towards goal congruent
behaviour.
The paper considers the motivation behind the
drive to a new performance measurement system
and the technicalities underpinning the system.
The management of the implementation and the
barriers to implementation that arose are exam-
ined. The regulatory environment places unique
constraints and challenges on water companies (see
Dean, Carlisle and Baden-Fuller, 1999; Ogden and
Anderson, 1999), and these are examined by this
phenomenological study. There are, however, many
implementation issues highlighted which were
common to those revealed by many of the organ-
izations in a questionnaire survey about the use of
value-based metrics as divisional performance
measures (see Francis and Minchington, 2000).
This case study explores why and how a
specific company developed a new performance
British Journal of Management, Vol. 13, 233–247 (2002)
© 2002 British Academy of Management
Regulating Shareholder Value: A Case
Study of the Introduction of Value-based
Measures in a Water Company*
G. Francis and C. Minchington†
Performance Management Research Unit, Open University Business School, Walton Hall, Milton Keynes
MK7 6AA, UK and Visiting Lecturer, Waikato Management School, Waikato University, New Zealand;
†Head of Education, ACCA, 29 Lincoln’s Inn Fields, London WC2A 3EE, UK
Corresponding author email: gajf@mngt.waikato.ac.nz
The implementation of a value-based measurement system within a privatized UK
regional water company is examined by means of a longitudinal case study. Evidence
is presented of how the system was developed within the context of a regulatory
environment, which presented special considerations to the company in designing and
implementing an appropriate system. In particular the paper considers the
implementation issues surrounding the management of the introduction of the value-
based measures at the operational level. The authors describe the drivers behind the
introduction of the new system and the technical, political and cultural challenges
raised by its implementation.
* The authors thank the Chartered Institute of
Management Accountants, Schroders, Jackie Fry,
Stewart Lawrence and Alan Sangster for their
assistance with this project and all those who made
constructive comments at the British Academy of
Management Annual Conference. We also acknow-
ledge the constructive and helpful comments of the
anonymous reviewers.
04_Francis 26/11/02 1:09 pm Page 233
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