Value Creation in a ‘Non-Producing’ Enterprise

Journal of Economics and Business

ISSN 2615-3726 (Online)

ISSN 2621-5667 (Print)

Published: 30 March 2019

Value Creation in a ‘Non-Producing’ Enterprise

Uyiosa Omoregie

Corporate Planning Department, Brass LNG, Lagos, Nigeria

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10.31014/aior.1992.02.01.78

Abstract

A widely-held proposition is that an enterprise does not create value until it commences production of goods or services for external customers for monetary profit. Another related proposition is that employees in a ‘non-producing' enterprise if remunerated, are paid 100 percent above the value of their labour – because the enterprise is not creating value. Counter-arguments to these two propositions are presented. To provide justification and support for the counter-arguments, the purpose of a firm or business enterprise is discussed and the nature of ‘value' is elaborated with a critique of the dominant marginal productivity theory of value. An example of a non-producing enterprise: A liquefied natural gas (LNG) company at ‘pre-operation' stage is presented. LNG companies often lock-in customers with 20-year contracts before commencing production – this is value creation. Value, it seems, is not in the eyes of every beholder but found in the eyes of the shareholders of an enterprise who can use key performance indicators (KPIs) and enterprise risk management (ERM) to track employees' value creation throughout the life cycle of the enterprise.

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