Adam Roberts - Value Management

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Papers > Value Management

What is Value Management?

Adam Roberts (2013)

Introduction

I was sitting in a small room in the Leeds Metropolitan University library discussing Value Management and it became evident to me that I wasn’t the only one that was a little confused, when asking the question as to ‘What is Value Management?’ It seemed to me that the disagreement revolved more around the definition of Value.

Jeremy asked the question “Is Value Management Objective or Subjective?” John answered by suggesting that “It had to be objective”, Jeremy on the other hand said that “It was subjective” and the rest of the group sat on the fence. This got me thinking as to how 5 people who are interested enough in Value Management, that they meet regularly to sit on a Specific Interest Group committee (SIG) focusing on Value Management, couldn’t even agree on the most fundamental question - Subjective or Objective?

On a subsequent SIG meeting, Jeremy tabled a short paper on definitions, definitions that he had either interpreted or simply “made up” as to his understanding of the term. This created a further discussion and even more disagreement. Some of the members of the group did not agree with all of the definitions that Jeremy had proposed and other member’s thought that the creativity of these definitions was a good basis for discussion. I had the delusion that Value Management, Earn Value Management and Value Engineering were all, somehow linked, but John, David and Jeremy put me straight, advising me that Value Management and Earn Value Management were not connected, however David did point out that Value Engineering was a subset of Value Management. This was at least one point that the majority of the group agreed, suggesting that the best starting point should be to rule-out what we all agree that Value Management does not include.

Armed with the seemingly little knowledge, I set out to find out what was the general accepted definition and interpretation of Value Management, outside of the group, might be.

Methodology

My objective for this paper was to attempt to find some common ground on the definition of Value Management and to comment on how Value Management might be manipulated into becoming a worthwhile strategic tool in Project Management. By reviewing literature on the subject, taking into account the informal conversations that I have had, adding in some recent first hand experiences that I have had and by researching the subject on the internet. I will attempt to extrapolate some commonalities between the various definitions and offer a combination of multiple ideas and approaches to the subject.

Literature Review

Davies. R & Davies. A (1998) define Value by using the equation: “Value = Benefits – Cost”.

Heathcote. J (2013)defines Value as: “Value = Benefit / Cost”.

The Oxford dictionary <http://oxforddictionaries.com/definition/english/value> (21/07/2013)defines value as: “the regard that something is held to deserve; the importance, worth, or usefulness of something”.

The Institute for Value Management <http://ivm.org.uk/what-is-value-management.php> (21/07/2013) states that: “The concept of Value is based on the relationship between satisfying needs and expectations and the resources required to achieve them”.

 It is important to note that Davies . R & Davies. A (1998) define “Value for Money = Benefits / Cost” which is what Heathcote. J defines as Value.

In a paper published by constructing excellence in November 2004, <http://www.constructingexcellence.org.uk/pdf/fact_sheet/value.pdf> (21/07/2013), they define Value Management, as “Value Management is a creative, problem-solving process that uses a methodical approach to include the necessary parties and, working together, achieve the best solutions for value from construction”

Discussion & Argument

After reviewing the definition of Value, it is fair to say that Value Management is simply an accepted method of managing “Value” and that there are many processes that we can implement, to ensure that we are managing value effectively.  As with any process there is an initiation phase, which would include creating a plan of action to manage the process and a delivery phase, which would include managing the actions and tracking the effectiveness of those actions, finally there would be a benefit phase highlighting the result of the process.

If we were to assume that this model is correct and that the three main overlapping phases creating an additional two subsets, that of implementation and tracking. Then the figure below would be a fair representation of this mode.

For the purpose of this paper, I am going to focus on the two overlapping phases, that of implementation and Track-ability, as these two phases seem to be what differentiates a Value Management process from any other Project process.

Starting with Track-ability, unlike a project, Value Management may work from a knowledgebase assuming that the benefits outlined in the business case are accurate and can be related to a specific currency value. With a fixed budget, it is a simple calculation taking into account that Value = Benefit (as per the currency outlined in the business case) – Cost (as per the budget that has been authorized for the Value Management exercise). By using a simple scheduling tool such as Microsoft Project it should be easy enough to track the effectiveness of the Value Management process by using any number of tracking tools, one of which being Earn Value Management.     

Davies. R & Davies. A (1998)refer to Earn Value Management (EVM) as being “used successfully in both public and private sectors” when referring to tracking complex, high-risk programmes, thus suggesting that EVM, may have more of a relationship with Value Management then originally assumed.

Perhaps the most important phase in Value Management is the implementation phase. This part of the process may be subjective in the method of delivery, however one would expect that the outcome should be objective, with a specific goal. Davies. R & Davies. A (1998)Value Management is the transition of wishful thinking to causal certainty

There are many variances on how a Value Management initiative could be implemented; each will be relative to the individual situation, however this does not mean that there is a one size fits all approach and it is my belief that it is this area that further discussion is required.

It is also in this phase of the Value Management process that the individual subsets may become useful, for example in order to implement a Value Management process in an engineering environment, it would be beneficial to make use of a Value Engineering technique to create a more efficient product resulting in any number of value adding outcomes.

Conclusion

After reviewing various definitions and points of view regarding Value Management, there seems to be one common understanding and that is, that value may have a different meaning, depending on the business or person that is affected. By this, I feel that Value Management can be summed up by one sentence, that is possibly open ended enough to include most interpretations:  

Value Management is the process of increasing the perceived value of a defined requirement, where Value = Benefit - Cost.

It would seem that in some cases the implementation method of Value Management may be subjective, however the end goal should always be objective, with a clear defined implementation method. It is my opinion that all projects would benefit from an ongoing Value Management review, in order to continually asses the feasibility of implementing a process which would result in a decrease in the cost of the project whilst still delivering the benefit that is required in the business case.

Additional Note:

During research of this paper, I came across a quote from Davies. R & Davies. A (1998), which didn’t quite fit into the rest of the paper, but I felt that it was relevant to the overall conclusion, thus I have added this quote at the end of the paper.

Blame is the apportionment of failure, accountability is the ownership of solution”

REFERENCES

1.     Roger H. Davies & Adam J. Davies (2011); Value Management, Translating aspirations into performance – Gower Publishing Ltd.

2.     Heathcote. J (2013)  

3.     Oxford Dictionaries - <http://oxforddictionaries.com/definition/english/value> (21/07/2013)

4.     Institute Value Management - <http://ivm.org.uk/what-is-value-management.php> (21/07/2013)


WORK HISTORY

ASTAD Project Management - QATAR, Doha

 

London Underground Limited 

 

NHS Homerton Trust

 

M J Quinn

 

Wingate

 

Tube Lines Limited

 

RBEBS Limited Various

 

eVentFil Closed Corporation 

 

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