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The Value Management Process

Introduction

Value Management evolved in the United States in the post World War II era when supply shortages compelled the manufacturing industry to use alternatives or substitutes.  In many cases it was noticed that the use of alternatives had both reduced costs and improved the performance of the product.

Value Management has since expanded significantly and is now used in a large number of industries.  The applications range from defence related procurement contracts to the development and construction industries.

As to results, the process has consistently achieved high levels of cost savings in both capital and recurrent terms.  In the Government sector, US Federal agencies have made grants or allocations of funds subject to the inclusion to the Value Management process in both program and project development.

In Australia, Value Management in the construction industry was initially used by the private sector.  Some major construction companies have a dedicated Value Management resource.  However, in the Australian construction industry, Value Management initially related to the review of design development principally with the intention of reducing the cost of the total project.  In addition, Value Management has been used to make significant improvements in the operations of manufacturing companies, product development and manufacturing processes.

Among public sector agencies, a number have established Value Management procedures and dedicated resources.

The Value Management approach is used around the world with Institutes of Value Management in Britain, France, Japan, the United States and Hong Kong to mention a few.

The process has moved beyond manufacturing and engineering to the “soft” end of problem solving such as Strategic Planning, Concept Validation and Development, Project Evaluation and Development, Risk Management, Organisational Restructuring and Business Re-engineering. Value Management is used by the private sector as well as federal, state and local government organisations.

Value Management is covered by the Australian Standard, Value Management AS 4183.

Value Management is a structured and analytical process in which a defined Work Plan is followed to improve value and, where appropriate, value for money in products, processes, services, organisations and systems. The process may be applied to management decision making at any level of an organisation and is equally appropriate for public and private sector applications.

Both public and private sector organisations require value for money to be achieved in delivery of services. By way of example, the Commonwealth Procurement Guidelines state that value for money is the core principle underpinning Australian Government procurement.

While Value Management can be applied in ongoing project and general management within any organisation to improve value or value for money, it is also a powerful process that may be used to develop agreement, understanding and commitment when applied to the resolution or optimisation of particular issues.

Overview

What will it do for you

Value Management can solve problems creatively and economically by:

Ø       Improving communications,

Ø       Resolving conflicts,

Ø       Challenging assumptions,

Ø       Identifying unnecessary expenditure,

Ø       Generating alternative ideas,

Ø       Promoting innovation,

Ø       Maximising resources,

Ø       Saving time, money and energy,

Ø       Simplifying methods and procedures,

Ø       Eliminating redundant items and

Ø       Updating standards, criteria and objectives.

 Value Management is not about seeking cheap solutions.

Value Management is about clarifying and satisfying customer needs; about creating ideas as to how a system can best “do its job” at appropriate levels of quality and performance.

Value Management and Continuous Improvement complement each other. One of the possible outcomes of a Value Management Study is the identification of areas where using the detail work place based approach of Continuous Improvement may result in significant gains.

Underlying the Value Management theory is the principle that there is always more than one way to achieve a function and that examination of the alternatives will produce the most acceptable conclusion.

Definition

Value Management is a structured facilitated process  in which decision makers, stakeholders, technical specialists and others work collaboratively to bring about value based outcomes in systems, processes, products and projects

Value Management is also described as a tool for your use that provides a structured, systematic and analytical process which seeks to achieve value for money by providing all the necessary functions atthe lowest total cost consistent with required levels of quality and performance

The Value Methodology

Value Management Studies are centred upon a participatory workshop involving a multi disciplinary, representative group of people working together, led by an independent facilitator, to seek the best value or value for money outcome for a particular situation.

The process is essentially one of participatory problem solving and planning in which project teams and technical experts work with decision makers, community representatives and other stakeholders, as appropriate, in a workshop format seeking to gain a common level of understanding of the facts and issues; identify what happens now and those functions that the scheme must perform; and subsequently developing value added strategies and solutions.

Considerable advantage is gained by capitalising on the synergy that is developed, and from the potential “constructive overlap” of expertise within the group.

Five essential elements in Value Management Studies have been identified. These elements comprise:

·          A prescribed Value Management Study Work Plan,

·          An appropriate mix and commitment of participants,

·          Management of the Value Management Study,

·          Senior management commitment and support and

·          Effective facilitation.

A Value Management Study may span in excess of 3 months from the initial client meeting to the presentation of the Study report.

Stages and Activities of a Value Management Study

Pre Workshop Planning

·          Prepare and review the Value Management brief,

·          Select Study participants,

·          Organise a venue,

·          Gather and distribute relevant information,

·          Prepare the facilitation strategy and agenda and

·          Brief participants as required.

 

The Workshop

·          Confirm the Study scope and objectives,

·          Build knowledge and understanding of the project and its context, including the attributes of value and value for money to be analysed,

·          Establish criteria for success,

·          Generate multiple ideas to improve value,

·          Evaluate ideas against criteria for success and

·          Develop options and proposals including recommendations and, where appropriate, decisions and prepare an action plan.

Post Workshop

Debrief with the client and prepare and deliver the Study report.

Post Study

Implement the Study recommendations.

What is Value?

In the context of a Value Management Study, value is defined as an attribute of an entity determined by the perceived usefulness, benefit and importance of the entity.

Value for money, or resources used, is a comparative measure among alternatives of the relationship between value and the associated total costs or resources used.

Function Analysis

A key differentiator of Value Management from other problem solving processes is function analysis. This involves clearly identifying what things actually do, or more importantly, what they must do to achieve the project objectives. The functional analysis perspective not only enables Value Management to explore the project and/or program brief but also to test the assumptions and needs perceived by the author(s) of the brief.

The Value Management process is function based not component based.

Function Analysis is a structured process that identifies and analyses functions, their interrelationships and, where appropriate, total costs or resources used.

Functions can be divided into two main categories, Essential Functions and Supporting Functions.

Essential Functions identify the primary purpose of a product, service or process. They are essential to make the product, service or process work.

Supporting Functions describe other purposes not directly accomplishing the primary purpose but supporting it or resulting from a specific approach. Supporting Functions can be grouped under four headings:

·          Assure Convenience,

·          Assure Dependability,

·          Satisfy User (Customer) and

·          Attract User (Customer).

Another important concept is the “Ladder of Abstraction”. This assists in establishing an order or hierarchy of the functions. By asking the questions “Why” and “How” you move up or down the ladder of abstraction from outcome focused functions to functions that describe specific actions to achieve the desired outcomes.

Identifying functions provides a precise and concise understanding of the project, service or process under consideration and is a very effective tool in aiding communication.

The Workshop Process

The workshop consists of five major phases:

·          Information,

·          Analysis,

·          Creativity,

·          Evaluation, and

·          Development.

During the first day participants are in a divergent mode, gathering and analysing information and exploring ideas. On the second day they converge to solutions based on facts, not assumptions and opinions.

Information Phase

During this phase participants explore the current environment the project operates within; differentiate facts from opinions; identify what the project currently does, including wanted and unwanted functions; and identify issues associated with the project.

Analysis Phase

During this phase participants identify which are the key issues and what are the essential functions that the project must deliver. Key stakeholders may also be identified at this time.

The Information and Analysis phases of the workshop give participants an opportunity to share knowledge and build on their understanding of the project, the issues confronting the project and essential outcomes to ensure a successful outcome.


 

Creativity Phase

Individually participants generated ideas to eliminate unwanted functions, deliver essential functions and deal with the key issues that had been identified.

Evaluation Phase

In plenary, the workshop participants evaluated the ideas that have been generated subjectively on the basis of:

·          It is a good idea – develop it further at this workshop.

·          It is a good idea, but needs more work outside this workshop.

·          Note for reference as the project develops.

·          Outside the scope of the workshop.

·          Discard.

Development Phase

Working in small groups, participants use the ideas generated in the creativity phase to develop strategies and action plans to enhance the project. The sub-groups are encouraged to identify time lines, accountabilities and responsibilities as well as give consideration to policy, financial and sustainability implications.

The small group work is then evaluated by all the workshop participants in plenary. The positive aspects of the proposals are noted, as are any concerns, dangers or potential pitfalls and any ideas that may offer improvement opportunities or address concerns.

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Last modified: 28-Jan-2013