Sunday, April 12, 2009

Value Management - A Group Decision-Making Process to Achieve Stakeholders’ Needs and Expectations in the Most Resource-Effective Ways

Key definitions:
 ‘‘ Value has been defined as a ratio between ‘Quality & Cost’, ‘Function & Cost’, ‘Worth & Cost’, ‘Performance & Resources’, ‘Satisfaction of needs & Use of resources’ and ‘Benefits & Investment’. All those ratios and others are acceptable, as long as, on one side, lies the satisfaction of an explicit or implicit need and on the other, the resources invested to achieve it.’’ In the United States and U.S.-influenced countries like English Canada, the Middle East, Japan, the focus is on cost, whereas Europe and countries like Australia, French Canada, and Hong Kong have developed a broader view of resources.

 ‘‘ Value Management (VM) consists of the combined application of value methodologies and other methodologies at organizational level (from strategic to operational) in order to improve organizational effectiveness.’’ (In the U.S.-influence zone it is an umbrella term for VA and VE, whereas in Europe and other countries it is considered a management approach, as described in EN-12973:2000 European Standard).

 ‘‘ Value Analysis (VA) and Value Engineering (VE) are specific value methodologies aimed at improving existing products or developing new products. Products can include both goods and services.’’

 ‘‘ Value Methodologies include all processes, tools and techniques derived from the work of Lawrence Miles. They specifically include the concept of functions and function analysis (and its derivatives), the concept of cross-functional teamwork and the concept of a structured process based on creative thinking (alternative left/right brain use).

Value Management Today: A Style of Management
At a management level, VM is based on three root principles:
1. A focus on objectives and targets: stakeholders’ needs and critical success factors
2. A focus on the function: purpose of the product, system, or service
3. A continuous awareness of value: measures for improvement and innovativeness

There are three key concepts that underlie all value methodologies:
(a) A transverse approach, translated in practice by cross-functional teamwork. The VM methodology is based on a multidisciplinary team approach in a workshop environment; it enables the team to broaden perspective, assess every angle, share opinions, and reach consensus.
(b) A structured decision process leading to better business decisions. The VM process is a systematic approach, based on creative thinking, which uses time in the most efficient way to ensure that the scope of the VM study is covered in the best sequence.
(c) The use of functions, increasing effectiveness and enhancing competitiveness. VM relies on functions, rather than on predefined solutions, to identify the expected outcome of a project, thus allowing evaluation of a broader range of possible options.

The application of VM at the organizational level is a source of competitive advantage. The combined use of a cross-functional group process, the concept of functions and of creative thinking principles combined to foster learning and enhance innovation, creates an undeniable combination of differentiation and implicit knowledge, leading toward competitive advantage.

Organizational decisions are often characterized by a high degree of uncertainty (lack of information), ambiguity (conflicting information), and stress (lack of time). Group decision making (GDM) enhances the ratio of facts versus assumptions, the quality (truthfulness) of information, consensus and objective sharing, and group commitment to decisions (also a relief of stress). VM is a GDM process that through sense-making will reduces ambiguity and enhances quality of information, and builds consensus and buy-in from participants in the process. At the elaboration phase, it uses scope definition, feasibility, and risk management concepts to increase the level of information and reduce uncertainty, as well as the possibility to develop more resource-effective options. If the players are well chosen among the key stakeholders, VM will increase decision support and implementation success through its participative group process.

To be most effective, value management must be linked to strategy, success factors, programs, and prioritization, as well as to change management. VM is a group decision management (GDM) process, which enables groups of stakeholders to make sensible and well-grounded strategic decisions, based on needs; define and prioritize expected benefits; and quantify them. It also enables program managers to select and prioritize projects and other actions, based on the expected benefits that have been defined at a strategic level and the most effective use of resources. Value management, if it is applied at the project gateways and program appraisal phase, becomes a change management methodology that ensures a choice of options directly related to the expected benefits.

VM is the method of choice to deal with the ambiguity of stakeholders’ needs and expectations and the complexity of changing business environment at program level and project initiation. It will bring structure and objectivity to what has often been a highly subjective and intuitive process and provide a framework for decision making throughout the delivery process. The VM process requires involvement of the whole program/project team, at different levels and times, but to be effective, decision makers—with authority over resources—must be involved at all stages of the process.



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