Home > Value Management > What is Value Management

This section has been broken down into the following sections

• Introduction
• Concept of Value
• The Key Principles
• The Benefits of Value Management

Introduction
Value Management is a style of management particularly dedicated to motivating people, developing skills and promoting synergies and innovation, with the aim of maximizing the overall performance of an organization.

Value Management has evolved out of previous methods based on the concept of value and functional approach. These were pioneered by Lawrence D. Miles in the 1940's and 50's who developed the technique of Value Analysis (VA) as a method to improve value in existing products. Initially Value Analysis was used principally to identify and eliminate unnecessary costs. However it is equally effective in increasing performance and addressing resources other than cost. As it evolved the application of VA widened beyond products into services, projects and administrative procedures.

The Value Management Approach involves three root principles:

• a continuous awareness of value for the organization, establishing measures or estimates of value, monitoring and controlling them;
• a focus on the objectives and targets before seeking solutions;
• a focus on function, providing the key to maximize innovative and practical outcomes.

Concept of Value
The concept of Value relies on the relationship between the satisfaction of many differing needs and the resources used in doing so. The fewer the resources used or the greater the satisfaction of needs, the greater the value. Stakeholders, internal and external customers may all hold differing views of what represents value. The aim of Value Management is to reconcile these differences and enable an organization to achieve the greatest progress towards its stated goals with the use of minimum resources (see figure below)

It is important to realize that Value may be improved by increasing the satisfaction of need even if the resources used in doing so increase, provided that the satisfaction of need increases more than the increase in use of resources.

The Key Principles
Value Management is distinct from other management approaches in that it simultaneously included attributes which are not normally found together. It brings together within a single management system:

• Management style
• emphasis on teamwork and communication, 
• a focus on what things do, rather than what they are (functional approach); 
• an atmosphere that encourages creativity and innovation; 
• a focus on customer's requirements and 
• a requirement to evaluate options qualitatively to enable robust comparisons of options

• Positive human dynamics
• teamwork - encouraging people to work together towards a common solution;
• satisfaction - recognizing and giving credit;
• communication - bringing people together by improving communication between them;
• fostering better common understanding and providing better group decision support;
• encouraging change - challenging the status quo and bring about beneficial change;
• ownership - the assumption of ownership of the outcomes of Value Management activities by those responsible for implementing them;

•  Consideration of external and internal environment
• external conditions - taking account of pre-existing conditions external to the organization over which managers may have little influence;
• internal conditions - within the organization there will be existing conditions which managers may or may not be able to influence;
• degrees of freedom - the external and internal conditions will dictate the limits of potential outcomes and should be quantified.

• Effective use of methods and tools.
• means of achieving outcomes.

The Benefits of Value Management
The most visible benefits arising out of the application of VM include:

• better business decisions by providing decision makers a sounds basis for their choice;
• improved products and services to external customers by clearly understanding, and giving due priority to their real needs;
• enhanced competitiveness by facilitating technical and organizational innovation;
• a common value culture, thus enhancing every member's understanding of the organization's goals;
• improved internal communication and common knowledge of the main success factors for the organization;
• simultaneously enhanced communication and efficiency by developing multidisciplinary and multitask teamwork;
• decisions which can be supported by the stakeholders.

The benefits are available to providers and consumers in all sectors of society:

• The industrial sector including manufacturing, construction and processing;
• The services sector, both public and private;
• The government, health, education and other public activities.

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