Value Management 價值管理Value Management 價值管理 KCTang Fri, 08/02/2019 - 14:20
Revised 28 February 2019 to add Process and Criteria
Created 31 January 2018
Different Terms 不同的名稱
- Value analysis 價值分析 - Original name used to refer to the methodology used to analyse the values of the various components of a product.
- Value engineering 價值工程 - A later name used when the methodology has been more well established as a system. It is said to be more focused on the technical aspects of the value study.
- Value management 價值管理 - An even later name used when the methodology has been adopted for services and processes. It is said to be more focused on the strategic or policy aspects of the study.
- Value methodology 價值方法 - A name referring to the methodology used in the value study.
- They should now be regarded as synonymous without being too academic to distinguish between them.
- Standard equation: Value ≈ Functions / Costs.
標準方程式： 價值 ≈ 功能 / 成本。
- Modified equation: Value ≈ Functions / Resources.
修訂方程式： 價值 ≈ 功能 / 資源。
- “Functions” can include prices, benefits, uses, worth, relationship, etc. of ALL parties.
- "Resources” can include costs, time, labour, materials, plant, effort, waste, etc. of ALL parties.
- "Worth" has a special meaning in VE/VM. It means the cost of achieving the same function using alternative means. If the worth is less than the cost of the present means, the present means has poor value.
Value Index 價值指數(性價比)
- Value index = worth / cost of a function = function worth / function cost . If worth < cost, i.e. value index < 1, then the function has poor value.
- Somebody uses value index = cost / worth, then if cost > worth, i.e. value index > worth, then the function has poor value.
- It is suggested to use the former formula, because it is more consistent with the Value ≈ Functions / Resources formula and the intuition that higher value ratio is better.
Purposes of VM 價值管理的目的
- Not necessarily cost reduction.
- “Cost” can be non-financial.
- Enhancing Value by:
- Reducing resources;
- Keeping resources unchanged;
- Increasing resources to a lesser extent;
- Increasing the extent of existing functions;
- Expanding the scope of functions.
- Reducing resources;
Value Study 價值研究
- A specific study on a particular product, service, process or entire project using VA / VE / VM to improve value.
- Usually done by conducting a workshop attended by many stakeholders representing different expertise, needs and interests.
- A value study should have the following three-stage process:
- Pre-workshop preparation;
- Value workshop;
- Post-workshop documentation and implementation.
Six-Phase Value Workshop 六階段價值工作坊
- Introduction Phase (preceding the 6 phases)
- Information Phase
- Function Analysis Phase
- Creative Phase
- Evaluation Phase
- Development Phase
- Presentation Phase
Similarity of the Processes of Various Management Models
- They all call for cyclical and continual review and improvements.
- A VM workshop is only a start at the “plan” stage and that continual review and improvements would be required throughout the course of project delivery.
Integration of Various Management Models
- Integrity management is the backbone throughout, and can be considered as part of the risk management.
- Quality, health and safety should be the basic minima that a project should achieve. They are only a sub-set of all the risks which may be encountered.
- Risk management is about preventing or mitigating risks in order to make a project successful.
- Value management is about adding value to the project on top of mere success.
- Non-contractual partnering helps people work easier and smoothly.
Ground Rules of Workshops
- Equal right and opportunity.
- Mutual trust and respect.
- No pre-judgement.
- Better value creation.
Persistent Critical Questions
- First ask "Do What" to identify the functions of the particular product, service, process or entire project being studied.
- e.g. [Do A], [Do B], [Do C].
- Phrase "Do What" in the form of a verb followed by a measurable noun to represent a simple and single function.
- The verb is to represent the action achieving the function.
- The measurable noun should represent the object to be acted upon to achieve the function.
- The objects should not use the names of the actual components making up the product, service, process or project so as to free up the choice of the components.
- Then ask "<-- Why" and "How -->" to link up the relationship of the functions.
- Why? [Do A] <-- in order to <-- [Do B] <-- in order to <-- [Do C].
- How? [Do A] -- by --> [Do B] -- by --> [Do C].
- Linked path: [Do A] -- [Do B] -- [Do C].
- Asking ”Why“ can help align objectives and ultimate goals on the far left.
- There can be functions not linked up in the horizontal manner but branched off at the same time, e,g. when [Do B], [Do C] also happens at the same time.
- There can also be parallel paths, or functions which happen at one time or all the time.
- Then ask "Why not" and "What else" to challenge the existing and generate new ideas.
- State ideas quickly.
- Quantity more important.
- “Free-wheeling” welcome.
- OK to state the obvious, to repeat, to think out of the box.
- OK to add upon, combine, improve on others’.
- OK to twist or turn around others’.
- No explanation required.
- No criticism, doubting, judgement.
Evaluation as a Phase or a Technique
- The Evaluation Phase follows after the Creative Phase where creative ideas are evaluated to judge their values.
- During the Information Phase and Function Analysis Phase, some prioritization, shortlisting and selection may be conducted.
- Each of these actions would involve some kind of evaluation techniques and judgement.
- Therefore, evaluation occurs across the whole process of value study.
(Section added 8 February 2019)
- Select the most significant and promising ideas for adoption
- Consolidate ideas
- Group similar ideas (no screening!)
- Review ideas critically
- Advocate or doubt-cast (but no scoring yet!)
- Adjust and expand ideas
- Determine criteria
- Observe overall objectives
- Observe individual functions
- Suggest criteria (no judging yet!)
- Group similar criteria (no screening yet!)
- Review criteria
- Adjust and expand criteria
- Weigh criteria (5 to 10)
- Score ideas
- Recommend ideas
- Consolidate ideas
(Section added 8 February 2019)
- Using a noun, e.g. time, as a criteria is not sufficient. Do you want shorter time (fast project) or longer time (long lasting battery)? A criteria should have some qualitative or quantitative qualifiers.
- Some qualitative qualifiers:
- Lower, higher
- Shorter, faster, longer, just in time
- Excellent, better, just OK
- Some quantitative qualifiers preceded by "more than / less than / equal to" and the like:
- Quality grade
- Environmental assessment grade
- Life span
- Aspects to study:
- Life cycle cost
- Life span
- Operational use
- Combine a qualifier and an aspect to form a qualitative criteria, e.g.:
- Shorter time
- Good safety
- Qualitative criteria may be more specific and may become screening criteria, e.g:
- Less than one month
- Zero accident
- Not more than ... accident rate
Units of Measurement
- When all the functions and resources can be converted into monetary units, the evaluation of the values will be much easier.
- However, not all can be converted into monetary units, then some other common units of measurement should be devised, e.g. some scientific units, mass, energy, speed, time.
- Yet, in many cases, there are no suitable monetary units or scientific units, human subjective views are to be adopted.
- When human subjective views are to be adopted as units of measurement, they have to be quantified, even for qualitative views, after thorough discussions.
- One can make and record one's own choices in whatever manner, but voting is the best way to express collective views in a quantitative manner.
- VM is about collective wisdom and collective decision.
- Dominance by the bosses or vocal people should be avoided.
- During group discussions, vocal people would involuntarily speak more to express their views or influence other people.
- Voting giving better chances for everybody to express free will and choices should be preferred.
- Voting can be by:
- Ballot paper - confidential, but needs time to count.
- Show of hands - quick, but may be dominated by bosses or vocal people.
- Show of figures (0 for no support, 1 for least support, 5 for strongest support) - expressing different degrees of support.
- Marking or sticking voting points on a displayed list of choices - quick and not dominated by others.
- When selecting top few choices out of many choices, give sufficient number of votes to each participant:
- e.g. for 30 participants each suggesting 3 choices, there will be 90 choices.
- When the participants are asked to vote for the top 10 choices, and each participant is allowed 10 votes, then the total number of votes will be 300 votes.
- Which number when divided by 90 choices will mean 5 votes per choice on the average.
- If the participants' choices are very diversified, each of the top 10 choices may only have a small number of choices of 10 to 20.
- Therefore, it would be better to give more than 10 votes to each participant.
- If desired to amplify the preferences between each participant's own choices:
- Request the participant to indicate on each vote a weighting on a scale of 5 or 3.
- Workshop participants may be asked to give scores on a scale of 10 for expectation and achievement to identify the gap between the two.
- An example is as follows:
- The aspects help people focus on the areas for present consideration and further study.
- Each aspect may be guided with evaluation criteria (e.g. on time, within budget, least environmental harm, good health, good quality, good safety, or further breakdown) for scoring.
- The scoring direction must be clarified, e.g. time or cost may be scored as 0 for very poor time or cost control or as least time or cost overrun, of totally reversed meanings.
- In this example, 5 is treated as the passing score for on time and within budget, and 10 as the excellent performance.
- The scoring scale may be a 5-point scale such as:
- 5 for excellent;
- 4 for good;
- 3 for fair;
- 2 for marginal;
- 1 for worth something;
- 0 for not supported.
- The results may be presented as a column chart for visualisation:
- Or as a bar chart:
- It may not be possible to agree the scores between a group of participants quickly without being dominated.
- Voting may need to be conducted.
- Each participant will give his/her score for each Aspect.
- The scores are then totalled and averaged per Aspect as follows:
- A show of figures based on a 5-point score will be quicker than a 10-point score.
- For an even quicker gathering and presentation of the scores at the workshop, a radar chart would be very useful.
- Here, there are three participants each having been requested to indicate their expectation and achievement scores for each aspect by putting a dot on a 10-point scale axis.
- After that, the approximate centres of gravity of the dots of different aspects are connected together.
- The distance between the two connecting loops will be the gap.
- For a workshop where the number of aspects or criteria to be scored is unknown in advance, a hand drawn circular radar chart with the number of axes flexibly added may be adopted:
- Also known as the 80/20 rule, or the law of the vital few.
- Roughly 80% of the effects come from 20% of the causes.
- Applying the principle generally:
- Focus on the significant 20% causes to generate 80% effects.
- When applied to construction costing:
- 20% of the items in the pricing documents represent 80% of the costs.
Most Cost Significant Items
- The most cost significant items should be selected for value study because they have the greatest potential for and impact of cost savings.
- Components listed in the regular cost reports:
- Sorted in the descending order of their costs:
Priority Rating of Intangible Items
- For intangible aspects of products, services, processes or projects, they can be rated by a single set or two sets of scores as follows, where the product score = importance score x probability score:
- Similar scoring concept has been used in risk management.
- The same can also be applied to the selection of value options.
- For physical components of products and projects, only one final value option would be chosen for a component.
- However, for intangible aspects of products, services, processes and projects, more than one value option may be adopted for achieving the same objective..
- But, because of limited resources, not all can be adopted.
- The above multiple scoring method may be used to select the top priority value options.
Comparison of Two Options
Like school examinations, the simplest way to calculate scores to compare between two options (projects below) would be as follows:
- This is useful when every score counts for precision (passing marks in examination) and the scores at columns B and C can be countable.
- Collective scoring as described above may be conducted when precision is not tha critical.
Multiple Criteria Comparison
If the aspects or criteria should not carry equal weight, then weighting of the aspects or criteria would be required:
The following shows the results if the same group of participants scored on a 10-point scale at the same time:
The following shows the results if the same group of participants scored on a 5-point scale at the same time:
The above 3 sets of results show that the absolute degree of accuracies may vary but the relative merits are not affected very much.
- A more detailed method to determine the relative ranking of different aspects or criteria is by pairwise comparison.
- A pairwise comparion is done by asking: between the pair of aspects or criteria at the left and at the top, which one is preferred, then write down the preferred one in the intersecting box.
- The total occuurence is then counted and the proportion calculated.
- The following is based on the ranking shown above.
- Note that if the comparison is done independently, the results may be very different because participants may say safety is of paramount importance.
- The above shows that Environment having the lowest ranking will score zero.
- This would not be used when the proportion is used as weightings.
- The following gives at least one vote for one aspect to avoid zero proportion, the ranking remains the same.
- Weighting may be added when doing the pairwise comparion by giving, for example, 3 for strongly preferred, 2 for moderately preferred, 1 for preferred.
- There are many formats and ways of pairwise comparion tables.
Life Cycle Costs
- When comparing different options having different patterns of initial costs and long term running costs, their life cycle costs should be worked out and compared.
- See Life Cycle Costing.
Action Plan of Applying VM on Intangible Aspects