Value Management 價值管理

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Note

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.

Value 價值

    • 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.
      “功能”可包含各方的價格、好處、用處、代替成本、關係、等等。
    • "Resources” can include costs, time, labour, materials, plant, effort, waste, etc. of ALL parties. 
      “資源”可包含各方的成本、時間、人工、材料、機械、努力、損耗、等等。

    Worth 代替成本

      • "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.
        英文的"worth"一般亦解作價值或值得否，但在價值工程，它有特別的含意，乃指達到同樣功能的其他辦法的成本。若此"代替成本"比現行方法的成本低，則意味現行方法的價值低。

      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

      1. Not necessarily cost reduction.
        不一定是減錢。
      2. “Cost” can be non-financial.
        ”成本” 可以不是金錢上的。
      3. Enhancing Value by:
        提升價值，可：

        • Reducing resources;
          減低資源；
        • Keeping resources unchanged;
          維持資源不變；
        • Increasing resources to a lesser extent;
          增加資源但幅度較細；
        • Increasing the extent of existing functions;
          增加現有的功能的程度；
        • Expanding the scope of functions.
          擴大功能的範圍。

      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)
        介紹階段 (六階段前)
      • Information Phase
        資訊明暸階段
      • Function Analysis Phase
        功能分析階段
      • Creative Phase
        方案創造階段
      • Evaluation Phase
        方案評估階段
      • Development Phase
        擇優深化階段
      • Presentation Phase
        總結報告階段

      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.
      • Non-adversarial.
      • 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.

        Brainstorming Rules

        • 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

        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.

        Process

        (Section added 8 February 2019)

        • Why?

          • Select the most significant and promising ideas for adoption
        • How?
          • 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

        Criteria

        (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
            • Easier
          • Some quantitative qualifiers preceded by "more than / less than / equal to" and the like:
            • Monetary
            • Temperature
            • Quality grade
            • Environmental assessment grade
            • Life span 
          • Aspects to study:
            • Quality
            • Price
            • Life cycle cost
            • Time
            • Life span
            • Maintenance
            • Operational use 
            • Risks
            • Safety
          • 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.

          Voting

          • 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.

          Tabular Comparison

          • 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.

          Column Chart

            • The results may be presented as a column chart for visualisation:

            Bar Chart

                • Or as a bar chart:

                Collective Scoring

                  • 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.

                  Radar Chart

                        • 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:

                        Pareto Principle

                              • 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:

                                    • Visualisation:

                                    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.

                                          Pairwise Comparisons

                                          • 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

                                           

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