Value Management in Projects – Definition and Goals
In the broadest sense, value management can be defined as a process of delivering some benefit to a client. When we talk about project implementation, delivery of expected results and organization of activities, value management concerns the benefits that are derived by the customer from the successful implementation of a given project.
Let’s see an example. Activities for creating a better working environment and improving skills of customer support staff can be organized into a single project that should deliver:
- Some value to the customer
- Some business profit to the organization
The value of this project will be that customers receive better support service (the benefit) because the number of satisfied requests is increased. The business profit will be that the organization gets more loyal customers and earns better reputation because the customers are satisfied and ready to purchase more products or order new services.
That is all briefly about the concept of value management in projects. Now let’s review the definition and goals of this concept.
Value Management Definition
Value management is a combination of planning tools and methods to find the optimum balance of project benefits in relation to project costs and risks. It is the process of planning, assessing and developing the project in order to make the right decisions about the optimized balance of the benefits, risks and costs. Project value management allows increasing the likelihood of producing the deliverables and creating the benefits.
Following the given value management definition, a project manager needs to know how to critically appraise and analyze all tasks, activities and processes involved in the project in order to determine whether better value alternatives or solutions are available and to apply right decisions. The main idea is to ensure the number of wasteful processes is reduced and inefficiency in specific aspects of project implementation is avoided.
Value and Benefits Management
Value management is close to benefits management, but these two concepts within project management are not same. When we talk about managing benefits within a project, we focus on the actual results in relation to the expectations, so that to define whether the benefits are delivered to the customer. Project benefits management is generally about planning deliverables of the project.
Meanwhile, value planning and management within a project is about balancing the expected benefits with available financial resources and mitigating the probability of risk occurrence that may cause project failure. When we talk about project value management, we focus on cost analysis and risk mitigation and look for ways to make the benefits valued to the customer.
One such way to do this is to lean on solid data.
Projections and predictions based on this data are essential for communicating the value of a project and planning and preparing for the aforementioned risks.
This is what matters to your clients: hard facts and quantifiable data that represents the expected value of your project.
The key to this is to make it accessible and easy-to-understand. Raw data can be impregnable to the uninitiated, so pick out the essential statistics and facts and convert them into comprehensible actions and statements.
When the project brings some value, it is worth implementing and can be qualified in business terms. The customer gets the benefit and the performing organization (which implements the project) receives some profit.
The importance of implementing project value management consists in enabling customers to set and achieve their needs through workshops and status meetings that facilitate teamwork, collaboration and end-user buy-in. Implementation of various value management models allows focusing on function and value for money, not cutting cost.
The Goals of Managing Project Value
Managing project value is a continuous enhancement process. Although it’s not about reducing cost, the tools and methods of this process aim at achieving the required quality of the project product throughout the project implementation process. The main purpose consists in maximizing project value in relation to the constraints of time, cost and quality. Risks play the pivotal role when managing cost, time and quality, so they should be also addressed by the value management process.
Multiple methods and approaches for managing value pursue one and the same set of goals, including the following ones:
- To achieve a better understanding of business needs of the performing organization
- To set simple and clear definition of specific stakeholder needs
- To consider all options, alternatives and innovative ideas regarding project implementation and product delivery
- To achieve optimum value for money while satisfying the range of customer requirements
- To minimize the likelihood of unnecessary expenditure by reducing waste and inefficiency
- To improve collaboration and communication with customers.