Value Management

In a September 10, 2010 post on his blog, Leaning Agile, Trond Wingard argues that value management is the missing area in the PMBOK.  He wrote:

There’s no knowledge area for ensuring that the customer or users gets maximum value, not even that they get something of value – only that they get “something”!

Trond, I’d like to suggest that “value” isn’t a knowledge area – it’s a product.  At the project level, the project team maximizes value as the result of a correct balance of cost, schedule, scope, and quality.  There is nothing more useless than “perfect, but too late.”  Neither is there much value in a product that is on time and on budget, but hobbled with defects or an incomplete feature set.  Nor is there much value in a product that is found to be unmaintainable or otherwise doomed to exceed its planned life cycle cost.  Thus, value management includes those analyses and decisions that enable delivery of a product that arrives just in time, which delivers whatever features are actually needed at that time, at the quality level required for the success of the users, and is cost effective both at the time of acquisition and throughout the life cycle.

At the program level, value is managed by scheduling the timing and execution of projects so they deliver required benefits while achieving the best utilization of capital, staff, time, and resources to build the capabilities the organization needs, when needed.  A good program unfolds as if it was a single project, rather than a coordinated group of projects, and delivers a growing capability just as the organization is poised to benefit from it.

At the portfolio level, value is managed by maximizing the contribution of the capital investments represented by the products, programs, and projects toward achieving the strategic business plan.  This means selecting valuable products for development, enhancement, replacement, and retirement, so that the product life cycle is matched to the value curve.  It also means timing products to the demand curve, timing the pace of change so that the organization can absorb it, timing activities so that operation and development staff can reinforce each other, and timing capital expenditures to match anticipated cash flow.  A good portfolio reflects and anticipates the business plan, at both the strategic and tactical level, and retains enough flexibility to take advantage of opportunities, but is still cost effective.

Should project managers be knowledgeable enough about their business to optimize value by their own hand?  I don’t think that’s completely realistic, but I do believe project managers should be advocates for maximizing the value delivered by their projects, and manage the process of selecting the right mix of scope and quality, with the funding and time available.  And that advocacy, in interactions with the project team, sponsor, stakeholders, and oversight committee is what will drive delivery of value.

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About Dave Gordon

Dave Gordon is a project manager with over twenty five years of experience in implementing human capital management and payroll systems, including SaaS solutions like Workday and premises-based ERP solutions like PeopleSoft and ADP Enterprise. He has an MS in IT with a concentration in project management, and a BS in Business. He also holds the project management professional (PMP) designation, as well as professional designations in human resources (GPHR and SPHR) and in benefits administration (CEBS). In addition to his articles and blog posts, he curates a weekly roundup of articles on project management, and he has authored or contributed to several books on project management.

3 thoughts on “Value Management

  1. Dave,

    Thank you for mentioning this post on your great blog, and also for writing up a thoughtful blog post in response!

    Whether or not Value Management is a knowledge area, is not something that is given by nature – it’s an act of human construction; it’s something we decide.

    And my strong professional opinion is that “value” is so central to what we should focus on, that we should have it as a knowledge area. Otherwise, we risk delivering less value even while still performing the current knowledge areas flawlessly.

    Case in point: We can do everything in PMBOK perfectly and still deliver something that’s ultimately useless to the customer – because neither the customer nor we discovered that what was specified was a bad solution to a vaguely defined problem.

  2. I agree, on all points. Maximizing the value of the delivered product should be the goal of governance, from the oversight committee to the sponsor to the project manager to the team leads to the individual contributors. And a value management knowledge area, whether added to the PMBOK, or the Standard For Program Management, or the Standard for Portfolio Management, would certainly help practitioners focus on adding and maximizing value.

    Perhaps we should collaborate on development of a proposed value management knowledge area. We can identify the processes associated with value management, determine which process groups they should map to, and identify inputs, tools and techniques, and outputs. Are you interested?

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