NEW DIRECTIONS IN VALUE MANAGEMENT
Stuart D. GREEN
Department of Construction Management & Engineering, University of Reading, Whiteknights, PO Box 219, Reading RG6 6AW, UK
ABSTRACT
The guiding concepts of group decision support (GDS) are having an increasing impact on international value management practice. In contrast to the traditional models of value management, the concept of GDS explicitly recognises that individuals make sense of situations in different ways, and yet invariably need to act in a collective manner. The conceptual framework of GDS also provides practitioners with an improved basis for reflective practice. The paper argues that effective value management must be based on an understanding of group decision-making which moves beyond the empty rhetoric of function analysis. New approaches to value management are described which are applicable in a much wider range of situations than the traditional 'job plan'. Value management must continue to develop if it is to remain relevant to the concerns of clients.
INTRODUCTION
The purpose of this paper is to outline new directions in value management methodology. The emphasis on the word methodology is important. All too often value management practitioners tend to focus solely on techniques which are largely meaningless in isolation of any guiding principles. The nature of methodology is initially defined followed by a discussion of the methodological distinction between value management and value engineering. The concept of group decision support is introduced and linked to strategic problems. It is further argued that the application of traditional value engineering is limited to narrow technical problems. Consideration is then given to the rhetoric of value management. The extent to which clients are attracted to different approaches is seen to depend less on theoretical validity and more on the persuasiveness of the associated rhetoric. It is assumed that readers are already familiar with SMART value management as developed in accordance with the principles of group decision support (Green, 1994). The latest developments are described which focus on the use of two other GDS methodologies. Important new opportunities for value practitioners are seen to exist within the contexts of (i) modelling business processes; (ii) integrated risk and value management; and (iii) participative information management strategy (PIMS).
THE NATURE OF METHODOLOGY
It is initially necessary to define the term 'methodology' and the way in which it differs from a 'method' or a 'technique'. The notion of a methodology is much broader than that of a method in that it includes a set of guiding principles which are based on an underlying theoretical position. This interpretation is supported by Checkland (1989):
'...the essence of a methodology - as opposed to a method, or technique...[is that]... it offers a set of guidelines or principles which in any specific instance can be tailored both to the characteristics of the situation to which it is applied and to the people using the approach.'
It is therefore apparent that most descriptions of value management (e.g. Miles, 1972; Dell'Isola 1982; Norton and McElligott, 1995; Parker, 1985) are theoretically immature in that they tend to concentrate on prescribing 'methods' and 'techniques' rather than issues of methodology. The commonly accepted 'method' of value management is that of the 'job plan'. Specific 'techniques' include function analysis, brainstorming and life-cycle costing. Unfortunately, the philosophical and theoretical beliefs which lie behind the advocated methods and techniques are rarely made explicit. If the different methodologies of value management are to be understood it therefore becomes necessary to infer the often taken-for-granted underlying theoretical positions.
VALUE ENGINEERING versus VALUE MANAGEMENT
Previous work by Green (1994) has articulated two alternative methodologies of value management which are fundamentally different in terms of their underlying theoretical beliefs. The first methodology borrows its philosophy from the scientific method and assumes that problems are essentially technical in nature and that they exist independently of human perception. The second draws from the philosophy of social science and emphasises that differing perceptions are an essential ingredient of any real -world problem. For the purposes of enunciation it is convenient to label the former as 'value engineering' and the latter as 'value management'.
Value Engineering
If the proposed distinction between value management (VM) and value engineering (VE) is to be meaningful in practice, the two methodologies must be seen to differ, not only in terms of theory, but also in their means of implementation. VE, as epitomised by Dell'Isola (1982), is invariably implemented retrospectively in response to a projected cost overspend. A review of the construction case studies described in the last five annual conferences of the Society of American Value Engineers (SAVE International) reveals this to be the dominant interpretation in the USA. It is implicitly taken for granted that design solutions form part of a reality which exists 'out there'. The identification of the optimal design solution is therefore simply dependent upon exploring the solution space. This position is epitomised by the way in which descriptions of function analysis assume that the underlying 'real function' can be revealed by the application of a prescribed technique. The overriding assumption is that the problem exists independently of the perceptions of the project stakeholders. Whilst this approach may well be justified if value engineering is applied to a building component, it is rarely justified for the soft, messy and ill-defined problems which often dominate during the early stages of building design. The intellectual origins of the so-called 'function analysis systems technique' (FAST), as developed by Bytheway and described by Fowler (1990), are readily apparent from the adopted terminology. Dell'Isola (1982) describes how FAST is 'compatible' with systems engineering, decision tree techniques and operational research.
Group Decision Support
In contrast to the tradition of VE, the broad theoretical framework for SMART value management is provided by the concept of group decision support (GDS), which can be defined as:
'....any designed process that supports a group of people seeking individually to make sense of, and collectively act in a situation in which they have power.' (Bryant, 1993)
The concept of GDS represents a decisive break with the American tradition by rejecting both the optimising paradigm of operational research and the associated terminology of function analysis. The above definition presents an obvious analogy to the role of VM in aiding design decision-making in general, and the briefing process in particular. It should also be recognised that there is a significant difference between the provision of GDS and the narrower concept of decision support to an individual. GDS differs in that it places less emphasis on substantive data and more emphasis on consensus building and the decision-making process. Given that building design is invariably a group activity which includes both designers and client representatives, it is clearly GDS which is relevant. This is especially true for multi-faceted clients where different interest groups possess conflicting objectives. Indeed, once the intellectual baggage of optimisation is jettisoned, the concept of VM becomes almost synonymous with that of GDS. The above quoted definition of GDS could therefore be suggested as a 'meta-definition' of VM.
From the GDS perspective, VM is primarily concerned with resolving ambiguity by constructing a shared consensus of the project objectives. The process of sharing different perspectives is facilitated by the use of decision-structuring techniques. The function of a building is therefore perceived to be something which is socially negotiated rather than revealed. There is no pretence of identifying optimal solutions, the emphasis lies on the process of VM and the extent to which participants learn from their involvement.
As a caveat to the above, it should be recognised that the practice of US-style value engineering frequently differs dramatically from the theory. Practitioners often intuitively weaken the underlying assumptions of VE and adapt the techniques for the purposes of problem-structuring. Ellegant (1992) is certainly a forward thinker in this respect. For such practitioners, the dogma of 'optimisation' owes more to salesmanship than to a guiding paradigm. Whilst clients may well be attracted by a consultancy service which offers the 'optimal answer', they are unlikely to be attracted by a service which offers a `shared social reality'. It should also be stated that the distinction between hard and soft approaches is often confused in the literature. This is perhaps inevitable given that the VM community has only recently begun to address issues of theoretical validity.
TECHNICAL PROBLEMS versus STRATEGIC PROBLEMS
The notion that VE is applicable to 'hard' technical problems and that VM (or value planning) is applicable to 'soft' strategic problems is clearly appealing. However, it ignores the fact that the chosen methodology can in itself act to influence the nature of the problem. This statement requires some degree of explanation.
The discussion so far has tended to distinguish between 'hard' technical problems and 'soft' strategic problems as if the distinction were a matter of fact. Unfortunately, this is not the case; a problem only becomes a well-defined, 'hard' problem if there is a consensus amongst the stakeholders to treat it as such. In other words, a consensus that a given problem can safely be delegated to technical experts. For example, even a relatively straightforward life-cycle cost appraisal can only be treated as a technical problem providing that there is a consensus amongst the key stakeholders regarding the key variables, i.e. discount rate, time horizon and future outcomes. Any such consensus may subsequently break down, thereby resulting in a low-level value engineering study suddenly becoming of a more strategic nature. Whilst the suggested distinction between VM and VE remains important on the methodological level, it is clearly often less clear cut in practice. Unfortunately, some practitioners slavishly adopt the published definitions without understanding the associated theory. A common mistake is to link the terminology to the stages of the project life-cycle. It might just as well be argued that the appropriate label depends upon the day of the week.
THE RHETORIC OF VALUE MANAGEMENT
It follows from the above that the pre-conceptions of the 'problem-solver' can act to influence the nature of a problem situation. Consultants will have an inevitable bias towards the methodologies with which they are most familiar. The favoured methodology will inevitably reflect, and continually reinforce, a tendency to view the world in a particular way. This raises the question of whether consultants are actually capable of choosing between methodologies. Their initial interactions with the client organisation will inevitably be influenced by their favoured methodology. Furthermore, the consultants' acceptability will depend upon the extent to which their rhetoric is compatible with their sponsor's 'view of the world'. Different consultants will have allegiances to different methodologies and, as a result, different clients will be attracted to different consultants. However, it should also be acknowledged that a consultant's modus operandi will be limited by the frame of reference presented by their individual sponsor. Whilst the consultant may well re-negotiate the frame of reference, there will be an inevitable pressure to 'understand the problem' in a way which is acceptable to the sponsor. The choice of methodology will also be limited to those which are acceptable to the 'hand which hovers over the chequebook'.
The above discussion raises a number of important issues which are central to the future development of VM. Firstly, there is the realisation that the applicability of any given approach cannot be determined simply by matching the methodology to particular 'types' of problem. For example, the methodology of SMART value management is based on a number of fundamental assumptions relating to the nature of design problems and, in particular, the relationships amongst the stakeholders. Its acceptance is therefore determined by the extent to which the client's key stakeholders already subscribe, or are willing to subscribe, to a similar view of the world. The acceptability of any value management methodology, therefore ultimately depends upon the persuasiveness of its associated rhetoric. For example, the acceptability of SMART value management certainly depends upon a willingness to distribute power amongst diverse stakeholders. Moreover, its introduction will create an expectation of participative decision-making, thereby changing the dominant perception of the problem. A single executive decision-maker who is unwilling to delegate any power would certainly not be attracted to SMART value management, unless it was to use the methodology in a manipulative sense.
THE WAY FORWARD
Notwithstanding the established success of SMART value management, it has become increasingly clear through sustained action research and consultancy that the methodology is by no means generally applicable. Whilst the overt rationality of decision conferencing can bring confidence to some clients, there are others who feel uncomfortable with its reliance upon quantitative decision modelling. The experience of implementing SMART value management within large client organisations has also demonstrated that it becomes less effective over time. Once participants become familiar with the weighting procedures they become increasingly proficient at manipulating the numbers to ensure the selection of their previously favoured option. Value management is only of benefit if it stimulates people to innovate and think critically about their decisions and procedures. If value management becomes a standardised routine, implemented without active participation and commitment, it will not achieve its objectives. It is therefore considered important that value management practice is not limited to any single methodology.
The potential application of the existing methodologies of GDS to the unstructured problems of early building design is readily apparent from the comments of Rosenhead (1989):
'distinctive features of these novel approaches include an aim of partial structuring of previously unstructured situations (rather than the solution of well-structured problems), and a process involving participation as a key component.'
It is important to recognise that such approaches make no attempt to identify optimal answers. The emphasis lies on constructing a social consensus regarding the nature of the problem together with an agreed course of action. It is particularly important to secure the involvement and commitment of the problem stakeholders. It is also recognised that the very act of modelling will inevitably alter the nature of the problem.
BEYOND SMART VALUE MANAGEMENT
An extensive review of the existing literature on GDS has identified several methodologies as being potentially useful for the purposes of VM. The following two have been singled out for particular consideration: (i) Soft Systems Methodology (Checkland, 1981 and 1989); (ii) Strategic Choice (Friend and Hickling, 1987). Both methodologies recognise the importance of a skilled facilitator and the interdependence between decision content and decision process. In contrast to hard operational research, the various models upon which the methodologies are based are seen to be facilitative devices rather than representations of 'reality'.
Soft Systems Methodology
Within the constraints of this paper, it is not feasible to describe soft systems methodology (SSM) in any detail. A full appreciation of its richness can only be achieved by reference to the source literature. Nevertheless, the paper would not be complete without offering a brief description. SSM has been specifically developed in response to dynamic, multi-perspective social problems which defy any attempt at solution. Of particular significance within SSM is the conceptual distinction between the 'real world' and 'systems thinking about the real world'. The real world is seen to generate problems, systems thinking is used to produce conceptual models which are then compared with the real world in order to provide meaningful insights. In theory, SSM provides a never-ending process of enquiry which only terminates when it ceases to provide meaningful insights. SSM is implemented as a participative process where a facilitator works with the problem stakeholders. In contrast to VM, the methodology is likely to unfold over a series of workshops ranging in length from two hours to one day. SSM provides a designed methodology which enables the facilitator to make explicit different interpretations of the 'problem' based on different Weltanschauungen, or 'world views'. Conceptual systems models are then built in accordance with each of the identified Weltanschauungen and different insights are derived by comparing each of these models with 'reality'. The recognition that human activity systems are subject to different interpretations from different points of view, each of which are equally valid, is in harsh contradiction to traditional VE. Whereas function analysis seeks to produce models of reality, SSM seeks only to produce models which are relevant to the debate about reality. Such is the distinction between operational research and group decision support.
Strategic Choice
Strategic Choice is rooted in the socio-technical approach pioneered by the Tavistock Institute in London during the 1970s. The approach is empirically based in that it draws from studies of strategic decision-making in practice. Once again, it is facilitator-driven with no specific constraints regarding the number or length of workshops. Strategic Choice is framed around four complementary modes of decision making activity, between which the decision-makers are likely to iterative .
The first mode, described as the shaping mode, is concerned with problem formulation. Key techniques include the graphical identification of, and linkage between, decision areas. This enables the decision-makers to identify the most urgent problems and agree upon an initial problem shape.
The second mode is labelled the designing mode during which the facilitator steers the participants towards the identification of different options. Of particular importance is the grouping of different combinations of options into discreet decision schemes. It is recognised that whilst some options would be compatible, others would be mutually exclusive.
The third mode is the comparing mode and consists of a sequence of techniques which seek to compare the benefits of alternative decision schemes. These techniques differ from those of decision analysis in that they allow for a combination of quantitative and qualitative comparison. As such they can readily be absorbed into the framework of SMART value management, thereby avoiding any dependence upon a complete set of numerical 'utility' ratings. Of further importance is the way in which the comparing mode conceptualises three different types of uncertainty:
The final stage of Strategic Choice is described as the choosing mode and is concerned both with making immediate decisions and with devising a strategy for managing those decisions which are best made in the light of further information. The outcome of any particular meeting would therefore always include immediate commitments to action and also strategies for resolving identified areas of uncertainty to aid future decisions. The latter aspect has some commonality with the established practice of maintaining risk registers.
NEW OPPORTUNITIES FOR VALUE MANAGEMENT PRACTITIONERS
Modelling Business Processes
The most immediate difficulty in implementing SSM is that it is so far removed from existing VM practice. Indeed, it has already been argued that consultants are constrained by the expectations of their clients. In many ways SSM would be better utilised as a framework for strategic briefing. The increasing concern amongst clients for construction professionals to understand their `business processes' before embarking on design makes SSM especially applicable in the current context. SSM offers a means by which construction professionals and client representatives can derive a common understanding of the client organisation's business processes. A further source of concern relates to the terminology of SSM, which undoubtedly provides something of a barrier to the uninitiated. Unfortunately for those who have an in-built aversion to 'jargon', the methodology of SSM is largely inseparable from its terminology. It is simply not possible to appreciate the significance of SSM without understanding the associated language of systems thinking together with the guiding framework of GDS. However, in practice there would be no need to expose the participating client representatives to the terminology of SSM, nor would it be necessary to explain the methodology to them in advance. All that would be required would be a commitment to a series of participative briefing workshops, which could vary in length from as little as two hours to a maximum of one day. The first such session could be introduced as one of problem definition and the rest of the methodology could then be introduced one step at a time. If the client organisation already used the language of BPR, then SSM could be easily presented as an approach to process modelling. (For further information, see Green and Simister, 1998). Of course, some leading VM practitioners are already including BPR amongst their list of services. However, unlike SSM, existing approaches to BPR tend to be strong on rhetoric and weak on rigour.
Integrated Risk and Value Management
Many of the techniques of Strategic Choice can be immediately absorbed into existing value management. This is especially true for the qualitative techniques of comparison. Indeed, these techniques are already central to the author's consultancy practice and have largely replaced the use of decision analysis matrices which rely solely on numerical scores.
Perhaps the most important aspect of Strategic Choice is the way in which it provides a conceptual framework which embraces not only VM, but also risk management. Indeed, it can be argued that it is meaningless to try to assess value independently of risk, or visa versa. It is no coincidence that many existing facilitators offer both services. No VM exercise can afford to ignore risk; the only issue is whether or not risk is made explicit. Whilst further research in this area is ongoing, it is already apparent that risk management and VM can no longer be considered to be two separate entities.
Participative Information Management Strategy (PIMS)
A further important opportunity for value management facilitators is envisaged in the area of IT implementation. The IT sector has a long history of failing to understand the way in which IT systems impinge upon the soft aspects of organisations. Indeed, there are many case studies of expensive IT systems which have proved to be white elephants. Whilst there is a growing awareness of the need to consider IT on the strategic level, there is an absence of designed methodologies which enable IT systems to be integrated within organisations. The majority of IT consultants are limited to the `hard systems thinking' of traditional VE. The progression towards facilitated workshops which seek to achieve consensus and shared commitment regarding the implementation of IT systems is therefore directly analogous to the progression from VE to VM. In this respect the label 'participative information management strategy' is self-explanatory. There have been far too many failures of top-down implementation strategies for the contribution of participative IT strategies to be ignored. Given the reported investment in IT by construction companies it is amazing how little care they give to effective implementation. Within the context of PIMS, there is potential for the implementation of both SSM and Strategic Choice.
CONCLUSION
This paper has provided an agenda for the future development of value management. There is no doubt that the methodologies described extend beyond existing interpretations of value management. While some people may question whether the methodologies described accord to existing definitions, there is no doubt that they provide important new opportunities for value practitioners. The skills of process facilitation and problem structuring are increasingly in demand within a range of different contexts.
Notwithstanding the above, there are a number of significant barriers to the widespread assimilation of the GDS methodologies described. The first is provided by the extent to which value management practitioners are willing to make the necessary intellectual investment. The second is provided by the expectations of the industry's clients. Industry practices cannot be improved simply by raising the intellectual capabilities of consultants. There must also be a willingness amongst clients to experiment with new methodologies. A further barrier is provided by the regulating role of value management associations. The success of such associations in persuading public sector clients only to commission value management services from their 'certified' members acts to discourage the introduction of new methodologies. Whilst the methodologies of group decision support will certainly continue to influence value management practice, their effective use is by no means limited to the 'value management' label. Important opportunities for value practitioners currently exist within a range of new domains. Value management cannot be allowed to stagnate. The discipline must continue to innovate and to be open to new ideas. Value management associations who maintain a 'closed shop' policy risk being left behind by new developments in group decision support..
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