Your Corporate VM Policy, and How to Get One
No company unit, least of all a Value Methodology group, can operate in a vacuum. Value Methodology is a staff function and not a line function. VM needs visible management support as evidenced by a strong comprehensive policy statement from top management, in companies of any size.
Top level of VM is a staff function not a line function. The policy statement is a visible record of acceptance by the highest management of a company. It signifies acceptance, endorsement, encouragement and lays down rules for relationships with other departments.
Value Analysis/Value Engineering (VA/VE), the Value Methodology, is an American grown discipline with roots back to WWII, where the notion that "Function" analysis was the key to Value Improvement - the accomplishment of required functions at lower cost - was first realized. Identification of unnecessary functions and costs and thereby cost improvement/reduction were the first benefits of the application of VA/VE.
In the development of the disciplines in the ensuing 40-50 years, the benefits derived from application of Function based VA/VE, the Value Methodology, have resulted in billions of dollars being saved in Construction, Manufacturing, Government and Municipal projects and organizations, both here in this country and internationally. The first step is the adoption of a Corporate VE Policy.
You, as a leader of your organization, need to understand the benefits that can be derived in your organization by developing a policy that applies VA/VE in all of your organizations' activities. You are no doubt aware by this time of the merits and accomplishments others have earned by adopting VM in their organizations. These can be yours as well.
Profit is the Bottom Line
VM results drive directly to the Bottom Line, with performances that generally exceed Return on Investment (ROI) of 10:1.
VA/VE should be encompassed within a Value Management organization. This organization should function with a Value Policy that has a charter indicating top management commitment and support.
Value Management? A New Concept?
Function Analysis involves relating cost to Function which serves to enhance the productivity of a multidisciplined team by focusing their effort through generation of "Creative Discontent" by the team members.
Creative Discontent provides the engine for enhanced brainstorming and breaking of paradigms. The most significant effect of function analysis is the enhancement of a structured problem solving effort by providing a method for clearly identifying the problem. As is clearly recognized, if the problem is defined, the solution is more easily obtained.
The net result of application of VM has been the improvement in the bottom line. VM through the use of function analysis has an almost unique capability to identify unnecessary costs.
The elimination of unnecessary costs without affecting the necessary functions, allows for simplification of end products, be they construction projects, manufactured items, or other products, processes or procedures. Benefits in the form of product simplification and cost reduction can be passed on as price reduction, improved competitive position, better reliability and/or better warranted performance.
Value Management, the management of a VM activity yielding benefits in retaining competitive advantage, increasing profitability and visible improvements to the bottom line, is a mature activity that you need for your organization to meet the needs of today's business environment. If your organization has not yet been involved in VM, now is the time to begin a management commitment to the excellence that can be your result.
Your Corporate Value Policy
What is Corporate Value Policy?
A visual record of acceptance by the highest management of a company.
Why a Corporate Value Policy?
To clearly indicate corporate support and commitment.
Who Needs a Corporate Value Policy?
Value Management will be a staff function and will require a strong policy statement to get cooperation from line functions
Objective and Purpose
- To set up the staff function
- Provide for assistance in relating to other line elements
- Set up budget
- Show strong corporate leadership
- Set up accountability
- Sustain positive effort
What does a Value Policy Statement Contain?
- A statement of compliance with government specifications and contractual requirements
- Establishes Value programs in each division
- Sets goals (like "3% of sales"). A most effective means to accomplish this is through the issuance of a Corporate Policy statement
- Describes the essential elements of a Value program:
+ suitable positions with functional responsibility;
+ selection and appointment of qualified personnel;
+ broad educational programs in Value techniques;
+ establish and implement procedures and controls to minimize all unnecessary product costs;
+ definitions (as required).
Goals and Objectives
The goals and objectives of the VM Staff are:
- Techniques development
- Prepare Value Change Proposals (VCPs)
Responsibilities of a VM Staff
There are generally two categories of responsibilities for the VM Staff:
1. Those peculiar to VM:
- Function identification
- Job Plan/Structured methodology
- Proposal implementation
2. Advance the art:
- Broaden use
- Extend benefits
Further Information Available
The Miles Value Foundation and SAVE International, "The Value Society" would be glad to send you more information pertaining to your Corporate Value Policy.
In particular, there are videos available that include experiences of companies of various sizes and various activities that would be of interest to you.
These videos include statements and comments from top management of companies that have adopted VM to better their companies competitive position and bottom line.
Companies such as:
- Star Electronics
- Celstar Group, Inc.
- Joy Manufacturing
Some of the material in this article has been excerpted from an Electronic Industries Association Pamphlet, "Corporate policies on Value Engineering," Chapter II of the pamphlet.