In my first blog, I have put forward the thesis that VfM is not an absolute parameter but needs to be taken in context. This raises the question: what are the elements that make up the VfM context? Based on my experience, I see three important elements: time, culture and governance.
The time available to complete a procurement (or project) can be anywhere form adequate to severely compressed. With the former, the planning team have smiles on their faces and the critical path is not highlighted in red. With the latter, there is much shaking of heads, sucking in of breath and the critical path is much discussed.
Organisation culture can either be success-driven or failure avoidance-driven. A success-driven organisation is willing to initiate a project with good return on investment (ROI) but significant risks. It is then able to re-evaluate the project and cancel if the ROI becomes unfavourable. In a failure-avoidance culture the aim is to ensure all the processes are followed and boxes are ticked, ignoring the fact that these processes incur their own project risks. Failure-avoidance appears to drive organisations to continue with a project even though budgets and time are heavily overrun.
Governance can be singular or distributed. For a project in most commercial organisations the buck stops with the IT Director; it is his project to execute, with his budget and the potential users sit opposite him in the boardroom. Government organisations have heavily distributed governance. You can argue that they have to have such governance to act as a check and balance for the spending of taxpayers funds. The number of stakeholders who sit at the decision-making table for a major government spend is rather large. Once the decision is made and the contract awarded, it takes enormous grief e.g. double the spend, twice the timescale with no end in sight before a project is halted.
To be fair on government procurement, I have seen some abject failures in the commercial world. One travel company was on its third attempt to procure a core system, each one with a different vendor and the last one had to be cancelled.
The three elements of time, culture and governance can be used to create a VfM space, see below and attached .ppt Download Blog10 .
VfM can be seen as absolute when time is adequate, culture is success-driven and governance is singular. In this context VfM can be judged against best practice metrics e.g. 250 FP/man year or 10% DCF NPV hurdles.
When time is severely compressed, culture is failure-avoidance driven and governance is distributed, the VfM becomes extremely relative to this context. Productivity can plummet to below 20 FP/man year and ROI hurdles become irrelevant.
I tried to name each corner of the VfM space represented by its context, borrowing a scenario planning concept. It was not so simple to get a complete set of eight with a consistent theme – all contributions gratefully received…
This analysis raises a difficult question: how far should an organisation attempt to move away from the relative corner towards the absolute corner? With the current failures reported in the press, some change is appropriate and therefore the argument becomes how much?
Ian Richmond
Email: ‘About’ and ‘Email Me’
Comments