Value, as we have noted, is often discussed and rarely defined.  Much in the same way personal or organizational values are tossed about, the value of a project, product or piece of work is used in the same mythic but nebulous fashion.  Kumar Javvaji, @solidwood described; “Value is a tangible contribution to meeting a critical need.” This is a credible definition; however, we still need to translate each tangible contribution into a language that can be understood by all of the stakeholders in the process.

One of the simplest approaches to developing a value language that everyone can understand begins with tweaking the definition.  Defining value as the financial benefit that an organization receives for expenditures is one example.   I do not think this definition moves too far from the intent in Kumar’s definition.  The word financial can be directly translated to mean money.  Nearly EVERYONE understands money.

The list of areas to mine for value noted in Value: Looking for Value in All of the Right Places suggests that some of the benefits of doing any piece of work are harder to translate into cold, hard cash.  Translating value into currency is straightforward when the discussion of value is focused on sales or reduced cost.  Items like marketshare are might be a bit more difficult depending on the time horizon, but items like customer and employee satisfaction tend to be written off as intangible.  Intangible benefits can be important components in value and huge factors in selling work emotionally.

Because intangible benefits are hard to measure I have often seen intangible value written off or relegated to the fine print in an ROI statement (the same is true for intangible costs).  Even though we might struggle with measuring items like employee satisfaction, there are frameworks that are useful.  For example, Douglas Hubbard, in How to Measure Anything, Finding the Value of “Intangibles in Business” Third Edition,  introduced Applied Information Economics (AIE). AIE is a method for measuring and determining whether measuring would be valuable.  (See our re-read of How to Measure Anything).  The goal of spending the time and effort to measure is both intangible value (and costs), so they are not swept under the carpet.

The big problem is that predicting the future is imprecise.  The problem with the use of raw monetary estimates of value is that they generally convey false precision.  In the early 00’s I once saw a major chemical manufacturer that immediately booked value statements as commitments.  If a piece of work promised a staff reduction next year, headcount was cut next year.  Frankly, it was an interesting approach that had several plusses and minuses.  However, in most internal IT organizations the effort to get to the level precision and accountability would probably be better spent on executing experiments to validate the value promised.

An alternate approach is to use relative measures, such as t-shirt sizing, to represent ranges of value (you still have to identify and quantify value).  For example, in the Software Process and Measurement Cast blog and podcast empire, small could be used to categorize value between $1 – $1,000.  The level of statistical error for any prediction of the future is fairly high.  Relative approaches for presentation help express that idea without wandering too far from the idea that we need a common unit of measure.

Every person and organization has a different perspective on the value of a piece of work.  They are all correct, at least in their mind; therefore, we need a common unit of measure to facilitate the discussion.  There are lots of candidates, but most everyone understands money.  The problem with money is not last of understanding what a dollar or a rupee is, but rather the degree of precision a sum of money connotes.  Our real goal in translating value into a common unit is not precision but rather making value a piece of work delivers easier to understand and less easy to spin.  A common unit overcomes some of the fluffiness attached to ‘value’ when it is denominated based on individual preference.