Where is the Value?

In recent months I’ve met several managers, running departments (operations, marketing, HR, IT), all working for different companies (Sectors include: retail, banking, manufacturing, IT) who at some point have all said a very similar thing;

“one of my problems is, my department isn’t seen as adding value, we’re seen as a cost centre”

So my questions are

  • where is the value created in organisations these days?
  • does it matter that the departments believe they are seen as cost centres?
  • If you subsitute the word profit for value does this help?
  • Should it matter that we understand where value is created? is knowing costs enough?

Any views or examples (positive or negative) on this greatly appreciated in the comments below.

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7 responses to “Where is the Value?

  1. IMHO Value is created at only one place consumption. If that’s the case, since you may never be the one to consume the product, you must establish how your department/yourself is tied to the elements of customer value. The better understanding you have of what the customer at consumption values and the CTQs that drive that value the more you realize the value that you supply.

    • That’s great Joe, thank you, I’ll just hold onto that thought to see if we get any alternatives or supporters.

      Taking it back though I wonder why the people I talk too seem to believe that somewhere in the organisation value is created, but their department isn’t recognised as being part of it?

  2. Hey, Mark.

    In a business context, isn’t value determined as the ability to make or save money? This speaks directly to your question of substituting profit for value. IT does this; imagine the costs incurred by working globally on paper. Manufacturing is a process; improve the process, save money, provide value through better practices. The managers you speak of seem to get bogged down in the tactical and operational, and forget to look at the strategic.

    Tony
    http://tonylamb.wordpress.com

    • Tony,

      I’m sure you may be right on the point of looking at the strategic issues, what I can’t be sure of, is it the managers being distracted or the business not have the tools to help them see. Certainly the managers I’ve met, some of whom I’ve know for a long time have been cutting costs and delivering increased outputs so it was surprising when they shared this. Maybe it is that as each year blends into the previous cost savings become harder and unless there are value based improvements then the business can only recognise cost ones and therefore cost control becomes the key metric.

  3. I agree with Joe Dager’s statement. The questions raised are a reflection on the culture of the company itself. There is clearly a disconnect amongst the teams and the players.

    I may take issue with a manager that can’t make the value connection to the corporate goals and objectives, but I may be confusing leadership with management. It also sounds as though these companies either have few or no meaningful metrics. What is being measured and why?

    Create a department mission statement, engage the team, resolve values, establish meaningful metrics, and demonstrate effectiveness.

    I loved reading Patrick Lencioni’s “Three Signs of a Miserable Job”. This is a great story that models the very essence of employee engagement discussed here.

    • Redge,

      Never come across the book so will check it out. As for the disconnect between the team and players, I think it maybe higher i.e. between the department and the customers but I will dig into that and maybe the mission statement and metrics will help. When it comes to metrics Tony made a point which set me thinking that the main metrics they may have been targeted with are cost based, which I believe is easy to assume is the same as value and after a while cost saving becomes harder to achieve and cost control becomes the main driver.

  4. Thanks for the comments so far, I’m trying to understand as well, is this common?

    From my own experience all the departments I’ve run have never been asked to define what we added to customer value and I’ve been through the “budget, spend, justify, budget” cycles many times. So challenged over cost but never on the value my teams created or helped other to create.

    I wonder if any businesses ask managers to justify their budgets on value, not costs?

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