What is Value? …or Project Value? | Video

Value has come right up the Project Management agenda recently, with its pride of place in 2021’s 7^th edition of the PMI’s Guide to the Project Management Body of Knowledge – the PMBOK guide.

But it has always been an important concept. The problem is that, between them, PMBOK 7 and the 7^th edition of the APM’s Body of Knowledge (the APMBoK) offer us three definitions, from the nebulous to the precise. 

So, what is going on here. And what really is Value?

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Project Value is a Vague Concept

Let’s start with precise vagueness. We can expect a decent dictionary to offer a precise definition of the word, but not mathematically precise. In that sense, we’d expect a dictionary to be ague.

My favorite dictionary says:

Value:
the worth, importance, or usefulness of something to somebody.

Another says.

Value:
the desirability of a thing, often in respect of some property such as usefulness or exchangeability.

So, let’s take a look at what the PMI’s PMBOK Guide says.

The PMI’s PMBOK 7 Definition of Value

Value:
The worth, importance, or usefulness of something.

Well, I know what dictionary the authors stole that from!

PMBOK 7 tells us that value is subjective and the same thing can have a different value to different people.

Now let’s have a look at what the Association for Project Management (APM) has to say.

The APM’s APMBoK Definition of Value

Value:
A standard, principle, or quality considered worthwhile or desirable.
In value management terms, value is defined as the ratio of ‘satisfaction of requirements’ over ‘use of resources’.

The first part of this definition is pretty much the same and bears a close but not identical resemblance to my second dictionary.

The APMBoK gives us a Way to Calculate Project Value

But the APMBoK definition gives us something else. The second part of its definition describes the most common way to measure value in projects: “as the ratio of ‘satisfaction of requirements’ over ‘use of resources’“.

To paraphrase this, Value = what you get / total cost

…or as an equation:

V = B / C

PMBOK 7 has a Second Definition of Value

But we are not done with the PMI’s PMBOK Guide yet. It has another definition…

Business Value:
The net quantifiable benefit derived from a business endeavor that may be tangible, intangible, or both.

This definition was inherited from PMBOK 6.

To paraphrase this definition, Value = Net benefit = Total benefit – Total cost

… or as an equation:

V = B – C

Two Ways to Calculate Project Value

So, we have two ways you can calculate value:

1. As net benefit: V = B – C
2. As the ratio of benefit to cost: V = B / C

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