Finally, "Value Added" Makes Sense!

The AccountingWEB community is grateful to Sylvia Pate, principal at QuickSilver Consulting, for leading a workshop on adding value to client services, and creating a REAL DEFINITION of "Value Added" in a way that we can all understand, communicate and measure.

First, let's look at the Value Equation: the framework to make value-add decisions for your clients and firm.

The Value Equation gives you a framework for making decisions that increase value. It helps create Value Add whether the consumer is your client or firm.

The Value Equation is based on the assumption that for every effort you put forth there is a RESULT . . . and a COST for producing that result. It's simple economics as you see in the formula:

RESULTS minus COST=Value

In a typical accounting situation, the RESULTS may be delivery of a tax return or consulting on a new software product or the successful launch of a new client business. The COST can be your overhead, payroll, etc. to accomplish those results.

Now, to determine your current Value, consider the DIFFERENCE between the RESULTS you provide and their COSTS.

To increase your value you can either INCREASE your RESULTS, or, you can DECREASE the COSTS of your efforts. Most organizations focus on the latter . . . decreasing costs as the means to create value.

The equations for Value Add is slightly different that the one before. It is:

INCREASED Results minus SAME or LOWER Cost=VALUE ADD

So no matter what part of the equation you aim your efforts, every decision you make impacts value.

Results of a market study conducted by QuickSilver of companies (with an employee population totaling 600,000) showed that more than 95% of all companies ask their people to be Value Add yet struggle to define what being Value Add really is.

Its no wonder people are frustrated. With so little clarity employees end up questioning their ability to increase personal value…which causes them to question their importance to the firm and clients.

Creating value is really critical to you and the future of your firm. As hard as it is to define "value add", in reality every decision you make impacts your value.

Decisions you make that achieve minimum job requirements and deliver just enough value to maintain or protect your job is referred to as VALUE EXPECTED. When you increase your RESULTS, yet maintain or reduce your COSTS, is VALUE ADDED.

Let's take a look at an example everyone can relate to -- dining out at a local restaurant. What actions occur when you first come through the door and then are seated by the hostess?

  1. As you approach the front door you note the general upkeep and looks of the building and landscaping.
  2. As you enter the front door you tune into the atmosphere…sounds, smells, appearance and cleanliness.
  3. You note how quickly and enthusiastically you are greeted.
  4. How quickly are you taken to a table and at what pace?
  5. What condition is the table in when you arrive?
  6. What condition is the surrounding area? Is the sound level good? Who's seated near by?
  7. Does the hostess take special care in helping you get seated?
  8. Who provides the menus and what information is offered?

Now, which of these are VALUE EXPECTED? Actions if not delivered you may consider leaving or for sure not returning? And, which of these are VALUE ADDED? Actions if delivered create a truly unique dining experience?

Value Added actions often cause us to make enthusiastic recommendations to our frineds about our experiences. What if you were called by name at the front door and by the server? Or if you were asked about particular dietary needs or if you have a timeframe in which to finish your meal? Or if you were offered a complimentary "Death by Chocolate" dessert? What if the announcement of a birthday meant a free meal?

And here's the good news. For actions you consider VALUE ADDED, they don't need to cost more. In this situation there were no added cost because it was the hostess and server who worked hard to think of ways to meet your special needs and produce a memorable result. They didn't add more time but put their brains to work to find ways to get your special needs met and to provide greater value. And in line with the Value Equation, they produced greater RESULTS at the same COSTS!

To identify the Value Expected and Added actions of your dining experience, we used a technique called "Value Pathing". It's an audit of activities that show what actions increase your value. Value Pathing uncovers actions that are Value Expected and actions that are or can be Value Added.

Value Paths Uncover Actions that are Value Added.

How about doing a Value Path focusing on the first phase of an Audit, the Planning stage.

First step: Quickly list the actions that occur during the Planning phase of an Audit. This could be as follows:

  1. Audit is scheduled.
  2. Audit team assigned.
  3. Client provides current inventory data.
  4. Prior year reports are reviewed.
  5. Dollar value of client inventory established.
  6. Audit is reconfirmed.
  7. Audit team arrives (to client's horror)

Next, identify actions that are VALUE EXPECTED . . . those that if not done you may lose the client! These could include:

  1. You must complete the audit.
  2. You must do it in a timely manner.
  3. You must not disrupt the clients operations, etc.

These tasks are Value EXPECTED. If not done, the consequences are not good.

For the third step, go back to Audit Planning list one more time. Identify actions where RESULTS can be increased for the customer at the same (or less) costs.

  1. Review competitive trends and benchmarks for your client's industry so that you can make money-saving or business-building suggestions.
  2. For clients who have you do their tax work, gather and disseminate information during the audit that makes their tax prep more efficient.
  3. Find other ways to save time for your client during Audits.

These tasks are Value Added. By doing them you create a uniquely positive experience for your client. Value Pathing helps you see how actions you already take can be adjusted (slightly in many cases) to become Value Add.

Value Pathing is a simple method to identify actions that bring more value to clients and your firm. You can use this same method to identify Value Add actions for your firm . . . and even for your personal life. Good luck!

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