iSixSigma

Business Value Added

Definition of Business Value Added:

During an audit, the quality engineer asked the production worker question after question related to their job.

“My goodness,” the operator sighed. “When will these endless questions be over so I can get back to doing real work?”

“Not much longer. We just need to be sure the process is being followed as intended.”

“I haven’t had an error in six months. This is a waste of time.”

Understanding the frustration in the operator’s voice, the engineer calmly expounded, “I realize this seems like wasted time not being used to build, but I assure you there is a clear purpose. These audits are here to help us avoid large, costly mistakes over time. These audits may not be value-added in nature, but they are business value added.”

An overview: What is business value added?

Business value added (BVA) refers to any part of a process that’s necessary to stay in business but is not directly contributing to the product or service, or directly valued by the customer. At first glance, these steps may come across as non-value added, as these steps are not performing a form, fit, or function change on a product or service. Upon closer inspection, it is determined that the deletion of these steps would lead to bad results.

For example, safety requirements can be viewed as business value added. The time spent putting on safety equipment does not actively add value to the goods or services and is not something recognized by the customer when they receive their goods and services. Instead, the preventative actions help minimize time lost due to injury, and injury that may or may not ever happen. There are cases when only looking at the financials involved, it may be cheaper to forgo safety equipment and let the occasional worker get hurt. Of course, the issue here is not financial but moral. It is both a moral and legal obligation to provide employees with a safe working environment.

A second example involves legal requirements. Governments require businesses to provide information such as patent and copyright information, employment relationships, sales transactions, real estate, and more. The costs of providing this information cannot be described as value-added, yet to ignore these actions is to risk fines or being barred from doing business within the country.

3 major benefits of attending to business value added

Safety

Safety-related BVA activities make for a workplace in which people want to work. No one wants to work in an environment where their short- or long-term health is at risk. These safety-related BVA actions also help keep organizations such as OSHA from handing out fees or shutting down the company for egregious safety violations.

Legal

There are government requirements for every business. By making sure your specific country’s legal requirements are met, and that the right information is provided to the government, you minimize risk of government interference with your operations. Be careful not to overperform your legal requirements, as the extra work now counts as non-value added. And pay your taxes, as it is a rare government that overlooks tax evasion.

Preventative

Preventative actions, such as quality checks and audits, are business value added. These steps cost money without changing form, fit, or function. Human beings are imperfect machines, so steps that help prevent or help identify human error early in the process will, over time, cost less than performing rework for errors found late in the process, or errors that reach the customer.

3 business value added best practices

  • Regarding safety equipment, be sure to minimize the set-up time by placing the equipment as close to the work as makes sense for the situation. Sometimes the equipment may have issues, and it will save time when needed to change the equipment.
  • Have a solid understanding of the laws in the countries in which you are doing business. International companies may find that one rule in your home country is completely different in a country you’re expanding into.
  • Be sure, when justifying BVA actions, to demonstrate how, over time, they will save the company money. If preventative, show examples where the company lost major amounts of money or business because the steps weren’t in place. With safety and legal situations, there are many excellent examples on the web of companies failing to meet legal requirements and the corresponding penalties.

Frequently Asked Questions (FAQ) about business value added

These preventative measures seem like a waste of time. How do I know if they’re truly BVA?

As BVA is not value-added, it’s important to review your BVA process steps over time. Always fight for preventative measures, but be confident that these actions are still serving their purpose. As processes and conditions change over time, you may find that your preventative actions are no longer relevant. BVA steps may turn into a true non-value-added step as the situation changes over time.

Are BVA activities unavoidable evils I should ignore?

Business value added activities should never be ignored. Review the processes involved, and try to minimize the work performed as much as possible. Just because you cannot eliminate the work doesn’t mean you can’t streamline the activity or make it more efficient.

I cannot clearly quantify the benefits of the actions, so my company wants to ignore them. What can I do?

There are times when management will try to ignore performing business value added activities. It is key to make sure that management possesses the correct risk analysis information before they decide to take that path. There are situations where a management team will take a risk due to other business factors, and taking that risk may be the right answer.

From a moral standpoint, though, if that risk involves the blatant disregard of human life and safety, it’s not acceptable. It will be up to you and others to determine the right course of action. In the worst situations, a whistleblower may be required, though this should be the last course of action as you are placing your career at risk.

BVA needed even though not value-added

Business value added activities, while not value-added, are critical if a company expects to stay in business. Preventative actions need to save more money than they cost, legal realities will always be intertwined with business activities, and every single employee deserves a safe work environment.

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