Value Added vs. Non-value Added
A successful business can be characterized by the amount of value they add to their customers and the amount of value added by each process that produces their product, service, or information. A successful person can be characterized by the amount of value their life gains from the most important resource a human has: time. I believe time is the most important, and non-renewable, resource a person has. For a business, the question is how many of the jobs performed by your employees or how many of the processes in your organization are actually adding value for the customer? For a person, the question is how many of the activities, people, or places that take up your time are adding value to your life?
Let’s start with business. Paul Akers writes that when you examine your value added vs. non-value added actions “… 90% of everything we do is waste.” 1 A post on leanmanufacturingtools.org says that “Many studies have shown that we only add value to a product for less than 5% of the time, the rest of the time is wasted!” 2 You might be thinking that sounds crazy. How can businesses be so inefficient that 90% of everything they do is waste? First, start by defining what value actually means. Define value from the perspective of the customer. What is the customer ACTUALLY paying you for? Read any article on value added vs. non-value added activities and you will see similar definitions. This definition from goleansixsigma.com says simply that a value added step meets three criteria:
- The step transforms the item toward completion (something changes)
- The step is done right the first time (not a rework step)
- The customer cares (or would pay) for the step to be done 3
To determine value, “… use Value Stream Mapping and process mapping to highlight the different steps in our processes and highlight where the value is being added.” 2 Literally write down each step in your business from start to finish. From creation to distribution, from supplier to buyer, or from concept to completion. Some steps may include sub-steps. For example, purchasing may be a major step that includes minor steps like: contacting suppliers, finding the best price, emailing company representatives, building a spreadsheet to track information and pricing, placing the order, receiving an invoice, etc.
Once you have completed some sort of value stream map, go to each individual step (both minor and major) and ask yourself: is this work that the customer is willing to pay for, work that physically transforms the product (or document/information), or work that is done right the first time? If the answer is yes, that step adds value. If the answer is no, that step does not add value. At this point, the 90% of everything is waste concept starts to become very clear.
A common logic trap is believing a process adds value because it is necessary for the business to continue operating, but in reality it does not meet the three requirements for value added work. An accounting department, for example, is an entire division of most businesses that adds no value to the customer. The logic trap is that if you do not pay your taxes or keep accurate records of purchases and sales, your business will not last very long and, therefore, you will no longer provide ANY value to customers, employees, owners, or shareholders. However, does the customer care about accounting when they just want to purchase your product, service or information? Unless you are literally an accountant and the customer is paying you for that service, the answer is no. If you are not an accountant, the customer is there to buy product, service, or information “x.” You keeping track of sales, expenses, taxes, etc is not producing “x.” Therefore, it provides no value to the customer. Yes, you HAVE to do it to keep your business running, but no, your customer does not pay you for record keeping.
Human resources is another example. Yes, you need to do things like hire people, provide benefits, and build culture in order to have employees, who in turn will be the ones producing the product, service, or information the customer pays for. Again, however, the customer doesn’t pay you for human resources (unless you are a human resources company). The customer pays for the product. Anything that is not directly related to transforming your product into something the customer is willing to pay for is non-value added.
Here are more examples of things that can be mistaken as value added work (unless it directly adds value to the customer):
- Organization
- Transportation
- Storage
- Meetings
- Communication
- Cleaning
Keeping an organized work place in essential for efficiency and can help reduce errors, which can lead to a better customer experience if the product they are paying for can be produced faster and more accurately. But they don’t pay you to spend time organizing. Transporting materials or information is critical to any business. But whether that material travels 5 miles or 50 miles, or the information is emailed around the office twice or a dozen times, the customer is paying the same amount for it. Even the most efficient system will need some type of storage. Your customer does not pay for you to store things. Physical space, digital servers, or filing cabinets might help you store materials or information critical to your business, but the customer doesn’t pay for that. The customer doesn’t pay for you to talk, strategize, or plan. They pay for the product, service, or information you provide. That doesn’t mean you should never communicate or have meetings, but keep in mind that the time spend in those activities is not time spent actually producing the thing you are selling to a customer. When you look at your value stream and include the things I have mentioned above, that 90% of everything is waste concept is even more evident. You can’t completely get rid of the things we have just talked about, because many of them are essential for the business to keep going. But what if you could reduce the amount of time, money, and energy spent on them? Making cleaning faster, organizing more organized, and communication clear and effective. Reducing the time spent on non-value added activities will increase the amount of time spent on value added activities. If you can get as much done as you are right now with 90% of everything you do being waste, how much can you get done if just 85% of everything you do being waste?
Now, let’s look at value in life. Everything a human does takes time. Time is a limited, non-renewable resource. Part of being an adult is having to do things that you necessarily don’t want to do. You have to clean your house, do laundry, mow your lawn, do your taxes, go grocery shopping, drive your kids around, go to work, etc. If you were to create a value stream map for your life, which of these activities would say say adds value to your life? I define value in this context as things that bring you joy. These are things you will look back on in old age and smile. Happiness, to me, is an overused and often misunderstood word that can mean different things to different people. But joy, “the emotion evoked by well-being, success, or good fortune or by the prospect of possessing what one desires,” 4 is much clearer. The FEELING is noticeable, while the concept of happiness can be abstract. In business, the concept of value is more literal, such as the customer literally pays for “x” and every step that directly leads to “x” is value added work. In life it is more subjective; each person individually defines what brings them joy, and, therefore, what adds value to their life.
When you think of time as a resource, also think of everything that takes time as an investment. Then ask, what is the return on that investment? Is it stress? Exhaustion? Laughter? Gratitude? If you wrote down all of the places you visit, people you interact with, or activities you participate in each week, and then put these up against the three determining factors for value, how would you characterize your life? You are the customer in your life and you pay for everything with time. Reflect on your payments. I am sure there are people, places, and activities that are taking more away than you are getting back. Imagine how much more joy you would get if you were able to reduce or eliminate the things in your life that you determine are not adding value?
Maybe doing laundry brings you joy. Great! I certainly enjoy having clean, organized clothes. But I would rather be mountain biking than DOING laundry. I have friends who get a lot of joy from taking care of their lawns. That is awesome for them! I would rather be having a beer with my friends on the weekend than spending part of the day mowing my lawn. I certainly like not going to jail and having accurate financial records, but do I enjoy doing my taxes? No. I would rather be reading a good book on a beach. My laundry, lawn, and taxes are like the accounting or human resources department of a company. They are necessary, but do not specifically add value to my life. I am not going to look back on my life and say “that one Saturday I didn’t go to the lake with my friends so I could mow my lawn was a great day.” So like in business, how can you reduce or eliminate things that do not meet YOUR definition of value and maximize the return of your investment of time to create more value in your life?
If a business is not providing value to its customers, it likely won’t exist very long. Also, the more time, resources, and energy spent on non-value added steps or processes decreases the investment in value added steps or processes and does not help the customer. Every business has steps or processes that are necessary, but are unrelated to the value that the customer is paying for. Find out which steps are directly producing value for the customer and which steps are not adding value for the customer. Reduce or eliminate those steps that are not adding value for the customer so that you can invest more in those steps that are adding value for the customer.
If your life is full of people, places, and activities that are not adding “value,” or joy, you will see an increase in things like depression, stress, and negative health consequences. First, define what a valuable life means to YOU. Next, determine whether or not your investment in time each day, week, month, or year is increasing or decreasing the amount of value you are experiencing. Do not determine your value based on what other people determine as their value, or based on what you see on social media. Truly reflect on those things that bring you joy. Those things that you can look back on later in life and smile. These will be different for different people. Try to reduce or eliminate the time you spend interacting the people. places, or activities that are not adding value to your life. You truly only live once. Make sure that when you look back, joy is the first emotion you experience.
As always, keep the conversation going by sharing or replying to my post. We are all in this together, so let’s all keep taking steps in the right direction and learning from each other!
-Tyson
Sources
1. 2 Second Lean, by Paul Akers, Copyright © 2019 by FastCap Press, https://paulakers.net/books
2. https://leanmanufacturingtools.org/89/value-add-vs-non-value-adding-processes/, Value Add vs Non-Value Adding Process, accessed 01/10/2021.
3. https://goleansixsigma.com/non-value-adding-activities/, Non-Value Adding Activities, accessed 01/10/2021.
4. https://www.merriam-webster.com/dictionary/joy, accessed 01/10/2021
