Utilizing Value Functions for Evaluating the Performance of Project Alternatives

Big idea

Value functions are a value measurement approach, meaning that it can support the user in choosing between alternatives by constructing a preference order. Value measurements can be used to determine the value of a thing by looking at both tangible and intangible aspects. Thus, it properly evaluates all relevant aspects of a project, concept, or idea and their alternatives. Consequently, value measurements (and, by extension, value functions) are used in decision-making tools like multi-criteria decision analyses Multi-criteria decision making (MCDM) for Project selection.

Value functions are useful when evaluating and comparing similar solution alternatives, as they assign a specific value to each alternative, creating a preferential structure. Several value functions are used when evaluating a solution alternative or project, one for each performance criterion (also known as key performance indicators (KPIs) ). From these, each solution alternative or project's performance can be assessed through the specific score/value that the solution alternative or project obtains on the value function scale. The preferences expressed by value functions should be coherent. Thus, they must be transitive and complete. This means that if project a is better than project b, and b is better than project c, then project a is better than c. It also means that either one project is better than the other or they are indifferent (project a is equally good as project b). Value functions can be used in any decision process. Consequently, they are useful As value functions play a big role in decision-making, and early Both the additive and multiplicative models can be used when creating value functions. The additive model $\sum^m_{i=1}w_iv_i(a)$

The multiplicative model $\prod^m_{i=1}[v_i(a)]^{w_i}$

• Continue tool description (how to construct value functions)

• Use in decision-making (benefits in creating a better decision ground for choosing between project alternatives)

• Basic theory (local and global scale), (3 types of value functions monotonically increasing, monotonically decreasing, and non-monotonic), (bisectional and difference method)

• Benefit for portfolio, program, and project management

Application

• Different creation methods (eliciting scores and weight for value functions) • How to read and understand the value functions • How to consult stakeholders and present the results (handling stakeholder input, handling stakeholder presentation) (often in decision making, the basis cannot be to complicated)

Limitation

• Stakeholder sensitivity • Criteria selection • Application limitations