Not just money… Investment
Too many value-for-money assessments focus on the costs of inputs and outputs but struggle with the value of outcomes and impacts. Let’s change that.
Value for Money (VfM) is a familiar term.
We hear politicians say it. We see it in evaluation terms of reference. We might say it ourselves when we’re making a big purchase.
But what does it mean?
I define VfM as good resource use.
Various organisations around the world have their own working definitions of VfM, examples of which I’ve compiled here. All of these definitions are consistent with the underlying concept of good resource use, as defined in my PhD and discussed in this paper. Differences between the various working definitions reflect different organisations’ contexts, priorities, and the aspects of VfM that matter to them - i.e., their criteria of good resource use.
There are many approaches to assessing VfM.
For example, there are methods such as cost-benefit analysis, cost-effectiveness analysis, cost-utility analysis, social return on investment, and others. There are frameworks, like the 5Es (economy, efficiency, effectiveness, cost-effectiveness and equity). There are participatory approaches to VfM. And more.
I developed a system to help you get clear answers to VfM questions. It doesn’t replace existing methods. It adds a sense-making framework, with a set of principles and a process for defining VfM in a context, selecting an appropriate mix of methods, making transparent judgements, and reporting them clearly.
I wanted to give my system a name, to differentiate it from other VfM approaches. I decided to name it Value for Investment.
Why Value for Investment?
Too many VfM assessments are clear about the money and fuzzy about the value. It’s not that the money doesn’t matter; making good decisions with limited resources is central to VfM. But policies and programs are more than just costs - they’re investments.
An investment is an asset or item acquired with the goal of generating value over time. It involves committing and risking resources - not only money but also things like time, effort, relationships, reputations, inspiration, and expertise - with a view to creating future value. Public spending can be seen as an investment, creating long-term value through building capital assets that endure and provide ongoing returns. For example, public assets might include a knowledge-based economy, a well-functioning healthcare system, or a resilient transport network, each contributing to sustained returns like increased productivity, better quality of life, and inclusive prosperity. Spending on social safety nets can also be viewed through an investment lens. More than simply redistributing wealth, these expenditures play a role in building social capital - for example, fostering a fairer, more cohesive society.
Investing in value propositions
Public resources are allocated to policies, organisations, programs and services on the basis of the promise they hold to do something that has value to people (e.g., by addressing a social problem or opportunity) - in other words, their value propositions.
This is a useful concept in VfM assessment because if you can define your program’s value proposition, you can evaluate how well that value proposition is being met.
Defining your program’s value proposition
An intuitive way to define a value proposition is to ask stakeholders:
To whom is this program valuable, and how?
What inequities does it tackle, for whom, and how?
What resources are invested in it, by whom, and what does good stewardship of those resources look like?
What ways of working will ensure we maximise value from the resources invested?
What outcomes should we pay attention to, that will tell us whether we’re on track to create value?
What critical factors affect whether the program creates a lot of value or a little?
The answers to these questions address different sections of the program’s value chain, like the one depicted below. This is a bit like a logic model or theory of change, but also a little different. Theories of change tend to focus mostly on the middle two boxes - how organisational actions produce outputs leading to outcomes and impacts. The value proposition takes a wider-angle view that includes the resources invested, the value that people place on the resources, actions and impacts, and the mechanisms that convert resources into value at each step.
The value proposition provides a basis for developing meaningful criteria and standards for a VfM framework - at every level from resources to actions to impacts and value. Those criteria and standards in turn scaffold methods selection and evaluative judgements, as I unpacked last week.
The value proposition helps you answer whether the program is providing value for the investment.
How this helps decision-makers
Value for Investment is increasingly being used in government, NGO, philanthropic and consulting settings as a way to join up evaluative and economic thinking for VfM questions. If you’d like to explore it in more depth, the resources on my website and the posts at the top of my Table of Contents page are a good place to start.
Bottom line
Policies and programs aren’t just costs - they’re investments in value propositions. Public investments create value from all the resources invested in them - not just money but people, relationships, power, know-how, inspiration, perspiration, natural resources, and so on. They create many different kinds of value - not just financial but also social, cultural, environmental, and economic value. They create value not only by maximising bang for bucks, but by balancing multiple objectives like equity, affordability, sustainability, ethical practice, human dignity and rights, effectiveness and efficiency, among others. Money is a valid way of measuring at least some of this value, but it’s a choice, not a requirement.
Focus on the value proposition. First define it. Then evaluate how well it’s being met.
Also see
King, J. (2024). Value for Money and the 5Es: Designing a context-specific VfM framework. Julian King & Associates Ltd.