Overhead value analysis

Overhead value analysis (OVA) examines the cost and value of indirect activities and services. It makes support work visible, asks internal customers what outputs they actually require and identifies opportunities to eliminate, simplify, automate, integrate, decentralise or outsource activities. The objective is to improve the value of overhead—not to assume that every indirect cost is waste.

When to use it

Use OVA when overhead has grown without a clear link to organisational priorities, when support services no longer meet internal-customer needs, or when financial pressure requires a disciplined redesign. It can be preventive or corrective. Because the analysis may affect roles, workload and employment, establish transparent decision criteria, worker consultation and implementation support at the outset.

An example OVA project

A manufacturer of military and advanced remote-control technology faced deteriorating financial results and limited organisational adaptability. Its OVA team created a structured inventory of indirect activities and costs, then used a full analysis to redesign support work. The organisation shifted from a functional structure toward market-facing business units. Departments clarified the value delivered to internal customers, while selected activities were decentralised. Broad participation helped employees shape the change rather than experience it only as a cost-cutting exercise. This example illustrates a possible route, not proof that the same structural response fits every organisation.

Origins

OVA belongs to the wider value-analysis and value-engineering tradition, which asks whether an activity or component performs its required function at an appropriate cost. Its management-accounting form combines that logic with activity-based costing, internal-customer evaluation and Porter’s value-chain perspective. The cited literature documents these related streams rather than establishing one definitive inventor of OVA.

What it is

OVA compares the resources consumed by indirect activities with the services and outcomes required by primary processes. Porter’s value chain helps locate support activities, while activity-based costing helps trace resource consumption. Interviews and questionnaires add judgments about necessity, quantity and quality that accounting records cannot supply on their own.