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Date: 2019-03-22 Page is: DBtxt001.php L070-PP-PROGRESS-PERFORMANCE

PROGRESS AND PERFORMANCE

Measure Change in State and you Measure Progress

PROGRESS and PERFORMANCE
What is Progress? What is Performance?
Open L0700-PP-PROGRESS-and-PERFORMANCE

IMPACT OVER TIME
Changes in the Socio-Enviro-Economic system over time
Open L0700-PP-SEES-changes-over-time
Acounting for changes in the State of the Socio-Enviro-Economic system
The basis for the TVM framing of enhanced impact accounting
Open L0700-PP-SEES-change-in-state-accounting

SOCIO progress and performance Open L0700-TVM-PP-SOCIAL
HUMAN CAPITAL ... an INDIVIDUAL perspective Open L0700-TVM-PP-Individual
RELATIONSHIP CAPITAL ... the collective / community perspective Open L0700-TVM-PP-Community

ENVIRO progress and performance Open L0700-TVM-PP-ENVIRONMENT
Atmosphere / Clean Air / Emissions / Pollution Open L0700-TVM-PP-NC-Air
Clean Water Open L0700-TVM-PP-NC-Clean-Water
Sustainable Land Open L0700-TVM-PP-NC-Land

ECONOMIC progress and performance Open L0700-TVM-PP-ECONOMIC
Economic Trends Open L0700-TVM-PP-Economic-Trends
Measuring Progress Open L0700-TVM-PP-Measuring-Progress
Measuring Progress and Performance Open L0700-TVM-PP-Measuring-Progress-Performance
PHYSICAL CAPITAL
Perspectives of INFRASTRUCTURE, ENGINEERING, TECHNOLOGY
FINANCIAL CAPITAL Open L0700-TVM-PP-Financial-Economy
An INVESTOR perspective Open L0700-TVM-PP-Portfolio
KNOWLEDGE CAPITAL
INSTITUTIONAL CAPITAL
An ORGANIZATION perspective ... Commercial Organization
Open L0700-TVM-PP-OG-Commercial
An ORGANIZATION perspective ... Not for Profit Organization
Open L0700-TVM-PP-OG-Not-for-Profit
An ORGANIZATION perspective ... Governmental Organization
Open L0700-TVM-PP-OG-Governmental
PROGRAM perspective Open L0700-TVM-PP-Program
PROJECT perspective Open L0700-TVM-PP-Project
CULTURAL CAPITAL
LOCATIONAL CAPITAL
The PLACE perspective Open L0700-TVM-PP-Place

STATE, FLOW and CHANGE in STATE
CHANGE in STATE is a very efficient way to measure progress
GO TOP
Compared to POTENTIAL
Extremely poor PROGRESS and PERFORMANCE
GO TOP
The POTENTIAL of modern KNOWLEDGE
The amount of knowledge has been growing exponentially for a very long time ... and in the past 50 years the amount of new knowledge has exploded.
Compared to the growth in knowledge the actual progress of the socio-enviro-economic system has been very modest.
Worse ... far too much of the knowledge has been applied in ways that have had the effect of impeded socio-environment progress for many while giving excessive benefit to a limited group of beneficiaries. Over time the level of inequality has become dangerously unstable.
The UTILIZATION of modern KNOWLEDGE
Modern knowledge has been applied in many ways that have been good for some and very bad for others. There are many examples:
(a) The increasing power of technology to destroy, and the relative weakness of technology to achieve and maintain peace
(b) The gaming of the system in order to creater financial capital while social capital and natural capital are exploited and destroyed
(c) The increased abiity to communicate rapidly and the growth of dataflows without much related growth in understanding
(d) Too much information enables users to choose their information to suit their prejudices. Freedom of speech being abused to misinform without limit.

Huge and Complex
Activites in the real world are very, very complex, and quite disorganized.
What is the best way to manage progress and performance in the reality of complexity?
Start by measuring progress.
Progress is the CHANGE in STATE between the BEFORE situation and the AFTER situation.
Look at the following graphics.
Understanding and measuring anything meaningful in the squiggles that represent the multitude of activities that are going on in any period is a huge task ... but measure the STATE before and after in comparatively simple and gives a very clear indicator of progress.
TPB note: My personal experience has been that it helps to have clarity about the goals. Historically companies have been very clear about the goal of improved profit performance, and as a CFO I wanted to be able to report periodically on profit improvement. In order to get to this outcome, the reality of the company's operations was complex and not always in the right direction. The company needed data that would inform ALL the decision makers throughout the organization how they were performing and how this was likely to impact the profit. My experience has always been that everyone will attempt to make better decisions when they have useful facts and know that performance is in fact being monitored in a fair and impartial manner. Better yet, when data about factual reality and performance are visible (transparent) then many individuals will outperform what was teh accepted norm simply because they know better than anyone else what actually works! With visibility, these outperformers can be recognised ... it may be financial reward, but non-financial reward also has important value.

The Relationship between Before State, Period Activities and After State
PROGRESS is the increase in VALUE (of the STATE) from beginning to end of the period
Steady State Good Progress Bad Results
PROGRESS is the change in the total of the values or everything


In this case the activities of the period do not change the state ... state at the end of the period (EOP) is the same as at the beginning of the period (BOP)
There is GOOD progress when the activities of the period result in a state at the end of the period that is better than the state at the beginning of the period.
There is BAD progress when the activities of the period result in a state at the end of the period that is worse than the state at the beginning of the period.
This is a huge simplification
What this means is that PROGRESS can be ascertained by reference to the state at the beginning and the end of a period, with no need to have any knowledge of the activities during the period that results in the change.
When this is at the core of the progress measurement method, it enables a significant simplification of the data collection and analysis process.
.
THE PROBLEM WITH CONVENTIONAL ACCOUNTING
The problem with conventional accounting
The problem with conventional accounting is that while it does a very good job for money based transactions, it ignores all the impact that is not measured with money and included in the core transaction.
Since the beginning of the industrial revolution, the growth of financial wealth has come about while human capital has been exploited and natural capital has been depleted. When the global economy was quite small in size, the natural capital depletion did not represent an existential threat, but the scale of the modern industrial activity has now reached a level where natural capital depletion is a significiant risk.
TVM takes into account ALL the CAPITALS
TPB Note: This conceptual framing was articulated a long time ago with a slightly different naming convention. The current framing of the capitals is (1) Social Capital, (2) Natural Capital, and (3) Economic Capital.
Social Capital is a slightly broader definition than Human Capital, but esssentially much the same;
Natural Capital incorporates the idea that the Sun is the source of all energy on planet earth; and
Economic Capital includes both Financial Capital and what is called here, Man Built Capital. The current framing of Economic Capital includes Financial Capital, Physical Capital and Intangible Capital.
Financial Goodwill and financial intangibles straddle both the financial capital subset and the intangible capital subset.

SINCE THE 1980s FINANCIAL PERFORMANCE HAS BEEN OPTIMIZED TO BENEFIT OWNERS AND TOP MANAGEMENT WHILE BROADER SOCIAL AND ENVIRONMENTAL ISSUES HAVE BEEN IGNORED. MORE AND MORE, THE NEED FOR IMPACT REPORTING IS BEING RECOGNIZED ... BUT NO SYSTEM OF NUMBERING HAS YET EMERGED THAT IS EASY AND WIDELY ACCEPTED.
THIS IS WHAT TVM AIMS TO DO!

Many economic / financial metrics show growth and are considered good

Stock market

Intangible value
Stock market up ... Intangible valuation up
The underlying physical value of the modern economy has grown quite slowly compared to stockmarket valuation.
This is caused in large part by high business productivity and profits while the flatlining of worker remuneration.

Money supply

Value of the US$
Money ... Quantity up / Value down
Few people understand money and the monetary system, but 'trust' that money has value. This trust is reasonably well founded when money is used for transactions, but less so when it is thought of as a stroe of value.

World GDP growth

US GDP growth
The Stupidity of GDP
The financial media, politicians and policy makers talk about GDP growth all the time. They don't seem to understand that GDP growth has a very dangerous correlation with the existential risk of ecosystem collapse.
Metrics about social performance are less positive and unaddressed

GDP v GPI

Wages flat
GDP v GPI and the flatlining of wages
The Genuine Progress Indicator (GPI) shows the weak progress of society compared to the growth of the GDP indicator. Since the 1980s productivity and profits have increased, but wages have flatlined. But it is worse, consumption growth and profits were enabled by massive unsustainable increases in consumer credit.
Metrics about environmental issues are alarming and also unadressed
CO2 concentration
Temp v CO2
GHG concentrations up / Global temperatures up
The correlation between GHG concentrations in the atmosphere and temperature rise around the globe is very strong. The idea that emissions associated with the industrialization that has happened in the last 200 years has not had a significant role in this is preposterous.

CO2 emissions
Greenhouse gas emissions (GHGs) continue to rise
Carbon dioxide equivalent (CO2e) emissions are going up less quickly, but that is not enough to avoid ecosystem catastrophe. As long as the managers of financial wealth have a singular focus on the growth of this wealth, the system will not change ... and it must.

Sea level rise


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PROGRESS is CHANGE in STATE GO TOP
PROGRESS is CHANGE in STATE
Progress is when the Post Activity status is better than the status Pre Activity.
WHY THIS IS POWERFUL
The idea that progress may be measured simply by assessing the change in the STATE from the beginning to the end of a period means that there is a huge reduction in the data that are needed. Instead of having to have all the transaction data for the period, it is possible simply to have data about the beginning of period state and the end of period state. This is a fundamental aspect of conventional double entry accountancy and one of the main reasons why it is so powerful and has stood the test of time.
TPB Note: Over the years I carried out hundreds of project evaluation and supervision assignments for the World Bank, the United Nations and others. I always tried to understand the situation pre-project and the situation post-project in order to determine if the project had had any meaningful impact. Sadly many of the projects had not improved the situation in any significant way, though a more conventional way of assessing the project would have concluded that they had been successful. The conventional approach to project monitoring was to compare activities as planned with activities as implemented, and compare the planned cost of these activities with the actual cost of the activities. If all of this was OK, then the project was deemed a success ... whether of not there had actually been any improvement in the STATE of the situation being addressed. Sadly this did not make me popular, and eventually my work as a project evaluation consultant dried up ... not a surprise, but another lesson learned



The text being discussed is available at


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