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|Date: 2022-07-07 Page is: DBtxt001.php bk0001060|
The Basic Concepts of True Value Metrics
What Impact Will TVM Have?
With better metrics … better everything
Some people are quite happy to manage “by the seat of their pants”, but that is not the way best performance is going to be achieved. Even where there are detailed metrics as in the case of major corporations and the stock markets, the results for society may not be good because the metrics are about money more than they are about value. When value metrics are as prevalent as profit metrics a lot is going to change for the better.
The impact of TVM is going to be a better world that has a hope of being sustainable and has a better quality of life worth several hundreds of trillions of dollars!
The impact of good metrics is huge. When high profit value destruction is changed to lower profit value adding, there is an order of magnitude swing in the performance of society and in socio-economic progress. If the world adopted TVM true value metrics, there could be more rapid progress out of poverty and better decisions about important infrastructure improvement … potential value swing several trillions of dollars.
Management information rarely uses academic rigor … but is cost effective and reliable for its limited purpose. Good metrics can substantially improve productivity. This is an example in a factory setting simply resulting from the use of better metrics.
The efficiency of the use of resources in most socio-economic activities has never been measured … it is difficult to know how badly resources are used. From time to time there are studies and it is common for observers to conclude that government performance is an order of magnitude less efficient than equivalent privately managed operations. Part of this is the lack of meaningful metrics almost everywhere for measuring performance.
What impact a paradigm shift? TVM will facilitate paradigm change … and through this there will be impact ... if for no other reason than an improvement in the way socio-economic scorekeeping is done will also change the way socio-economic decisions get made. It is a an accepted reality of management that metrics are important.
The money measure scale of the modern global economy is several hundreds of trillions of dollars. All of these resources are flowing because of money profit decision that are made with most of the decisions ignoring totally any negative value destruction associated with the earning of returns.
There is a record number of money billionaires in the world … and at the same time a record number of people who are poor and hungry. A socialist agenda to give the rich peoples' wealth to the poor is fatally flawed … but a social agenda to have decision making based on both profit return and value return could add trillions of dollars to the profit and value creation that improves quality of life for everyone.
When value is measured as much as profit, then decision making will change and quality of life will improve. The capacity of technology to be a partner in progress will be realized more rapidly when profit potential is supplemented by value potential.
With TVM, good decisions are recognized … while decisions that destroy value are identified and the reasons for this ascertained. Experience suggests that the difference between an environment where good decisions are being made and one where “anything goes” is not a percentage point or two … but an order of magnitude or two. In other words, if good data and facts are used for decision making, and resources are properly allocated and deployed, the value adding can be improved by between 10 and 100 times.
The elimination of poverty called for by leaders like Professor Muhammad Yunus is possible … but it requires way better decision making and allocation of resources than we are normally seeing.
Profit is often value neutral or value destroying … modest changes in how profits are made can make a huge difference in the value adding of profit making.
TVM changes the way activities get measured. It is not simply about how much has been done, but what impact there has been and what value has been added as a result of doing something. Good managers have known this for a very long time … but many big organizations have adopted systems of management and accountability that have put focus on measures … quantification … without a deep understanding of what is happening to deliver results to intended beneficiaries. Other organizations have evolved their systems so that donors are informed while the work being done goes without meaningful metrics.
The goal of TVM is not merely to deploy a value based accounting system … but for a TVM based system to change the way major resources are allocated … and for this to result in an improvement in productivity and quality of life.
In theory, the reason for allocating resources and doing the work is to get a result. The result has a value ... money profit performance and a social value which may be quantified and translated into some money equivalent.
In the case of health interventions the impact should be more good health ... and good health has value.
In the case of education, the impact is better educated students and then the population … with a high incremental value. In the case of education, the value may only be realized if there are limited economic opportunities for employment or profitable business. With no opportunities, the value of education is largely wasted.
Potential huge impact When the leaders of the capital markets are using value as much as they use profit, then there will be major changes in the way global capital market resources are allocated.
The progress of modern science and technology has been far greater than most would have predicted fifty years ago … and it is clear that much of the potential of this progress remains unrealized.
When decisions are made in a timely manner using meaningful data, decisions can be very much better.
The potential for better metrics to change the paradigm of performance means that several billion people in abject poverty today should be emerging from this state in a few years … at the same time the middle class becomes happier if not money wealthier … and in the economic totality the rich elite can stay rich and elite, but no longer holder the world to ransom!
Difficult to quantify It is not easy to quantify value outcomes, but it can be done using a system of standard values for the value of outcomes in the community setting. Some outcomes have a money cost and a price when they are purchased … but many do not.
Hundreds of millions of children will grow up to be of little economic value unless good decisions are made about socio-economic investment. Every child that grows up without education and skills, and with compromised nutrition and health is a multi-million lost opportunity. Add it up and the impact of good decisions is trillions of dollars of better socio-economic performance.
Any community stands to benefit when good decisions are made for the community … whether the decisions are being made by local leaders, local citizens, local organizations or outsiders. Most communities are missing opportunities because poor decisions are being made.
TVM does not constitute a benefit … TVM is not in itself of value … but good decisions that result in good activities is where the value lies!
Community micro-up decision making
TVM helps to change the framework for economic activity and specifically the locus of decision making … a paradigm change so that the concentration of economic money wealth and power in very large centralized entities will be offset by local decision making and local implementation of economic activities. People who are near a problem often have an understanding of the problem and how it might be solved most effectively. When people solve their own problems, amazing progress can be made. Small things can have huge leverage.
Decision making done to optimize local impact may be an order of magnitude better than any decision made by centralized decision makers, no matter how well intentioned.
Removing constraints on possibilities
A society that matches the needs of people and quality of life with the potential of people to satisfy needs and improve quality of life has unlimited potential. While material resources are finite … the human resource is abundant, and human intellect has reached a point where big problems can be solved as long as the goal is properly defined.
TVM can contribute to progress and performance … to improve quality of life by helping to provide meaningful metrics about what is the “state” and what “progress” is being achieved and the performance of society in making this progress … the cost efficiency and the cost effectiveness.
All winners and no losers is not an impossible dream … but it does take work to optimize the use of resources. With TVM all segments of society will progress better than will be possible without the deployment of TVM … many times better. Everyone! Meaningful metrics that include the value dimension makes it possible to demonstrate that socio-economic progress can be win-win for everyone rather than being a zero sum proposition where one group wins at the expense of the other groups.
Perhaps, most important TVM has the potential to stop stupidity … and to limit the abuses of greedy people and corrupt organizations. If ordinary people knew how bad the decision making is in major organizations handling millions if not billions of dollars, they would be appalled.
A paradigm change is possible!
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