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|Date: 2022-07-07 Page is: DBtxt001.php bk0002020|
The Basic Concepts of True Value Metrics
Data at the Center of Everything
Data centric decision cycle
This is a simple representation of a data centric decision or management cycle where data are at the center of everything. Data are at the center ... and data are used at every stage of the process. One set of data used by everyone and for everything!
Data are used in every step of the process:
“Management information is the least amount of information that enables a good decision to be made reliably and in a timely way.”
TVM is a paradigm shift for society because it moves into a much broader use of data for decision making and public accountability … and the goal is not to have academically rigorous study but society that works and society that progresses and solves problems. Data that are internal to the corporate world are more pragmatic and useful than anything that is used in the academic community and for public information about society.
More than anything else data are an organized way to record facts … and it is facts that drive success and failure. Data facilitate analysis and therefore make it possible for better decisions to get made.
Data need to be about material matters. It is very easy to create data, especially about small quite meaningless matters … and then in short order to have “data overload”. Good data for decision making is about matters that matter.
Don't sweat the small stuff
Management information needs not only to be meaningful but accessible to decision makers easily and at the right time.
For socio-economic progress and performance … that is the satisfaction of needs and improvement in the quality of life, progress for the community and efficient and effective performance … there needs to be timely data about what matters, the data that are needed to make good decision.
It does not matter who makes decisions and who, that is what organization, implements activities. What does matter is that the resulting activities produce good results.
Use same data for multiple tasks
The same data are used for multiple tasks … the facts are the same, and the metrics needed to use these facts in various different functions of management are similar.
The same data may also be used in different places in the organizational hierarchy or structure of organizations.
Use metrics that are meaningful
TVM metrics have two purposes: (1) to keep score; and, (2) to provide good data for decision making. Data are needed that are relevant to the operations … to the problems that are the most serious and the activities that are going to have the most impact.
Prevailing money metrics have evolved to serve the stakeholders of the organization, and for this money metrics are very effective … but TVM is about serving the interests of society, and for this it is value metrics that are more meaningful. In TVM both money and value metrics co-exist … with the expectation that it will be the value dimension of performance that will in due course become the dominant interest of society as a whole.
Good data for everything
Purpose of data
There is purpose for data … a large part of which is to improve performance. Good data are very powerful … but not well used for the benefit of society as a whole. People have recognized for a long time that data have value and accordingly most data are held as property to be used for personal and organizational benefit more than for societal benefit. In the main this is legal, though it is very much detrimental to the
The data for decision making is often referred to as management information … and a useful definition of management information is as follows:
'Management information is the least amount of information that enables a good decision to be made reliably and in a timely way.'
Accountancy has a history going back several hundred of years to the advent of the era of merchant adventurers. The system of accounting is based on the give and take nature of transactions … and reflects this in a system of double entry books.
Management information is quite new. Various forms of analytical accounting were developed in the era of great factories … costs and works accounting … and eventually they the advent of commercial computers and electronic data processing (EDP) fully fledged management information systems.
Data are needed to make key decisions about allocation of resources, and the prioritization of activities. The aim is to use resources so that there is a maximum of community progress … the maximum increment in the quality of life.
Data are needed to provide a starting point:
In my own work, I have always considered that the purpose of management information was simply to improve decision making … with no reason to exist in its own right. I subscribe to the idea that: Good data and analysis are a good starting point for management information. Relating operational key data with accounting information makes it possible to address issues that are important and will make a difference.
The information needed to understand the progress and performance of the community are similar to corporate money accounting and MIS except that there is formal quantification of the value elements.
Data … metrics … facts on everything that matters
There is no universal master list of what metrics matter. TVM is based on the fact that every place and time is different, and therefore deserves to have metrics that reflect the reality of the place and the time, and not merely be a derivative of some average derived from complex sophisticated statistical manipulation.
In socio-economic metrics, quantity and money are not enough. There also have to be metrics about value. In TVM there is a framework that embraces quantity, money and value … and as well there are metrics for where we are (state), and how things have changed in the past (progress), and what activities have achieved (performance).
Some issues are more important than others … and importance varies from place to place and from time to time. TVM uses the concept of materiality to focus on things that are important, so that the metrics can be used to make better decisions about the major matters of importance. In other words, TVM has meaningful metrics about everything that matters.
Data are an efficient way of making a record of facts. A key purpose of data is to be a representation of the facts. This is not always easy … but this is what data should do. Data are a way to record and communicate realities ... tangible facts. There is no question that facts exist ... and the role of data is simply to make it possible to get facts into a form that is easier to manage and analyze.
Data to understand and guide progress
In a data centric management system data are obviously important. Socio-economic progress is an outcome of a complex dynamic with all the elements not well understood. Data are a key to success.
Possibilities can be achieved more reliably when there are data about performance and the application of resources. Data are at the center! TVM data are central to everything and used for:
Data for coordination
Data connect everything … facilitate coordination
Coordination without data is merely another layer of complexity … but data in support of coordination is an approach that has the potential to improve performance in ways that are very substantial. Coordination is often expensive and ineffective, but with the use of appropriate data the process of coordination can be facilitated at very little cost.
With appropriate data the best way to work in cooperation becomes apparent with little need for opinionated negotiation. Data show whether or not cooperation is working or not.
Data for scorekeeping
Scorekeeping … the metrics for performance are three (1) progress is how much the state of the community improves; (2) activity efficiency is how much something costs versus what is should have cost; and, (3) cost effectiveness is how much progress is achieved relative to resources consumed.
The scientific community has addressed this question in considerable depth because the issue of measurement determines whether or not the scientific analysis has any meaning or not. There are similar questions in the field of socio-economic analysis and policy formulation.
The central idea of management information in TVM is to measure in ways that are going to be the most useful … to make the best decisions. It follows from this that performance should be measured where it is needed to make good decisions reliably … and this is most likely to be at the community level where there is more granularity and less complexity.
Even at the community level there can be a lot of data … and therefore very easy to have data overload. A lot of data does not mean there is a lot of information … and especially not a lot of useful information.
Step one is to identify what is important for decision making that is important … and for this there is the need, first of all, to have data to determine what issues are important.
Based on this, more data are needed about the important issues. There is no need to collect data about things that are of little importance … or of little relevance to the decisions that need to be made.
Economic analysis using sophisticated statistics may be of academic interest … but does it help to make better decisions at an operational level. Usually not … the key information for operational decisions are usually very simple and easily ignored.
Data for public accountability
Accountability is one of those words that is used in public dialog … but it is rare for anything very much to be done about it. Data are needed for individual and organizational accountability. While it is expected that decision makers will make decisions for purposes that are in the interest of the organization or for society, this is not going to happen without appropriate checks and balances. There are strong internal financial controls in most well run corporate organizations that ensures good decision making in the interest of the organization is the norm … but there is nothing like it within the prevailing money metrics for the interests of society. TVM value accounting is done from the perspective of society and the community and is a way for society to have checks and balances and accountability.
Accountability has become a fashionable idea … but not popular within the ranks of decision makers and those in control of resources and wealth. There is dialog and there are conferences to opine about accountability … but the systems to do accountability never get deployed. TVM is a step towards accountability. The data and the analysis show performance … and performance reporting highlights good performance in some place and with some organizations and bad. This is the essence of accountability.
Transparency is a part of this. There has been much talk about transparency for several decades ... but an effective process for doing transparency has never been developed, or, to the extent that it was developed, never deployed.
Data for oversight
The idea of oversight is normally associated with something negative … stopping local initiatives on the assumption that local is bad. But good oversight has a very big positive which is that the understanding of progress and performance in the community makes it possible for alternative and perhaps better approaches to be introduced.
The one external resource that has the potential to be almost always a “win-win” is the sharing of technical knowledge so that performance is improved. Sharing knowledge is improved significantly when the specifics of a problem are clear … and sharing knowledge is most valuable when it is practical usable information.
Continuum of ImprovementA system that improves performance
The basic module
The management cycle has the following form: (1) Collect data, do analysis; (2) plan and organize; (3) implement; and (4) measure and analyze again.
A system … a continuum
High performance programs integrate data collection, analysis, planning, action, more data collection, more planning, more action in a perpetual process. These are reflected in the following schematic. Everything has a data component. The basic construct is not done once but is repeated over and over again ... data are collected and used for decision making all the time.
In corporate accountancy there is both balance sheet and operating statement as an integrated whole ... similarly TVM has the state of the community and the economic activities of the community. Corporate accountancy has focus on money transactions and financial profit ... TVM takes into account the broader idea of social value creation and destruction
The ultimate measure of success is whether the change between the initial status and the post activity status has a value that (substantially) exceeds the costs. The following schematic shows this as a box “Metric of Improvement”.
Over multiple cycles the aim is for the scale of the interventions to diminish and for the impact on community to get better and better, and the bad things to get smaller. The following graphic depicts this over a four year cycle. The interventions start big and get smaller while the net socio-economic state starts poor and gets better.
The global economy functions as a continuous process … it never stops .. production and consumption keep on going … value is consumed and value is created. How well it works has to be assessed “on the fly”.
At some level this is what markets do … they also keep on going without waiting for deep analysis to show what is “right” or “wrong”. People have to make market decisions with the data that are available.
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