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|Date: 2022-07-07 Page is: DBtxt001.php bk0002040|
The Basic Concepts of True Value Metrics
Reporting Gives Power to Metrics
Reporting facilitates good decisions
Easy access reporting … everywhere in the economy
Without metrics it is impossible to manage … without management information performance is always compromised. It should not be hard work to get the data needed to make good decisions.
TVM aims to make it very easy to get the data that will help get the best possible decisions made about the allocation of scarce resources.
Community is the main reporting entity
TVM has community as the primary reporting entity, not the organization as it is in most money accounting financial reporting. TVM has the public or society as the primary stakeholder in the access to information about the socio-economic state, progress and performance. TVM organizes data in a way that is going to be the most useful for decision making and to enable public oversight and accountability, The organizations of data are used to provide clarity about the situation in a community, together with the activities and organizations in the community.
Community is where people live their lives. TVM has focus on the community more than on the organization. Socio-economic progress and performance is first about people and their quality of life and only secondarily about the profit of organizations. The quality of life of people is more closely associated with community than it is with organization. In TVM a community is a place … though in any place there may also be other sorts of communities such as affinity groups, virtual communities, and so forth. In a community there may also be sub-division of the community into smaller units or places … such as the neighborhood, the block, the building, etc.
Within community there may aggregation by sector or aggregation by organization … but the aim is better quality of life for the people and families in the community. Decision making about activities determines socio-economic progress and performance … and TVM acquires data to help with decision making and holding decision makers accountable for performance. The most important socio-economic measures relate to place … for many reasons. The place is where people live and work … the place where quality of life has tangible meaning. A place does not move … it has a perpetual existence. While many factors of economic life can and do move around … the place stays constant.
TVM uses value accounting and analysis to show the state of the community and the progress of the community. The framework of analysis shows what is important and what is not, and what organizations and activities are doing to contribute to or constrain progress . Community is the main entity for TVM to report on progress. TVM incorporates organizations and activities into the analysis in a subsidiary role … similar t6o the accounting for subsidiary organizations and subsidiary activities in group accounting.
An organization is usually the entity that does activity … one or many activities … in one or many communities. People in organizations are the main decision makers about resource allocation and activities … and in turn in the progress and performance of the community.
Most organizations have internal money accounting. TVM adds a value dimension and a very different perspective. The main metrics are derived from activities of the organization and the value proposition associated with these activities.
In TVM, the performance of an organization is a means to an end, not an end in itself. An efficient organization may have efficient activities that have good community impact … but it is also possible than an efficient organization has activities that do not have good community impact. TVM metrics have focus on the impact of activities on people and the performance of the community more than on the performance of the organization.
In TVM an organization is subsidiary not primary in the hierarchy of reporting and analysis. Money accounting is done almost exclusively from an organizational perspective … to report profit performance … to report the receipts and payments of money against a budget. In TVM it is the community that is most important.
In TVM the performance of an organization includes how the organization's activities impact on people and community. TVM consolidates … does roll-up … of the activities of an organization not so much to see how well the organization is doing, but more to understand how well the community is doing.
TVM metrics are valuable in conjunction with the Corporate Social Responsibility (CSR) initiatives that are becoming increasingly common in the business world. Most CSR functions with limited metrics. … and where there are metrics they tend to be ad-hoc and not part of any system of mainstream reporting.
Ideally TVM should be an integral part of the organization's accounting and management information system. The basic architecture of TVM data would allow this and make it possible to do TVM reporting as thoroughly as the profit reporting.
Accordingly it is useful for organizations to report using the TVM reporting construct … and in fact many organizations could improve their public perception significantly by making full use of value reporting rather than simply doing financial reporting. Not-for-profit organizations communicate next to nothing by distributing detailed financial reports … it is a near useless exercise. An equivalent level of effort and detail about the value flows of these organizations would be incredibly interesting.
Reporting about organizations
TVM does not ignore organizations … they are the main actor that drives the economy. In TVM the goal is to have the community progress … and to understand organizational performance from that perspective. It is interesting to know about their profit performance but it is the impact on community, people and families that is of the most interest in TVM. This is a paradigm change in the metrics about modern society that have been dominated for decades by the profits of business, stock market prices and growth … largely measured by how much gets consumed.
For specific activities
TVM uses an “activity” as the basic entity for performance analysis. It is activities that create socio-economic product or value … consuming resources and value in the process. Any discreet activity may be subject to TVM style analysis to obtain its value profile and what impact the activity is having on the community. The same information is useful for the analysis of the performance of an organization.
Activity reporting is the foundation element that sustains socio-economic performance The socio-economic status of the community and socio-economic changes for the community result from socio-economic activity. An activity consumes economic resources and in the process creates economic value … and where there is a surplus of value creation over value consumption there is value adding.
TVM uses the activity as the focus of data acquisition because an activity has simplicity, is the entity that sustains socio-economic performance and may easily be associated with factual information as well as time and place. An activity may have some form such as a “project” or a business “branch” … or a religious unit, or something in health or education or construction … but this does not change the concept. The activity is something simple that may easily be understood.
Data about an activity may be “rolled up” or consolidated so as to form a bigger entity. This roll up may be a variety of activities that add up to be the aggregate for a community, or the aggregate for a sector, or the aggregate for an organization.
Activities use resources, that is, consume value in order to create value. The process gives either value adding or value destruction. Activities also have a money dimension with money costs and money inflows resulting in money surplus or deficit. Sustainable activities are value adding and money surplus producing.
Accordingly the productivity of economic activity is a critical factor. TVM metrics therefore have some focus on the activity and the performance of the activity both in respect of its cost efficiency and its cost effectiveness. The metrics of efficiency and effectiveness relate respectively to the cost associated with the activity and the relationship of cost to impact for the activity. The goal is not merely to do the activity, but to get some useful results from doing the activity.
While many modern corporate organizations straddle many communities, and indeed in some cases many countries … their activities take place in specific places and it is in these places that there needs to be performance analysis and metrics about the impact on the community. A typical well managed organization will know about the profit contribution of any of its activities anywhere … in the TVM reporting framework there will also be knowledge of the value contribution of these activities on the communities where they are.
Projects and programs
A project or program may be similar to activity … or a subsidiary roll-up … it depends on the structure of the project or program. In many ways TVM activity reporting is similar to the project reporting that is done for UN, World Bank and other relief and development initiatives. The main characteristics of the TVM reporting is clarity about when and where the activity is taking place, and the ability to “roll-up” the information in a useful way to the community level.
The project or program has been an important operating entity for development implementation. Such an entity is well suited to capital projects like major construction, but not at all suited to work such as capacity building and works where a continuing activity is anticipated as in most non-capital support for development.
TVM does analysis at the “activity” level which may be “rolled-up” to a project or program depending on the circumstances. The size and complexity of many projects and programs makes it a virtual impossibility to have good decision making and accountability. Without this, many projects and programs have failed due to more or less misappropriation of funds. Large projects without clear “community specific” activities also have failure potential associated with the use of “average” solutions for very specific problems.
People and family
TVM does analysis that is people centric … does analysis that is bottom-up rather than top-down. The metrics of quality of life have to be relevant to individuals and to families … and in practical terms this is better done at the community level than at the national level. There are also many reasons for looking at quality of life issues at the community level, not least of which are matters like privacy and the undesirability of any imposition of intervention initiatives at this level.
TVM has a people perspective, which in turn means family. The economics of the family aggregates into quality of life for the community. TVM does not attempt to track people and family level progress directly for two reasons (1) at a practical level, this is not the level where decisions have a public impact (2) and from a privacy perspective, the data is too invasive to be acceptable as a society wide initiative.
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