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|Date: 2022-07-07 Page is: DBtxt001.php bk0004010|
The Basic Concepts of True Value Metrics
Data Without Analysis is a Waste
Analysis releases the power of data
There are data … and then there is information, then knowledge and then wisdom. It takes analysis to move from having data to having information. Knowledge is getting information into the human brain … and then wisdom is sorting this knowledge so that it gets used in a useful way. The world has a whole lot of data … most gets used for just a very little bit of analysis … a terrible waste!
Almost every study needs some data to be the foundation for the analysis and conclusions. Enough data are collected to satisfy the methodology of the study … and analysis is done … conclusions drawn … and report submitted. Some time later another study in a similar area of interest … but usually little or no reference to the prior data. Easier analysis … easier conclusions … easier report without the problem of more data that may or may not fit exactly the new study format, analysis and conclusions. What might be the problem and what might be the solution.
The problem might be that many studies are part of an education process that requires original study, analysis and reporting. The primary objective is passing educational requirements … not helping directly with the progress of society and analysis to make this better. Merely recognizing this reality and getting the data more completely into the public space could help significantly.
Making metrics useful
TVM is about making metrics useful. In order to be useful the analysis has to be fast, based on reliable data and the conclusions clear. The whole process has also got to be affordable … in other words, low cost even if the eventual value of the process has a huge potential to be substantial. Any process of metrics and analysis is part of the “overhead” of society, not directly productive and its cost reduces the resources available for the valuable work!
Adding the value dimension to accounting sounds like it is adding a lot more work … but it may simplify accounting and by adding a dimension to accounting that facilitates answering important questions way better than a money accounting system can do on its own. Part of the essence of good analysis is to focus on matters that are material … that are important.
Don't sweat the small stuff
The big questions about social impact cannot be answered reliably unless there is a value component in the accounting system.
Making analysis fast and useful
Decision making needs to be timely … is best when the relevant data is available and presented in a clear useful manner.
What this means in practice is that available data are used … and the analysis is as good as possible relative to the available data. Rigorous academic analysis takes time … and by the time the analysis is complete, the situation has changed … or should have changed!
TVM recognizes that the academic community and many experts in the international relief and development industry, and in institutions like “think tanks” favor rigorous academic study of complex economic development issues … but this approach is expensive and of rather little practical decision making value. It is too expensive, too little and too late.
Some successful organizations have used simple rapid planning processes for years with good outcomes … for example the UN High Commission for Refugees (UNHCR).
UNHCR Used Really Rapid Planning
For many years, the management approach of the UN High Commission for Refugees (UNHCR) was unusual in the UN system, and very effective. They estimated the number of refugees as quickly as possible and as accurately as possible, and this number established a default budget framework for their immediate operational activity. The UNHCR method made it possible for UNHCR to do in hours what other units of the UN system would take weeks or months to do. This approach saved lives … not to mention saving money!
In much of the business world a rapid planning process is used to take advantage of opportunities and to avert crisis.
Fast Planning in a Business Setting
An international fishing company negotiated fishing licenses to operate in a country's Exclusive Economic Zone (EEZ) … with the provision that a fleet of fishing vessels should be in operation on site within a short period of time … three months, I believe. The expectation was that the international company would not be able to deploy suitable vessels in this time, and the licenses would therefore lapse. The international company did an urgent plan that involved very unconventional solutions and was able to deploy suitable vessels within the time limit imposed … much to the annoyance of the government officials who had designed the “trick”! Fast planning made it possible to take advantage of a desirable opportunity!
Analytical codes are basis for organizing data
Codes facilitate the organizing of data. The power of relational analysis is maximized by the design of the analytical codes. This is the key to easy analysis, and relatively easy to do for a relational database. Frequently, however, it is ignored and code designs do not follow fully logical rules and easy analysis then becomes impossible.
Part of the power of conventional accountancy was the logic of the account codes ... and this has become even more important as the TVM approach to socio-economic performance metrics has been developed
In government settings budget codes are the codes that control government moneys more than anything else. Many countries use a “single treasury account” financial control framework with all government disbursements controlled by a “vote” of the legislative body.
Program codes … Organization codes … etc.
The power of IT for processing data is optimized by a strong code system that allows for easy aggregation of transaction data and easy drill-down from summarized data.
Place and time analysis
Place and time analysis are important in the use of TVM … and for easy analysis there must be rigorous systems for coding of place and time.
Analysis Independent of Permissions
TVM does value analysis independent of any permission … the more permission is refused or there are constraints on dataflow, the more it is imperative that value analysis is done and conclusions drawn. The more there is “push back” the more there is a need for the data to be obtained and for the analysis to be done and reports available.
While there are strong laws and rules that require organizations to publish financial data … the way these data are published limits what it is possible to learn from the material rather than being a regime where data about performance are clear and operations transparent. There are good … that is bad … reasons for keeping operational data private! Many business organizations cut corners and private “deals” are going on all the time. These “deals” make the participants a lot of money and are only possible as long as the financial reporting remains opaque.
This is an old idea … that works
If the CFO considers everyone to be a crook … and designs the accounting system so that it is difficult for a crook to steal the company's assets … then the accounting system will control the company's assets. Experience suggests that crooks are everywhere … but most are lazy … so they don't bother with an accounting system that is hard to compromise. Change the internal control system from time to time to keep from making it easy!
Organizations like the World Bank have diminished the role of financial processionals in keeping track of the money … accordingly it is no surprise to have extremely weak financial controls in almost all areas of the relief and development sector, including in projects that are funded by development banks and international donors. These fund flows have been treated like open access ATM machines, and the fact of slow progress in the relief and development arena is not at all surprising.
Changing this is not going to be done “with permission” … it is going to get done because it is right, and the public is entitled to accountability for the use of resources and the outcomes.
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