Definitions for TrueValueMetrics
When? When does TVM apply?
TVM is timely. TVM is a timely system ... data are collected as quickly as reasonably possible and fast enough so that the data still has high value. TVM is timely ... providing the earliest possible alerts about change and things that need attention.
The value of data usually diminishes with time. Time matters. The very idea of progress implies something about time. Are things better now than they were? The TVM system helps answer this in a simple but quite rigorous way.
Changes over time are a critical measure of progress. The history of change may be studied at leisure ... but the data about changes that are taking place now is most valuable when available in a timely manner. Management information needs timely data in order to be useful.
“When” is a data element that helps to establish causality. Quite simple time series will often show useful relationships without the need for complex sophisticated analysis. Without paying attention to timing, analysis may suggest causality that is impossible. Without appreciation of changes that naturally occur over time, such as seasonality, simple analysis can easily result in very incorrect conclusions. Changes over time are very helpful to understanding what is going on.
Where conditions change from day to day the data should be collected daily. Where conditions change more slowly, the data can be collected less frequently. The key is to collect data so that the results of data analysis are “in time” for good decisions to be made when they are needed.
Production Reports at Southern States, Inc. This story illustrates the vital importance of timely information. It goes back to the early 1970s. Most of my career I have been associated with corporate accounting, consulting, planning and the analysis of performance. I have not done many line management assignments ... but in this case I was the VP Manufacturing for Southern States Inc, a manufacturing company making air-break switches for the electric utility industry.
Having datapoints associated with time makes it possible to do time series. Tine series show how things are progressing or regressing. The time interval should be a balance between very frequency and cost and the value of the associated results. Sometimes data needs to be daily, or even more frequent ... sometimes once a year is enough!
The company had a backlog of orders, but the factory was a production bottleneck ... and we had neither the time nor the money to invest in expanded manufacturing facilities. We had to do better with what we had. For years the factory production report had been written up and distributed every day around 10 am ... informing everyone of the production numbers for the day before ... a fairly standard practice at the time!
I changed this to give management a report at 8.30 am (the factory started at 7.30 am) about the anticipated production for the day ... today, not yesterday! By 9 am the support staff were deployed fixing problems that would improve performance today! The factory always beat its anticipated production ... and the factory production almost doubled without any major capital investment to expand the capacity! A simple change in the timeliness of data and clarity about what the data were for, and the factory production reached record levels.
TVM with modern technology means that data acquisition can be immediate and the analysis and reporting as fast as it needs to be.
A small amount of good information is way better than a lot of dubious unreliable information
Time and causality. It is very difficult to establish causality with a high degree of confidence in a complex system that is not well understood. On the other hand movement in the right direction is easy to identify. TVM identifies causality by using temporal (time) analysis ... it measures progress over time ... using community balance sheet changes as a critical metric, and how the activities of society result in value adding progress or value destruction.