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Date: 2023-09-27 Page is: DBtxt003.php bk0002010-v2019
Burgess Book Manuscript
Basic Concepts for TrueValueMetrics
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Chapter 2 ... How TVM Improves Quality of Life
2-1 What Is TVM ... True Value Metrics?

Scorekeeping and Statistics

Scorekeeping for society … for community

Simply put, True Value Metrics is scoreleeping and “stats” for society. It takes what has been developed over hundreds of years … that is old fashioned double entry accounting used in the business world … and makes it work for society by including value metrics as well as just money metrics. This is a paradigm shift that improves the management information dimension of decision making for society … it offers the possibility of more tangible progress and less political posturing.
Scorekeeping and Stats!
In the sporting world … there are always metrics about the score so that everyone knows which team is the winner. The scorekeeping is independent and not in the control of the players, the coaching staff, the owners or the fans. There are also “stats” that are specific to the sport and used to improve the game mainly by players and coaches .
What metrics are important depends on what the goals are … in the case of society as a whole the over-riding goal is that quality of life is improved. The Founding Fathers of the United States put pursuit of happiness as a high priority in their thinking, and it seems reasonable that it should remain a high priority. For some this is progress out of poverty, for others this is sustaining an existing good quality of life. True Value Metrics measures what progress whether it is progress out of poverty and or improving quality of life.

Metrics for decision making

Measurement for scorekeeping is good … but there also needs to be data for decision making. What gets measured depends also on what needs to be done. Some measures are always needed … specifically … what resources are used and what outcomes are achieved. These metrics are independent of the activity, and independent of any specific process. Other metrics relate to specific activities and relate to specific processes and help to improve activities and processes.

Modern society has a wide range of metrics … but most are about money and wealth … and the various activities that translate into wealth. Every corporate organization engaged in business has impressive metrics in their “management information systems” … and the capital market data services have all sorts of data to help with the analysis of the capital markets and corporate profit performance. So much data about profit and wealth, but very little data to address issues about quality of life and other factors of social importance .

Decision making needs information now … as good as possible now is what is going to get used. If it turns out to be wrong, then there will have to be adjustment later. This is the real world. Identifying cause and effect is done … but it is done “on the fly”!

TVM aims to be for society what cost accounting is for the typical corporate business organization. In corporate business there is management information that relates cause and effect. Society needs something similar. The community needs for decisions to be made that are good for the community, and for decision makers to be held accountable for the way in which they make decisions and use resources.

Metrics about quality of life

Value is the main measure … not money

What TVM does is to take the money accounting framework and incorporate value metrics into it. Value quantification in addition to money metrics is a basis for some level of paradigm change. Using value in the data and analysis framework, not merely money is a different dynamic. Value is subjective and not as easy to quantify, but it is very important and the main determinant of quality of life … much more so than money

TVM has value at its center just as business accounting has money as its focus. While it may be possible to use money as a metric for wealth, it does not work well as a measure of quality of life. TVM has progress to a better quality of life as the big goal of a high performance society, not merely the acquisition of more and money money wealth.

Value … subjective … but still very important

Rigorous accounting for value requires a quantification for value. This is not easy because value is a subjective idea, but by using a system of “standard values” TVM has facilitated quantification.

Value must be quantified … just like money

Nobody really understands what money is … but it does not seem to get in the way of money being used everywhere to measure business performance and the performance of the economy at a macro-level. Value is more important both for the business organization and for society as a whole, and some way must be used to enable widely accepted quantification of value.

TVM is introducing a system of “standard value” to facilitate quantification. This is an approach somewhat similar to standard costs in corporate business cost accountancy. Everything gets a “standard value” … and the aggregate of value transactions becomes the measure of socio-economic performance.

An Integrated Analytical Framework

Starts with a double entry accounting construct

The double entry framework that is used in business accounting serves as a powerful method to organize and control data for use in business decision making. TVM uses a similar construct. TVM uses the double entry idea that has made money accounting so effective for corporate performance metrics. The double entry idea makes it possible for state, progress and performance to be part of a single system with internal checks and balances.

Like business accounting … with value!

TVM measures progress and performance a little bit like it is measured in business accounting … but with value not simply money! Money and value are related but not the same … and there are two datasets: (1) a dataset that describes a state; and (2) a dataset that describes an activity. This is the same concept that is used in business accounting where there is a balance sheet (that describes a state) and the operating statement or profit and loss account (that describes activities). TVM uses the very elegant way in which accounting organizes data into transaction data that impact the profit and loss account, and the data that impact the balance sheet.

Progress is the difference between the value at the beginning of the period and the value at the end of the period. The primary metric of progress is very simple. Is the community better now than it was in the past? This is not a complex idea, and there is no reason why there cannot be quick, easy and useful data about this. In the image below, the value of the community is the same at the end of a period as it was at the beginning ... ordinary daily activities produce what is consumed ... it is a stable steady state situation.

Performance is both the efficiency of the activity and the impact of the activity. The data makes it possible to measure how much something cost with what it should have cost. The data also makes it possible to measure the relationship between cost and the impact … that is the change in value arising for the community.

The purpose of economic activity is to maintain quality of life and make progress … the elements of “state” and “progress” are set out below together with the metrics of “performance” for the implementation activities.

Similar framework using value

TVM uses the same basic framework but with value data … value elements about quality of life and socially important matters, as well as the well established elements about money wealth that are used in the money accounting system. The use of both money results and value results in a complementary manner makes it possible for decision makers to understand through routine reporting the social value impact of profit making and to be held accountable for both.

The money framework is sadly deficient because the money profit reporting is only about organizational performance and money, with no data about the impact of all of this on quality of life, and the decisions about allocation of resources needed to improve quality of life.

In TVM, “State”, “Progress” and “Performance” are an integrated set of metrics similar to the integrated metrics associated with business accounting and financial reporting … the balance sheet and the P&L account. In the case of money accounting the reporting is mainly in connection with organizational performance, in the case of true value metrics it is about the performance of society … how is the community moving forward!

Analytical construct from need to progress

The management cycle serves to track decisions and resources through a process … to establish priorities and the assess progress and performance. This information structure helps with this. The structure of information used in TVM for appreciation of state, progress and performance is:
  1. Balance sheet at beginning of period;
  2. Needs;
  3. Resources available;
  4. Resources being used to satisfy needs;
  5. Unmet needs;
  6. Resources needed to satisfy unmet needs;
  7. Incremental external resources mobilized;
  8. Incremental resources deployed;
  9. Activity … resources used … value consumed;
  10. Activity … value creation;
  11. Activity … impact … value adding;
  12. Balance sheet at end of period;

Organized data are very important

Data organization reduces data overload.

The massive increase in dataflows over the past few years has resulted in rather little increase in information and knowledge, but massive data overload. All planning and operational frameworks need a data flow system and management information. Without these, it is as dysfunctional as a human being without a nervous system.

The global society has built up a very complex institutional framework for the financing and operation of the economy and governance … but it operates with a very incomplete set of progress and performance metrics. There are pieces, but not a complete framework. Too much of the analysis data are derived from very small surveys and statistical manipulation, with very little of basic cost accounting, and even less of cost effectiveness analysis.

Code systems facilitate the organization 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. There are different codes including account codes, budget codes, program codes, etc.

A community perspective

TVM also looks at socio-economic performance from the perspective of the community. Profit and value for the organization does not necessarily translate into quality of life improvement in a community … yet this is a core purpose of all economic activity. The idea of the state of the community is reported using a report similar to a balance sheet, the progress of the community is reported by a comparison of balance sheets and the operational performance of the community by looking at the activities of the community.

TVM Complements Other Metrics

Complement to money accounting

The need for TVM arises not because TVM is an alternative way of doing the existing metrics and could therefore replace them, but because TVM is adding to metrics in a way that supplements existing systems and helps with community level decision making.

TVM has a community perspective. In TVM, the primary reporting entity is the community. The state of the community … the quality of life in the community … changes because of the socio-economic activities going on in the community that consume resources, create value and produce value adding or value destruction for the community. All the other reporting is subsidiary to the reporting at the community level.

TVM has some of the characteristics of money accountancy for business … except that TVM is not only about money transactions and economic measurements in terms of money but doing something similar with value transactions as well. Money accounting is used everywhere … in business organizations, in government, in not for profit organizations … and extensively in economic analysis. Money accounting does not include any accounting for value. TVM adds a complementary rigorous methodology that does accounting for value just as money accounting does for money.

TVM builds on established GAAP money accounting but with major extensions. Financial reporting of an organization are based on a universal “money accounting framework” … the generally accepted accounting principles (GAAP). The balance sheet and the profit and loss account (P&L Account) together represent a unified set of information about the money aspects of the organization. Financial statements comprise a balance sheet, a comparison with a prior period balance sheet and a profit and loss account. This presentation of money data shows the financial state of the organization, how the organization has progressed from a prior period and the performance of the organization … how the activities of the organization changed the state of the organization.

Complements other social progress metrics

The fact that money profit accounting is insufficient as a system of socio-economic performance metrics is well known, and many initiatives are in progress to address the problem. TVM recognizes that some of these initiatives have advanced substantially and in some ways are better than TVM … while in other ways TVM is a better solution.

The best way forward is to add a value dimension in whatever way seems to be the most effective in a specific situation.

Reporting To Whom? By Whom?

A new paradigm

Most reporting ends up being part of massive information overload, and sorting out what matters from what does not is a big job, and not usually done well. TVM does not eliminate or replace anything that exists, but complements it so that there can be more information where it is needed. The users of data about a community are those that are interested in the community … either as decision makers for the community or as concerned citizens. The data may be used to make decisions or as part of a process that helps to make decision makers accountable.

Summary reporting using the TVM's value analysis construct will be built up over time for many communities … ideally all communities. These reports will shows how the community has been progressing and what is its present state. In most cases these reports will be web accessible.

A first level of drill down from the community summary will show some of the activities of the community and how these activities have helped or hindered in the progress of the community. An alternative drill down will identify organizations that have been engaged in activities in the community and how these organizations have helped or hindered community progress.

By the public for the public

The question about who does the reporting and who gets the reporting is very important … but also, maybe, irrelevant. The fact of the community does not change because of any structure of governance … the community is what is is.

In its most unintrusive form, TVM compiles data about the facts of the community … and that is all that is on the record. The scorekeeping is happening because the community exists. There are no fans, no coaches … just a game going on.

If someone chooses to try to improve the way the game gets played … to improve performance, they may use the data … the stats to improve performance.

In other words, the data are passive … they may be used by anyone and everyone to help to get the game played in a better way.

Role of the press … the media

The media … and in its original form, primarily the press or print media … serves to be the voice of the people in the checks and balances of democracy. The importance of this function is recognized in law by the passage of the 1st Amendment to the US Constitution so that the press could perform this function with little constraint.

These checks and balances are as important today as at any time in history, maybe more so, because of the power of technology and the ability to do a lot of damage to the socio-economic fabric of the world in a very short time.

For TVM, the question about who does the reporting and who gets the reporting is both important … but also, maybe, irrelevant. The fact of the community does not change because of any structure of governance … the community is what it is. The TVM goal is for data to be accessible so that they may serve the interests of the community.

In its most unintrusive form, TVM compiles data about the facts of the community … and that is all that is on the record. The scorekeeping is happening because the community exists. There are no fans, no coaches … just a game going on.

If someone chooses to try to improve the way the game gets played … to improve performance, they may use the data … the stats to improve performance.

In other words, the data are passive … they may be used by anyone and everyone to help to get the game played in a better way.

In large part TVM is about public information being reported to the public by the public. TVM and the information infrastructure are the passive media to move the data and information into useable forms.

TVM facilitates reporting in a form that facilitates public dialog about important issues, and better dialog about these issues. An element of this is to report on issues that are important to individuals and communities, and about which the individual knows enough to be able to improve the outcome of a particular course of action.

Only the very powerful and the economic elite can make much of a difference at a national and international level … but most everyone can make a difference at the local level … and especially around things that have value and impact quality of life. When one community improves its quality of life and puts it on the record … and then another … and then another … there is a combined impact that adds up to something important.

But the underlying paradigm change may be bigger than it might initially appear. The powerful and economic elite are able to do things to benefit themselves and they have the money to invest … but they are not empowered to do very much for everyone, and especially things that are very personal.

The tools that are controlled from the top of society are quite limited … something like “pushing on a heavy weight with a piece of string”. So often the heavy hand of regulation ends up being counterproductive … though a world without law and regulation, as was evident in the Bush era financial implosion is worse. There has to be a better way … and the right way starts with the use of data to improve decision making at the local level.

Not a system to replace existing metrics

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