TrueValueMetrics ... Impact Accounting for the 21st Century

Date: 2025-05-02 Page is: DBtxt003.php L0913-TVM-MMW-000012

TrueValueMetrics ... Peter Burgess Manuscript
Making Management Work
for Relief and Development

Chapter 12
Management

Management ... the Process

Has Almost Universal Application

The process works almost everywhere. It really does not matter what sort of structure is involved, the same basic approach will help to optimize performance.

We choose to think that the best performance is one where the resources consumed are the least, and the socio-economic benefit is the most. The basic measure is change in socio-economic status ... the value of the situation at time one relative to the same situation at a later time two ... compared to the resource use over the time interval. It is a technique that has been applied for ever in the analysis of thermodynamic systems, it is a technique used in corporate accounting and financial analysis, and it works very well for the relief and development sector.

In order to get to the best results there is a multi-part process that involves:

getting facts, understanding the current situation;
doing some planning;
getting organized;
implementing the activities;
measuring performance;
providing feedback; and,
making improvements.

In management literature, this process is usually depicted as a circle, but I see it as an iterative process that changes over time. The process works the best when it works as a “feedback” loop that has continuing impact of the ongoing works.

Get facts;
Organize relevant data;
Plan and Budget;
Think through the proposed intervention;
Put into numerical format;
Organize and Implement;
Mobilize the resources needed;
Buy things ... do things ... create value;
Measure;
Do the accounting, collect statistics, do analysis, do reports;
Feedback ... have dialog about improvement and plan improvement;
Action ... make improvements.

Get Facts

Facts should be easy, but in spite a huge amount of data, rather little of decision making value is available. In order to make good decisions, it is necessary to mobilize and organize the relevant data. If this does not get done, then the planning is merely a blind activity.

Plan ... and budget

Planning is an iterative process with a lot of thought about what is the best way to achieve results.

And plans need to be translated into a budget for the resources that are needed. By putting the proposed actions into numerical form with costs and results quantified, there is a realism that does not exist with just simply descriptive text.

Organize and Implement

Getting organized is the first reality check, and then the work of implementation. If the plans will not work, this is going to start to become apparent as the organization takes place, and then it will be very clear by the time there is implementation activity.

Without resources, very little is going to happen. Though it might give the appearance of doing something, more and more planning is not a good way of covering for the lack of resources. Mobilizing resources is not easy, but without resources nothing happens.

Buy things ... do things ... create value. This is the heart of implementation and key to success.

Measure

But if there is no measurement, who will know what works and what does not. Do the accounting, collect statistics, do analysis, do reports. This is the central tool of management and good decision making.

Feedback

And feedback is a way for good information to get back into system so that there can be an informed dialog about ways to make improvements and get the best possible performance.

Action

And to the extent that there are improvements to be made ... get them made. This is the most important step, and almost totally missing in the relief and development sector. The sector is forced to be less than optimally effective because its underlying structure and modus operandi eschews long term interventions that have a chance to become optimized.

Management ... the Function

Management is not administration

The relief and development sector is not managed, at best it is administered, and frequently it is mal-administered. Nobody is bothered much by this because the system lacks even basic accounting and management information systems.

Administration and bureaucracy is really a hangover from a long gone era when hierarchy was king ... and the peons in the lower echelons of the organization were expected to follow procedures and their superior's instruction without question. This is really what prevails in the big multilateral organizations and in government bureaucracies worldwide, and especially in the “south”.

There are a number of techniques that are useful in making management effective. These include the following:

Financial Control:
- Boring ... but essential;
Management Information:
- Interesting ... and very valuable;
Distributed Decisions:
- Great way to get good performance - automatically;
Decision Processes:
- Decisions ... a controllable constraint;
Oversight:
- Critical for any responsible management team;
Ethics:
- Oops ... making it an asset, not a liability.

Management performance makes a difference

Management performance makes a tremendous difference. Management is about making decisions, and seeing to it that they are effectively executed.

Management is an art, but it is driven by what is possible ... and what is possible is, more than anything else, driven by science, technology, knowledge and know-how.

The biggest differentiator between organizations in the same industry segment is management. This is sometimes used to justify the very high remuneration paid to senior management in the corporate sector ... and it certainly justifies considerable reward, though not the obscene pay packages that are now commonplace, even for quite mediocre management staff.

Management Makes a Difference
Performance shows up in a lot of places. For example: why is it that one company gets better results than another company in the same industry? How did General Electric in the USA flourish and Blaw-Knox, Westinghouse and others in the same industry essentially disappear? The answer appears to be that General Electric made better management decisions and deployed its resources better, and over time, of course had more resources to deploy and then drew further and further ahead.
General Electric's management seems to have organized better, adopting a better strategy and executing better.
Simply ... General Electric had better management.

Procedures are a crutch

When the issue of fund flows and misappropriation of funds is raised with officials of the World Bank, the UN organizations and others in the relief and development sector, it is usual for them to refer to the procedures that they have that define what must happen.

Procedures Get in the Way
As an accountant I have done my fair share of analysis of procedures ... and I have probably discontinued and thrown away more bad procedures than most. Unless they are very well done, which is rare, big books of procedures get in the way and people are unable to do their best work.
Of course there are some things that have to be done in a routine manner ... accounting is all about doing routine rigorously. But most things can be improved when people simply do their best, and do it right.

What I refer to as “management by procedure” never works. The totally erroneous assumption is that people are going to follow the procedures, while the reality is that people will work the procedures so that they get the results they want that serves their own self interest. I do not know how many times the well known relief and development organizations have “strengthened” their procedures in the aftermath of some publicity about their fund flows going wrong ... and it does not take long for the “bad guys” who are many to figure out how to beat the new and stronger procedures.

People should be expected to do what is right. Most people know the difference between right and wrong, and procedures are not needed for this. Of course, not all people will do right, and the system of accounting, internal check and performance measurement should find these people relatively easily.

Knowing is not enough

When people know something is not working right, something should be done about it. An organization should be structured so that it is easy for everyone to be part of the solution. Some of the rapid growth successes of recent years have embraced this.

But this is not the way the relief and development sector works. There are many excuses. People often choose not to know, even when they do. People define their job responsibility so problems are clearly not in their area of responsibility. People point fingers at others. The list goes on.

To get performance, people have got to know and have got to do something about it. This is a culture change for the relief and development sector organizations, and also most under-performing organizations everywhere.

Make best use

In almost any organization there are some people that know how to improve performance, either because, for example, they have long experience or they have good analytical abilities or they can bring in some relevant knowledge not presently being exploited.

Good management will figure out how to use this improvement potential in a practical way ... either by some form of ad-hoc effort or by some systemic change in the organization. But it will get done. Procedure, rules and regulations will not get in the way of doing something that is worthwhile.

Getting the Most for the Least
I was responsible for running a factory at one point in my career. There was a serious capacity constraint in the foundry, and something significant had to be done quickly and at modest cost.
The first step was to use some high end corporate consultants to advise on the problem ... they charged a big fee and recommended a $5 million capital expenditure project. The second step was a rather less prestigious consulting firm ... who had rather more modest fees and recommended a rather more modest capital expenditure program. My third step was to figure out myself what would be best to do, consulting with the experienced staff in our organization, some of whom were not at all academically trained.
The local factory workers and supervisors knew what would work, and what would increase production enormously, at a very modest cost. Instead of investing millions and waiting for perhaps 2 years, we invested around $150,000 in some incremental equipment, and also two weekends of maintenance overtime installing and making changes ... and got the same results that the first consultants were projecting at an investment that would have exceeded $5 million.

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