5 November 2010

Peter Burgess: True Value Metrics

Posted by Admin under: Accounting; Economy; Policy; Sustainability .

Peter Burgess writes:
True Value Metrics (TVM) has evolved over a very long time … the idea of double entry accountancy is several hundred years old … and is the core of the methodology. Enabling technology has emerged over the past fifty years and amazing data systems are now possible. TVM is a paradigm shift in the way socio-economic activities are evaluated:
  1. The original purpose of accountancy centuries ago was to ensure that merchant adventurers made good use of the money entrusted to them… and brought back goods of value. …. TVM takes this original basic idea and does the same thing with the resources that decision makers in modern society are entrusted with.
  2. But: modern money accounting is not enough … it has been compromised by law makers and now has a singular focus on corporate money performance. And typical economic measures like GDP are not enough. Money accounting is a good foundation … but needs the added dimension of value. Value is subjective, but very important and in TVM is quantified using a standard value approach.
  3. The perspective of money accounting is that of the organization. TVM looks at money and socio-economic performance from the perspective of the place … the community or neighborhood. The impact that activities have on the place are important in TVM reporting.
  4. TVM uses an analysis framework that has its origins in business financial reporting and in engineering thermodynamics! There are three key concepts: (1) the balance sheet or state of the community; (2) the progress or the community … that is how the balance sheet has changed in a period of time; and (3) the performance of the community … the efficiency of the activities and the effectiveness of the activities. These ideas may be used in both the place / community and for organizations, activities, etc that are part of the community … or consolidated through roll-up in various ways, These concepts apply in every aspect of business and society … a universal system of metrics about state, progress and performance.
  5. Finally TVM has the challenge of creating an enabling environment and infrastructure for the system to be used. Every industry is working to improve metrics … especially in the social sectors and areas where money profit is not the only outcome. TVM has the potential to complement the various sector initiatives so that there can be some common measures about costs (value consumption), revenues (value creation) and profit/loss (value adding/destruction) in society no matter what the activity.
Part of the workshop session will be to have dialog about quantifying value … especially around areas where the participants have deep knowledge and interest. I am already working on this with different sectors and actors: microfinance …. extractive industries …. African villages … various aspects of Haiti rebuilding … a sporting club … a school and its PTA … developing country health at the community level … malaria specific health … etc. All of this is “work in progress” but exciting what seems to be possible!

One Comment so far...

The Sustainable Leadership Forum » Sat, Nov. 20, 1-4 p.m. “How Do We Measure Sustainable Value?” Says:

5 November 2010 at 7:06 am.

[…] Peter Burgess, author of True Value Metrics (forthcoming) will be the featured guest at the next meeting of the Sustainable Leadership Forum, at the Morris County Library, on Saturday November 20, 1-4 p.m. […]

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