The current economic and environmental crisis challenges us to initiate what will need to be the greatest explosion of creativity, innovation and cooperation in recorded history. As the actual status of the earth’s climate and biological situation have become more revealed, we are seeing the beginning of the same dynamic as the actual facts of the economic situation, which has been moving in the same direction for years.
Only now is it being seen for the instability and destructiveness that has actually present for some time. One part of it, rarely mentioned in the commentaries, that helped put things over the edge, were the changes in bankruptcy law. Pushed through by the money-center banks in 2005, over the virtually unanimous objection of every bankruptcy judge in the country, this lead to even more risky credit card and mortgage activity. This is described in the forthcoming book from Bob Booth and Ed Morler, Good People, Bad Credit.
As the events that led to the bank bailout become more unpacked, the role of poor to terrible transparency should emerge front and center as a key driver of their risk management failure. In fact, this recognition is essential, if a real conversation about positive change in objective economic reality is going to start. Within organizations, the almost universally absent transparency is how behavior and decisions create financial results. This is destructive across the board, perniciously undermining almost everything people are trying to accomplish at every level. This situation tends to be invisible to many, from the boardroom to operations team meetings, because it is a function of absence, not presence.
In many cases, the story could be written as ‘Good Companies, Bad Numbers’. This is a situation that Joe Scanlon addressed directly in his day, and with which Scanlon companies still struggle today.
The pivotal fact, that standard financial data is fragmented and incomplete, means the objective facts of property and contract cannot be included in the thinking by all parties. In business conversations, and in the creative process of problem solving, not having an accessible and common-sense shared language often hampers optimal outcomes. This missing overall ‘score’ should be something that everyone can glance at as often as needed for an impersonal reference point to the discussions at hand. Doing business without that is akin to attempting to play championship football on a round field with no 50-yard line or yard markers, and goal posts that tend to move for no particular reason. Bowling through a curtain in front of the pins is a common metaphor used to describe the impact of current accounting and finance practice. All the participants on both the professional and the customer sides are unknowing victims of a divisive system they had no part in creating.
It can be demonstrated with guaranteed predictability that a transformation of this invisible and incalculably destructive pattern of missing organizational practice and behavior can be launched in one day with an intact senior leadership group. Improbable as it may sound, providing a simple and scalable model of the economic reality everyone can understand will release unlimited enthusiasm and collaboration that has been blocked heretofore. Thankfully, all the information required to execute on the finance side is already imbedded in the existing data, and simply requires using the 50 years of resources that already exist to support the full implementation and use of Financial Accounting Standards Board regulation 95. With full linkage of the bank account to the accrual statements, it then becomes possible to employ the scientific method as a tool for collaborative maturing of the entire measurement system; so all stakeholders can support the base business model to evolve.
According to Jim Huntzinger, founding thought leader of Lean Accounting (See Fresh Ideas: Accountants as Change Agents in the February E-Zine), the base business model is a crucial element in this situation. “I have found that a so-so executed “flow” business model will significantly outperform a very well executed “batch” business model. I have actually witnessed this from a plant/operation level. But to take the business model to its needed level, the leadership has to not just be on board; but understand functionally, and execute to the better business model. Very, very few realize this, let alone have the experience and knowledge to achieve this”. This is especially true due to the issue Scanlon so directly addressed; the people doing the work have crucial insight that leadership does not know how to use. Jim’s insights are now being demonstrated in both the service and public sectors as well. These non-manufacturing cases are now beginning to be chronicled in The Assocation. for Manufacturing Excellence’s Target Magazine.
The current-practice absence of a common sense, usable picture of financial reality, and evolving measurement maturity then contributes a fundamental instability to attempting genuine and sustained collaboration at virtually every level of the private sector, civil society and public institutions. Ever wonder why meetings tend to be so painful and unproductive so much of the time? There are two basic reasons. One is the absence of the impersonal and objective facts of the money, with the behaviors that are creating it, presented with relevant and practical transparency. The second is absence of virtually any collaboration on the design and execution of meetings by the people in them, to actually achieve consistently outstanding results with optimum use of the available wisdom and very efficient use of time.
Any meeting or conference can be a direct experience of group genius, using a fusion of methodologies drawn primarily from the Technology Participation and Integral Operations Finance, plus use of World Café, Open Space Technology and the Collaborative Operation System, and with thorough pre-planning. A meeting can capture in writing all the available wisdom in the room, especially people’s strategic insight and tactical clarity, ending with real-time documentation completed and available almost immediately. Unless and until meetings and conferences become collaboration exercises that deliver a directly felt experience by every participant of fully giving their gifts, not wasting their time, and receiving the gifts of everyone else’s experience, effective and sustained development and execution of collective will will continue to elude us.
We in the Performance Management Institute’s network and at The Commons call for the further development and market-wide adoption of an Integrated Business and Institutional Leadership Structure. One that builds on the foundation Scanlon laid. One that provides a fundamental framework to address the twin challenges of practical transparency and sustained collaboration, and capacity to quickly transfer ability to execute to CEOs and their teams. This is an opportunity for the United States to resume its centuries-old role as the driver of new and unlimited possibilities for human beings to pursue their own destinies as they also steward the larger society of which they are part.
We declare our willingness to use our Intellectual Property in collaboration with any individual or group that practices the values of Asset Stewardship on behalf of themselves and the whole society, along with a Fundamental and Behaved Respect for the ability of all human beings to engage their spirit in service to their enterprises, loved ones, the greater community and the whole.
All power to those who care,
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