Sunday, May 24, 2009

The Concerns of Economics (Prosperity)

In my post entitled The Framework for Organizational Fitness, I outlined the three basic concerns - or systems - of any organization, they are the concerns of Affiliation, Economics, and Learning. Today I would like to explore the most recognizable of an organization's three basic concerns, Economics.

To me, the concern of Economics is about creating prosperity, which is why I think I'm going to change it's name. I like the term prosperity because it encompasses more than just the accumulation of wealth. To me it also denotes success and achievement in ways that don't revolve around building monetary wealth and so includes charitable work and not for profits.

Whether for profit or not, an organization must provide something of value, say a product or a service, to the community at large. This is the organization's value proposition. The systems that configure, create, and deliver this value (products or services) are the systems devoted to managing the concerns of Prosperity. The delivery of value is often called throughput, a term I dislike because it blurs main objective - the delivery of value. Still, most BPM, six sigma, process improvement, lean or any continuous improvement effort such as (insert your favorite here), focus mostly on throughput, for example, driving down cost, speeding up delivery, or any other typical matter of efficiency. This focus can easily undermine value creation.

Since concerns of Prosperity embody the financial aspects of an organization, and since most public organizations live and die by the stock markets whose primary indicator of value is profit and growth, these elements are often overly distorted in importance. I know this may sound strange, but it's true. Most organizations tend spend way too much time focusing on finances. When profits, shares, and growth get overly distorted in importance, an organization can become fixated on driving down cost, speeding up delivery, or other typical matters of efficiency. Sound familiar? When this becomes the organizational mantra, it also becomes the hymn of both internal and contracted improvement efforts.

The focus on throughput and efficiencies is absolutely necessary but it is not sufficient. Perhaps even more important are the concerns surrounding Community and Learning. Without establishing a viable, trusted and inclusive community, and without a system of learning through the practical application of observation and insight - a fundamental aspect of adaptability and sustainability - an organization will get out of touch with its communities and will have no compass for the road ahead. More later.

Cheers.

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