Truly, money is not EVERYTHING, although it seems to be the ONLY thing when it comes to measuring success in business. Let’s take a closer look.
Every business is a SYSTEM; a network of nodes—end-to-end processes, departments, business functions, tools, technology; you get the drift—and their connections. Connections or interfaces are the glue that hold nodes together as an organic whole. Hence, nodes are the organs of an organism, which shows that the organism has properties that none of the nodes possess individually. Nodes are thus interdependent of each other. Not only that, they are also tightly coupled due to the economic necessity to share scarce (expensive) resources. As a result, there are no redundancies. When these resources become unavailable—do not function properly—the system as a whole may grind down to a hold.
Every system serves a purpose—otherwise what’s the point of investing time money and resources in its creation and operation. While all nodes have a purpose of their own, they’ll have to subjugate theirs in support of the realization of the higher purpose.
Consequently, nodes and their connections need to be Designed, Structured or Organized, Implemented or Operated, Maintained, and Managed. I call these functions the BUSINESS GOVERNANCE of any organization, which is an EXCLUSIVE executive responsibility because no one has more authority to allocate all necessary resources and delegate the required authority down the hierarchy to people who perform the actual tasks.
Intricately interdependent nodes and tight coupling of scarce resources require thoughtful change management procedures. In other words, you can neither just implement new tools/technology/practices, nor remove, replace, upgrade or reorganize any existing ones WITHOUT questioning the consequences of your proposed initiatives on any of the other nodes and thereby the organization as a whole.
This questioning involves a simple checklist. When I change XYZ, will that impact any of the organization’s design aspects: Commercial; Housing; Administrative Organization; Finance; Personnel; Information; Legal; Organization; Tools/Technology. Hence the acronym CHAFPILOT, which is a quick tool to assess the duration, cost, and disruption of a proposed a change management initiative.
The Preferred Status of Finance
No matter how one slices and dices the performance of a single node or the business in its entirety, every performance measurement can and will, eventually, be expressed as a monetary equivalent. In other words, Finance recounts the past, the history or background story of all numbers that make up financial statements.
Hence, Finance is an EFFECT! Therefore, if you want to obtain a different effect, you’ll have to change its CAUSE, which is a function of Business Governance; the executive suite.
Then, why are leaders so obsessed with Finance? Mark Twain said, “Thunder is good, thunder is impressive; but it is lightning that does the work.” In paraphrasing him, I’d like to say that Finance is good, Finance is impressive; but it is Business Governance that does the work.
Now, can anyone explain to me why ubiquitous best practices in optimizing efficiency are celebrated as the go-to measure for improving performance? Would anyone fiddle with the dials on the dashboard of his or her car and seriously expect to improve its performance? I hope not. So, don’t do it with your business either!