Commerce and trade are some of the most basic and ancient human activities. This is a theme that has run through a number of my BlogTalkRadio conversations, particularly with Marsha Shenk and Jahn Ballard. I spoke with Jahn last week on the show, in a segment entitled Lean and Green Transformation. Jahn is a truly out-of-the-box thinker who has integrated a stunning number of perspectives into his approach to creating transparency and sustainable performance in organizations.
One of the big points for me was the way Jahn looks at operating cash flow. Anyone who has been to business school has learned a variety of accounting conventions and financial ratios – which have become the goalposts and field markers in the game of business. But how much sense do they actually make? Do they really tell us what’s going or are they several levels of abstraction away from the reality of the business? Jahn would argue the latter.
What’s amazing is that most of us, at the level of ordinary domestic reality, know that so much cash is coming in, and so much is going out. Pretty simple. Businesses, on the other hand, especially the big ones run by MBA-types, have a bewildering array of metrics, used in financial statements, that often obscure the truth more than illuminating it. Think about Enron, widely celebrated as a runaway innovator and success until the sheer “creativity” of its financial metrics was revealed in all its shoddy glory.
Likewise, one of the supposedly radical innovations in Lean Manufacturing is the idea that workers become involved in working out their own solutions to problems, based on agreement about the metrics that matter. How radical is that? For most of our history as hunter/gatherers, or farmers, that’s been pretty ordinary stuff. Let’s put our heads together and figure out how to cut one of those mammoths away from the herd so we can eat.
But somehow, we’ve been lost in that Industrial Age Bubble, where ordinary logic is banished in the name of specialist management-think. Somehow I think this is related to the clever MBA mindset (disclosure: I have an MBA) that slices bits of mortgages into new instruments, puts it all into a blender, and creates derivatives whose risk characteristics and accountabilities resemble some indistinct smoothie more than a piece of meat one can value and sink one’s teeth into.
Somehow the ordinary business of risk, interest, and trade gets lost in all this. And we’ll likely deflate until we find the ground again.
