1. MULTI DIMENSION IMPACT ACCOUNTING File:
MDIA-p3-14-PRODUCTIVITY-150707.odp Peter Burgess (c) All rights
reserved MDIA PRODUCTIVITY
2. MULTI DIMENSION IMPACT ACCOUNTING WORK-IN-PROGRESS. SLIDESET
STILL IN DEVELOPMENT. UPDATES WILL BE POSTED OVER THE NEXT SEVERAL
WEEKS
3. PRODUCTIVITY has been enabled by technology not so much by
information technology, but by machinery and equipment that uses
data to make production productive. MULTI DIMENSION IMPACT
ACCOUNTING
4. PRODUCTIVITY is measured by comparing output to the amount
of labor that is used in producing the output. This is a metric
that had utility when production was constrained by a limited
supply of labor valid until around 1970 but since then not a
significant constraint on amount of production. MULTI DIMENSION
IMPACT ACCOUNTING
5. However using money as a measure of SOCIO-ENVIRO-ECONOMIC
ECONOMIC PERFORMANCE creates an unacceptable level of distortion.
MULTI DIMENSION IMPACT ACCOUNTING Note: Households are earning a
lot more money but when discounted for the reduced buying power of
money the income is almost the same as it was 50 years ago
6. MULTI DIMENSION IMPACT ACCOUNTING SunSun EOP Financial
Capital Human Capital Man Built Capital Natural Capital SunSunSun
BOP Financial Capital Human Capital Man Built Capital Natural
Capital Sun THE MONEY ILLUSION
7. One thread of history suggests that most factory owners have
ALWAYS made investments to improve their own profits. Nothing else!
These owners did not embrace the idea that impact on SOCIETY
(PEOPLE) is an important part of business purpose. Nor did they
consider ENVIRONMENTAL matters to be of any concern for the
business. MULTI DIMENSION IMPACT ACCOUNTING
8. Another thread of history is that some combined investment
for PROFIT with the idea that workers could live in decent
conditions and be able to live a quite good life. Lord Leverhulme
who started the company that is now Unilever built a factory and
community at Port Sunlight. The Cadbury brothers did much the same,
building Bournville to be a factory in a country atmosphere. MULTI
DIMENSION IMPACT ACCOUNTING
9. MULTI DIMENSION IMPACT ACCOUNTING SunSun EOP Financial
Capital Human Capital Man Built Capital Natural Capital SunSunSun
BOP Financial Capital Human Capital Man Built Capital Natural
Capital Sun WORKERS' HOUSING AT PORT SUNLIGHT
10. There were impressive improvements in PRODUCTIVITY in the
19th century. Individual production was replaced by the factory
system which produced much more with less labor. Mechanical energy
replaced purely human energy. MULTI DIMENSION IMPACT
ACCOUNTING
11. Manufacturing 100 years ago was already quite mechanized
quite organized MULTI DIMENSION IMPACT ACCOUNTING
12. MULTI DIMENSION IMPACT ACCOUNTING SunSun EOP Financial
Capital Human Capital Man Built Capital Natural Capital SunSunSun
BOP Financial Capital Human Capital Man Built Capital Natural
Capital Sun SPINNING COTTON MORE THAN 100 YEARS AGO
13. MULTI DIMENSION IMPACT ACCOUNTING SunSun EOP Financial
Capital Human Capital Man Built Capital Natural Capital SunSunSun
BOP Financial Capital Human Capital Man Built Capital Natural
Capital Sun FACTORY SCENE FROM THE 1920S
14. TECHNOLOGY is part of the reason for increased PRODUCTIVITY
since the 1970s Another part is the fact of GLOBALIZATION, which
itself has been enabled by technology. MULTI DIMENSION IMPACT
ACCOUNTING
15. CONCRETE PRODUCTIVITY improvement in pouring concrete from
wheelbarrow to very versatile concrete pumping systems. MULTI
DIMENSION IMPACT ACCOUNTING
16. MULTI DIMENSION IMPACT ACCOUNTING SunSun EOP Financial
Capital Human Capital Man Built Capital Natural Capital SunSunSun
BOP Financial Capital Human Capital Man Built Capital Natural
Capital Sun CONCRETE USING WHEELBARROW
17. MULTI DIMENSION IMPACT ACCOUNTING SunSun EOP Financial
Capital Human Capital Man Built Capital Natural Capital SunSunSun
BOP Financial Capital Human Capital Man Built Capital Natural
Capital Sun CONCRETE USING A BUCKET SYSTEM
18. MULTI DIMENSION IMPACT ACCOUNTING SunSun EOP Financial
Capital Human Capital Man Built Capital Natural Capital SunSunSun
BOP Financial Capital Human Capital Man Built Capital Natural
Capital Sun CONCRETE USING A PUMPING SYSTEM
19. SHIPPING PRODUCTIVITY improvement in shipping has been
enabled by containerization and very much larger ships. MULTI
DIMENSION IMPACT ACCOUNTING
20. MULTI DIMENSION IMPACT ACCOUNTING SunSun EOP Financial
Capital Human Capital Man Built Capital Natural Capital SunSunSun
BOP Financial Capital Human Capital Man Built Capital Natural
Capital Sun CARGO SHIP STEVADORING CIRCA 1950
21. MULTI DIMENSION IMPACT ACCOUNTING SunSun EOP Financial
Capital Human Capital Man Built Capital Natural Capital SunSunSun
BOP Financial Capital Human Capital Man Built Capital Natural
Capital Sun CONTAINER SHIP LOADING CIRCA 2010
22. AUTOMOBILE ASSEMBLY PRODUCTIVITY improvement in the
assembly of automobiles has been enabled by robotics and very much
finer tolerances in the production of sub-assemblies. MULTI
DIMENSION IMPACT ACCOUNTING
23. MULTI DIMENSION IMPACT ACCOUNTING SunSun EOP Financial
Capital Human Capital Man Built Capital Natural Capital SunSunSun
BOP Financial Capital Human Capital Man Built Capital Natural
Capital Sun AUTOMOBILE ASSEMBLY CIRCA 1950
24. MULTI DIMENSION IMPACT ACCOUNTING SunSun EOP Financial
Capital Human Capital Man Built Capital Natural Capital SunSunSun
BOP Financial Capital Human Capital Man Built Capital Natural
Capital Sun AUTOMOBILE ASSEMBLY CIRCA 2014
25. PAVING MULTI DIMENSION IMPACT ACCOUNTING
26. MULTI DIMENSION IMPACT ACCOUNTING SunSun EOP Financial
Capital Human Capital Man Built Capital Natural Capital SunSunSun
BOP Financial Capital Human Capital Man Built Capital Natural
Capital Sun MACHINE FOR LAYING BRICK
27. The ability of LABOR to have a bigger share of the
incremental gains from productivity has been gutted in the past 40
years MULTI DIMENSION IMPACT ACCOUNTING
28. In this graph the growth of corporate profit (green) is on
a log scale while the growth of household income (blue) and real
output per hour (red) are on a standard scale. MULTI DIMENSION
IMPACT ACCOUNTING
29. MULTI DIMENSION IMPACT ACCOUNTING SunSun EOP Financial
Capital Human Capital Man Built Capital Natural Capital SunSunSun
BOP Financial Capital Human Capital Man Built Capital Natural
Capital Sun THE MONEY ILLUSION
30. Part of this has been a systematic push back on the right
of workers to unionize and have collective bargaining. Part of this
has been the reduced demand for labor as a result of productivity
improvement. Part of this has been the relocation of jobs through
outsourcing to other locations where workers are available at lower
wages. MULTI DIMENSION IMPACT ACCOUNTING
31. All of this has been possible because the metrics being
used do not inform decisions makers of the facts in a way that
results in better decisions. MULTI DIMENSION IMPACT ACCOUNTING
32. Recalling the PC paradox The PC was the productivity tool
of the 1980s. It brought computer power to everyone and the
commercial world invested heavily in PCs to improve office
performance. After a decade, little improvement in productivity
could be observed. Behavior change was slow. MULTI DIMENSION IMPACT
ACCOUNTING
33. Post PC productivity By the early 1990s the technology used
for the PC was being used to drive machines in the factory
(numerical control) and then to streamline design, prototyping and
manufacturing. Less people and significantly better production.
MULTI DIMENSION IMPACT ACCOUNTING
34. The start of data everywhere In the 1990s PC technology
started to be connected to the Internet. Data flows became
automated with customized Personal Digital Assistants (PDAs) and in
turn this enabled massive improvements in supply chain management.
All of this was use of data to improve real economy performance.
MULTI DIMENSION IMPACT ACCOUNTING
35. The downside of productivity The modern economy has some
critical circularity. Consumer demand is driven by spending power.
Aggregate wages determine sustainable spending power. Lower wages
and in due course there is reduced spending power and reduced
consumer demand. MULTI DIMENSION IMPACT ACCOUNTING
36. The impact of lower spending power on aggregate demand can
be offset to some extent by enabling credit. This has been done in
many creative ways over the last thirty years. Excessive use of
this was one of the root causes of the great recession of 2008.
MULTI DIMENSION IMPACT ACCOUNTING
37. Policy makers have not yet understood the many systemic
problem that have to be faced. Full employment in an era of rapid
increase in productivity will result in too much production and not
enough demand. High production and high consumption also means
dangerous impact on resource depletion and environmental
degradation MULTI DIMENSION IMPACT ACCOUNTING
38. CLOSING OBSERVATIONS: Productivity has changed the profile
of demand for labor; Productivity has made higher profit margins
possible; Wages down, profits up; High energy use also means a high
impact on the environment MULTI DIMENSION IMPACT ACCOUNTING
39. Policies to enable a smooth transition to a high
productivity, high quality of life and low impact on the
environment world have not been formulated; and money metrics alone
make doing this virtually impossible IMPACT metrics are also needed
for decision makers. MULTI DIMENSION IMPACT ACCOUNTING
40. NEEDS that go unaddressed are huge! In many 'rich'
countries, infrastructure needs massive upgrading to suit the 21st
century rather than the 19th century. In 'poor' countries, much of
the population lacks essential infrastructure and access to
services. MULTI DIMENSION IMPACT ACCOUNTING
41. The technology innovation that is going on at this time is
impressive. The challenge is to use it in a manner that delivers
progress for people without doing further damage to the environment
in fact to achieve substantial remediation of the damage already
done. MULTI DIMENSION IMPACT ACCOUNTING
42. Up to now, PRODUCTIVITY has delivered good results for
OWNERS but has been an unmitigated disaster for ordinary people.
This has to be changed and a key part of making this change is
going to be making some fundamental changes in the way we do the
metrics. Money metrics on their own are not enough! MULTI DIMENSION
IMPACT ACCOUNTING
43. Follow up: Request for Feedback Getting these ideas fleshed
out into a clear, simple but comprehensive structure is a big job
and remains a work-in- progress. Many organizations are making
progress with this, but there is no broad universal framework yet
that will enable all the pieces to come together and work
efficiently. I would like to get feedback from anyone and everyone
to help move this initiative forward. While I have some clear
concepts about much of this architecture, there are many details
that I do not know enough about and need help. So, please feel free
to contact me ([email protected]). Please put something relevant
and catchy in the subject line. MULTI DIMENSION IMPACT
ACCOUNTING
44. Some links and contact information: Peter Burgess
[email protected] Peter Burgess LinkedIn profile
https://www.linkedin.com/in/peterburgess1 Link to
TrueValueMetrics.org website http://www.truevaluemetrics.org/ Link
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MULTI DIMENSION IMPACT ACCOUNTING