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Commerce · I.02 · MMXXVI · daylight

La Bourse  /  Volume I  /  Nº I.02

Where You Already Stand

Volume I — Transition: From Here to the Living Economy Nine movements, one inventory.

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THE PLATE

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THE LETTER

The previous chapter asked you to spend thirty days looking for the place where your organisation is already regenerative. This chapter is about what you will find, and about the strange resistance you will meet when you find it.

Here is what happens. You go looking, and within a fortnight you have four or five candidates — a maintenance programme, a supplier nobody re-tenders, a team with a turnover rate that makes no sense, a waste stream somebody quietly diverted. You cost one of them roughly. The number is larger than you expected. You take it to somebody senior, and they say, in a friendly way: well, yes, but we've always done that.

That sentence is the subject of this chapter.

"We've always done that" is how an organisation describes an asset it has stopped being able to see. It is not dismissiveness. It is the ordinary consequence of something working reliably for a long time — reliability makes things invisible, and invisible things do not get funded, defended, or repeated elsewhere in the business.

So the work of this chapter is not discovery. You have already discovered. The work is making the found thing legible — giving it a name, a number, an owner and a place in the reporting — so that it can survive the next reorganisation, and so that it can be deliberately reproduced somewhere else.

You are conducting an inventory of what your organisation already knows how to do and cannot currently say out loud.

— The Editors

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DISCOVERY

The six findings, and what each is actually worth

Let us go through them properly, because each has a characteristic shape and a characteristic mistake.

The maintenance programme.

Somewhere in your organisation is a machine, a system, a building or a codebase that has outlived its schedule because one person decided it would. In the case we costed in the previous chapter, a press with a replacement cost of £400,000 on an eight-year cycle — £50,000 a year amortised — has been kept in production by a rebuild programme costing £22,000 a year.

The annual difference is £28,000, and the programme is running at roughly 2.3 times the value of its own cost. Over the eleven years it has run, that is £308,000 that never appeared as a saving anywhere, because it appeared as the absence of a capital request.

The characteristic mistake: costing the rebuild and forgetting the counterfactual. The rebuild line is visible in the maintenance budget and looks like an expense. The £50,000 of deferred capital is invisible, because deferred capital does not have a line.

The retention anomaly.

Rank your teams by voluntary turnover and one of them will be well below the others. In a two-hundred-person unit, the difference between a 22 percent rate and a 9 percent rate is twenty-six fewer people leaving each year.

At an average salary of £45,000 and a fully loaded replacement cost of one times salary — conservative; the published range runs from a half to two times depending on seniority — that is £1.17 million a year, produced by whatever that team's manager is doing and costed nowhere.

The characteristic mistake: treating this as a compliment to the manager rather than as a practice to be documented. The question is never "isn't Priya good?" The question is "what does Priya do on a Thursday that the others do not, and can it be written down?"

The protected supplier.

Every organisation has one relationship it does not put out to tender, and everyone knows why without being able to say it. Ask directly what you receive that the unit price does not capture, and you will get four answers with striking consistency: they answer the phone outside hours; they hold stock for you; they tell you when you are about to make a mistake; and they will take a rush order without renegotiating.

Those four things are an option on your own operational continuity. You are paying an implicit premium for a real instrument and calling it loyalty.

The characteristic mistake: letting a procurement review price the goods and ignore the option, which is how such relationships die — not by decision, but by a spreadsheet that had no column for the thing that mattered.

The diverted waste stream.

Someone found a use for something that was being thrown away. Interface's programme is the canonical case, and the part worth carrying is not the ambition but the funding: the early years were paid for out of avoided waste that had been leaving the building unnoticed.

The characteristic mistake: counting the revenue from the diverted material and not the avoided disposal cost, which is frequently the larger of the two.

The redirected spend.

This one is usually institutional rather than commercial, and Preston is the worked example. A group of anchor institutions examined where their combined procurement went and redirected what they could locally.

Take an illustrative combined anchor spend of £750 million and a local share moving from 5 percent to 18 percent. That is £98 million a year entering the local economy that was previously leaving it. Apply a conservative local multiplier of 1.6 and the gross local effect is around £156 million.

No new money was raised. The same money was routed differently. That is the entire mechanism, and it is available to any organisation large enough to have a procurement function.

The sixth finding, which is the one people miss.

There is a fifth-and-a-half place to look, and it is the least obvious: the decision your organisation declined to make.

Somewhere in the last five years, someone talked the business out of something. A plant that was not closed. A product line that was not discontinued. A restructuring that was proposed twice and quietly did not happen. A team that was going to be outsourced and was not.

Those refusals almost never get written down, because a decision not taken produces no document. But the person who argued against it usually had a reason, and the reason was usually a stock they could see and the proposal could not. Find them and ask what they knew.

The characteristic mistake with this one is thinking of it as organisational politics rather than as information. It is information. In most cases the person who blocked the closure had a supplier relationship, a piece of tacit process knowledge or a customer dependency in their head that never made it onto any slide — and Michael Polanyi's observation that we know more than we can tell is not a philosophical flourish here. It is a description of where a great deal of an organisation's value is actually stored.

Why all six findings have the same shape.

Look at them together and the pattern is unmistakable. In every case:

1. Someone made a judgement that the formal system could not represent.
2. The judgement turned out to be right.
3. The rightness produced value continuously and quietly.
4. The value was never counted, so the judgement was never credited.
5. And because it was never credited, it was never reproduced.

Step five is where the money is. The first four steps describe something that already worked. The fifth describes the six other places in your organisation where it would also have worked and nobody knew to try.

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THE ARITHMETIC

Making the invisible legible — and where the method breaks

The common structure of all five findings is that the value sits in a counterfactual, and counterfactuals have no line in the accounts.

Formally, what you are computing is:

  V  =  (C_alternative  −  C_actual)  +  R_captured  +  O_option

  C_alternative   what would have been spent without the practice
  C_actual        what is being spent on it
  R_captured      revenue that exists because of it
  O_option        the value of flexibility it preserves

Three of those four terms are invisible in a standard management account. Only C_actual has a line — and it is the one that looks like a cost.

This is the whole reason regenerative practice is under-adopted. Not ideology, not short-termism, not indifference. The accounting shows the cost and hides the return, and people respond rationally to what they can see.

The rule for O_option. Name it, do not monetise it. Option value is real and genuinely hard to price, and an executive who monetises everything is discounted entirely. A single line — "we also retain a supplier who will take a rush order without renegotiating, which we have used four times in three years" — is worth more than a modelled number nobody believes.

If you must put a floor under it, use the cheapest defensible method: what would it cost to buy the same optionality in the market? A supplier who holds stock for you is providing warehousing and a call option on capacity. Both have prices. Quote the market price of the substitute, state plainly that it is a floor and not a valuation, and stop there. A floor you can defend beats an estimate you cannot.

A note on where the counterfactual comes from. The strongest counterfactuals are not modelled — they are observed. If you have six comparable sites and one of them does the thing, the other five are your control group and the comparison is empirical rather than hypothetical. Look for that structure before you build a model. Organisations with multiple sites are sitting on a natural experiment they have never run, and running it costs a query rather than a study.

Now the honest negatives, and there are two.

First: the counterfactual can be inflated, and often is. "Without this we would have replaced the press" assumes the replacement was necessary and imminent. If the press would have limped on for three more years regardless, the avoided capital is not £50,000 a year — it is £50,000 deferred by three years, which at a 9 percent discount rate is worth about £11,600, not £150,000.

Compute both. Present both. The person who presents the conservative case alongside the optimistic one is the person whose optimistic case gets believed.

Second, and more seriously: some of what you find will be depletion wearing the costume of thrift. A maintenance programme that keeps a machine running by deferring a rebuild it genuinely needs is not regeneration. It is drawing down a stock and reporting the draw-down as a saving — precisely the error this whole edition exists to name, and it is embarrassingly easy to celebrate it by accident when you are hunting for good news.

The test is the one from the previous chapter, and it is not optional:

  Is the stock rising, flat, or falling?

  R(t+1) > R(t)   regeneration      — the asset is improving
  R(t+1) = R(t)   maintenance       — honest, and worth costing
  R(t+1) < R(t)   liquidation       — a cost being reported as a saving

For the press, that means condition data: vibration, tolerance, downtime, defect rate. For the team, it means capability, not just headcount. For the soil, organic carbon. Ask for the trend, not the level. A practice that cannot produce a trend is a practice you have not yet measured, and it should not be presented as a finding until it can.

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DREAM

An organisation that can see what it does

Picture the version of your organisation where this inventory has already been taken and written down.

There is a document — four pages, updated annually — called something plain like What We Already Do Well. It lists the practices that produce disproportionate value, what each is worth on stated assumptions, who owns it, and what would have to change for it to stop working. It is not a marketing document. Nobody outside the organisation has ever seen it.

New managers are given it in their first week, and it is the single most useful thing they receive, because it tells them what not to break. The number of well-intentioned reorganisations that have destroyed something valuable has fallen to roughly zero, and everybody has quietly noticed.

When a practice is found to work in one unit, there is a route by which it travels to another. Not a mandate — a documented method and a named person who will spend an afternoon explaining it. The organisation has developed the habit of asking "where else does this apply?" and it asks it as a matter of course.

Priya's Thursday is written down. It turns out to be four specific things, none of them remarkable individually, and two of them have now been adopted by three other teams with measurable effect. Priya was promoted for it, which is the part that made everyone else start writing things down too.

And the finance function has a category for this. Not a full second set of books — a standing appendix to the management accounts headed Counterfactual Value, with five to ten lines, each carrying its assumption and its owner. It is reviewed once a quarter. It takes eleven minutes. Nobody thinks it is unusual.

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DESIGN

The inventory, built

Step one: the sweep. Two hours with your controller, the five places, five candidates on one page. This is chapter I.01's work and you have done it.

Step two: the trend test. For each candidate, ask for the stock trend. Any candidate that cannot produce one is set aside — not rejected, set aside, with a note about what would have to be measured. You will find that setting things aside for want of measurement is itself the most valuable output of the exercise.

Step three: name it. Every finding gets a plain name that a person could say out loud in a meeting without explaining. The press programme. Priya's Thursday. The Kowalski relationship. Naming is not decoration; an unnamed practice cannot be referred to, and a practice that cannot be referred to cannot be defended when someone proposes to cut it.

Step four: cost it twice. Optimistic and conservative, both stated, both with the assumption written next to the number. Half a page each.

Step five: give it an owner and a second owner. The owner is usually the person who has been doing it. Tell them. In most cases nobody ever has, and the conversation in which somebody explains what their quiet practice is worth in pounds is among the better conversations available in organisational life.

Step six: one page into the standing pack. Not all five. One — the strongest — with its number and its trend. The rest go into the four-page document.

Step seven: ask the transfer question. Where else does this apply? Write the answer down even if you do nothing about it this year. You are building the map, and the map is the durable asset.

A note on the order. Steps three and five — naming, and telling the owner — look like courtesies and are in fact the load-bearing steps. A finding that has a name and a person attached to it survives; one that exists only as a number in a document does not. If you have limited time, do those two for all five candidates rather than doing all seven steps for one.

And a note on who does this. It is tempting to give the inventory to somebody junior as a research task. Do not. The value of the exercise is concentrated almost entirely in the conversations in step five, and those conversations only produce their real content when the person asking has the standing to act on the answer. The exercise is cheap in hours and expensive in authority, which is an unusual combination and the reason it is so rarely done properly.

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DESTINY

How an inventory stays true

Inventories rot. This one rots in three specific ways, and each has a countermeasure.

It rots by becoming a trophy cabinet. Once the document is a list of things the organisation is proud of, nothing can be removed from it, and within two years it describes practices that stopped years ago. Countermeasure: every entry carries a trend, and an entry whose trend has gone flat or negative for two review cycles is moved to a section headed "Was true, no longer." Keeping that section populated is what keeps the rest credible.

It rots by inflation. Each annual revision, the numbers get a little more generous, because nobody wants to reduce the estimate of something they own. Countermeasure: the conservative number is the one that goes in the standing pack. The optimistic one lives in the appendix.

It rots by orphaning. The owner leaves, the second owner was never really recruited, and the practice continues by momentum for a year and then stops. Countermeasure: the annual review asks one question of every entry — "who would notice within a month if this stopped?" An entry with no answer is already dying.

The honest limit: an inventory does not protect anything from a determined cost programme. If someone is told to remove 12 percent, they will remove 12 percent, and the fact that a practice is documented and valued will slow but not stop it. What the inventory does is make the removal visible as a decision rather than invisible as an omission. That is worth a great deal and it is less than protection, and it is dishonest to promise more.

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DELIGHT

The conversation you get to have

There is one specific pleasure in this chapter and it is worth naming, because it is the reason people who do this work keep doing it.

At some point you will sit down with the person whose quiet practice you have just costed — the maintenance supervisor, the manager with the low turnover, the buyer who protected the supplier — and you will tell them what it is worth.

They will not believe you at first. Then they will explain, in more detail than you asked for and with obvious pleasure, exactly how it works: what they watch for, what they learned the hard way, the thing they tried in 2019 that did not work and the thing they tried after that which did.

You are the first person who has ever asked. That is the whole of it. There is a specific and lasting satisfaction in being the person who finally asked, and in watching somebody discover that the thing they thought was just how they did their job is in fact a method, with a name, worth a quarter of a million pounds a year.

Bring a notebook. Write it down while they talk. The writing-down is the gift.

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OPERATIONALIZE THIS

At the level of finance

The inventory becomes a financial instrument at the moment it enters the management accounts. Here is how, precisely.

The artifact: a Counterfactual Value appendix.

A standing appendix to the monthly management pack. Five to ten lines. Each line carries:

Why an appendix and not a restatement. You are not proposing to change the accounts. Restating is a two-year argument with your auditors that you will probably lose. An appendix is a management report, requires nobody's permission beyond the person who owns the pack, and does ninety percent of the work — it puts the number in front of the people who allocate, every month, with an owner beside it.

The depreciation conversation, opened properly.

For any asset whose condition trend is rising, the useful-economic-life question is now live and evidenced. Bring three years of condition data — not conviction — to your auditors and ask a narrow question: does this evidence support extending the useful life of this asset class?

Worked: a press carried at £400,000 on an eight-year straight line depreciates at £50,000 a year. Extend the assumed life to twelve years on evidence of maintained condition, and the annual charge falls to £33,333 — an £16,667 improvement to operating profit each year, from a report rather than an investment.

That is not accounting cleverness. It is the accounts catching up with a physical fact somebody has been producing for eleven years for £22,000 a year.

The transfer case — where the real money is.

The inventory's highest-value output is not defending existing practice. It is reproducing it.

              value of practice at site A  x  number of comparable sites
   Transfer  ─────────────────────────────────────────────────────────────
                cost of documenting and teaching it

Priya's Thursday is worth £1.17 million a year in one unit of two hundred people. If the organisation has six comparable units and the practice transfers at even 30 percent effectiveness, that is £2.1 million a year for the cost of documenting a method and funding six afternoons.

That ratio is the strongest number in this entire volume, and it is available to anyone who has done the inventory. Put it on the front page.

The first ninety days on a page.

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APPRECIATIVE QUESTIONS

Twelve, for a room

Discovery — what is already working

1. What do we do here that we have always done, that a competitor would find remarkable if they saw it?
2. Which asset is in better condition today than it was three years ago, and who is responsible for that?
3. Think of a practice in this organisation that survived a reorganisation it should not have survived. What protected it?

Dream — what becomes possible

1. If every valuable practice we have were written down and named, what would a new manager's first week look like?
2. Imagine we became known for reproducing what works rather than for launching what is new. What would be different about how we spend our time?
3. What would it be like to work somewhere that could describe its own strengths accurately?

Design — what we build

1. Which of our findings could produce a trend line this quarter, and what would we have to start recording on Monday?
2. Who owns each of these practices, and have we ever told them what it is worth?
3. What is the one line we would put in the standing pack this month if we could only have one?

Destiny — how it holds

1. How would we know if a practice on this list had quietly stopped?
2. Which entry would we be most tempted to inflate at the next review, and what would keep us honest?
3. Where else in the organisation does our strongest finding apply, and what is the smallest experiment that would test it?

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WORKS CITED

Anderson, R. C. (1998). Mid-Course Correction: Toward a Sustainable Enterprise. Chelsea Green.

Cooperrider, D. L. and Whitney, D. (2005). Appreciative Inquiry: A Positive Revolution in Change. Berrett-Koehler.

Cooperrider, D. L., Whitney, D. and Stavros, J. M. (2008). Appreciative Inquiry Handbook, 2nd edn. Crown Custom Publishing.

Kaplan, R. S. and Norton, D. P. (1996). The Balanced Scorecard: Translating Strategy into Action. Harvard Business School Press.

Manley, J. and Whyman, P. (eds) (2021). The Preston Model and Community Wealth Building. Routledge.

Ostrom, E. (1990). Governing the Commons: The Evolution of Institutions for Collective Action. Cambridge University Press.

Polanyi, M. (1966). The Tacit Dimension. University of Chicago Press.

Nonaka, I. and Takeuchi, H. (1995). The Knowledge-Creating Company. Oxford University Press.

Note on figures. The press, retention and anchor-spend calculations are computed in lib/verify.py and reproducible there. Turnover replacement-cost ranges vary widely by role and method; the conservative one-times-salary figure is used throughout and the wider published range is stated in the text. The anchor-spend figure is illustrative and labelled as such; Preston's own published proportions are in Manley and Whyman.