Structural and behavioural coupling in business value-creating organizations

Abstract

The objective of this paper is twofold: on the one hand, to present a coherent framework regarding theformal logic of value production in, or through, organizations (Mella); on the other, to show how the newlogic of Economic Value Added and Activity Based Costing must be united in order to strengthen thecognitive activity of organizations in order to make the production of value maximally efficient(Moisello). The subject matter is developed along the following guidelines:1 – the processes for the production of value are carried out by permanent production organizations, inparticular Business Value-Creating Organizations (BVCO) or “production organizations”), as well as byfor-profit business organizations (or “capitalistic firm”);2 – the production of value takes place through a network of efficient production, economic and financialtransformation processes guided by laws that determine the stable equilibriums;3 – from an internal point of view, BVOCs are operationally-closed systems that are at the same timestructurally and behaviourally coupled to the environment; through (and to the extent of) their owncognitive and computational resources they perceive disturbances such as external stimuli, process these,and act (react or pro-act) to balance the network of vital processes;4 – in BVOCs the internal cognition - data gathering processes, strategies, decisions, planning andcontrols – are carried out by the management, which produces the thought of the organization (rationalcalculations for decision-making, strategies, programmes and controls) from which the organization’s actions derive; the production, economic and financial processes, which are instrumental for theproduction of value, are carried out by the effector organs that produce the action of the system;5 - in this sense BVCOs can be conceived as “conscious cognitive systems” that link themselves to theenvironment through a system of processed, up-dated, and evaluated information which we can define asthe representation of the external world;6 – from an external point of view BVCOs are teleonomic systems that can continue to exist only as longas their performance as systems for the production of value is appreciated by the environment, accordingto a coherent system of performance indicators for the production of value (productivity, quality,economic efficiency, returns, Economic Value Added and Economic Value of the Firm); BVCOs allowmanagers to continually modify the network of autopoietic processes on the basis of the disturbances fromenvironmental changes.7 - the culture of value is diffused, and BVCOs not only have the maximization of value as their objectivebut must translate this into an operative approach to management problems. This approach emphasizesthe capacity of BVCOs to generate an adequate cash flow for new investment and to insure a remunerationat rates that exceed the cost of capital, in order to have available resources for organizational expansion aswell. Management must transform itself into a Value-Based Management (VBM) that must not onlymanage its normal activities but also the value of the organization as a whole;8 –The appearance of new Web-Based Information Technologies that favor and strengthen theglobalization process, as well as the growing role of financial markets, bring out more clearly the problemregarding the application of traditional decision-making, planning and performance-measuring models.This implies a reorientation of cognitive activity toward managerial models that favor the understandingof the driver of value and permit objectives to be set and performance to be measured in a manner whichis coherent with the expectations of stakeholders.