Embrace the energy of judgement.

We think of judgement as something that is done to others to determine if they are guilty or innocent, but it is essential to distinguish between justice and judgement.

The energy of judgement is a powerful but uncomfortable energy that cleaves apart and serves as the razor that splits the mud into the water and the sand to leave the ocean and the desert. If we understand this energy, it is a powerfully creative force that can lead to very creative power. This energy allows us to split the elements of dreams into action and potential and create progress.

Justice is more typically a situation in what is inevitable is played out — i.e. karma has taken its turn, and now a guilty party faces what was coming to them, or an innocent are set free. The two elements that we typically see being judged is innocence or guilt. But we get judged every day on other energies such as: love vs rejection; potential vs achievement; compassion vs selfishness; unity vs division; creation vs destruction; openness vs concealment; efficiency vs waste; power vs dominance; truth vs deception; beauty vs low self-esteem; rejoicing vs groaning; purpose vs desolation; success vs failed creation; progress vs failure; engaging vs isolating; performance vs mediocrity. Judgement is the dynamic force that shifts the energy from the one side to the other. Let’s call the two sides of energy the poles of judgement in this conversation.

The prelude to the state of judgement is often a higher-order or seemingly better state. The change that you are going through is because of something different before. Maybe there was supposed to be better than it is now, or there was an illusion that is coming to the fore, based on a change of assumptions, the non-realisation of premises or a fundamental change in the reality of the world. Something happens, and the state changes. This something could happen due to action, inaction, discovery or imposition of will.

Judgement typically happens because of previous actions. These actions could have been voluntary or involuntary. The objective of the judgement may be to determine if you were cause or victim and if there is a sense in maintaining the energy that goes you where you are now or if there is some cause for the energy to change. As such judgement is the process of evaluating the extent to which the energy needs or is changing. This is an important aspect as it shows that whatever the consequence of the judgement, that the energy must and will change.

When judgement is an action that you go into prepared, and it is not foisted on you, you are inviting scrutiny and the process, and its consequence will invariably change you.

Judgement based or inaction or discovery is a potent catalyst of change. This type of almost accidental state change is where the unexpected happens, and you are somehow benefitted or even potentially harmed and or it changes your potential. The real judgement, in this case, is based on what you have done with the opportunity. If you work it, then you are judged as victorious, and when you ignore it, you tend to move to a lot lower state of being. History is littered with the carcasses of those that have failed to act, and paintings and library walls are decked with the stories of those that have turned discoveries into catalysts for change.

The change that caused there to be the necessity for judgement was not necessarily positive else we would have declared a victory. So, judgement inherently has some sense of perceived failure associated with it. The perception of failure is not in the judgement, but the judgement itself is to mediate the perception of failure to a new normal. This sense of perceived inadequacy or failure comes from a standard that was set inside or outside of ourselves. Inside it may be motivated by experience or peer pressure, and externally it is by a common or shared value system such as a state of laws, prevailing norms or imposed rules in a group. Rules then is a permanent type of judgement that is only made stronger by judgement and then creates a new ongoing set of judgements going forward. As it is judgement can also not be an outright failure — else it would automatically have been defeat or loss — so there is still some element of uncertainty — either in time or substance, which will cause the separation of the poles of judgement. In this duality of not being quite a victory or quite a failure, there is an energetic motion that allows the creative energy of your actions being spliced at every turn and either moving you forward or backwards.

The forward and backward part is hard because as you believe you are going forward, you may be going backwards and because of the fine line of balance implied in the energy of balance, every single small step may be the point that tips the scales of justice. As you are typically quite focused on every level, the inevitable causality of the complex set of variables are brought into balance — a set of actions or non-actions can develop into a potent force that comes to bear on the present situation. The challenge is that every action of this nature needs to be met with a corresponding force to maintain balance and if this spirals out of control — you may find yourself outside of the energy of justice in the heart of chaos. Chaos is a world in which there is no judgement but also no order. It is a dark and volatile space in which no happiness can reign, and creativity is senseless as it is only consumed. The only way out of chaos is to establish the pattern of order that eventually forms a beautiful change that is both ordered, self-repeating and wholesome. Chaos only disappears when it is destroyed through dreams, judgement and action.

Living in the energy of judgement is when you are heading towards a state of judgement, and your actions need to stand up to the scrutiny that is to follow. These actions need to motivate and aspirate high ideals and support real vision else these actions will enter the maelstrom of judgement and just come out as more dreams. Remember that judgement parses the action state and separates that which changes the world from that which does not. Dreams cannot stand on their own — they need substance to be delivered.

This means doing the right thing in the face of extreme odds to ensure that you live to fight another day. The only way to overcome and to survive while in the energy of judgement is to use vision and action to translate the inevitable into the seemingly impossible. Inevitable and impossible are the two poles can only be separated by the power of action that supports judgement. This will only happen if you apply yourself more than 100% and step way beyond the energy that brought you to this path in the first place. It is when you rise above your situation by subjecting yourself to the rigour of the required change and changing what needs to be changed. It is being rigorous, disciplined and painfully diligent about moving ahead millimetre by millimetre, even if sometimes there are setbacks that take you further back.

This eeking out of existence seems like the lowest form of happiness at the time and often is very painful. It is the hard yards, the real pain of transformation, but if you add joy, happiness and an open spirit to this and do the work — you start to take massive strides forward. The clear vision, desire to break free and step by step actions that you took start slowly gaining momentum and starts to blend into a transformation that bends the energy away from utter hopelessness to green shoots that grow slowly into some nice-looking shrubbery. It is not a great grand oak yet, but through many cycles, it may become one, once again.

The energy of judgement is one where there is a something that now has to be acknowledged to create a new reality, or more accurately an adjustment to the reality that is now. It may be as simple as an official acknowledging that there has been a change and a collective or for there to be a seminal event that ushers in a new dawn. Any change can usher in a new reality. 

For the energy of judgement to work, there must be someone or something that can judge you. This is a superior or somehow powerful entity that has sway or dominion over the subject of your judgement. It could be yourself, or a perception of some aspect of yourself, most notably your past and unfulfilled expectations of someone that you want to please. The judge could be active, passive, aggressive or docile and administrative, punitive or compassionate. Depending on how you understand the judge, you may alter your approach to the energy of judgement.

The process of judgement is not fun as all that came before is measured, weighed and burnt away. New layers may be added, but it will always be more constrained than it was previously and to break free may require a whole new reality that may be limited differently. The challenge is that somehow, the energy of judgement travels with the judged as the past is a natural constraint in breaking free from judgement.

Judgement is an essential part of a type of wheel that moves from judgement to reality, subjugation, dream, action, glory/victory/ partial victory / partial failure/failure, judgement again.

Judgement is also letting external parties into our existence. You cannot be part of something if you are not willing to be judged in that existence. It is almost that where there are two or three people, there will be judgement. It is our natural state to judge, have a sense of justice and to insist on fairness in the procedure, application of justice and attention. It then follows that the elements of procedure, consistent justice and attention are key components of any group of people. Invariably some entity controls or patrols these rules and that define membership and ensure that members conform in some way or form to the group basis.

To understand the energy of judgement, arguably, the most important aspect is to evaluate the potential of breaking free from that energy. It may be the best option in some cases, especially when there is mindless oppression or a reality that is not useful. In many cases, however, we must make ourselves fit to be judged. By constantly getting better at the things we will be judged on, we get better and better and challenge ourselves to be the best by a definition that only we will understand in time. There is a reason why some of the most challenging sports have petty rules, and some of the most beautiful artistic expressions require significant work. It is because of the rules that we can learn to innovate within the bounds of a judged world. We instantly know the best chess player — because it is someone that uses the same rules as the weak chess player and redefines what it means to be judged. This is, in fact, the hallmark of genius. It is the people that do not change the rules but understand them, combine them and ultimately transcend them that achieve the real victory.

That victory may seem empty to people that stand outside of the circle of judgement, but it fills the circle and resets the boundaries for those that achieve it within the circle. By breaking free, it is possible to stand outside of the circle of judgement, but it may be hard to fight your way back into the circle and shift the boundaries. There is an old story of an Indian brave that fought with the elders to change the rules. The elders expelled him from the tribe, and for some time, he shouted at the borders of the tribal lands. Nobody heard him, and no one took him seriously. In time he returned to the tribe and worked from within to change it. In time he became an elder and eventually the chief of a prosperous tribe that grew under his vision and caring and compassion for those around him. This is the consequence of the energy of judgement — it puts you in a circle to be judged and through prevailing, pushing to get better and achieving more; eventually, it helps you change the rules.

Judgement is complex energy that is a precondition for creative expression and ultimately acknowledges the purity of the service that we express to one another. By both judging and being judged, we set norms, standards and expectations that allow us to regulate and mediate our shared existence to higher ideals. Without it, we invite chaos into our lives and or we expand our view too narrowly into a world of complacency.

Stand and be judged… Stand and succeed… Invite the energy of judgement and build in yourself the confidence to make judgement your ally in a world where few are willing to embrace it. 

Better change

New ventures and even existing businesses are not immune to the powers of change. Change also happens when it is least expected and the interaction between changes definitely can lead to drastic and dramatic shifts in a business. So how do we become better at change? Is it possible to become a change master? How can entrepreneurs better utilise change to their advantage?

A business is often as good as the manager or leader in the organisation. This leadership theory extends further to say that the person is as good a leader as they are a person. So a good leader will be a good person and will run a good organisation. While the empirical evidence for the two-way relationship between goodness and leadership is not perfectly correlated there seems to a natural link between the sustainability of leadership and the inherent qualities of the leader. This forms the basis of integral management theory as proposed by Shewart and Deming (1939) and further developed by others in literature (Avilo, Galindo, Mendez, 2012; Walton, 1986) and it starts giving us some new ways to look at change.

It basically states that the leader needs to be an expert at managing change. This means both responding to change and also creating change.

Very few leaders that are worth their salt does not ask what they need to change to make the business work. But it is not always responding to change that is the challenge but also how to initiate and sustain it.

Organisations need to change constantly. It seems that we all want “out of the box” perfect businesses and that planning and constant backwards and forwards engineering of processes consume most businesses and entrepreneurs. What most businesses often ignore is the market forces that necessitate us to look at change differently. We cannot however manage every required change as the business grows – so the question becomes how we maintain our culture and perspective that made the initial business successful.

As the social and business environment is constantly evolving, new entrants are entering markets, consumer preferences change, trends come up and the very people that you employ also change. Each person also changes and this change has an effect on the world around that person. There is a constant ebb and flow between seeking growth and accelerated performance while balancing with the realities of people that are expected to deliver on this.

To become a change master one has to start asking what is the changes that if you make them today will have a meaningful and long term positive impact on the organisation and to actively work towards that. This change needs to be embodied in the organisational vision or dream and needs to re-inforced at every turn possible.

To make a change based approach to entrepreneurship work it requires a long hard look at the facts of the business and to act on these premises to build a conclusion that is in line with your vision. If you see that the facts that are in front of you will lead to a result that is different from you vision – you have to start asking – what needs to change?

Once you find the change that is required – arguably the rest of the process is much easier.

It may be tempting to look at change as something that is delivered by consultants. Change is not easily something that is bought for a fee, however it may be useful if dramatic and incisive change is required in an organisation to employ these change experts and it is often useful to have to someone around to blame if it does not work. However – we may have moved beyond a more structured approach to change management as proposed by Kotter (1995) and can say that purpose driven change management presents a new paradigm in which real and systemic change in organisations are facilitated through a clear understanding of the purpose of the business to its customers and the subsequent operations that are required to support this customer driven focus through the purpose of the internal stakeholder.

Linking the customer purpose to the purpose of the individuals in the organisations is a powerful approach to massive success. We all like working for companies that make us happy and that makes their customers happy.

To this effect many propose that the correct process is to

• Dream;
• Execute; and
• Review.

This model assumes the following methodology:

• The company started with a dream and goals that generally arise from the entrepreneur’s personal or business philosophy.
• The entrepreneur’s business philosophy founded a group of policies that govern each of the strategic activities of the company, by a group of procedures for each of the links in the chain of success.
• The entrepreneurship proceeds to design and to enforce the activities proposed by the policies designed.
• The established procedures produce results that must be reviewed by a battery of diagnostics and must be compared with the original dream goals.
• The review could imply, if difficulties in achieving the goals appear, the introduction of decisions to correct the situation, trying to obtain continuous improvement and the achievement of the dream goals.

The strength of the dream and the skills of the entrepreneur or their management to drive the correction towards the dream will determine the progressive realisation of the vision as outlined.

This approach to managing change is supported by an action learning methodology which is based on the premise that you

• Learn;
• Correct;
• Redefine; and
• Execute.

The principles underlying action learning are:

• learn from personal experience and from the experience of others;
• consider the challenges posed by other entrepreneurships and listen to the suggestions of others;
• listen carefully to others in an environment with no prejudice;
• develop several possible courses of action that facilitate the entrepreneurships to develop their business and problem solve; and
• review the results of actions, taking into account the opinion of other members of the group and share the lessons learned.

We have to decide what to change today to make the business move closer to a dream and a future reality that is desirable to our customers and other stakeholders. We have to be decisive about these actions and execute on the changes – making sure that they are anchored in the organisation and that they continue to contribute to the on-going success of the organisation. We also need to let go of our fear to change things.

To really get better and to stop our business from getting stuck into a pattern that makes it resistant to change – we have to be open and inviting to change and also be the creators and masters of change or else things will change around us and we will be the victim of change.

Conclusion

Change is real. We have a choice to determine if we will change the world or if the world will change us. This choice is made by the millions of little actions that we do everyday to move closer to our dreams. If we start ignoring the sense that we are moving further away from where we want to be – then we are being led by change. To get back to our true purpose, dream and vision we have to make decisive steps to learn from the environment and share and grow with others to bring us closer to that vision. This is the call – you better change and you have to be better at change.

Kotter, J.P. (1995) Why Transformation Efforts Fail, Harvard Business Review, Mar 1995.

Shewhart, W.A. and Deming, W.E. (1939), Statistical Method from the Viewpoint of Quality Control, The Graduate School, The Department of Agriculture.

Edgar Muñiz Avila, Miguel-Ángel Galindo, María Teresa Mendez, (2012) “SERCREA+ model: a business tool for change management in Mexican organizations”, Journal of Organizational Change Management, Vol. 25 Iss: 5, pp.736 – 747

Walton, M. (1986), The Deming Management Method, The Putnam Publishing Group, New York, NY.

Adding economic value

When you study economics, you are taught that the price of a good or commodity is determined where there is a balance between the supply and demand for that good. If more people demand it, then the price is higher and when less is supplied then the price is also higher. The challenge in an open market is that if you limit supply, the next guy will supply more and you would have lost out. This is the power of competition. While that explains why monopolies limit supply to increase prices – it does not give a clear guideline on how to create value.

Value added in economic terms is the difference between the price of the finished product/service and the cost of the inputs involved in making it. So measurement of value added shows the enhancement a company gives its product or service before offering the product to customers. Value added is used to describe instances where a firm takes a product that may be considered a homogeneous product, with few differences (if any) from that of a competitor, and provides potential customers with a feature or add-on that gives it a greater sense of value. This increases the demand for the product and so increases the price that can be asked for it.

A value-add can either increase the product’s price or value. In marketing one gets taught that customers are weighing different features and benefits of options to find the correct price. For example, offering one year of free support would be a value-added feature and would be compared by the customer to other products without such a feature. Additionally, individuals can bring value add to services that they perform, such as bringing advanced skills to a position in which the company may not have foreseen the need for such skills. The combination of what makes your organisation different defines the value that is added to the end consumer. Bad choices in terms of adding value may cost more than it generates.

This is where management comes in. Managers also add value. Their primary stakeholder for adding value is the shareholder. The basic cost of doing business is defined as capital expenditure and through the management process, economic value is added to shareholders. This basic insight led to the formation of the theory of economic value added and provides a measure of a company’s financial performance based on the residual wealth calculated by deducting cost of capital from its operating profit (adjusted for taxes on a cash basis). This is also referred to as the “economic profit” and is a measure of how well management created operating profit. The formula for calculating EVA is:

EVA = Net Operating Profit After Taxes (NOPAT) – (Capital * Cost of Capital)

If the EVA is positive then the company created more value than expected by shareholders. If the EVA is negative – then the company performed lower than expected by the shareholders. Cost of capital is a measure of the return in excess of market that is expected by the shareholder.

Another similar measure is Shareholder Value Added, which follows the same type of idea and is expressed as

SVA = Net Operating Profit After Taxes (NOPAT) – Cost of Capital

This gives a value based performance measure of the worth of the company to shareholders as it measures the value that is added, considering the profit that is generated in excess of what is required to outperform the requirements of the issue of debt and equity considering the weighted average cost of capital. (This may sound daunting – but read more on the MBA Finance Module to find out more).

So it should be easy. As long as management creates value, shareholders should be happy. The separation of ownership from the control of capital by managers creates a conflict of interest. Managers who run the business need not necessarily be guided by the same principles as owners in terms of enhancing shareholders’ wealth – but act in their own best interest. This is called the agency problem. While more complex, some companies use the incremental increase of EVA as a management performance measure in order to maximize shareholders’ wealth. This includes some of the world’s largest corporations.

EVA makes people accountable not just for the results but also for resources utilized in achieving the results. For example, without an EVA-based incentive system, marketing people generally want more resources to sell more and earn larger sales-based compensation even when the marginal benefit to the organization is less than the marginal cost of increased sale. This would also apply to the marginal cost vs. benefit of an employee and many other measures within the business. An EVA based decision-making and incentive system would determine if there is an economic value that will be created by this decision. To motivate managers to act in shareholders’ interests, one option is to link their compensation to increases in EVA they produce. Managerial objectives based on increasing income or market share, increasing return on assets or equity or other traditional measures can provide incentives that are not consistent with maximizing the shareholders’ wealth. Maximizing EVA will in most cases produce incentives to maximize shareholders’ wealth.

Organisations are a complex variety of explicit and implicit contracts involving several stakeholders, including, employees, customers, suppliers, lenders, the community and shareholders. Each of these contracts or relationships is a decision that must add economic value. You may say that this is great – as our company provides services without a lot of capital. Both tangible and intangible capital represents a choice managers make daily and the cost of that capital determines if the business adds value to shareholders or not. So, through managing these complex contracts you add value to the brand and to the operations and this adds value to the shareholders.

Most companies estimate the marginal profitability of their product without regard to opportunity cost of equity capital. So often it happens that companies are willing to accept business at a margin that is profitable, without considering if we have other choices in terms of using the same operating capital.

To be practical – think of it this way. Every day you earn a salary. If you take this salary and divide it by 21 workdays you get a number of how much you earned today. If you take this number and multiply it by 10 it gives you a sense of how much value you should create daily. If you further take this daily value add number and you multiple it by the number of people in your section or division – you need to ask yourself if your business unit created that much value today through the work that you have done. If you did not – then there is better ways in which the tasks or objectives of your section or division can be structured to add more value. The value may not be for today – but you must have worked on items that created that much value today for it to be profitable for shareholders to pay you to do it tomorrow. You may argue that you are an employee of a non-for profit – the same logic applies. You may also argue that you work for the government – the same logic applies.

In summary

Value added is a vital part of the operations of any organisation and has direct links to marketing, sales and the operations of any organisation. If more organisations focused on the value addition process it would direct the use of capital into increasingly relevant areas and build long-term choices that add maximal value to shareholders and build more sustainable organisations.

Economic value added (EVA) is an important measure to determine if there is value added to shareholders and can form the basis of incentive and decision making systems.

As an individual it is important to measure my own value added daily to find ways to ensure that the efficiency of an organisation improves.