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"Term or Factor?"

The goal of any company is to make profit. The reason for making a big company is to benefit from economies of scale, which is to say to take advantage of the fact that a task done for one person might be cheaper per person if done for more than one. It also allows for specialization, which means people can do the thing they are best at, and we gain efficiency. This is basic economics.

The question is how you add value. For the main line worker, this is straight forward. A coder produces code, and compiles it, then the sales force sells this code. (Yes, a wild over-simplification.) A baker makes bread, and the cashier takes money for it. In general, some makes something, and sells it. In fact, you break that down even further: Someone creates value, and converts it to energy.

We store our energy as a few things, like money, and goods useful to us, but in the end those things represent the energy we receive for expending our energy on a task that was useful.

But what about the folks who don't produce the product? Every company is littered with those: managers, administrative aides, human resources folks, maintenance folks, IT. They don't produce value.

Nope, they multiply it. These folks are "factors". The folks that produce the product and sell it are "terms". Take any term, any product maker, and multiply his or her potential output by the affect of those who have influence, and you have that person's actual output.

To give you an example, let's say Bob makes widgets. Bob's an average machinist, he can make five widgets a day. Bob has a manager, Carl. Carl decides that Bob is being inefficient, so he asks Jim, the shop foreman to work with Carl to be a bit more efficient. Carl is then able to make 7 widgets a day, a forty percent improvement. Better still, if Jim can use this same training time to improve every machinists efficiency, the whole department might make widgets faster, and so reduce costs, either making more money per widget, or allowing them to undercut their competitor, and so hopefully producing higher volume of sales. Either one would produce more value. If Carl can actually make that change, he has multiplied the departments value by 1.4.

What about "Cost centers" like IT, or HR? These are a little less straight forward, but not much. First, both have a loss prevention affect. HR prevents loss by dealing with issues that must be dealt with by the company, importantly sparing your producers from having to deal with it. It's obviously more efficient to have a staff trained in hiring, rather than having managers screening thousands of resumes or typing up tax forms, when they could be looking at the money making process for ways to increase efficiency. IT can have a more direct affect on producers by making the producers tools faster, and by providing training in the efficient use of those tools.

The goal of any factor is to make the producers more efficient. That is to say, their goal is to be above one. To be above one means your effect on the people you influence helps them produce more value. This is how factors can lay claim to the results of the producers.

All right, enough blather.

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