Performance Indicators in Business Value-Creating Organizations

The processes for the production of value in the advanced economies (where production is distinct from consumption) are carried out by permanent productive organizations1, in par-ticular Business Value-Creating Organizations (BVCO), which are also known as production market-oriented organizations, and by business for-profit BVCOs, called capitalistic firms. The production of value occurs through a network of efficient processes - carried out by a structure of processors, or organs, or by networks of specialized organizations (Thorelli, 1986; Alter and Hage, 1993) - that produce cognition, metabolism and transformation sup-ported by specific rules that define their stable equilibriums. In this paper I propose a general model to understand (not merely describe) the operating logic of Business Value-Creating Organizations and, in particular of the capitalistic firm - that is, the business for-profit organization. When viewed as autopoietic and teleologic organizations, firms can be interpreted as operating systems for efficient transformation that carry out five parallel transformations, a. a productive transformation of factors into production; this is a transformation of utility, governed by productivity and by quality; b. an economic transformation of costs and revenues into operating income; this is a trans-formation of value, governed by prices and therefore by the market; c. a financial transformation of risks, which transforms capital into returns and guarantees the maintenance of its financial integrity; d. an entrepreneurial transformation of information into strategies, which leads to a continual readjustment of the firm's strategic position; e. a managerial (organizational) transformation of strategies into actions of management control. The model allows us to propose a system of performance indices and measures and to high-light the mutual relationships among these indices and measures.