Transactive Management Theory

General management consulting areas encompass the full range of management-planning, organizing, staffing, leading, and controlling. They are grounded in Transactive Management theory, which is designed to help both for-profit and not-for-profit businesses operate more effectively and efficiently. Transactive Management can be classified as an open system organizational model. Open system models emphasize that all organizations-including businesses-operate and must succeed within a broader social and economic environment comprised of other organizations.

The term "transactive" was chosen to emphasize the two types of transactions that take place within the business (internal) and between the business and broader business environment (external):

1. Performance directed transactions include the full range of individual, group, organization, and business environment interactions-or "transactions"-that are quantifiable or otherwise involve economic, financial, operational, or administrative actions that measure performance-e.g., revenue, income, output, turnover, employee levels, salaries. From an individual standpoint, performance-directed activities are based on the cognitive and analytical thought process.

2. Value directed transactions include the full range of individual, group, organization, and business environment interactions-or "transactions"-that are inter-personal and reflect and influence individual, organizational, or social attitudes, values, norms and behaviors-e.g., teamwork, environmental responsibility, self worth, respect. From an individual standpoint, value-directed activities are based on the creative and intuitive thought process.

The term was also chosen to emphasize that unilateral, one-way actions-as implied in the term "proactive"-do not necessarily lead to the desired result. Rather, outcomes are the result of not only the initiating action-the cause-but also the reaction by the individual or organization that is the object of that action-i.e., the effect is determined by the transaction, which is bilateral.

Engagements are directed at promoting the development of businesses that are value-based, performance-directed, and culturally aligned as depicted in the business archetype figure. The face of the pyramid shows the performance-directed management hierarchy: defining the mission; translating this into a strategy and plan; and engaging organizational units via line and support staff level plans and budgets and individual and team-based performance objectives and associated performance metrics and incentives. Performance-directed management represents operational, administrative, and financial management and reporting processes that comprise much of the structure of business activity. Value-directed attributes are promoted by recognizing that resident in each of these activities are opportunities to shape values, norms and behaviors-i.e., opportunities for value-directed interventions that promote cultural alignment (the shaded right side).

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Practice Area Profiles

Governance and policy development efforts support clients to establish policies that serve as a boundary system that is defined by legal limits as well as limits established by boards of directors or other oversight authorities in terms of business scope, authority delegations, and governance requirements. We work with executive management and the legal or compliance staff to develop policies that ensure officers and managers have a clearly defined envelope of authority to effectively manage on a day-to-day basis consistent with such boundaries. Policies are developed or revised based on a detailed analysis of the business charter and founding documents, which define business scope and mission, and board-level resolutions, consents, and other mandates, which establish policy direction. They are also designed to meet criteria, which consider how decisions and actions commit resources, expose the business to risk, and comply with legal standards (e.g., the "prudent-man" test) and requirements (e.g., the Sarbanes-Oxley Act and implementing regulations).

Strategic planning and analysis supports private and public sector businesses put in place a strategy and a prioritized set of actions for success within their respective external environments. Conceptual models, planning templates, and plan development are based on the performance-directed hierarchy depicted in the business archetype figure. We help clients identify each revenue-producing unit-e.g., power plant, product line, or public service (i.e. fixed route transit service)-in terms of strategic parameters. These parameters represent the interface with the external stakeholders (e.g., customers, financial institutions, contractors, suppliers, regulators) that account for or influence the large majority of business unit cost, revenue, capitalization, and depreciation. Financial, operational, and other plan goals and objectives and related business environment assumptions are used to develop annual budgets and multi-year financial projections. Plans also assign line and support staff responsibility for achieving the goals and objectives necessary to make financial projections a reality and metrics that monitor progress toward this end.

Organizational design, staffing, and effectiveness engagements apply Transactive Management's 4-P Business Transition Model success criteria. We define strategic alignment criteria for a performance-directed management process (the "1st P") that links the business to the market or public constituency served via a four-step management process comprised of planning, implementing, monitoring, and adjusting (course correcting). We also define structural alignment criteria for a "3-P" Infrastructure that is made up of: human assets and organizational culture (people); financial and capital assets (property); and operational, financial, and administrative communication and control links (processes). Organizational assessments and management audits allow us to gain an understanding of the inner workings of the client organization through interviews, document reviews, and direct observation. Interviews apply the "employee universe" figure, which also serves as the Transactive Management's logo, which is depicted in our masthead. Interviewees first define their responsibilities (the middle circle). Next they name positions above and below them (horizontal bars), and the internal functions (vertical bars) and external stakeholders (ring of circles) with whom they interact. Once their universe is defined, interviewees are asked how well it is working vis-à-vis the 4-P model success criteria.

Management processes and internal controls are assessed in terms of the diagnostic controls and organizational lines of communications the provide repositories of organizational learning and transactive memory. 4-P model concepts and success criteria are used to ensure that processes and systems promote both performance-directed and value-directed management. We distinguish between traditional, performance-based diagnostic control processes and a subset of information provided by these processes that is pivotal to strategic alignment-i.e., maintaining a clear, accurate, and realistic forward-looking view of what is demanded by markets or public constituencies served. Business unit strategic parameters are used to identify a limited set of performance measures that are strategically significant and should be regularly monitored by top management through "transactive management forums"-i.e., face-to-face meetings with subordinates and peers. We also improve diagnostic control processes through workflow analysis as well as techniques, which assess the value-directed dimension of these performance-directed processes. Finally, we help to develop accounting and internal control policies, guidelines, procedures, and processes consistent with board-level requirements.

Human resources planning and management projects support HR executives by applying strategic planning, organizational effectiveness, and other skills to elevate this function to strategic level that is commensurate with the key role human capital must plan in a knowledge society. We emphasize four imperatives. First, manage HR as a business in terms familiar to the CEO and other senior managers by demonstrating program and process excellence and cost effective execution. Second, forge a strategic partnership with senior management by forming a senior leadership team that is both a focal point and forum for approving and monitoring HR programs, plans, and budgets. Third, claim a role as the guardian of business values by establishing an organizational effectiveness program that replaces nebulous notions of culture with concrete explanations of what employee, organizational, and social values are, where they can be identified, how they can be aligned, and why they are important. Fourth, use this program to promote the integration of value-directed management into performance-directed management processes-i.e., make values and performance the warp and woof of day-to-day activity.

Market research and analysis helps clients determine their market size and share, develop positioning strategies, and assess new product and service opportunities. It also supports other practice areas including developing new business venture plans and strategies. We are skilled at documentary research, data collection and analysis, and telephone and face-to-face surveys including focus groups. We help clients define each product and service "success ingredient"-i.e., features that are most desirable to end users vis-à-vis alternative offerings by direct and indirect competitors. This includes meeting end users' physical (e.g., transportation, travel, communications) and psychological (status, recognition, enjoyment) needs as a function of price, quality, service, and image. Economic principles are applied to improve effectiveness-measured by customer satisfaction-of both private and public sector businesses as well as to improve competitive strategies. Our skills in this area are also applied to identify and document "best" and "standard" industry practices and benchmarks as part of both general management and litigation consulting engagements.

Economic analysis and power plant valuation and depreciable life studies apply economic theory, principles, and techniques. Our consultants are skilled in conducting cost/benefit studies, public sector outsourcing studies, and business, product, and asset valuation studies and due diligence reviews. Skills are also applied to support other practice areas including market research and analysis, strategic planning and analysis, and quantifying damage claims in litigations. We have conducted numerous power plant valuation and depreciable life studies that have allowed our clients to increase book income.  These studies are based on our proprietary methods for projecting plant service life, determining market value, and projecting plant economic life consistent with asset impairment accounting standards.