There are seven testing guidelines used in decision making, which the text, Holistic Management: A New Framework for Decision Making, describes in detail. Each guideline includes one or two questions you ask yourself prior to implementing a decision to ensure that the decision is economically, environmentally, and socially sound relative to your holisticgoal.
Does this action address the root cause of the problem?
The cause and effect test is one that carries considerable weight when making a decision about how to address a problem. This test seeks to avoid non-solutions by first asking you to think carefully about what might be causing your problem. If the decision under consideration addresses that cause, it passes this test.
Identifying the cause of a problem can sometimes require considerable probing. In most situations, this is a relatively unstructured exercise. You merely pose and answer the same questions over and over again: What is the cause of this? and when you have your answer, Well, what is the cause of that? You may have to ask this question three or four or more times—peeling away layers of symptoms—before you find the cause you should address.
If the problem concerns the environment—soil erosion, a plague of grasshoppers, a decrease in the number of ducks—look first to the four ecosystem processes for an answer, particularly community dynamics. Then consider the tools—rest, fire, grazing, animal impact, living organisms, technology—that may have been used in the past. How they have been applied will affect how the ecosystem processes are functioning now.
When the problem is related to human behavior you should generally look first to how your organization is structured, how management functions, and how the organization is led.
It may be sensible at times to remove a cause and simultaneously treat its symptoms. Be wary though, because in practice this often results in draining resources from the most efficient action. Remove the cause first and see what happens. Most often the symptoms disappear at no additional cost.
A chain stretched to breaking will, by definition, fail at the weakest link. At any moment in time every chain has one, and only one, weakest link that alone accounts for the strength of the entire chain, regardless of how strong other links might be. An undetected weak link can cause mighty undertakings to fail outright or suffer continual setbacks. This test applies in three different contexts: social, biological, and financial.
Have we considered and addressed any confusion, anger, or opposition this action could create with people whose support we need in the near or distant future?
You and the future you envision in your holisticgoal are linked by a chain made up of all the actions you will take to get there. Any action that runs counter to prevailing attitudes and beliefs is likely to meet with resistance, creating a blockage that, if not addressed, will at some point become the weakest link between you and the achievement of your holisticgoal.
When you suspect that the implementation of a decision is likely to result in a reaction that blocks further progress, you will fail the weak link test if your decision does not include a plan for dealing with the blockage. If there are no foreseeable obstacles in implementing the action, the decision passes this test.
Does this action address the weakest link in the life cycle of this organism?
The weak link test applies when you are dealing with populations of plant or animal organisms that have become a problem because they are either too many or too few in number. Before you take action to increase or decrease their numbers, you need first to ensure that your action addresses the weakest link in the organism’s life cycle. That way, you are likely to maximize the effectiveness of the treatment and ensure that the results will be lasting.
Every organism has a point of greatest vulnerability, a weakest link, in its life cycle. Most plants, for instance, are most vulnerable during their initial establishment when the seed has germinated and root and leaf must find sustaining conditions in a limited time. Insects and amphibians that produce a mass of eggs appear to be most vulnerable while still in the egg or larval stage. The adult stage of the life cycle is rarely the point of greatest vulnerability in any species. When the tool or action addresses the weak link in the organisms’s life cycle it passes this test.
Does this action strengthen the weakest link in the chain of production?
Each year, in conjunction with Holistic Financial Planning, you need to identify the weak link in the chain of production that stretches from the raw resources you work with to the money you receive for the products produced.
The chain of production has three links to which human creativity is applied: resource conversion, product conversion, and marketing (or money conversion). The first link involves the use of human creativity and money to convert resources that differ slightly depending on the type of business or enterprise, of which there are two broad categories:
• Sunlight harvesters—those whose primary production is based on the conversion of sunlight energy (through plants) to a saleable or consumable product, such as food, fiber, lumber, wildlife, and so on.
• Resource enhancers—those who are one step removed from the sunlight-conversion business—a shoe store, bakery, accounting firm, and so on. Their primary production is based on the conversion of raw materials and energy to a saleable product—goods or services.
In the product conversion link, the sunlight harvesters render the plants grown in the first link into a marketable form—crops for humans; fodder for livestock and wildlife. The resource enhancers convert the resources in their first link into goods, services, or marketable skills. In the marketing (or money conversion) link, the products or services of the second link are marketed, and money is finally derived from the sunlight captured, or the raw materials and energy utilized, in the first link.
Obviously, whenever strengthening the chain of production requires money, and profit is included in your holisticgoal, the proposed investments should pass the weak link test. No amount of money invested in advertising (marketing link), for example, will profit a business that turns out a poor product (product conversion link). Only investment in the weak link will result in more profit at the end.
Which action provides the greatest return, in terms of our holisticgoal, for the time and money spent?
The marginal reaction test ensures that your commitment of time, effort, and money provides the maximum possible thrust toward your holisticgoal at any moment. In applying the test, you are essentially asking yourself which of two or more actions will result in each additional dollar or hour of labor being invested where it provides the highest return in terms of your holisticgoal. No two actions can possibly give you the same return for each unit of effort (money or time) invested at that moment. Thus, when resources are limited, you want to select the one from which you gain the most. In doing that, you will end up spending less time or money and achieve what you want more quickly.
Which enterprises contribute the most to covering the fixed costs (or overhead) of the business?
In the gross profit analysis, you simply look at the income likely to be derived from each enterprise and deduct the additional money you will have to spend to bring in that income—the difference between money in and money out is the gross profit. The additional money to be spent is that money you would not spend unless you undertook the enterprise. Through the analysis and comparison of many possible enterprises with this test, you are selecting the best enterprise, or combination of enterprises, to create profit and minimize risk.
Is the energy or money to be used in this action derived from the most appropriate source in terms of our holisticgoal? Will the way the energy or money is to be used lead toward our holisticgoal?
In this test you need to examine both the sources and patterns of use of the energy and money involved in implementing a decision. We lump money and energy together because any action contemplated usually requires one or the other and often both.
In terms of availability, energy sources fall into two categories—sources that are abundant or unlimited, and sources that are limited in supply. The sunlight energy used to grow the farmer’s crops is unlimited in that supplies are inexhaustible until our sun burns out; but the petroleum the farmer uses to fuel his tractor is limited because it took millions of years to produce, and we will eventually run out of secure and affordable supplies. In terms of their effects on the environment, energy sources can be benign or potentially damaging. That depends on the rate at which they are consumed and the methods used to harness and distribute them. Obviously, we stand a better chance of long-term success by favoring the energy sources in unlimited supply, but only if we can ensure that their effects on the environment are benign.
The money used to implement any action can be derived from either internal or external sources. The source is internal if the money is taken from your own earnings—what the business or land generates. Any time you can rely on an internal source, you are likely to be better off, but there will be many occasions when money will have to come from outside the business in order for you to move forward. When the money to be invested is derived from an external source, you need to be wary of the strings attached to it. If the outside source is a bank or other lending institution, interest will always be included. If the source is a government cost-share program, it may involve management requirements that could cause you to deviate from your holisticgoal.
In the second part of this test, you look at the specific way the energy or money will be used and whether it will take you toward your holisticgoal. There are no rules that tell you what is right or wrong, but there are some questions that will help you decide:
1. Is the proposed use providing infrastructure that will assist you in reaching your holisticgoal? Infrastructure refers to the sort of things that are essential to running your business more effectively: knowledge, skills, trained staff, buildings, roads, equipment, machinery, transport. If energy or money is used to create infrastructure and all the materials or other aspects involved pass the other tests, you would tend to say the proposed infrastructure passes. If you are creating infrastructure that is not needed this year and it does not pass the other tests, it would likely fail this test too.
2. Is the proposed use merely consumptive, with no lasting effect? A use of money or energy is consumptive if it is consumed in a one-time use. If the same action were to be undertaken again, it would require new money or new energy. Many of the running costs involved in a business are consumptive uses—the fuel required for your vehicles, accounting fees, and so on. If the source of the money or energy used is in line with your holisticgoal, and the action passes most of the other tests, a consumptive use automatically tends to pass this one.
3. Is the proposed use cyclical, in that once initiated, it would not require more money or the purchase of more energy? A good example of cyclical use would be the single expenditure of money to install a hydraulic ram for pumping water. Since falling water provides the energy that drives the pump, all water is thereafter pumped at no cost, assuming you ignore the minimal maintenance it takes to operate the ram, which has few moving parts. Using animal impact to break down crop residues is another example. This might require an initial expenditure of money for the temporary fencing that confines the animals in any one place. But each year thereafter, it would merely require planning, implementation, and reuse of the movable fences to have the animals do the job using only solar energy.
4. Is the proposed use addictive, in that once initiated, you risk an undesirable dependence on further inputs of energy or money? It is usually wise to avoid an addictive use of money or energy. An addictive use is one that obliges you to take the same action again and again, possibly with increasing frequency or increasing cost.
If we take this action, will it lead toward or away from the future resource base described in our holisticgoal? This is one of the few tests that asks you to focus on a specific aspect of your holisticgoal—the future resource base. The sustainability test ensures that all the decisions you make to meet short-term needs also provide lasting gain—that they are socially, environmentally, and economically sound in terms of the future as well as the present.
No matter what type of business you are in, you need to consider how the perceptions of the people included in your future resource base—clients or customers and suppliers, extended family, advisors, and so on—are affected by the decisions you make. If you have described yourselves as honest, reliable, and professional, you want to make sure that the actions you take reflect those characteristics.
If you are in a sunlight-harvesting business, as all farmers and ranchers are, you will have described a future landscape in terms of how each of the four ecosystem processes—community dynamics, water cycle, mineral cycle, and energy flow—should function. When any of the decisions you test deals with the land, you want to ensure that the likely result is going to take you toward that future landscape.
Considering all the questions and our holisticgoal, how do we feel about this action now?
The society and culture test is normally performed last, because it should take into account the mental picture that has formed after passing through all the others. But where each of the other tests asked what you think, this one asks how you feel.
How you feel is going to be based in large part on the values reflected in your quality-of-life statement. And those values, in many respects, are a reflection of the traditions, customs, and culture shared by those who formed your holisticgoal.