Simply put, Holistic Management is a specific, practical, common-sense approach to management that guides organizations, businesses and institutions to decisions that are sound in all aspects: financial, social and ecological

Based on the concept of holism (the whole is greater than the sum of the parts), and consistent with modern theories of physics, it sees all organizations, civilizations, the natural world and indeed the universe, as an inter-relating series of wholes, rather than an interconnected series of parts.

Noel McNaughton is a Certified Educator with The Allan Savory Center For Holistic Management in Albuqueque, New Mexico.

Since 1991, Noel has taught hundreds of farmers, ranchers, business operators and civil servants the process of managing Holistically. The results have seen people enjoying higher quality of life, more profit, better customer relations and healthier land bases.

by Noel McNaughton

Holistic Management is a simple (but not necessarily easy), common-sense, yet revolutionary decision-making framework. One can start at almost any point in the decision-making “cycle”, but it is described here in order from “defining the whole” to “monitoring actions”.

“Holism” is the theory that with any organism, or “whole”, the whole is greater than the sum of the parts. The theory of holism also suggests that the universe does not consist of separate “things”, but rather sets of patterns, or relationships, each of which is a “whole”. The universe is really a multitude of wholes within wholes, so it follows that consciously managing “wholes” is likely to be more successful than managing parts in relative isolation from each other.

Defining the Whole:

Any group, association, business or organization must define the “whole” it is working with, or managing. For ease of definition, it is useful to consider various aspects of the whole separately:

People: This aspect of the whole identifies the people actively involved in the decision-making of the whole being worked with. In a business, the “people” referred to here would be the owners, managers, employees and board of directors.

Resource Base: This describes the resources available for sustaining the production or activity of the whole. In a land-based organization such as a farm, the resource base is mainly the land owned by the farm. A community agency might have as a resource base the goodwill of the government body that supports it, plus the “clients” the agency serves. A retail store’s Resource Base would be its physical plant, plus its customers and suppliers. Without one or the other, the organization would likely disappear. Another aspect of the Resource Base for any entity is the ecosystem itself, which is the only “sustainable” capital any society has.

Money: This aspect describes the money the people have to work with. Both that on hand, and the income they can generate, as well as any credit available, in order to operate.

The Holistic Vision/Goal:

Once the “whole” is defined, a Holistic “goal” or “vision” must be formed that will guide the business or organization in what it does. It is important that all the people involved in running the organization have an active voice in forming this vision. Holistic Management is collaborative, not hierarchical. It is also critical that the vision only describe what the people want, not how to get it. (The “how to’s” of carrying out the vision is determined with the help of the testing guidelines, described further on.) This vision has three aspects, which simply put are:

Quality of Life: what the people in the whole want out of life, based on the values they choose to live and operate by. An organization might begin with a written “statement of purpose”, and go on to describe the values the people want to express in their working relationships with each other, the principles the organization wants to operate by, the physical working environment desired by the people, and so forth.

Production: what they must do to achieve what they want, including the nature of the activity they will do for money or income, and what they must do to create or achieve the other aspects of their quality of life vision. (E.g. if they want to have harmonious working relationships, they will have to create an atmosphere of trust, respect and acceptance.)

Future Resource Base Description: a written description of the condition their resource base must be in to sustain production forever. In a land-based enterprise such as a farm, or public land, such as a national park, this aspect of the vision will describe the condition the ecosystem of the land being managed must be in to sustain the desired production forever. Other enterprises or organizations will describe the way they must be perceived by their supporters or clients and suppliers in order that the organization will receive continued support. A community might describe the layout, infrastructure, and condition the ecosystem (water, soil, diversity of plants, insects and animals) in the town, as well as the surrounding hinterland must be in for a healthy and thriving community far into the future. This part of the vision may also include people (e.g. clients or customers), but these are not the “people” who make decisions and manage the organization. All organizations and businesses, whether they own land or not, must have a general statement describing the desired condition of the ecosystem in and around their community, and perhaps expanding to their province, nation or even the whole world. This may sound grandiose, but the fact is the decisions we make as we go about our everyday lives (the kinds of purchases we make, the vehicles we drive, even the food we eat) has an impact on the ecosystem, and ultimately a healthy ecosystem is the only true capital that sustains civilizations.

Once this Holistic Vision/Goal is written, even if it is only temporary (which it will be for at least a while after an organization begins managing Holistically), it is the beacon toward which all action is aimed.

The Testing Guidelines:

To ensure all actions take the organization toward its Holistic Vision, Holistic Management employs a series of evaluative decision-making questions called “Testing Guidelines”. There are seven guidelines, designed to analyse each proposed action to ensure it is simultaneously socially, financially and ecologically sound.

Cause and Effect: the question asked in this test is: will the action (or tool) we are testing address the cause of the problem we are dealing with, or is the problem a symptom of some other cause? This is the first test to turn to when a problem is being addressed, especially if it has been dealt with before. Tremendous effort is spent every year all over the country by organizations trying to solve problems, but the problems keep getting worse, because the action taken is really addressing symptoms. This test is designed to deal with causes of problems, which usually take longer to solve, but do not return.

Weak Link: There are three aspects to this test: Social, Biological and Financial:

Marginal Reaction: The question asked about the action being tested here is: in which action should I invest each additional unit of money, or time and labour, to provide the greatest progress toward the Holistic Vision? This test always requires two or more actions to compare. This test is simply a reminder to think about where the organization’s effort is going so it gets maximum performance toward the Holistic Goal with every action taken.

Energy/Money | Source & Use: There are two aspects to this test, which is designed to remind the organization where it is getting the money and energy from (the source) to carry out a given activity, and what it is doing with the money and energy (the pattern of use) relative to the Holistic Goal. This test may sound complex, but in essence it is quite simple.

The Source of Energy or Money

The questions asked in this part of the test are:

* Is the source of energy:
- constant or finite?
- benign, or potentially damaging?

* Is the source of the money:
- internal or external?

Keeping in mind its Holistic goal, an organization must always be aware of its effect on the ecosystem, as it is the foundation supporting all civilizations. This question reminds it of that. It is also a reminder to be aware of the source of the money being used to carry out activities. Internal money (profit or income generated through business activities) is far more stable and less risky than external money (e.g. loans, grants).

The Pattern of Use of the Energy or Money

The questions asked in this second part of the test are:

1. Will the use being tested provide infrastructure to assist in reaching our Holistic goal? Building infrastructure, such as buildings, roads, sewer systems, equipment and myriad other things, including gaining knowledge, require investments of energy and money, not to mention time. But once something is built, or knowledge acquired, it presumably does not need to be done again. Although it is always preferable to use internal money and benign energy, building infrastructure is the least risky pattern of use for external money and potentially damaging energy, as it is a one-time expenditure that gives long-term service.

2. Is the use being tested once-only, or consumptive, with no lasting effect toward achieving the Goal. i.e. If used again, will the same expenditure of energy or money have to be incurred? A typical example of consumptive use is burning of gasoline to run a vehicle, and the purchase of that gasoline. Every time the vehicle is used, more energy (and money) are required. For consumptive uses benign energy and internal dollars should be used as much as possible. At the moment, almost all internal combustion engines run on petroleum fuel which is both non-renewable and damaging to the ecosystem.

3. Is the use being tested cyclical, in that once invested no further inputs of money or energy are needed? An example of a cyclical pattern of use might be the purchase of photo-electric cells as a source of electricity. Once the energy is expended to create the cells, and the money spent to purchase them, no further expenditures are necessary, and the cells go on working indefinitely. This is a less risky pattern of use of finite energy and external money, as just like building infrastructure, it is a one-time expenditure that gives long-term service.

4. Is the use being tested addictive, so that once you start using the energy or money this way, you risk becoming dependent on it in the future? One of the main causes of addictive patterns of money and energy use is addressing symptoms rather than underlying causes of problems. The longer a symptom is addressed the worse it becomes, and the more the organization can get "hooked" on spending money and energy on it. Government subsidies and grants can be addictive as well, again because people can become dependent on them, and have business decisions skewed by whether they help the organization qualify for more subsidies.

Again, this test simply says to be aware of the source of the energy and money being used, and the pattern of how it is used.

Gross Profit Analysis

Profit is necessary to run any business, and in Holistic Management profit is part of a business’s Holistic Vision. In conventional thinking production is generally the goal or objective and profit is often used as a test. The testing, which you are probably getting the idea of by now, is to ensure that all actions to yield that profit are socially, environmentally and economically sound. The best way to evaluate which enterprises have the highest profit potential is to do a Gross Profit Analysis on all enterprises to detect those which provide the most income over variable costs to provide for covering overheads and the excess required for profit. The Gross Profit Analysis referred to here does not include fixed costs. In conventional economics, this test would be called Contribution Margin. The reason for leaving out fixed costs is that they can distort the financial picture, as it can be difficult to attribute fixed costs to each enterprise equitably. As the organization will be paying fixed costs (overheads) anyway, they are simply left out of the calculations, in order try to determine which enterprises produce the most money (Gross Profit) to pay the overheads with. In using this test, one simply estimates the income that will be produced by carrying out a given enterprise and deducts the extra money that will have to be spent to carry it out. The difference is the Gross Profit, which is available for paying overheads, with presumably some for profit as well. The more enterprises with high Gross Profit an organization has, the more likely it is to be profitable.

Whereas other tests are used in most decisions and are done as mental exercises, this test is always pencilled, done in great detail and only used when selecting and looking at the performance of enterprises, usually once a year during financial planning.

Sustainability

This Guideline simply asks whether the action being tested will lead toward or away from the future resource base described in the Holistic Goal.

Society and Culture

This Guideline is used last as it builds on the mental picture formed from going through the other six tests. There is one exception to this order: in financial planning following brainstorming new sources of income, Society & Culture is the first test used to evaluate new sources being considered.

Where the other six tests concern themselves with facts about the tool or action being tested, this one asks how the people involved feel about it. The question asked here is:

"Does this action truly take us in the direction of the Quality of Life we seek. Does it fit with our values? Does it negatively affect anybody else's Quality of Life?"

This test can keep an organization from using tools or taking actions that it may profit from, but that offend or injure others. Activities that cause pollution, or violate community social norms would fall into this category.

Monitoring

Even though a proposed action may have passed all the Guidelines, and so appear to take the organization toward its Holistic Vision, there still may be an error in thinking somewhere along the line, so the result of implementing the action is monitored continually in order to observe what actually happens. If the monitoring shows that the desired results are not being achieved, the action is stopped, the situation re-examined, re-planned, and new action tested, and the process carried on. This plan-monitor-control-replan loop helps ensure the organization is always moving toward its Holistic Vision, as that Vision describes everything the organization exists for.

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