The Hindu Business Line : Measure measures by their reliability and validity

A QUALITY read from the American Society for Quality is Measurement Matters, by Brooks Carder and Patrick Ragan, Pearson Power (www.pearsoned.co.in). The book, which is about `how effective assessment drives business and safety performance' opens with `the fundamental principles of Dr Deming's approach', and discusses `the 14 points for management' aimed at making it possible `for people to work with joy'. On `principles of measurement', the book states that the quality of a measure is determined by its reliability and validity. Reliability is about the repeatability of a measure, while validity is ensured by `measuring what you want to measure'.

The chapter on `incident-based measures' narrates the 1981 disaster at the Hyatt Regency Hotel in Kansas, when "two suspended walkways crowded with people collapsed in the lobby of the hotel, killing 114 people and injuring nearly 200."

Essential inputs are in the chapter on `audits', where the authors note that though they attended `five four-day seminars taught by Dr Deming', they don't recall his ever discussing the audit as a method of quality improvement.

"The word audit does not appear in the index of either of his books. To the extent that an audit implies enforcing regulations, he would have questioned it. He probably would have asked what value an audit has in understanding the process." Any answers?

Balance sheet botoxing!

ON THE day of the board meeting, employees either avoid the vicinity of the boardroom, "or walk past it with their heads bowed in deference," writes Dinesh Kumar in Corporate Capers, from Response (www.indiasage.com). Contrary to what many think, "The board meets before it actually meets," informs the author. The informal meeting happens usually an hour or two before the scheduled time, in the CEO's vast office, where everybody troops in one by one! That's where consensus is built, explains Kumar.

Topics discussed could "range from a trip abroad, finding suitable jobs for relatives and an extra perk here and there, to putting in a word to that government official the CEO knows and you don't." There are many issues in this complicated world requiring a collaborative effort, points out Kumar.

The book is a collection of more than 50 witty essays with titles such as `balance sheet botoxing, greed for gadgetry, crash course in quality, Viagra for the drooping market, swing your fortune on the golf course, eating with implements, conversationally yours, and the seven habits of highly perfidious people.'

Hilarious and educative!

Impractical economics

BORN in a business family in India, acquired a doctoral degree in economics in the US and became a diehard capitalist, served as a counsellor at the Suicide and Crisis Intervention Service of the University of Florida and got shaken up by deep anguish, returned to India as a committed Marxist, lived in a slum while teaching at the IIM Bangalore, organised the trade union of the Institute during the Emergency, began a study of Indian archaeology, history and scriptures... That's a short bio of Bharat Jhunjhunwala who has put together his ideas in Hindu Approach to Indian Economy: Global Challenges and Opportunities, from Rawat Publications (www.rawatbooks.com).

The book has chapters on employment, services, environment, the elderly, education, language, governance, dalits, spiritualism, globalisation and so on. The final chapter is on `practical steps' with guidance for thinkers, politicians, businessmen and people. The author advises thinkers to `embrace voluntary poverty' to escape from `harassment by politicians'. Also, "thinkers should speak the truth and educate the people fearlessly." What about politicians? They must meet with and listen to suggestions from the thinkers, insists Jhunjhunwala. Moralistic rant worth steering clear of.

Add value to valuation

EVER wondered if there is scope for innovation in valuation? Yes, aver S. Rajaratnam and V. Jayaraman in Tax Valuation 2005, from Company Law Institute (www.cliofindia.com). There are new classes of assets such as `time shares, property under development, and rights under different types of contracts (e.g. teak trees)' point out the authors, as rationale for fresh thinking. "Estimation of market value depends on many imponderables," they state, citing Hindustan Oil Co Ltd vs Damodaran Namboodri.

The book has two dozen chapters, covering various facets of valuation such as fair market value, open market, belting and yield methods, comparable sales, split ownership, lease/tenanted property, encumbered asset, goodwill, cost of construction, role of valuers, and so on. Treatment is in the Q&A format, with more than two hundred questions, beginning from `Is valuation a science?' and ending with `What is the future of valuation?'

Though originally tax valuation was important from the perspective of gift and wealth tax, we have seen the abolition of gift-tax from October 1, 1998; and "wealth-tax has been debilitated by adoption of statutory rules of valuation and by leaving out most assets by characterising them as non-productive".

One more factor that limited the scope for valuation is the "dilution of the power to adopt fair-market value for purposes of capital gains tax under Section 52 of the Income-Tax Act by judicial interpretation requiring proof of understatement in K. P. Varghese vs ITO (1981, SC)" and the subsequent omission of the provision from 1988.

"However, recent introduction of Section 50C requiring the adoption of guideline value or the value as per basic valuation register with right to substitute the valuation adopted by the Valuation Cell has opened up a new vista for valuation for capital gains purposes," inform the authors.

In a chapter titled `Sceptre of 50C', one of the questions reads, `Does stamp value have any sanctity?' The authors are of the view that though the value may not be relevant for property valuation, an explanation may become necessary for the difference between apparent consideration and property value, "to carry conviction as to the genuineness of apparent consideration as the real transaction price."

A book that comes with the added value of experts' stamp of authority!

BooksOfAccount@TheHindu.co.in

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