Invest in corporations that can manage investment funds to produce managed returns
The economic crisis produced large investor losses
Several trillion dollars of investor funds were lost in the past six months. Investors, advisers, and experts point out many mistakes made, poor government oversight, the credit freeze, unknown asset value, investor greed, poor corporate governance, and other symptoms as the cause of investor losses. These mistakes are contributors, but not the cause of investor losses. Investment banks, investment funds, stock brokers, investment advisers, government regulators have demonstrated their lack of knowledge of what is really happening and the real cause of the financial and economic crisis and investor losses. They have demonstrated their inability to manage the problem or to identify real solutions. Blind investment professionals are leading blind investors.
Investors must look deep to understand the cause of loss to avoid future loss
Everyone looks for quick fixes and easy solutions every time there is a crisis, so the real fundamental problems continue unsolved. The fundamental problems require deep analysis and understanding of the actual business. Investors must understand the real reason for their losses. There is only on fundamental reason: the failure of financial institutions and other corporations to manage the business to plan the capital investments they must make to create value, manage the proper utilization of their investments to create value, and manage the results produced from their investments that provide value to investors. Financial institutions and other corporations are not able to do this systematically. They cannot manage capital worth (often called asset value) in the future result cost absorption and result value-added from the utilization of investments and the result value-added to be available from the sale or disposal of the capital solution asset. They are unable to provide information on the transparent actual business for proper government supervision and informed investor decisions. Accounting accounts for cash in a contrived chart of accounts that is not related to the actual business. Arbitrary accounting principles, such as “mark to market” are employed instead of accounting for the business. Financial and risk models used are arbitrary and are not related to the business. Financial statements produced are inaccurate and limited and do not report the business to reveal problems.
Corporations lay structures over their business and manage the enterprise
All financial institutions and other corporations today employ dead-end 20th century management. Organization, strategy and plan, account, process, financial management, risk management, quality management, performance management, and many other structures are laid over the business. The actual business in “investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results” is not managed. Specific investments, both financial investments to produce income and growth results and capital investments to provide solutions to produce other business results, must be identified as capital solutions in the set of capital solutions that comprise all corporate capital to manage solution worth and return of specific solution investments. Specific economic output results, such as investment studies, products, orders, revenues, dividends and income, and shareholder value must be managed as a complete set of results to manage quality and value. The cost and effectiveness of performance of each capital solution to produce each result must be managed to manage total costs and result value-added. This is not managed as a whole today with 20th century management.
Corporations are unable to plan or manage specific investment costs and the return on investments
20th century structures laid over the business force corporations to estimate the benefits or the return on capital growth, capital development, or business change investments. The corporation business is not organized to identify and itemize and manage benefits or to itemize the costs of specific investments as a part of the routine. Financial institutions are not able to manage their portfolio of investments as part of the business, and instead use various financial and risk models that now have proven their ineffectiveness.
Corporations do not manage investments the same as investors manage investments
Virtually all of us are investors and stakeholders. When we invest, we analyze the investment and know the benefits we expect to see from the investment. But, when the enterprises we invest in, invest our money, they are not able to define accurate benefits or return from investments. They are forced to guess at sales and revenue increases and use assumptions rather than actual business data in rate of return or cost-benefit calculations and the various management models and structures used.
20th century investment management methods invest in costs, and not in benefits
Corporations do not have an open and transparent way to plan the detailed value-added through investment and substantiate the return on investment. The corporation invests in costs through capital development, performance improvement, and solution implementation. Costs of these investments are not itemized and managed against the capital solution created, but are managed by a project or tangible asset. Many solutions needed and developed are called “intangible assets” and never managed. Benefits in specific added result value-added cannot be itemized and managed at all.
The corporation must invest in and manage results for value-added benefit
In order to invest in benefits, the corporation must organize the business to define and manage all output results to be produced. The benefits of investments come from adding value to results. The risk in the investment is that planned result value-added will not be produced. Risk is an attribute of each result and must be managed as part of the business. The corporation must manage results across the complete business to itemize the benefits of improving specific results, establish result goals for utilizing investments, and to justify the investment through substantiated result investment performance cost absorption and value-added over a pay back period that exceeds the investment cost.
The corporation must manage specific capital solutions needed to manage return on investments and capital worth
The corporation must plan every tangible and intangible capital solution needed to produce each result to capture investment costs. Capital solutions are utilized in operation to add value to results. The return on capital solution includes the investment balance amortized in performance cost by results for the payback, plus the gain or loss in the attributed value-added to results in utilization to date. Capital solution worth (or asset value) is the continually assessed future cost absorption and result value-added reasonably expected over the remaining life of the solution plus the result value-added to be derived from the sale or disposal of the solution after the end of the useful life. Capital worth must be greater than unamortized balance of the investment costs in the solution. If the investment cost is greater there is a loss on the investment that incurs additional performance costs against the results produced. This identifies a performance problem that must be immediately investigated and managed to handle the capital solution cause. The economic crisis showed conclusively that financial institutions and other corporations are unable to do this, and thus incur large losses and write-downs when they must liquidate solutions.
21st century business management is the answer, to organize and manage the actual business
The means manage results, capital solutions, and the performance of each solution implemented to produce a result is actual business management. By managing the business, financial institutions and other corporations can effectively plan and report value-added from initial investment planning through to completing the return on investment in a way that management, investors, and other stakeholders can understand. Then we, as investors and stakeholders, can see and understand how the enterprises we invest or employ to manage our investments use our investment funds, the risks present in the investment, the managed worth of investments over the remaining life, and the projected returns.
Result-performance Management (R-pM) provides the knowledge for actual business management
Result-performance Management (R-pM) is the only source of knowledge and expertise on how to manage the actual business. Forward-looking enterprises are now using R-pM guidance to organize and manage their business to gain breakthrough advantages over competitors burdened by unsolvable 20th century management problems. Business management is explained and documented in the Business Management Toolkit. The Toolkit provides procedures for actual business management and maintains emerging 21st century management conventions, definitions, and standards. Management consultants who base 21st century business management services on R-pM knowledge are licensed to help enterprises learn, organize, and manage the actual business. R-pM and business management are supported at result-performance-management.com.
The Solution to the Economic Crisis is explained in free downloads
Three free white papers explain the dead-end 20th century management problems, such as the failure to plan, account for, and manage the actual business, that caused the economic crisis, the way to eliminate the problems, and a government program to address the crisis by stimulating the economy, solving the problems, building a structure for financial and economic management, and organizing local businesses to flourish in the eventual recovery.
- How to Eliminate Problems that caused the Economic Crisis explains the major unsolvable 20th century management problems and the solution to eliminate the problems
- Business management; the only Solution to the Economic Crisis explains how to plan and manage the business to capture business data and provide management the information needed for actual business, corporation, industry, and economic management
- A Government Business Management Program to Answer the Economic Crisis outlines a government program to encourage business management, stimulate the economy, restore confidence, organize businesses to flourish in the recovery, and manage economic cycles to prevent future crisis
These three white paper downloads are available to R-pM Community Members at Result-performance Management.com. There is no cost or obligation to join the R-pM Community. Join by entering your email address and personal password. Your email address is protected and used only for download problems, product updates, and occasional R-pM Member news and white papers.
