Why Your Enterprise Organization Structure Spells Doom for Your Business

The fundamental problem of 20^th century enterprise, the failure to organize the business

The generally-accepted definition of the enterprise business is “the activity of providing goods and services“. Therefore, the activity of providing goods and services must be organized in order to organize the business. However, 20^th century organization theories organize “the enterprise” into organization units, positions, functions, reporting relationships, etc. to produce a contrived “enterprise organization structure” that is laid over the business. The organization structure is the fatal error of 20^th century management. Once an organization structure is laid over the business, the business can never be managed.

The business must change continually, while the “enterprise organization structure” remains rigid. The rigid organization structure hampers business change, creates change management problems, and eventually creates pressure for reorganization to contrive a new “enterprise organization structure” that is aligned closer to the actual business. If the business was organized, the organization would change with business change.

The solution is to organize the business for 21^st century management

The only way to manage the business properly is to organize the activity of providing goods and services into a business structure. The business activity is organized into capital invested in the business defined as specific solutions that are utilized in business performance. The business goods and services are organized as specific results that are produced by utilizing specific capital solutions in business activity or performance. The organized results to be produced across the business and the organized capital invested in solutions are combined to organize the business, by implementing specific solutions in performance domains to be utilized to produce specific results. The cost-effectiveness of each solution utilized is managed against the value-quality of the result produced.

By organizing the business, instead of the enterprise, the business itself is used as one structure to integrate enterprise organization and management. Actual business data is captured on the amounts and return on capital invested in the business, capital implemented to produce results to know all costs incurred by the business, results produced by the business to know the value created and quality of business outputs, and performance of the business to know the value-added across result chains leading to business profits. The business is planned in the strategic business structure. The business is directed, controlled, accounted for, reported, and governed against progress from the current to strategic business structure. Complete business data, not captured today, is utilized by management to reduce costs to essential capital, maximize the value and quality of results, ensure customer value and quality, and manage profits and shareholder value.

20^th century theories organize the enterprise and not the business, dooming the enterprise to problems

Many organization theories and methods were developed throughout the 20^th century promoting different ways to organize the enterprise. Organizing and reorganizing the enterprise became big business for management authors and consultants. The problem is that once the enterprise organization structure is implemented over the business, the enterprise is doomed to unsolvable 20^th century problems, for the following reasons:

• The enterprise organization structure is laid over the business creating the unsolvable reorganization problem
• The enterprise business, the activity of providing goods and services, has never been organized, preventing the business from being managed
• The enterprise must be managed through contrived accounts, processes, systems, architectures, functions, etc that also are laid over the business
• There is continual conflict between the ever changing business and rigid overlaid structures producing the unsolvable 20^th century management problems
• Each added structure incurs high costs and wastes high-worth capital in the human, IT infrastructure, and other capital required to administer the structure

The enterprise organization structure is the foundation for unsolvable 20^th century problems with reorganizations, inaccurate accounts, corporate governance, unknown value creation, intangible assets, unknown costs, unknown capital worth and benefits of investments, capital development management, outsourcing, alignment, collaboration and on and on. Each structure defines the enterprise differently and requires an information system for processing, creating enormous information complexity and unnecessary IT overheads, while not recording actual business data or reporting actual business management information.

20^th century enterprise management problems must be eliminated by organizing and managing the business

20^th century enterprise problems can never be solved by laying new or improved structures over the business. The problems exist because the enterprise business, the activity of providing goods and services, has never been organized. Therefore, the solution is to organize the business into current and strategic business structures and use the business structures to integrate business planning, direction, control, and reporting. One complete and accurate set of business data is captured and one set of consistent management information is reported on the actual business. All information in or leaving the business is related to a business entity in one official Business Information Base. The general ledger system and a relational data base management system are used to manage the business. All structures laid over the business and the costly information system processing to manage today’s overlaid structures are abolished.

Filed under: Best Practice Management • Corporate Governance • Organization Methods • Strategic Management

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