The Logic of Capital Management
Capital Management is the management of enterprise capital in performance solutions to produce results of value needed by the enterprise. Capital management is an important part of 21st Century Management.
Capital is not managed in 20th century management
20th century management does not manage capital. 20th century management provides administration functions like finance, accounting, human resource administration, purchasing, information technology, and corporate planning to administer selected tangible capital. Most capital is not identified or managed by the enterprise. Much capital is created and used in the enterprise, but is known only in the department that keeps it. Much enterprise capital is assigned to a responsibility center and managed no further. The capital in administrative units is administered rather than managed to provide solutions, control costs, create value, and increase in worth.
Capital investments are not managed to develop specific capital to produce value in results
Enterprises invest significant sums in the capital used, but these investments are not managed to provide the specific returns. The tangible capital is normally developed as a lump sum for an asset or a project. The capital is utilized by the business is the form of specific performance solutions, but the solutions are rarely identified in development. Many solutions such a human capabilities and knowledge, business processes specific to produce a result, management plans and tactics, and information capital usually are not identified as solutions or as part of the capital. They may be considered “intangible assets”. But, these “intangible assets” are an important part of the solution to give the solutions worth by enabling results of value.
Capital must be organized as performance solutions to produce business results
In order to utilize capital in the business, the capital must be organized as performance solutions. Performance solutions are the items of capital that can be identified to be utilized to produce business results. Capital development must be planned from the results to be produced to know the value added potential to provide the return on investment. The capital needed must be defined as performance solutions, including 20th century “intangible assets”. The development project must produce the new enterprise results and new enterprise solutions as project results to capture development costs and to document results and performance solutions properly.
Capital must be organized by the capabilities needed to support the specific capital
Different capital requires different professional capabilities to manage. When the capital is analyzed by the capability required, there are four categories of capital to be managed:
- Business organization, process, and data capital to manage capital that directly produces a result and cannot, generally, produce another result. Business capital requires business knowledge and analytical capability
- Human personnel, capability, and knowledge capital to support and develop the worth of human capital. Human capital requires human handling, development, and coaching capabilities
- Facility equipment, supply, and record capital to manage reusable and consumable tangible assets and records. Facility capital requires expertise with the specific capital
- Management strategy, tactics, and intelligence capital to plan results and performance investments, to keep on course, and to know opportunities and ward off threats. Management capital requires management analysis and research capabilities
All capital must be professionally managed as capital utilized to produce results. Capital must not separated out as finances or information technology for special administration.
Capital must be managed for support and development
Capital cannot be “administered” to have a custodian. Capital must be managed in operations and development. Some capital, such as the telephone or computer infrastructure must be operated to provide solutions needed by the business. Other capital is operated in the result units, but must be supported to prevent and rectify problems. All capital must be developed, as needed, to improve existing performance solutions and to provide new solutions.
Capital gains worth by by producing results of value. If the enterprise does not know the value of results produced, it cannot assess the worth of human and other capital. Managing capital to control capital costs and add value to results produced to increase capital worth is the responsibility of capital management.
Capital performance must be managed to provide the solutions needed to produce results
Capital management includes performance management to provide qualified solutions to produce results. Specific performance solutions must be matched to the need to produce a set of results or a specific result. The solutions in operation are supported to handle problems with solutions and to meet requirements for new solutions. Result managers have a professional to call for problems with the solutions they utilize.
Capital must be integrated with the business to produce results
All performance solutions are integrated with the business solution in their capital class. There are three classes of solutions:
- Readiness capital to integrate human personnel, facility equipment, and management strategy with the business organization to be ready to produce a set of results
- Production capital to integrate human capabilities, facility supply, and management tactics with the business process to produce a specific result
- Information capital to integrate human knowledge, facility records, and management intelligence with business data to produce results and document results produced
When the capital is integrated with business capital, the business can be managed and operated efficiently.
Capital management is an important part of 21st Century Management
21st Century Management replaces administration with capital management. The capital management objective is to operate, maintain, support, and develop capital to provide the performance solutions needed to produce results. Capital is managed by professionals with the specific capability needed. Performance is managed to see that qualified capital is developed, provided, and maintained to produce results.
