The Logic of Management Capital
What is management capital? Management capital is not the capability of our managers. That is part of our human capital. Management capital is the capital provided by management so that the enterprise can develop and execute a successful strategy.
You hear of management strategies, management tactics, and management intelligence; but do think of it as management capital? You likely do not, because 20th century management does not organize and manage management capital as the capital that is utilized to plan, and direct the enterprise business. 20th century management has functions like corporate planning, internal audit, public relations, legal, marketing, etc. that may administer some management capital, but few, if any, really manage management capital. Many enterprises have problems due to inadequate management capital.
Logically all capital must be defined as performance solutions to be deployed and utilized to produce a specific result. The post on August 6, 2007, The Logic of Capital Management, provides the background.
Capital utilized by the business is organized into four categories
Capital utilized by the business requires different professional capabilities to be professionally managed, which organizes four categories of capital:
- 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 facilities and records. Facility capital requires expertise with the specific capital and administrative ability
- 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.
Management capital is organized by capital class giving the performance solution type
There are three classes of management capital. Each class of management capital is a solution type. Each solution type is broken down into specific performance solutions to produce a specific result.
- Management strategy: The readiness capital that sets the future direction of the business and maintains the strategic business structure solution
- Management tactics: The production capital that guides current business operations and maintains business competitiveness
- Management Intelligence: The information capital that identifies new opportunities or threats and provides insights into the progress of the business
Management capital is managed by a management capital unit that is responsible for developing, supporting and maintaining management capital, for maintaining progress toward the strategy, and for providing management performance solutions. Management capital relates results to the overall business strategy and environment.
Management capital is integrated with other capital in each class
Management capital is integrated with business capital in the same class to produce the set of results or a specific result. There are three classes of solutions:
- Readiness capital includes business organization capital and integrates human personnel, facility equipment, and management strategy with the business organization to be ready to produce a set of results
- Production capital includes business process capital and integrates human capabilities, facility supply, and management tactics with the business process to produce a specific result
- Information capital includes business data and integrates 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 in the same class, the business can be managed and operated efficiently.
So, altogether there are twelve solution types, when capital is properly categorized into four categories for professional management and support, and when each category is classified into three classes to be integrated with the business capital and utilized in the business to produce results.
Management strategy capital is professionally managed to maintain the future business direction
Management strategy solutions are readiness capital to plan results and the performance needed. Management strategy capital is responsible to develop and maintain solutions to produce strategic results, invest in the required performance solutions, and manage stakeholder value from current to strategic result value. Management strategy capital defines future result value and the new solution development required to create future result value. Management strategy maintains the strategic business structure and result-performance development structures. Management strategy provides the strategic estimates at the strategic horizon based on progress of the business towards the strategy.
Management tactics capital is professionally managed to guide and optimize the current business
Management tactics solutions are production capital to support actual utilization of capital to produce results. Management tactics is responsible for management solutions to guide results for competitive advantage, evaluate results and assess performance, and optimize cost-effective performance to produce value-quality results. Management tactics solutions include all management policies and directives, solutions to gain and maintain competitive advantage, solutions to protect the intellectual property contained in results, solutions for enterprise social responsibility and legal compliance, external information solutions, management solutions from evaluations and assessments, and other solutions needed for current business management.
Management intelligence capital is professionally managed to inform management of opportunities, progress, and potential problems
Management intelligence solutions are information capital integrated with business data, human knowledge, and facility records solutions. Management intelligence is responsible to provide solutions that inform management, at all levels, of external opportunities and threats and internal status, forecasts, problems, and advantages. Management intelligence is derived from external business and market and competitive research, and internal information analysis. Management intelligence solutions provide insights for management evaluation and supports management strategy and tactics with information.
Management capital must be managed to secure the future of the business
Management strategy solutions are important for good corporate governance. Management tactics solutions maximize the current competitive environment and business status. Management intelligence solutions inform management of future opportunities and threats. 21st Century Management provides many advantages not available today through the proper organization and management of management capital.
Logical management capital organization and management requires Result-performance Management (R-pM) to organize the business for 21st Century Management. It is all explained in The R-pM Toolkit, your 21st Century Management Manual.
