Manage contribution and profits through result value-added
20th century management cannot manage the components of profits
20th century management does not manage contribution to profits from the line business and profits from complete enterprise operation. 20th century management accounts for profits by adding up cash income and cash expenses, independent from enterprise operations and management.
21st century management manages the components of profits to manage profits
The business consists of economic output results of value that must be managed to manage revenues and income. The business also consists of capital utilized or consumed in the business in the form of performance solutions that must be managed to manage performance costs and expenditures. Result-performance Management (R-pM) organizes the business in the output results produced to create value and the performance solutions utilized to incur costs to determine result value-added, the most important management metric for 21st Century Management.
Contribution and profits are not just lines that happen to appear on an income statement. Contributions and profits are results produced by the business that should be planned and managed on a daily basis with result goals. Contribution and profits are derived from result value added over performance costs for all the economic output results from the business. Therefore, the value of every economic output result and the performance costs producing the result must be managed to manage the result value-added that goes to contribution and profits.
20th century management does not manage result value or performance costs
20th century management does not define or manage results as one set of economic outputs produced by the business. Results are defined as performance and mixed with the actions of performance to manage enterprise “performance” rather than separately managing business results and business performance.
20th century management does not define the capital utilized by the business as one set of costs incurred to produce business results. Much capital of worth is not identified or accounted for as capital. Much capital is simply called “intangible assets” and ignored.
Since 20th century management does not manage the components of contributions and profits it cannot manage the actual production of contribution and profit results.
21st century management manages result value added in result value chains across the business
Revenues and income are produced by a chain of economic output results that produce final results that go to the customer. Each result in the chain must be managed to optimize the value of the result, in the customer willingness to pay.
The total value of results in the chain cannot exceed the value of the final customer result. Each result in the chain is produced by utilizing human and other capital as specific performance solutions and incurring performance costs. The result value less performance costs is the result value-added. The result value added is managed to maximize the contribution and profit results from the business. The result value-added may be negative for certain results that are incurred, such as waste, that must be minimized. If the result value is negative for other results, the result must be eliminated. If the result is essential, the performance costs must be reduced or the result value must be increased and the value of other results in the chain must decrease.
21st Century Management optimizes the performance producing results to maximize result value added and the profit result.
Result-performance Management means managing the specific performance that produces a specific result. Each result has a result manager and each performance solution has a performance manager. The result and performance managers optimize the performance solutions utilized to produce results to ensure the best solution is in place, that the solution is utilized properly, and to solve any performance problems, with the objective of increasing result value, reducing performance costs, and adding increased value to the contribution and profit results.
The means to manage contribution and profits through result value-added is explained in the R-pM Toolkit, available at Result-performance-Management.com.
