New forum of articles: Why Manage your business?
Most managers think that they manage their business and make business decisions
Do you manage your business? What is the definition of the business that you manage? Ask a manager if he manages his business and makes business decisions, the normal response is yes. Ask for the definition of the business, and they cannot give a precise definition. Most will describe the enterprise rather than the actual business.
No corporation, institution, or other enterprise manager manages the actual business today. The managers employ 20th century management to administer the enterprise. Managers make enterprise decisions to manage and change the enterprise, rather than business decisions to manage and change the business. It is impossible to manage the business today, because the business has never been defined properly or organized.
The business to manage has never been defined and actual business management has never been taught
What is the enterprise business? There are many conflicting and imprecise definitions for the word “business”. Proper definition of the business is hampered by the definition of performance to include both the utilization of capital in actions executed and the results accomplished. Business schools and management books teach dead-end 20th century management to administer structures laid over the business, and do not define the actual business or teach us to manage the actual business.
Outside of R-pM, there is no source of information on the real-life fundamentals of actual business organization and management. Since there has never been a precise definition of the business or teachings or books on actual business management, managers do not know what to organize in order to manage the business.
R-pM provides a precise definition of the business
We must separate performance from results using Result-performance Management (R-pM) in order to define and manage the business. R-pM defines the business as “the utilization of capital of worth in performance to incur costs and produce value in results”. The enterprise business has three components:
- Capital in the performance solutions of worth available to the business
- Performance of the business in the utilization of capital as specific performance solutions to incur costs and produce specific results
- Results in the economic outputs of value produced by performance
Therefore, if we are going to manage the business, we must organize and manage the capital utilized by the business, the performance of the business in the actual utilization of capital to produce results, and the output results produced by the business. But, today we cannot manage the business because we have never organized or supported human and other capital we invest in as a managed set, and we have never organized the output results that must be produced for business success as a managed set.
In order to manage the business, capital, results, and performance must be organized
Some capital is administered as money, assets, or employees, but much high-worth capital has been developed but never defined as capital, and much capital is labeled as “intangible assets” and ignored. Capital utilized must be organized as a set of specific performance solutions to manage common attributes like worth, development costs, capacity, operating costs, effectiveness, uncertainty, and utilization. If we do not manage performance solutions, we cannot know the amount invested in capital, the capital worth, the cost incurred in the utilization of capital, the value created by the capital, and the return on the capital investment.
Some results are identified as isolated entities, like material in store, product sold, order booked, revenue received, maintained machine, completed training, etc. But, many important business results are never identified or managed as results of value to the business. Results have common attributes like volume, value, quality, risk, total cost, and value-added that must be managed as a set. If we do not manage results produced by the business, we cannot plan or manage value-quality chains or the strategic value created by the business.
Business performance is the utilization of capital to incur costs and produce value in results. Performance must be recorded to know the costs and effectiveness of capital utilized to produce value and quality in results. Performance must be recorded against expectations for the performance solution utilized and against goals for the result produced. Performance transactions are recorded to provide complete and accurate business records and management information.
All business decisions and business change involve capital utilized and results produced
Every current or strategic business decision boils down to what result to produce and what capital to utilize. Every business change is a change to a specific result produced or to the performance solutions utilized to produce results. The actual business is the utilization of capital of worth in performance to incur costs and produce value in results. Therefore, we must organize and manage capital, performance, and results in order to make business decisions and manage business change.
This article will be detailed in a forum of articles “Why Manage your Business” posted every Friday
Many visitors to the Business Change Forum have indicated difficulty understanding the business fundamentals underlying Result-performance Management (R-pM). People often get confused because they mix R-pM business fundamentals with dead-end 20th century management that they have been taught and use today. R-pM supersedes 20th century management, so learn new R-pM business management fundamentals completely separate from 20th century management that will never be used again.
The Business Change Forum will run a series of articles under the forum “Why Manage your Business?” to explain R-pM fundamentals for actual business organization and management for the 21st century. A new article will be posted every Friday.
