Why organize the business?
20th century management used today does not organize the business
20th century management lays a contrived enterprise organization structure over the business, instead of organizing the business. This is the fatal error of 20th century management. If the business is not organized, the business cannot be managed.
The contrived organization structure follows one of many 20th century organization theories to organize the enterprise. The business, which we have defined as “the utilization of capital of worth in performance to incur costs and produce value in results” is not organized. The rigid organization structure goes out of “alignment” with every new or closed result or change to a performance solution utilized. Eventually there is need for reorganization to contrive a new organization structure that is closer aligned to the actual business, and the cycle is repeated.
The need for reorganization shows that the business is not organized
Some may argue that their business is organized. Ask if they ever reorganize the business, and they will answer yes, of course. Reorganization is needed because the business is not organized. A rigid organization structure is laid over the business. The organization structure goes out of alignment with the business with every business change to capital utilized or a result produced. If the business is organized the business organization changes with each business change, and the unsolvable reorganization problem is eliminated. Reorganization does not organize the business, but produces a new enterprise organization structure that is laid over the actual business.
If we do not organize the business, we cannot plan or manage the business
Since the business is not organized, the enterprise must be managed by separate 20th century management structures laid over the business; such as a strategic map or corporate plan, business processes and functions for direction, financial and cost accounts and quality structures for control, and data reconciliation and scorecards for reporting. Each structure defines the enterprise differently, uses different information systems, and reports different entities that must be reconciled. These many overlaid structures are rigid and conflict with the actual business producing high costs, excessive IT overheads, and many unsolvable problems.
The business organization is capital that must be managed as capital
The business organization is not a management prerogative or political football. The business organization is capital of worth that must be professionally managed to maintain an accurate view of the current and strategically planned business. The current business organization is business organization capital that is maintained for each change to the business. The strategic business organization is management strategy capital to define strategic value creation and result-performance development required to acquire or develop new solutions needed to produce strategic results.
We must organize the utilization of capital in performance to produce value in results
We have defined the business as “investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results”. Therefore, we must organize the capital of worth invested in the business and available as specific performance solutions as one component of the business. We must organize the economic output results of value to be produced across the business as another component of the business. The business organization is similar to a spreadsheet, with results to produce across the columns and capital solutions available for utilization down the rows. The business is organized by deploying specific capital solutions along the performance row to a cell, called a performance domain, to produce specific result in a result column. The strategic future business is organized similarly by organizing strategic results and the current and acquired or developed solutions needed in the strategic business structure.
Organization units and responsible managers are solutions deployed to produce results
One concern in 20th century organizations is to show responsibilities and reporting relationships and positions. The organization unit, called a result unit, and manager responsible for results are deployed as solutions for each result. Results to be produced and capital to be utilized may be organized together as a module under a particular result unit. Capital is supported by defined capital result units for business, human, facility, and management capital. Revenue result units may be organized for product support, product sales, after sales service, etc. Investment result units may be organized for operational investments and result-performance development investments. Result units are business organization solutions managed as business capital. Results are not assigned to organization units, rather result units are deployed as solutions with responsibility to produce results and reach goals. The result unit has a set of deployed performance solutions utilized to produce results. As the result unit is deployed to produce new results or as existing results are closed, new solutions may be deployed to the unit’s results or existing solutions redeployed as needed.
Every result has a responsible result manager. The result manager is usually a manager within the result unit deployed. The result manager is deployed as a human personnel solution to be utilized to see that the result is produced to meet result goals, established when the result was defined.
Reporting relationships are shown by relationships between results
Reporting relationships are shown in the relationships between results. Upper management results relate to many lower-level results that must be produced under upper management. Positions are established in the human personnel and capability capital solutions needed to produce a specific set of results. Human capital is not fixed in position but is deployed as needed to produce specific results for any length of time. The organized business structure is set up in a general ledger or relational data base management system. Results to be produced by any particular result unit or result manager solution can be extracted from the business structure and inverted to be managed and reported under the responsibility.
The organized current and strategic business structures are used for all business management
The current and strategic business structures replace all the 20th century management structures laid over the business. Result goals for strategic value creation and performance expectations for solutions utilized are set by time period to the strategic business to substantiate the strategic value planned. The current to strategic business structures are used for all planning, direction, control, and reporting.
We must organize the business to capture business data and report management information
Business data is captured on capital solution utilization to produce a result for each performance domain for performance costs and effectiveness; on capital for solution capacity, capital development and operating costs, total performance costs, effectiveness, and utilization against expectations; and on results for volumes, value, quality, total performance costs, and value added against goals. Management information is reported on performance costs, result value and quality, capital worth and investment returns etc to enable direct business management. One set of consistent financial and non-financial management information enables good governance of the progress to the strategic business.
The business structure changes with every business change
Business changes involve business results added or closed and changes to the performance solutions utilized. Every decision is updated to the current and strategic business structures. Capital development is replaced by result-performance development to acquire or develop new capital required in the strategic business structure to produce specific results of value. The current business structure is updated as new solutions and results are implemented.
This is the article eight under the forum “Why Manage your Business”
The Business Change Forum is now running series of articles under the forum “Why Manage your Business?” to explain R-pM fundamentals for actual business organization and 21st Century Management. This is article eight in the forum. A new article is posted to the forum every Friday
Visit result-performance-management.com to learn about the breakthrough advantages of R-pM and how you can use R-pM to organize your business for 21st Century Management.
