Why plan the business?
20th century management used today lays various plans over the business
20th century management cannot plan the business directly because the business is not organized. The enterprise is planned through various structures laid over the business. These overlaid planning structures include:
- Strategic plans using such structures as maps and corporate plans
- Financial plan and budget structures
- Information technology plans and enterprise architectures
- Capital development plans and investment analysis structures
- Operational plan structures
Each of these planning structures uses its own set of entities to describe the enterprise, uses different information systems, and requires its own support staff. Each plan must be maintained and updated with actual progress against the planned entities, and reported. The plans plan the enterprise in various ways depending on the particular structures implemented. It is difficult to understand and manage the actual business from these plans.
None of the overlaid plans plan the actual business
Since the business is not organized, the business cannot be planned. The results produced by the business cannot be planned as an interrelated set. Some results may be planned in isolation as separate entities such as product sold and revenue received. The plans are usually created from estimates rather than a period by period build up from the existing business. Since the business is not planned actual business data is not planned for actual measurement; such as performance costs, performance effectiveness, result value, result quality, capital worth, investment returns, etc.
The business must be organized to provide the basis for business planning
Before the business is planned, the business is organized using Result-performance Management (R-pM) in order to plan and manage the business as strategic and current business structures. R-pM organizes capital that is invested in the business as specific capital solutions, the results that must be produced by the business to create strategic value and business success, and the performance of the business to utilize specific capital solutions to produce specific results. Once the business is organized there is a baseline and experience for business planning.
The organized business must be planned to reach the strategic business
Strategic business planning must plan the actual business at some future date called the strategic horizon. The business is planned using Result-performance Management to build on the current business structure. The strategic business structure is defined to plan the added or developed results needed in detail and results continued unchanged from the current business in total. Strategic result value is planned across the business. Future capital is planned in the specific capital solutions that must be available to produce strategic results. Result goals are planned period by period to move from the current to strategic business. Strategic value creation planned is substantiated by result goals accepted by the responsible result manager. Capital development required for specific solutions to add or improve results is planned as well as the strategic result value increase provided by implemented solutions. The strategic business structure is management strategy capital and is approved by the board.
The planned business provides a tool for corporate governance
The planned business provides the baseline for management reporting and the tools for good corporate governance to understand the actual status of the transition from the starting business to the strategic business. Plans are updated each period with actual data and new strategic estimates to keep on track to the strategic business. Capital development projects are included in the strategic business structure and strategic plans. Proposed investments for capital development are analyzed and planned in detail as investment results. Approved investments are included in strategic plans. Capital development projects in progress are managed as investment results. The investment project result is supported by the project plans and the project business structure in progress. Once the project is complete, an investment return result manages the result value-added for the return on investment against goals.
The planned business provides the framework for changes to the business
New opportunities and threats to the business can be modeled in the strategic business structure. The status of the actual business and the impact of proposed result and performance solution changes are clearly understood and beneficial changes approved. New results and capital solutions are incorporated easily into the business. Results can be closed and solutions redeployed to other results easily. Business plans are kept current to reflect the actual planned and approved business. The business is planned using Result-performance Management to enable 21st Century Management.
This is the article nine 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 nine 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.
