Why manage the business?
Most managers think that they manage their business
Do you manage your business? What is the definition of the business that you manage? Ask a manager if he manages his business, and the normal response is yes. Ask for the definition of the business they manage, and they do not have a precise definition. Most will describe the enterprise rather than the actual business.
No company, corporation, institution, or other enterprise manager manages the actual business today. The managers employ 20th century enterprise management to administer the enterprise. It is impossible to manage the business today, because the business has never been defined or organized properly.
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 20th century management to administer structures laid over the business, and do not define the actual business or teach us how to manage the actual business.
Outside of our explanations of business management, 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.
Business management provides a precise definition of the business
So today, results, capital solutions, and performance in the utilization of capital to produce results continue to be confused by the definition of performance. We must separate results and capital utilized from performance in order to define and manage the business. Business management defines the business as “investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results”.
The enterprise business has three components:
- Capital in the professionally-supported capital solutions of worth available to the business
- Performance of the business in the utilization of capital as specific solutions to incur costs and provide effectiveness to produce specific results
- Results in the economic outputs of value and quality produced by utilizing all required solutions in 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 utilized in business as a set of specific solutions and we have never organized the output results that must be produced for business success as a set of specific results. We have never organized business performance in the specific capital solutions utilized to produce specific results. We now have the information technology we need to organize and manage the actual business, and it must be put to use for competitive advantage.
In order to manage the business, capital, results, and performance must be organized
Every business makes large capital investments that must be managed as part of managing the business. 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. If we do not organize capital utilized in the business as a set of specific capital solutions, we cannot plan or manage the utilization of capital in business performance. Capital solutions have common attributes like worth, development costs, capacity, operating costs, effectiveness, uncertainty, and utilization. If we do not manage capital as 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.
Every business produces output results of some level of quality and value that must be managed as part of managing the business. 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 organize and manage results produced by the business as a set, we cannot plan or manage the current or strategic value created by the business.
Every business utilizes capital as specific human and other solutions in performance to incur costs and produce value in specific results. This capital utilization in performance to produce results must be managed as part of managing the business. Performance must be set up to know the rules and exceptions, such as cost per result, for measuring performance, and to record 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 accurate business records and management information.
The business is manage through specific results that must be produced for business success
The business consists of very specific output results produced that can be counted and measured. The results relate to each other and must be organized to organize the business. The results require capital investments in specific solutions of worth. The results can only be produced by utilizing capital as specific solutions in performance. The results produced, capital available, and capital solutions deployed to be utilized in performance to produce results define one very precise organization of the business at any particular point in time.
Therefore, results as outputs must be defined separate from the capital utilized and the utilization of capital solutions in performance. Once you have defined your results, your capital utilized and your performance in the utilization of solutions to produce results, you have defined your actual business. They are not contrived departments, functions, positions, etc., which mean nothing on their own. They describe what you are actually using and producing in day to day business performance.
Once the business is defined in terms of specific results to produce and specific capital available as solutions, the business is organized by deploying specific capital solutions to be utilized in performance to produce specific results. This produces a business structure that is used for all management in business organization, planning, direction, reporting, and governance as described in prior articles.
The business can be viewed as a business structure
The business, or any part of the business, can be viewed as a business structure that is like a spreadsheet with results to be produced organized in columns across the top and the capital solutions to be utilized in rows down the side. Each cell with a solution deployed to produce a result is a performance domain to record performance costs and effectiveness. The total costs of solutions utilized down a result column give the total result cost against the result value to determine result value-added. The total costs of a solution to produce results across a row give the total solution cost for capital management.
The business is planned and managed as a current business structure with result manager solutions and business organization solutions implemented to be responsible to produce specific results.
The strategic business is planned at a strategic horizon in the strategic results to produce and capital solutions needed
The planned business is managed through strategic results that must be produced at a future strategic horizon to provide growth and strategic value creation. The strategic results require capital as new and improved solutions that must be developed. Strategic results and the capital required is planned in a strategic business structure. The evolution of the business from the current business to the strategic business is planned in period by period result goals that show the value increases required in existing results and the new value to be introduced by new results in a specific period. The capital development required is very specific in capital solutions needed to produce each result. All investment is directed at producing strategic result value. Investments are managed and the investment return is produced in the specific result value-added to be gained by achieving result goals.
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 solutions to utilize. Every business change is a change to a specific result produced or to the capital 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 organize and manage the business.
Result-performance Management (R-pM) provides the knowledge for actual business management
Result-performance Management (R-pM) is the only source of knowledge and expertise on how to manage the actual business. Forward-looking enterprises are now using R-pM guidance to organize and manage their business to gain breakthrough advantages over competitors burdened by unsolvable 20th century management problems. Business management is explained and documented in the Business Management Toolkit. The Toolkit provides procedures for actual business management and maintains emerging 21st century management conventions, definitions, and standards. The Business Management Toolkit guide “How to Build Result Value-quality Chains” describes value chains in detail. Management consultants who base 21st century business management services on R-pM knowledge are licensed to help enterprises learn, organize, and manage the actual business. Business management knowledge and the Business Management Toolkit are available and supported today at result-performance-management.com.
The solution to the economic recession is explained in free downloads
Three free white papers explain the dead-end 20th century management problems, such as the failure to plan, account for, and manage the actual business, that caused the economic crisis, the way to eliminate the problems, and a government program to address the crisis by stimulating the economy, solving the problems, building a structure for financial and economic management, and organizing local businesses to flourish in the eventual recovery.
- How to Eliminate Problems that caused the Economic Crisis explains the major unsolvable 20th century management problems and the solution to eliminate the problems
- Business management; the only Solution to the Economic Crisis explains how to plan and manage the business to capture business data and provide management the information needed for actual business, corporation, industry, and economic management
- A Government Business Management Program to Answer the Economic Crisis outlines a government program to encourage business management, stimulate the economy, restore confidence, organize businesses to flourish in the recovery, and manage economic cycles to prevent future crisis
These three white paper downloads are available to R-pM Community Members at result-performance-management.com. There is no cost or obligation to join the R-pM Community. Join by entering your email address and personal password. Your email address is protected and used only for download problems, product updates, and occasional R-pM Member news and white papers
