The only Way to prevent Economic Crisis is to manage the Actual Business
Investors have lost trillions of dollars and more trillions are committed to attempt to clean up the economic crisis
We see the intervention by governments in the US and around the world to address the symptoms of the fundamental problems in 20th century management. We see trillions of dollars of losses in stock markets and businesses worldwide, and more trillions being spent to buy low-worth capital asset solutions, unfreeze credit, and restore confidence in obsolete enterprise management.
While the distortions and risks created to replace fixed mortgage asset solutions with leveraged security solutions sparked the crisis, there are underlying problems in the basic management methods utilized by all the enterprises involved that prevent them from capturing actual business data and generating direct business management information.
In addition, we see little effort to understand and eliminate the underlying unsolvable business management problems that cause this and other recurring crises, particularly on the part of business owners and shareholders who have the most to gain or lose, professional bodies who establish business management principles and standards, and governments who are responsible for economic management. Most corporate executives will not try to identify their real problems and improve their management, unless put under pressure from their shareholders or their government.
The current financial and management crisis is caused by failure to organize and manage the business
The fundamental unsolvable problems are present in all banks, financial institutions, and other enterprises because the enterprise is managed by structures laid over the business. The actual business in “investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results” is never managed. The three components of the business in business results produced, capital solutions invested in the business, and performance of the business in the utilization of a solution to produce a result are not defined as data sets. Therefore, actual business data concerning results produced, capital utilized, and performance employed cannot be captured. Enterprises today are unable to measure or manage the following important capital measures, performance indicators, and result metrics that describe the actual business:
- Investment costs incurred in the acquisition and development of specific capital solutions, be they solutions implemented to produce business revenue results or financial facility solutions utilized to produce direct income and growth results
- Actual capital solution worth in the potential to contribute to future result value creation
- Actual performance costs that amortize investments as solution worth declines in the consumption and utilization of capital or in reduction in solution disposal worth
- Added solution investment costs and potentially added-worth in solution improvement and replenishment
- Economic output result value created from the utilization of capital in performance
- Value added in result value greater or less than performance costs for all solutions utilized to produce a volume of full or partial results
- Result value-added across result chains within the final result value-added, to identify and rectify low-value results and ineffective solutions
- The return on solution investments in attributable contribution to result value-added to date
- The changing ongoing solution worth in future contribution to result value or income added over the remaining solution life, plus the solution disposal result value
- The projected gain or loss on capital solution investments in the current solution worth less the unamortized investment balance
- The qualifications of specific capital solutions to perform effectively to produce specific high-quality results
- The potential of solution utilization in performance to meet expectations and reach result goals
- The managed reliability of solutions to reduce performance uncertainty and result risk
- The inadequate or deficient capital solutions causing performance problems that produce symptoms in late or low value-quality results and the elimination of result symptoms by solving performance problems through improved capital solutions
- The strategic result value-added and shareholder value to be created by managed strategic results
- The itemized result value-added planned to justify result research and capital acquisition and development projects
None of these important measures, indicators, and metrics that can be produced by the actual or planned business are known or managed by management today, because the actual business is not planned, organized, or managed.
Instead, enterprises lay archaic 20th century management structures over the business producing well-known, but unsolvable, problems with reorganization, alignment, “business complexity”, “business change”, unknown costs and value, unknown capital worth and returns, intangible assets, IT and business conflicts, investments, projects, accounting limitations, inaccurate information, corporate governance, quality, risk, collaboration, outsourcing, IT overheads, and on and on. 20th century management is a dead-end. New 20th century structures can never solve these problems, but just increase business complexity and escalate IT and other costs.
We will continue to lack the information needed for proper business management and continue to face unsolvable problems, until we organize and manage the actual business of every enterprise and base accounting, industry regulations, auditing, and compliance reporting on the actual organized and managed business.
20th century organization structures used today do 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 rigid organization structure goes out of “alignment” with every new or closed result or change to a capital solution utilized. Eventually there is need for reorganization to contrive a new rigid organization structure that is closer aligned to the actual business, and the cycle is repeated.
The business organization is not a political football, it must be professionally managed capital
The business organization is not a management prerogative or political football. The business organization is capital of worth that must be managed professionally 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 research new results and acquire or develop new solutions needed to produce strategic results.
If we do not organize the business, we need additional structures to 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, scorecards, and compliance structures for reporting. Actual business data on capital utilized in performance and results produced cannot be captured as one defined and interrelated set. Distorted and incomplete data is captured against overlaid structures. Each structure defines the enterprise differently, uses different information systems, and reports different entities that must be reconciled by data models and processing structures. These many overlaid structures are rigid and conflict with the actual business producing high costs, excessive IT overheads, and many unsolvable problems.
None of the overlaid structures manages business capital, business performance, or business results
No overlaid structure can plan, direct, control, and report actual business capital measures, performance indicators, and result metrics described above.
The only way to prevent future crises is to use actual business management to organize the actual business as capital solutions available to the business in the capital structure, result chains that produce final customer results and other output results required for business success in the result structure, and capital solutions implemented in performance domains to produce specific results in the performance structure. Overlaid structures are cleared away to eliminate unsolvable problems. Capital worth, investment returns, performance costs, result value-added, strategic value creation, and ongoing stakeholder value are managed directly, as explained in many articles in the Business Change Forum.
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. 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. R-pM and business management are supported at result-performance-management.com.
The Solution to the Economic Crisis 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.
