Rule No. 5 for 21st Century Business Management: Operate to optimize operations, result value-added, and the profit result
Rule No. 5 of the ten rules of 21st century business management is Operate to optimize operations, result value-added, and the profit result. This rule requires that the capital solutions utilized to produce each result are optimized to be cost-effective and produce a high value-quality result, so that all business operations are optimized.
21st century business management organizes the performance producing each result
Business operations cannot be optimized unless the business is organized in order to manage the specific performance that produces a specific result. The 21st century business is organized using Result-performance Management (R-pM) knowledge and procedures, so the business can be optimized, by ensuring that capital solutions are deployed or implemented to produce the proper results and are integrated to employ the most cost-effective performance to produce the highest value-quality result.
21st century business management organizes capital investments as specific solutions
21st century business management organizes the capital the enterprise invests in as specific capital solutions that are implemented to be utilized to produce one or more specific results. This allows the enterprise to capture the cost of developing or improving the capital and to assess the:
- Cost of consumption of the capital in operations
- Performance costs generated as solution worth declines over the solution life
- Effectiveness of the capital to produce a high-quality result
- Capacity of the capital to produce a volume of results
- Uncertainty of the performance of the capital and the risk of a poor result
- Return provided on the investment in the capital from the share of result value added to date
- Level of performance of the capital against expectations
- Worth of the capital assessed from result values to be produced over the remaining life
Capital solutions are categorized as business, human, facility, or management capital so that a performance manager with specific capabilities can be responsible for providing qualified solutions. Within each category, solutions are classified as one of three classes; as readiness solutions to prepare an organization responsible for a set of results, as production solutions to be used or consumed in producing each actual result, and as information solutions to support or document results. Capital solutions are integrated by capital class for utilization to produce a result.
21st century business management organizes the outputs from business performance as specific results
21st century business management organizes the inputs incorporated and outputs produced by the enterprise as results. Results are tangible items of value that can be counted. Each result has an internal or external customer that wants the result produced and is willing to pay a value to receive the result. This allows the enterprise to evaluate the:
- Value of the result produced in a chain of result values
- Quality of the result against standards and quality determinates
- Volume of results counted from utilizing the capital solution capacity
- Risk that a poor or defective result will be produced
- Actual against goals to produce a quantity or value within a time period or quality of the result
- Total capital solution performance costs absorbed against the value
- Result value-added in result value less total performance costs
Results are categorized as revenue results in a chain of results that produce revenue and profit results, capital results that manage capital and support performance, and investment results that implement new or improved capital solutions to increase future result value.
21st century business management optimizes the performance to optimize value-added and the profit result
21st century business management manages the performance producing each result and evaluates results and assesses performance to optimize the result. Each capital solution is under a performance manager and each result is under a result manager. Each manager has a continuing responsibility to ensure cost-effective performance to produce a high value-quality result. Result value-added (result value less total performance costs) is maximized. Result value-added contributes to the profit result.
High value or strategic results are periodically optimized from the bottom up with each result manager in coordination with the performance manager for each set of solutions utilized. Results and performance are also optimized from the top down by investment management for return on investments and senior management to identify and rectify problems.
Capital solutions are assessed by capital class to ensure that they are integrated to be effective in producing the result. Result goals are reviewed against the expectations of performance and qualifications of solutions to ensure that goals can be reached by the solutions provided. Result value is evaluated against the performance cost of each solution and the total cost of solutions to know and improve the result value-added. Result quality is evaluated and the performance of each solution is assessed to ensure that each solution is effective and that any ineffective solution is identified. Performance uncertainty is assessed to identify the risk of a poor result to modify or insure the result or reinforce performance. Capital solution capacity utilization in performance to produce a volume of results is assessed to ensure that the lowest capacity solution is sufficient and that the cost of overcapacity in other solutions is minimized.
21st century business management makes operating to optimize operations and the profit result part of the routine of result, performance, and investment managers.
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.
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