Why we must invest in corporations that can manage their investments and capital worth
The economic crisis shows that banks and corporations cannot manage investment returns or capital worth
Many investors invested in financial institutions and other corporations only to discover that the corporation is unable to manage investments, the return on their investments, and the ongoing worth (asset value) of investments made. How much money must investors lose, before they wake up to the fact that no corporation today is able to plan and manage investments to ensure a positive return, is able to plan the capital worth of each investment, or is able to manage the changing on-going worth of capital investments as part of routine business management. As we saw, reductions in capital worth come to light only when there is an attempt to sell or dispose of the asset. Then, suddenly there are large capital write-downs and losses for investors.
The 20th century corporation is not organized to manage investments
You likely invest in corporations. As an investor, you try to identify precisely how you are to gain a return on your investment and have some idea of what that return should be. Do you realize that the corporations that you invest in have no way to do the same when they use the money you have invested?
20th century management does not provides a business structure or other framework to manage investments, specific capital solutions acquired or developed, solution investment costs, the worth of capital solutions, solution amortization in performance costs as solution worth declines, the value-added to the business over the solution life, or the worth of the solution to be sold or disposed of after its life with the corporation.
Corporations are not organized to manage investments, so corporations do not have a fundamentally strong means to plan and manage the return on their investments, from initiation through to measuring the return. So corporations rarely really invest, they either spend or speculate. The only way to plan and manage return on investments is to plan and manage the added-value to results produced attributed to the investment.
The 20th century corporation cannot plan or manage capital worth
Financial institutions, at least, identify the specific capital solution invested in for income and growth result value-added as part of an investment portfolio. But this portfolio is managed separate from the business using various arbitrary structures, numbers, and models. Capital worth is not managed as part of ongoing business worth. Worth is set in an “asset value” based on a formula or estimate such as future market asset sale result value. Once the capital worth is set, it is kept in the books, without periodic review as part of business management.
Most corporations do not even identify specific capital solutions implemented in the business to be utilized to produce business results. Most of these solutions are lumped together as an “asset”, are used but have never been recorded as capital, or are considered as “intangible assets” and never managed. The investments made by the corporation in the specific solution, the capital worth of the solution, and the return on investment in the solution are never recorded or managed. The corporation can never know accurate business net worth if it does not organize and manage all capital solutions in the set of capital, as assets in specific solutions of positive capital worth, and as liabilities in specific solutions of negative capital worth.
Each corporation must organize the business in order to manage investments
The answer is to organize the actual corporation business as 1) the set of economic output results, including products, income, growth, and shareholder value results, that must be produced for success; 2) the set of capital solutions invested in by the business, including securities, property, human capital, other capital utilized by the business; and 3) performance in the utilization of specific solutions to produce specific results, to manage the cost and effectiveness of performance and the value and quality of results. Result value is the current willingness of customers, who want the result produced, to pay for the result, or a future result that must be sold or disposed of. Result value is managed to determine the value-added over performance costs to plan and contribute to the return of investments for solutions utilized, and to update the current capital worth in result value-added over the remaining solution life, plus result value-added in the sale or disposal of the solution.
Result-performance Management (R-pM) provides the method to organize the business and utilize human and other capital, where needed to produce results
The source of knowledge for corporations to organize and manage their business is Result-performance Management (R-pM). R-pM shows how to organize results to be produced and then how to deploy and implement capital solutions where needed to produce results. Once the business is organized the business can be managed directly, without the need to lay enterprise organization and management structures over the 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.
