20^th century enterprise management used today does not organize the business

20^th century enterprise management lays a contrived enterprise organization structure over the business, instead of organizing the business. This is the fatal error of 20^th century management. If the business is not organized, the business cannot be managed.

The contrived organization structure follows one of many 20^th century organization theories to organize the enterprise. The business, which we have defined as “investments in capital as solutions of worth utilized for cost and effectiveness of performance to produce value and quality in results” is not organized. 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 organization structure that is closer aligned to the actual business, and the cycle is repeated.

The need for reorganization shows that the business is not organized

Some may argue that their business is organized. Ask if they ever reorganize the business, and they will answer yes, of course. Reorganization is needed because the business is not organized. A rigid organization structure is laid over the business. The organization structure goes out of alignment with the business with every business change to capital utilized or a result produced. If the business is organized the business organization changes with each business change, and the unsolvable reorganization problem is eliminated. Reorganization does not organize the business, but produces a new enterprise organization structure that is laid over the actual business.

If we do not organize the business, we cannot plan or manage the business

Since the business is not organized, the enterprise must be managed by separate 20^th 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 and scorecards for reporting. Each structure defines the enterprise differently, uses different information systems, and reports different entities that must be reconciled. These many overlaid structures are rigid and conflict with the actual business producing high costs, excessive IT overheads, and many unsolvable problems.

The business organization is capital that must be managed as capital

The business organization is not a management prerogative or political football. The business organization is capital of worth that must be professionally managed 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 results-driven capital development required to acquire or develop new solutions needed to produce strategic results.

We must organize the utilization of capital in performance to produce value in results

The business consists of investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results. Therefore, we must organize the capital of worth invested in the business and available as specific capital solutions as one component of the business. We must organize the economic output results of value to be produced across the business as another component of the business.

The business organization is similar to a spreadsheet, with results to produce across the columns and capital solutions available for utilization down the rows. The business is organized by deploying specific capital solutions along the performance row to a cell, called a performance domain, to produce specific result in a result column. The strategic future business is organized similarly by organizing strategic results and the current and acquired or developed solutions needed in the strategic business structure.

Organization units and responsible managers are solutions deployed to produce results

One concern in 20^th century organizations is to show responsibilities and reporting relationships and positions. The organization unit, called a result unit, and manager responsible for results are deployed as solutions for each result. Results to be produced and capital to be utilized may be organized together as a module under a particular result unit. Capital is supported by defined capital result units for business, human, facility, and management capital. Revenue result units may be organized for product support, product sales, after sales service, etc. Investment result units may be organized for operational investments and results-driven capital development investments. Result units are business organization solutions managed as business capital. Results are not assigned to organization units, rather result units are deployed as solutions with responsibility to produce results and reach goals. The result unit has a set of deployed capital solutions utilized to produce results. As the result unit is deployed to produce new results or as existing results are closed, new solutions may be deployed to the unit’s results or existing solutions redeployed as needed.

Every result has a responsible result manager. The result manager is usually a manager within the result unit deployed. The result manager is deployed as a human personnel solution to be utilized to see that the result is produced to meet result goals, established when the result was defined.

Reporting relationships are shown by relationships between results

Reporting relationships are shown in the relationships between results. Upper management results relate to many lower-level results that must be produced under upper management. Positions are established in the human personnel and capability capital solutions needed to produce a specific set of results. Human capital is not fixed in position but is deployed as needed to produce specific results for any length of time. The organized business structure is set up in a general ledger or relational data base management system. Results to be produced by any particular result unit or result manager solution can be extracted from the business structure and inverted to be managed and reported under the responsibility.

The organized current and strategic business structures are used for all business management

The current and strategic business structures replace all the 20^th century management structures laid over the business. Result goals for strategic value creation and performance expectations for solutions utilized are set by time period to the strategic business to substantiate the strategic value planned. The current to strategic business structures are used for all planning, direction, control, and reporting.

We must organize the business to capture business data and report management information

Business data is captured on capital solution utilization to produce a result for each performance domain for performance costs, effectiveness, productivity, and utilization against expectations; on capital utilized for solution capacity, capital investment and operating costs, unamortized investment balance, and attributed value created to return the investment and substantiate capital worth; and on results for volumes, value, quality, total performance costs, and value-added against goals. Management information is reported on performance costs, result value and quality, capital worth and investment returns etc to enable direct business management. One set of consistent financial and non-financial management information enables good governance of the progress to the strategic business.

The business structure changes with every business change

Business changes involve business results added or closed and changes to the capital solutions utilized. Every decision is updated to the current and strategic business structures. Capital development is replaced by results-driven capital development to acquire or develop new capital required in the strategic business structure to produce specific results of value. The current business structure is updated as new solutions and results are implemented.

Performance Management is one of the top 10 problems of 20^th century management!

The definition of performance and performance management is a fundamental 20^th century enterprise management problem

Since the 15^th century, performance has been defined as both the capital utilized in action executed and the results accomplished. The definition prevents management of results separate from performance and restricts enterprise management to one confused performance dimension. Performance management is a big part of 20^th century management, with a variety of structures like processes, dashboards, and scorecards laid over the business. Key performance indicators (KPI) mix result volumes, capital utilized, and performance levels. Business process re-engineering focuses on business process management and performance quality to produce a process output. Many performance and productivity methods and consultants redefine costs out of the process and into other capital utilized in the business.

Separate results and capital from performance to enable 21^st century business management

Business Process Management, Conventional Management Methods, Performance Management, Solving Performance ProblemsThe performance management problem is eliminated by separating results and capital solutions from performance to organize the enterprise business in results produced, capital solutioins utilized, and the performance of a solution to produce a result. The enterprise business changes each time management decides to produce a new result, close a finished result, or utilize a different capital solution. Capital management acquires, develops, improves, and supports capital solution investments that have the potential and are qualified to produce results. Performance management maintains cost-effective capital solutions utilized in performance. Result management utilizes specific solutions to produce specific value-quality results.This produces 21^st century business management.

The Performance Management Problem

Performance management mixes performance activity together with performance results like goods and services

To this day, performance is defined to include not only the capital utilized in execution of actions and activities in performance, but also the outputs, things accomplished, or results of performance. Sales performance includes the capabilities applied or time taken by the salesman human solution in making the sale, as well as the results in the number of sales, number of items sold, and the amount of the sale. The accepted definition of the enterprise business is “the activity of providing goods and services“. Yet the definition of performance suggests that the business is “the performance providing performance“, since the activity and the goods and services are both defined as performance.

Mixing actions and results of performance together as the same entity, prevents the 20^th century enterprise from managing results separate from capital solutions utilized and performance in order to organize and manage the business.

Business Processes, Performance Management Systems, and Key Performance Indicators mix results, capital, and performance

Performance Management Systems report to management through a variety of dashboards, scorecards, cockpits, and control panels that are laid over the business and the organization structure. Re-engineered business processes mix results and capital solutions together and business process management tries to manage the monolithic process. KPIs mix indicators of performance, which indicate a level maintained over time, with measures capital that show the status of investments in the business, and metrics for results, which are finite outputs produced within a time period that can be counted. This is why we hear of sales performance, revenue performance, and profit performance instead of results.

When we re-engineered business processes, we mixed up results and performance, so that we expected organizations units to manage performance and performance quality, and we set up a process team to manage a result as the output from the process. This put our results and performance backwards. We managed performance in the organization and a result across a process.

The Performance Management Solution

The business can be defined more precisely as “investments in capital as solutions of worth utilized for cost and effectiveness of performance to produce value and quality in results”. Capital investments in solutions must be defined as a set. Economic output results must be defined as another set. Performance in the utilization of a defined solution to produce a defined result must be defined as a third set. This separates capital management and result management from performance management, and enables the enterprise to organize and manage the business. Results are managed to produce outputs that can be counted to reach goals. Capital is managed to acquire, develop, and implement solutions needed to provide potential. Performance is managed across the results produced as a level over time to know solution utilization to maintain expectations.

Manage capital through capital management, results through result management, and performance through performance management

In a managed business, business processes are refined to be result value-quality chains by separately managing results, capital solutions, and performance. Instead of business process management, the business is organized and managed as a matrix or a spreadsheet. Results are managed in the columns to create value and exceed goals. Capital is managed as specific solutions in the rows to manage investments and returns. Performance is managed in the cells, called performance domains, where solutions are utilized to produce a number of results, in order to record all costs and maintain expectations. Result metrics measure and manage the results produced by the organization units, capital measures manage the investments in the business, and performance indicators measure and manage the utilization of capital solutions across the business.

21^st century business management enables gains not possible with 20^th century performance management

Separate management of results, capital solutions, and performance enables the 21^st century business management to do many things that are not possible with 20^th century business process and performance management.

• Organize results as a complete set and manage value as an attribute of results
• Measure and manage quality as an attribute of results
• Organize capital as a complete set of solutions of assessable worth that provide total capital and business worth
• Organize the natural business by deploying specific capital solutions to produce specific results in cells or performance domains
• Refine business processes as result value-quality chains to manage all capital solutions utilized to produce each result and to manage all results to a final result
• Capture business activity in performance records to know the cost of capital consumption and capital solution utilization to produce a specific result
• Capture performance costs against the capital solution to know changes in worth
• Capture performance costs against the result value to know result-value added
• Measure and manage capital solutions, performance, and results to manage capital investments amortized as performance costs against result value, capital capacity utilized in performance to produce result volumes, capital qualifications and performance effectiveness producing result quality, and capital reliability and performance uncertainty impacting result risk
• Enable capital solution worth assessment to identify improvement or replacement needs
• Enable result value evaluation to identify results that should be closed or improved
• Understand the relationship between providing capital potential, meeting performance expectations and reaching result goals
• Relate result symptoms and performance problems to understand the capital solution cause and the value-added benefits to justify the cost of improvement, acquisition,  or development of the capital solution
• Optimize the total attributes of results against the totality of performance to produce high value-quality results through cost-effective performance
• Provide two dimensions of management for results that utilize a set of solutions to create value and reach goals and for performance to provide qualified solutions utilized by a set of results to manage costs and meet expectations
• Provide the third management dimension to manage value-quality over time to create strategic value in the transition to the strategic business

One of the fundamental advantages of business management is the explicit separation of results, capital solutions, and performance, to organize the natural business as one business structure to integrate planning, direction, control, and reporting.

Business management manages capital measures in capital management, performance indicators in performance management, and result metrics in result management. Capital capacity is utilized in performance to produce result volumes. Capital investments are amortized as performance costs and charged against result value. Capital qualifications must be utilized in effective performance to produce result quality. Capital reliability reduces performance uncertainty to reduce result risk. Result value less performance costs gives result value-added, which provides a contribution to each solution utilized to provide the return on investment gain to date and to estimate the worth of the solution in result value-added over the remaining life. Defective capital solutions cause performance problems that appear as result symptoms. Result symptoms are removed by solving performance problems through new or improved capital solutions. Capital solutions provide the potential to meet performance expectations to reach result goals. This provides the means and relationships to manage capital solutions, performance, and results to manage the business. 21^st century business management manages the business directly to eliminate 20^th century performance management problems.

The Business Complexity Problem

Business Complexity is one of the top ten business problems of the 20th century enterprise

Business complexity is the opposite of business simplicity. Business complexity arises when the business is forced to adjust to overlaid management methods. Instead of simplifying the business and organizing and managing the business in its simplest form, the 20th century enterprise overlays a rigid organization structure on the business and then overlays more methods for strategy, planning, operating, reporting, accounting, etc.

Business complexity also arises from excess results, diverse capital mixed together, and unmanaged capital.

The Business Complexity Solution

Business complexity arises from two sources.

• Excess results that do not meet an objective or that have a performance cost greater than their value.
• Unmanaged and ineffectively utilized capital

Business complexity is reduced by simplifying the business. In order to simplify the business, the enterprise needs to understand and manage the business. In order to understand and manage the business, the enterprise must employ Result-performance Management to manage specifically the only two entities that describe business reality.

• Result: The economic outputs actually produced directly from the business
• Performance Solutions: The capital defined as specific solutions to be utilized to produce specific results

Result Performance Management eliminates business complexity as a problem by structuring only the high value results needed to generate revenues, to reach other objectives, to manage enterprise capital effectively, and to manage change, improvement, and development.

All other results are deactivated.

Performance solutions are defined and the minimum performance needed to produce a value-quality result is deployed to produce results. Unneeded or unusable performance solutions are outplaced or liquidated.

Thereafter, business simplicity is maintained by continually managing results to optimize the highest value results and by continually managing performance to improve and upgrade solutions, to redeploy solutions from deactivated or reduced volume results, and to outplace or liquidate solutions that cannot be redeployed.

Result Performance Management enables the 20^th enterprise to define, organize, and manage business reality to become a 21st century enterprise to leave business complexity and other 20th century business problems behind.

The Change Management Problem

Change Management is one of the top 10 business problems in the 20th century enterprise!

The conventional enterprise finds business change a mystery. They do not have a firm foundation for change since:

• Change is suppressed until the need for change is acute. Then change involves a major upheaval
• There is no systematic method to identify the benefits of change and properly plan charge
• Change is through ad-hoc projects with reassigned staff
• There is no defined responsibility to manage charge
• The entities that actually change are not managed, so the change to the individual entity is not managed
• Change is executed through contrived methods to change contrived entities like systems, processes, jobs, and functions
• Each contrived method is another overlay that increases the impact of change, since each method must be changed separately for any change
• There is no framework for people to understand their role and impact in charge, so change is often resisted

Since the enterprise finds business charge a mystery, most do not maintain a capability to manage change or development projects and turn by change over to vendors or consultants. This does not solve the problem, but it may increase the chance of success.

Since the conventional enterprise does not manage the utilization of capital, it is difficult to manage the change to the capital, particularly human capital. This produces adverse impact from change. Consultants are called in again to provide “Change Management Services”. These services address the impact of change, but do not install the enterprise capability to manage change. So the same problems arise at the next change.

Successful business change occurs because of the extra-ordinary efforts of those involved in change, to win the up-hill battle that all enterprises face with conventional methods.

The Change Management Solution

Only two entities actually change in business change: 1) results the enterprise produces and 2) performance solutions that define the capital employed to produce results. These two entities are not directly managed by the conventional enterprise. By managing results and performance, Result Performance Management takes the mystery out of business change. Every change is a change to a specific result or to a specific performance solution. Result Performance Management enables the enterprise to manage successful change by providing:

• A framework to plan and manage change through the result-performance strategy, result-performance structures, and investment analysis and planning methods
• Investment management result responsibility to manage all change over time
• Change within the requirements of the result-performance strategy
• Change as a natural evolution as each result or performance solution is changed
• Change to one integrated method, so that any charge automatically changes the organization, plans, reporting, etc.
• Professional change management as the routine for every solution changed
• Change to results to utilize new solutions to increase result value, as guided by the result-performance development method
• On-going roles and organization for result-performance development to eliminate ad-hoc assignments and properly involve users and developers
• A new management consulting model to employ consultants in partnership to assist result value-added success

Result Performance Management is fully supported method for business change that is designed to make every change project a success. Change management is built into the enterprise routine and eliminated as a problem or as a need for extra services.

In an article on February 16 we discussed Striving for quality performance. We said that many enterprises emphasize quality in their business processes. This has been particularly true since we reengineered our business processes specifically to help us manage performance quality.

Does “performance quality” make sense to you? When you buy something, are you concerned about “performance quality”? Even for a service, what is more important — the performance quality in delivering the service or the quality of the result of the service? The result of the service is your input result that you add value to.

In the article, we said we need a way to understand quality consistently across the whole enterprise, to understand the impact of bad quality, and to isolate problems producing bad quality.

As we see with our business processes, quality happens along the process. But how do we manage performance quality? Many set up performance checkpoints, but what are they really managing at these checkpoints? The fact is the only place we can formally manage quality of reengineered business processes is the quality of the output result from the process.

This is because quality is an attribute of results. Quality is not an attribute of performance. Effectiveness is an attribute of performance. Instead of managing performance quality, we need to define the results that are produced in the business process.

Our order fulfillment process includes many results like order received, credit checked, inventory checked, order approved, inventory picked, invoice prepared, delivery organized, order delivered, customer receipt confirmed, etc. The only way to manage quality within the process is to manage the quality of these results. Any one low-quality result could lead to an unfulfilled order output result. If we only manage the output result quality and performance quality in the process, are we really doing what we should be doing?

The only way to understand quality consistently across the whole enterprise is to manage the quality of results across the enterprise. The only way to understand the impact of bad quality is to manage quality along the chain of results. The only way isolate problems producing bad quality is to manage the effectiveness of the performance producing the result.

So, stop striving for performance quality, strive for quality results.