Archive for November, 2007

20^th century management cannot manage the components of profits

20^th century management does not manage contribution to profits from the line business and profits from complete enterprise operation. 20^th century management accounts for profits by adding up cash income and cash expenses, independent from enterprise operations and management.

21^st century management manages the components of profits to manage profits

The business consists of economic output results of value that must be managed to manage revenues and income. The business also consists of capital utilized or consumed in the business in the form of performance solutions that must be managed to manage performance costs and expenditures. Result-performance Management (R-pM) organizes the business in the output results produced to create value and the performance solutions utilized to incur costs to determine result value-added, the most important management metric for 21^st Century Management.

Contribution and profits are not just lines that happen to appear on an income statement. Contributions and profits are results produced by the business that should be planned and managed on a daily basis with result goals. Contribution and profits are derived from result value added over performance costs for all the economic output results from the business. Therefore, the value of every economic output result and the performance costs producing the result must be managed to manage the result value-added that goes to contribution and profits.

20^th century management does not manage result value or performance costs

20^th century management does not define or manage results as one set of economic outputs produced by the business. [more...].

20^th century management reports against structures laid over the business

The generally-accepted definition of enterprise business is “the activity of providing goods and services”. In order to organize and manage the business, we must organize and manage both the activity or performance involved in providing and also the goods and services provided to our customers.

20^th century management does not provide a structure to do this. Instead of organizing the business, an organization structure is laid over the business to define organization units, functions, and positions. Since the business is not organized, management structures must be laid over the business. A business strategy defines visions, objectives, owners, requirements, and other entities. The chart of accounts defines centers, objects, and codes. The business process defines process objectives, stations, performance activities, performance quality, and other entities. Information systems have their own built in file structures and entities. Cost accounting gathers known costs against activities, centers, selected final products, or other entity. Performance management systems require reporting on other sets of entities concerning the process, training, customer actions, etc. The many structures laid over the business produce business complexity and hide the actual business.

Overlaid structures capture vast amounts of data and report mountains of information, but not on the actual business

None of these structures captures actual business data or reports actual business information. [more...].

20^th century management manages performance and not results

20^th century management used today does not define and manage output results that must be produced for business success. Instead, we define and manage “performance” in various functions, activities, tasks, processes, systems, work flows, etc. Performance per se has no value or meaning. The value and meaning of performance is in the output results produced that are not defined or managed in 20^th century management.

Wasteful performance structures are laid over the business

Since results are not defined, 20^th century management can not organize or manage the business. Instead of defining and organizing the business in the capital to be utilized to produce results, various organization and management structures are laid over the business. An arbitrary organization structure defines functions, jobs, etc. Management structures include strategies, processes, systems, cost accounting, performance management, and administration methods. Structures laid over the business conflict with the actual business and prevent actual business management. None of the structures captures actual business data on the output results produced by the business or the capital utilized by the business to produce results.

21^st Century Management focuses on utilizing capital to produce essential results

Result-performance Management (R-pM) organizes the capital actually needed and utilized to produce essential results for 21^st Century Management. Essential results are identified [more...]d