Archive for July, 2008

In most enterprises, human resources are administered as employees and are assigned to positions in organization units. There is no way to measure the value they produce, evaluate performance costs against the value created, assess their worth as human capital, or to develop them to increase their worth and provide measured increased value to the enterprise. Administered employees do not have a defined stake in the enterprise.

Conventional human resource management methods prevent good human capital management

There is a lot of talk about human capital, intellectual capital, knowledge management and other means to improve the capabilities, productivity, and output of human capital. But, each item is treated separately. We try to manage human performance, but have no framework to understand real human performance related to measured value to the business. We try to develop human capabilities, but have no framework to relate human capabilities to specific business needs. We have no way to integrate human capital performance with the value created and the worth of human capital.

We try to manage and improve human performance without managing the results humans produce

The key to making human capital a high-worth asset is to manage the results our enterprise produces related to human and other capital utilized.

We need to document the human capabilities required by our business processes to produce specific results. [more...]

Why do we have business change and change management problems

Every business must change to improve and grow. Business change is change to the business for management improvement, new solution or system implementation, a new organization structure, etc. Change management is the management of changes to the business. Why do we have business change and change management problems that have never been solved? If the business is organized, the business changes with each change to the business; business changes are not accumulated for business change and change management projects. The fundamental problem is that business itself has never been organized or managed. If we do not manage the business, how can we manage change to the business?

Enterprises today do not know what constitutes the business

We do not even have a good definition of the enterprise business to know if the business is organized or managed. The most generally-accepted definition of the business enterprise in dictionaries seems to be “the activity of providing goods and services”. According to this definition, we must organize and manage “the activity of providing goods and services”. [more...].

According to the Business Change Forum “Investment analysis and capital development” is one of the top 10 problems of 20^th century management . This includes the problems with project management structures and systems.

Project management structures concentrate on managing activities and performance

Project management has always attempted to manage people, tasks, and activities. This is the cost side of the project. However, even with the attention to the cost side, there is no good method to manage costs. The benefit side is not managed.

The problems arise in investment analysis and capital development from three main sources:

1. Failure to plan and manage the economic outputs or results to be produced by utilizing the developed capital to set up value creation
2. Failure to define the capital being developed as specific solutions to be utilized in performance to produce economic outputs or results, to capture the cost of development, to set up specific capabilities to support and manage utilization of capital in operation, and to capture the cost of capital consumption in operations
3. Failure to organize and manage capital development projects as a business to utilize assigned capital in performance to produce project results as a sub-business of an enterprise result in progress like “implemented capital solution” or “development project in progress”

The failure to define results and performance solutions affects both the external management of the capital being developed by the project and the internal project management of performance solutions utilized to produce project results.

Project management problems arise because we do not organize and manage the business

These problems arise because we do not organize and manage the business. The precise definition of the enterprise business is “investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results”. If we are going to plan, organize, or develop a business, including a project, we must plan, organize, and develop the three components of the business:

• Results: Specific economic outputs of value and quality produced at any level from business performance
• Capital: Specific invested capital available as solutions to be utilized in business performance
• Performance: Utilization of a specific solutions of worth to incur costs to produce specific results

20^th century capital development and project management structures manage the project to develop capital as tangible assets or a completed project, but do not manage the new results to be produced and the specific capital solutions needed to produce the results.< [more...]

Most managers think that they manage their business

Do you manage your business? What is the definition of the business that you manage? Ask a manager if he manages his business, the normal response is yes. Ask for the definition of the business they manage, and they do not have a precise definition. Most will describe the enterprise rather than the actual business.

No company, corporation, institution, or other enterprise manager manages the actual business today. The managers employ 20^th century management to administer the enterprise. It is impossible to manage the business today, because the business has never been defined properly or organized.

The business to manage has never been defined and actual business management has never been taught

What is the enterprise business? There are many conflicting and imprecise definitions for the word “business”. Proper definition of the business is hampered by the definition of performance to include both the utilization of capital in actions executed and the results accomplished. Business schools and management books teach 20^th century management to administer structures laid over the business, and do not define the actual business or teach us how to manage the actual business.

Outside of R-pM, there is no source of information on the real-life fundamentals of actual business organization and management. Since there has never been a precise definition of the business or teachings or books on actual business management, managers do not know what to organize in order to manage the business.

R-pM provides a precise definition of the business

So today, results, capital solutions, and performance in the utilization of capital to produce results continue to be confused by the definition of performance. We must separate results and capital utilized from performance using Result-performance Management (R-pM) in order to define and manage the business. [more...].

Many arbitrary business methods have been contrived over the years

Throughout the 20^th century, various business methods for operating and developing the company have been contrived and refined, becoming the conventional business methods that we use today. We improve management and effect business change by laying new contrived business methods and structures over the methods in place. Even with all the improvements, we continue to have fundamental problems with re-organizations, intangible assets, accounting limitations, cost control, information management, alignment, etc. Even with all the business organization and management methods, we still have not found the one right method to organize and manage the company business.Until now. Result-performance Management, newly launched in 2008, provides the one right method to organize and manage the business in the 21^st century company, and leave problems with 20^th century business methods behind.

Conventional business methods are the generally-accepted wrong ways

Over the past decade, we implemented breakthroughs like business process re-engineering, business transformation methods, business performance management, and enterprise resource planning. But, these turned out to be just new names for conventional business methods to do the same old things.

Why are there so many different business methods to do the same thing? Why isn’t there just one right business method? It is simply because all of these different business methods are wrong methods, and we do not know the one right business method. [more...].

20^th century management does not enable governance of the corporate business

20^th century management used by corporations today prevents actual governance of the corporation business. Organization and management structures are laid over the business preventing actual business management. Corporation management receives mountains of reports against structures laid over the business. The reports are inconsistent since each structure defines the corporation differently. The reports are incomplete since actual business data is not captured and reported. There is no consistent framework for business management and governance. The corporation strategy map or corporate plan is different from business processes, projects, and functions, used to direct the corporation, which are different from the chart of accounts, activities for costing, or quality structures used for corporation control. These structures may have their own reporting that is different from corporation management reporting through various performance management control panels, scorecards, etc. The structures laid over the business prevent good corporate governance of the actual corporate business.

Corporate governance is through compliance with rules and regulations

Since the corporation is unable to manage and govern the actual business, corporate governance is not positive in ensuring that the business is properly governed. [more...].

Many methods have been put forth for cost accounting and control and value management. The main cost accounting methods charge costs to center and activity. Financial accounting charges some costs as expenditures to objects. Value management methods used today do not manage actual business value creation, but provide arbitrary methods to calculate numbers called value.

Cost accounting and value management are prevented by the organization of today’s enterprise

Conventional cost management is restricted by problems with “intangible assets”, “unknown costs”, and confusion over where to charge costs. We also want to manage value, but we have no viable method for value management. We need a method to get rid of intangible assets and unknown costs and to charge our costs to the meaningful things. We also need a method to manage value as part of our business.

Result-performance Management provides the answer by organizing the business for 21^st Century Management

Result-performance Management (R-pM) is a breakthrough for actual business cost and value management. Result-performance Management (R-pM) is available today to organize and manage the business by all tangible and intangible capital utilized as solutions in performance to incur performance costs to produce economic output value in results over planned time periods. [more...]

20^th century management lays reporting structures over the business

Since the business is not organized or managed the actual business cannot be reported. Management reporting is against the myriad of organization, management, administrative, and other structures laid over the business. Each structure employs its own terminology and information systems to produce reports on the structure. This produces a myriad of unrelated management reports for plans, business processing, resource planning and utilization, manufacturing, supply chains, customer relationships, accounting, quality control, financial management, human resource management, information technology management and on and on. The reporting possibilities create information complexity with no specific framework to relate all the reporting. Despite all the reports and complexity, there is no direct reporting on the actual business.

We try to bring together information from the diverse structures by adding special 20^th century reporting structures, such as:

• Performance management: Control panels, dashboards, scorecards and various other structures to capture and report information
• Strategic enterprise management: Structures to consolidate defined information from specific information systems
• Data reconciliation: Structures to gather and redefine inconsistent data from diverse systems
• Decision support and drill down: Structures to allow management to search and find information in diverse systems
• Categorization: Structures laid over information to reconcile and restructure information and to manage records, documents, reports, content, and other information sub-sets

These various reporting structures and supporting information systems constitute a large overhead and contribute to rather than solving information and business complexity problems. Management information produced is inconsistent, inaccurate, and incomplete in terms of what is actually happening in the business.

Business management reporting must be against the current and planned business

In order to report the business the actual business must be organized, planned, directed, and controlled as explained in previous articles. Actual business reporting is provided by Result-performance Management (R-pM) by reporting the three components of the business:

• Results: The economic outputs of value and quality produced across the business
• Capital: The investments in capital as specific solutions that must be acquired and developed to provide the capability to produce future results and that must be utilized in business performance to produce actual results
• Performance: The deployment and utilization of a specific capital solution to incur costs and provide effectiveness in producing a specific result in a performance domain

The business can be reported only by organizing the actual business as current results produced, invested capital available to the business, and performance in the utilization of the capital to produce results. [more...].

Managers may prevent beneficial business change that is against their vested interest

We all know stories about managers who resist change to protect their own power and authority. How do we prevent damage from vested interests in the enterprise? Is it just up to the Board and CEO to know what is going on? How does the Board or CEO find out? Whom does the CEO listen to? Is there a way to support those with change ideas that are widely considered as good and to counteract those widely considered as bad? Whose head is on the line if profits suffer because beneficial change is delayed? Is it the lower-level manager responsible or the CEO?

Good corporate management and governance requires more than one reporting line

20^th century management methods provide only one reporting line. Responsibility for performance includes responsibility for capital invested, responsibility for utilization of capital as solutions, and responsibility for output results produced. [more...].