Archive for September, 2008

Past and current financial crises have been caused by failure to manage the actual business

A recent article in 21^st Century Management Magazine explains the real need for investment to prevent future mismanagement that that produces these crises.

All financial crises, corporate governance problems, and other problems due to inadequate corporate or financial institution management have roots in one fundamental problem, the failure to organize and manage the actual business. 20^th century management lays many structures for organization, strategies, account charts, processes, scorecards, etc over the business to manage the enterprise. The actual business in the cash expenditures for specific capital investments, performance costs from capital utilization, value created in results, and value added providing profits, capital returns, and capital worth is hidden under overlaid structures and never reported to management.

Enormous sums of money are used to cover up actual problems and restore confidence

No attention is being paid to eliminating the pervasive financial institution and corporate management problems that led to the crisis. The funds are used to pay a higher worth for the currently low-worth and unsellable assets of those who mismanaged corporate and personal funds, and transfer the potential further losses and gains to taxpayers. In effect, we keep covering up the unsolvable problems of 20^th century management that have never been solved and can never be solved by more 20^th century management.

Governments should help enterprises manage their actual businesses to eliminate 20^th century management problems

The big change is the change in thinking required to put aside the lifetimes of misleading teachings and experience and visualize and understand the business as “investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results”. Managing the business is common sense used by all to manage their personal businesses. The investment in managing the actual business is very small and recovered quickly the added value-added of a managed business.

The cost of a government investment program to assist local enterprises to organize their businesses for 21^st Century Management is insignificant compared with the cost of bailing out companies and covering up the failures of 20^th century management. The program will provide transparent reporting of the business for management, shareholders, and regulatory authorities. The program will provide real economic boost in the new value created by organized and managed businesses.

Learn more in the full article in 21^st Century Management Magazine. .

The ongoing credit crunch and growing financial crisis show the failures of 20^th century management used today

A recent article in 21^st Century Management Magazine explains the enterprise organization and management problems that caused the current financial crisis and the only solution to solve the problems and avoid future repeats of the same problems.

20^th century management lays organization and management structures over the business to manage the enterprise arbitrarily, rather than managing the business. 20^th century management does not manage important result metrics like result value, result volume, result quality, result value-added, and result risk; important performance indicators like performance costs, capital utilization, performance effectiveness, and performance uncertainty; or important capital measures like investment costs, capacity, qualifications, reliability, investment return, and solution worth.

The problems being experienced today invariably point to the lack of information and management of return on capital investments, planned and current capital solution worth, capital amortization in performance costs as solution worth declines, new product result value, planned future value-added from product results, and other information needs that are blocked by 20^th century management methods.

The only solution to the current problems and to prevent any enterprise from experiencing the same problems is Result-performance Management (R-pM)

Now is the time to wake up to the problems of obsolete 20^th century management. 20^th century management used today is a time bomb for all business enterprises in the world. The enterprise either will experience similar problems and losses due to the inadequacy of 20^th century management methods or will lose out to competitors who are now abandoning 20^th century management and organizing their business with R-pM for 21^st Century Management. R-pM is the only way to clear away structures laid over your business, and organize your actual business as one business structure for complete, consistent, and accurate 21^st Century Management.

Learn more in the full article in 21^st Century Management Magazine. .

Result-performance Management (R-pM) replaces business process management with value chain management to enable business collaboration

Result-performance Management (R-pM) replaces business process management with result-performance management and re-engineered business processes with result value-quality chains. This enables the enterprise to manage result value-added and to collaborate with business and outsourcing partners, who use R-pM, to re-link value-quality chains for shared value. Review the article “Business Process Management that Prevents Value-quality Chains” to learn more about result value-quality chains.

R-pM manages the result value and performance costs for each result in the chain, to manage result value-added across the chain

R-pM can do this because R-pM defines and manages the result, which provides the specific economic output of value that forms each link in the chain. R-pM also manages each capital solution utilized to produce the result to determine the total performance cost and value-added at each link in the chain. Capital solutions are classified and categorized to have comparable and benchmarked costs for alternative solutions used to produce a result. This enables comparison of alternative linking of value-quality chains with business collaboration and outsourcing partners to produce the highest shared value-added. [more...].

Many capital development, business change, and management improvement projects involve management consultants. Each management consulting firm has their own approaches and methodologies that are not familiar to the enterprise client. Misunderstandings often arise over the scope of the project and the responsibilities of the consultant and the enterprise.

Result-performance Management (R-pM) organizes and manages the enterprise business and also organizes and manages all capital development projects as a business. R-pM provides a new 21^st Century Management Consulting Model to enable consultants to participate in an enterprise-led partnership to provide capital solutions to a project to develop specific enterprise capital solution investments that are implemented and utilized in cost-effective performance to produce planned and measured value-quality in enterprise business results

Management Consulting today faces many unsolvable problems that prevent scoped and measured business change

20^th century management improvement consulting projects have many fundamental and unsolvable problems, such as:

• The enterprise business is not organized, so there is no framework to scope and plan change projects and services
• The business results to improve are not known or managed for added-value
• The capital solutions to acquire, develop, and utilize are not known and managed
• Performance in the utilization of capital solutions to produce results is not defined or managed
• The specific changes needed for success can not be identified and managed
• Consultant services do not change the business, but change structures laid over the business
• The enterprise must learn new organization, plan, process, system, or performance structures with added terminology and definitions
• Changed structures are implemented to adds costs, but not to create value
• The value-added by consulting services is not measured to know success
• The enterprise lacks the capability to manage the investment in development and change
  
• The enterprise does not lead and participate properly to best take over changes
  
• Human and other capital is not managed for utilization allowing change problems
  

These are some common problems with organization and management structures and management consulting approaches utilized today for capital development, business change, and management improvements. Today, the enterprise client and consultant must work in good faith in an unmanaged business environment to produce ad-hoc changes that may or may not improve business results.

Enterprise clients and management consultants need a framework to work together in partnership

Business organization and management consulting services tend to be led by the consultant and the client enterprise must await a deliverable and then decide whether the deliverable is acceptable. [more...]

The 20^th century method is to manage for results

For years, managers have been “managing for results” as discussed by Peter Drucker and others. “Managing for results” manages performance within separate organization units across the enterprise to produce a final result that goes to the customer and produces revenues or profits. “Managing for results” says results are not produced within the enterprise business as an internal business entity, but that results are an economic indicator of final results that go outside the enterprise. Results are in revenues as viewed from outside the enterprise.

“Managing for results” provides an economic perspective, but has also been used to guide enterprise management. This has prevented companies from defining the chain of results within the business that lead to the final results that leave the enterprise, and organizing the actual business as “investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results”.

We have managed for results, but we have never managed results

While we have managed for results; we have never managed results. We have never managed results along result chains and in separate organization units across the enterprise in order to produce the final result in revenues or profits.

If we are truly going to manage our enterprises and businesses well, we must manage results. But, as we described in a recent article, those who contrive “managing for results” and other 20^th century management methods define the actions executed in utilization of capital as performance and results accomplished by performance as performance. Results are not performance! [more...]!

Some enterprises take pride in their business complexity

When you talk to a company manager about employing a standard solution the response is often “Our business is too complex for a standard solution”. This is said with a measure of pride in being associated with a complex business. Is a complex business something to strive for or to be proud of? What is the alternative to a standard solution? Do non-standard solutions simplify the business? What is better, simplify the business to use standard solutions, or continue to develop non-standard solutions that compound existing complexity?

Result-performance Management organizes only the business essentials to eliminate business complexity

Enterprises today introduce business complexity as soon a they create an organization structure that is laid over the business. They then lay more structures for strategy, accounts, business processes, performance management, etc over the business. Each overlay introduces more entities with conflicting definitions to be managed and increases business and information complexity.

Result-performance Management (R-pM) clears away contrived overlaid structures and organizes the business for 21^st Century Management. All business organization, planning, direction, control, reporting, and governance employs the current and strategic business structures and only the essential business data entities.

Business complexity is accepted as normal in today’s enterprise

Business complexity is built in to 20^th century management methods, so business complexity is accepted as normal. We have no straightforward method to identify and root out business complexity and then to prevent future business complexity. [more...].

New enterprises must not waste that precious “green field” advantage

Every day new enterprises are being organized around the world. As described in the previous post, enterprises go to the drawing board to organize and manage the start up, but they do not know what to draw. So, virtually all of these new enterprises simply adopt generally-accepted 20^th century management methods and doom themselves to the unsolvable problems discussed here at the Business Change Forum. These enterprises waste the precious “green field” advantage of no legacy structures and the opportunity to do it right from the start.

Conventional wisdom says copy a business model and do not “reinvent the wheel”. The model involves products, marketing, customers, etc but does not provide a real model or organization for the actual business. New enterprises adopt a typical 20^th century organization structure that does not organize or model the business.

Management consultants still recommend that new enterprises lay traditional organization and management structures over the business, rather than organizing and managing the business for significant competitive advantage.

Managers and consultants must employ the best structure available to protect future shareholder worth

Any manager or management consultant involved in organizing a new enterprise has a duty to study all options to protect the worth of the shareholders’ investment.

Most managers and consultants do what everybody else does and erroneously assume that the enterprise organization structure they adopt actually organizes their business. [more...].