Archive for February, 2009

Investors are the big losers in the economic crisis

Corporate investors have lost trillions of US Dollars in the current economic crisis. The recession appears to be long and deep delaying any gains in a recovery. Investors need to understand the fundamental problem causing the widespread problems in financial institutions and corporations around the world. Corporate investors are up against conventional corporate management thinking, which propagates dead-end 20^th century management and prevents 21^st century business management. Every business in a corporation must be managed consistently to consolidate into one corporate business. Corporate shareholders must pressure corporate management to manage the actual corporate businesses to eliminate the problems that caused past and present crisis, and surely will cause future crisis.

Investors lose because they invest in corporations that do not organize, plan, direct, or control the business

The business is “investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results”. Corporations do not manage the business today. They organize the corporation with an organization structure, plan with strategy and corporate plan structures, direct with function and process structures, control with account and quality structures, report with compliance and financial reporting structures. The structures laid over the business are not related to the business, often are not related to each other, consume enormous IT resources and costs, and do not collect or report actual data concerning the business.< [more...].

The current economic crisis arises because managers do not manage the business

Business managers today do not manage their businesses. Business managers employ dead-end 20^th century management to manage structures laid over the business. Business managers must manage 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”. All business decisions and information needs boil down to business results needed for success, capital investments to provide qualified solutions, and the utilization of solutions to produce results,

The failure to manage the business is the one underlying cause of symptoms of economic recession in the unknown “asset values”, unmanaged speculation that built bubbles, unknown product value and costs, corporate business consolidation problems, accounting failures, lack of business transparency, unknown human value-added to the business, and on and on. The problem can never be solved until managers around the world organize their businesses for 21^st Century Management. The managed business provides significant competitive advantage over enterprises burdened by unsolvable 20^th century management problems.

Business managers must recognize their unsolvable problems and the need for actual business management

All business schools, management books, packaged solutions, and on-the-job learning propagate dead-end 20^th century management. But, 20^th century management is not natural management. Managers must invest time to contrive, learn, and work with structures laid over the business, such as the organization chart, corporate plan, processes and systems, chart of accounts, costing activities, positions and salary scales, quality structures, scorecards, and on and on. Corporate executives and other managers thus have lifetimes invested in learning and working with 20^th century management. It is difficult to contemplate that 20^th century management should be replaced.

Managers must open their minds to recognize that 20^th century management has never organized and managed the business. They must recognize that their actual business is hidden under structures that prevent actual business data capture or use of actual business management information. They must recognize the unsolvable problems they have faced throughout their careers that cost their enterprises and cause enormous waste. They must recognize that continuing 20^th century management will never solve the problems that caused the financial and economic crisis or current business downturns. They must think of the benefits of clearing away overlaid structures and concentrating on their actual business.

Managers must think in terms of actual business management

Managers must recognize the inevitability of organizing the actual business for 21^st Century Management. 21^st Century Management is now gaining momentum and all managers will be faced with the need to learn, organize, and manage their business. [more...]s.

Human capital is administered as human resources and their worth in the value added to the business is unknown

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.

The economic crisis shows that banks and other corporations do not plan, manage, and account for human worth in the value-added to the corporate business, giving rise to perceived unmanaged executive compensation and staff rewards. The only way to eliminate the problems that caused the economic crisis is to manage the business and to manage human capital as part of the business.

20^th century 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 must manage the business to manage the worth of capital in development costs and the future value added to results produced

Before we can manage human capital properly, we must organize the business for 21^st century management. The business is “investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results”. We must identify and organizes the results needed for business success, the human and other capital solutions needed to produce results, and performance in the utilization of each solution to produce each result. We must manage the development and utilization of specific human capital solutions to produce measured result value, to increase capital worth, and justify increased performance costs.

We must improve human performance by 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. [more...].

The Economic Recession provides opportunity for corporations and governments

All nations and economies are suffering from the economic recession. But, every economic downturn or financial crisis is an opportunity for those with the proper viewpoint. Will corporations use people and resources made available to organize and manage their real business? Will governments take advantage of the downturn through a program to eliminate the fundamental business management problems that cause the crisis; to restore and build confidence, stimulate the economy, and prepare local businesses to flourish in the upcoming recovery? Or will governments throw money at the obvious symptoms and fail to understand the fundamental problems, as always in the past?

We cannot continue to use dead-end 20^th century management

This financial, corporate governance, and economic crisis and all past crises are caused by one fundamental problem; failure to manage the corporate business. Since the beginning, all business, financial, corporate governance, and economic crises and problems have arisen because businesses are not managed, finances are not managed as capital solutions utilized by businesses; and corporations, industries, and economies are not managed as one interrelated whole, comprised of the businesses involved. The problems are fundamental to 20^th century management still used today to manage enterprises, finances and financial institutions, and economies.

Dead-end 20^th century management lays organization and management structures over the business that conflict with the actual business and cause many well-known, but unsolvable, management problems. The problems can never be solved by added or improved 20^th century management structures. [more...].

Business owners and corporate shareholders are the big losers from the economic crisis

Corporate management may have lost out on some big bonuses and property owners may have to wait for the worth of their properties to recover. But, the business owners and shareholders have lost trillions of US Dollars on their investments due to the continuing failures of obsolete 20^th century management. They have invested in corporations and institutions that are unable to manage their business in the costs and planned worth of investments, the cost and effectiveness of specific capital solutions utilized in performance, the value and quality of results produced from performance, and the historic return and future solution worth from the value added to results. These failures cause the continuing cycle of corporate management problems.

The corporate management problem must be simplified to manage the actual corporate businesses

The only solution is to simplify business management down to the three components of the business and three additional data entities that must be managed to manage the business effectively. The corporation must organize and manage the actual business to clear away the myriad of enterprise management structures laid over every business. Actual business data, unknown today, must be collected and one consistent set of complete and accurate actual business management information, not available today, must be utilized to manage the business. Each corporate headquarters, division, business unit, subsidiary company, or other venture is a business. Each business is consistently-defined according to 21^st century business management conventions and standards to add up to one consistent corporate business. Any potential problem appearing at the corporate level can be traced to a particular capital solution utilized to produce a result at a business level.< [more...]s

The World Economic Forum shows the lack of understanding of real business management problems and solutions

The World Economic Forum, held last week in Davos, Switzerland, showed the continuation of conventional thinking that blinds the world to the real problems of 20^th century management used today to manage financial institutions, corporations, and governments. The participants are products of 20^th century management and cannot see beyond tried and failed management methods. Many experts are from business schools that continue to propagate misguided and obsolete 20^th century management. The discussions of root causes and problems were simply a litany of the deficiencies of 20^th century management structures laid over the business, and the failure to manage the actual business. Emails on R-pM and 21^st Century Management, sent to Forum organizers and participants, obviously went straight to the recycle bin, since R-pM conflicts with generally-accepted and ingrained 20^th century management principles.

Discussions focused on symptoms and needs for solution, with no actual solution

There were many discussions on the symptoms of the economic crisis and the need to address symptoms. But there was no attempt to identify the real problems underlying the crisis or to identify solutions to solve the problems and prevent future crisis. Management from corporations that suffered large losses rationalized their failures as failures in the management structure and systems used today. Largely, this is true. The structure and system used today to manage all enterprises is 20^th century management. [more...].