Archive for March, 2009

The Economic Crisis is caused by failure to manage businesses

Managers of financial institutions and other corporations that suffered large losses in the economic crisis blame the problems on unreliable accounting information and ineffective management structures. Financial institutions say that they are unable to manage “asset value” as one reason for the current economic crisis. The term “asset value” shows that they do not manage the business of the corporation. All businesses are “investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results”. Much capital is not managed and is labeled as “intangible assets”. Other capital is not managed for the return on investment and the worth of the capital is not managed as a specific solution to be utilized and sold or disposed of at the end of its useful life. The term “asset value” shows the failure to manage the business. Assets are specific capital solution investments of positive capital worth. Value is an attribute of output results, such as interest and dividends earned, that provide the return on the solution investment. Result value-added is the value less the full performance costs of the solutions producing the result. [more...].

Many of us have participated in business change projects. Likely, we share many experiences with the difficulties in gaining successful business change. We have read about many cases of problems and disasters.

Something must be wrong. Why after all this experience and the many stories of unsuccessful business change, do we continue to have problems? Have management consultants with their business change and system implementation methodologies provided the answer? Are the conventional methods we use adequate for business change management?

The real problems are fundamental in the way we organize the business. Conventional methods introduce unsolvable problems, so that no business change method or consultant methodology can work properly.

“Business change” is not change to the business, but change to structures laid over the business

The problems start with the fatal error of 20^th century management; the organization structure. [more...]

Corporations, financial institutions, and other enterprises do not manages their businesses

The Business Change Forum discusses the problems of 20^th century management used today that lays organization and management structures over the business and does not manage the business. The actual business in “investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results” is not defined, organized, or managed. This failure to manage the business is the fundamental problem that leads to all economic, financial, business, industry, and corporate governance problems.All the problems cited by experts and the media as the cause of the economic crisis are really just the apparent symptoms of the failure to manage the business.

The current economic crisis is caused by the inability of corporations, financial institutions, and other enterprises to manage the business. Anyone following the news of the crisis has seen bank and corporate management cite such problems as the following as the cause of their losses and failures:

• Financial institutions are not able to manage “asset value” in their investment portfolios
• Corporations cannot plan or manage the actual return on investments
• Corporations cannot manage investments to know current and future capital worth
• Management does not have the business information needed to anticipate and prevent problems
• Current accounting practices produce inadequate and inaccurate information
• Corporations do not know full costs incurred or value created across operations
• Corporations are not able to manage effectively all the various units of the corporation
• Corporations are unable to consolidate corporate businesses into one oorporation business
• There is no structure to manage businesses, finances, industries, markets, and economic sectors as an interrelated whole

These are just some acknowledged examples of the unsolvable problems of 20^th century management that afflict all enterprises today. Many commentators and experts call for new business management practices to solve the problem. These problems can never be solved by more 20^th century management structures and practices laid over the business. The problems can only be eliminated by learning, organizing, and managing the business directly. A new set of actual business management practices organize the business for 21^st century business management.

Financial institutions are not able to manage “asset value” in their investment portfolios

Financial institutions cannot manage “asset value” as part of the business. [more...]s

Business transformation has a bad name today because of past problems and failures

20^th century business transformation was a big thing over the past twenty years. But did it transform the actual business and solve fundamental problems with a sound structure for business success; or did it simply rearrange the 20^th century management structures and methods that are the cause of business problems? We see the problems suffered by financial institutions that cannot manage “asset value”, corporations that are unable to manage their businesses, and limited and inaccurate accounting that cause the financial crisis and economic recession.

20^th century transformation did not transform the actual business or provide expected benefits

20^th century business transformation changes the organization structure, strategy structure, business process structure, performance management structures, account structures, information technology architectures, management information structures, and other structures that are laid over the business, rather than organizing and managing the actual business. Conventional 20^th century enterprise organization theories never organized the business. If the business is organized, routine business change updates the business organization continually, instead of having separate business change and transformation projects.

The business changes with every business decision, not every few years when management decides it is time for business change. The only reason that business transformation is needed is because the business is not organized and managed. Conventional business change and transformation is not change to the business, but change to the structures laid over the business. Many 20^th century business transformation methods, like total quality management (TQM), business process reengineering (BPR), and activity-based costing (ABC) laid new contrived structures over the business, and are no longer considered viable today.

Business transformation must organize and manage the business as one structure

Business transformation describes what is needed to learn, organize, and manage the actual business for 21^st century business management. [more...].

All the economic crisis problems revealed are symptoms, and the remedies proposed address symptoms

Many experts are discussing and writing about the problems causing the financial and economic crisis and recession. They discuss problems in managing “asset value”, in managing complex financial securities, in preventing large sudden financial losses, in confusing interrelationships between institutions, in understanding the real financial situation or credit worthiness of a bank or other enterprise, in the need for some sort of regulation, and on and on. None of the problems discussed are the real problem. They are symptoms of one real problem. Remedies discussed are not directed at solving any real problem. Remedies address the symptoms to prevent failures and to keep the business and financial system functioning, in spite of the fundamental unsolved problem.

The symptoms are complex and confusing and do not indicate any solution

The symptoms of the problem are difficult to understand. Since they are symptoms, it is difficult to find real solutions. Symptoms cannot be solved; symptoms can only be alleviated. Money spent to bail-out companies, to provide capital or loans for continued operations, or to provide insurance or guarantees only enable continuance of unsolved problems. [more...].

The Chief Executive Officers and their management methods are being criticized

The economic crisis is generating criticism of the Chief Executive Officers (CEO) and the 20^th century management structures they use. CEOs must heed this criticism and take a new look at current 20^th century management structures and the limitations imposed on their own performance by the structures.

The Chief Executive Officer is responsible for the quality and value of results produced by the corporation businesses from suppliers to the customer, value creation in the enterprise strategy, the full costs incurred from the utilization of tangible and intangible capital, the real return from each capital investment and capital development project, the worth of human and other capital employed, the current worth of financial investments to produce income and growth results, and value-added across the businesses to create shareholder value. The CEO must do this in spite of the fact that 20^th century management used today, does not provide the means to manage any of these CEO responsibilities.

The only solution for the Chief Executive Officer is to manage the actual corporation business

The actual business that must be managed is “investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results”. Each business, within the corporation must be managed and the separate businesses must consolidate into one corporation business. In order to manage the business, output results must be defined and managed as one complete data set. Capital investments in specific solutions that can be utilized to produce results must be defined and managed as another data set. The implementation of capital solutions to produce specific results and subsequent utilization in performance must be defined and managed as a third data set. Fortunately for the CEO the actual corporation business can now be managed. [more...].