Archive for 'How the Business Benefits from R-pM'

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

20^th century enterprise 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...]s

20^th century management lays reporting structures over the business

Since the business is not organized or managed today, 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 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 a capital solution to produce a result. [more...].

The on-going economic crisis demonstrates the need to manage capital as part of the business

We hear a lot about capital these days be it capital asset values, capital scarcity, new capital products and instruments, and so on. You can see that no one is too sure what all this talk of capital means and how capital relates to actual corporate businesses. The confusion arises because the future worth of capital assets or solutions and the historic return on investments in capital solutions has never been managed properly in 20^th century management used today.

The problems that caused the economic crisis are actually symptoms of one problem; the failure to manage the business. Financial institutions crashed because they could not manage asset value in the capital worth as an ongoing part of the business. Corporations are unable to manage the individual businesses within corporation as a part of the managed corporate business. Enterprises are not able to capture actual business data and do not have the information to manage the business.

The only answer is to learn what capital really is, the worth of capital utilized in the business, and how capital must be managed as part of the business. Business management eliminates the problems by organizing capital solution investments as part of the business, by managing capital solutions utilized in performance to incur costs and create added-value in actual business results to provide return, and by managing solution sale or disposal after use by the business.

What is the business and capital as part of the business?

The business is defined as “investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results”. Every business in the world invests in capital needed, in order to utilize capital in performance, in order to produce output results. The capital must have a worth that justifies the investment costs for acquisition or development and implementation as capital solutions and the continuing utilization over the useful life of the solution. Capital solutions are utilized to produce result value, be in business results produced or in income, growth, and disposal result value for solutions purchased as investments. Capital solutions have a disposal worth in the result value produced from sale or liquidation at the end of the useful life or in the sale of solutions purchased as investments.

Capital is the investments in the business to have the capability to produce results

The only reason to invest in capital is to provide the capability to produce results. [more...].

20^th century enterprise management lays structures over the business to control the enterprise

The operations and development of the enterprise today are controlled by structures laid over the business for:

• Financial and statistical accounting through a chart of accounts structure
• Financial control through actual compared to budgeted measures
• Cost accounting through activity, center, and product structures
• Capital development control through project structures and asset registers
• Quality control through TQM, six sigma, and other quality structures

The control provided by each of these structures is limited to certain entities and known measures. Financial control covers capital for tangible assets and finances for cash receipts and expenditures against plans or budgets. Cost control is limited to known costs against arbitrary entities like activity or center. Non-financial control is sporadic depending on individual management. Quality control focuses on performance producing selected end-product results.

Accounts record accrued and actual receipts and expenditures from point money comes in to the point money is spent. There is no control of the business cycle from the point money is spent until value is created to enable money to come in. Accounting control is enforcement of rules and principles rather than providing accurate information for business control.

Capital development lumps costs together as a project or tangible asset. The specific capital solutions developed are not controlled and may be lumped together as one large asset or classified as intangible assets. No method or information is provided to plan and control return on specific capital solution investments. Projects are not organized to capture investment costs for implemented solutions and plan value-added to the business from solution utilization. Capital worth numbers are sporadic for some asset and liability solutions, but real capital worth in the capability to produce future business value is unknown.

Each structure is separate from other structures and uses its own terminology and definitions to describe the enterprise. Each structure introduces high costs and much effort to collect and report information. But, none of these overlaid structures can control the actual business.

The actual business must be controlled for each component of the current and planned business

In order to control the business the actual business must be organized, planned, and directed as explained in previous articles. [more...].

20^th century enterprise management lays structures over the business to direct the enterprise

The day to day operations of the enterprise today are directed through a variety of structures laid over the business. These structures focus on enterprise performance, which mixes the actions of performance together with the results accomplished. The main structures used to direct the enterprise are:

• Processes, which define the flow of performance across the enterprise
• Functions, which define activities performed by the enterprise
• Information systems, which provide the flow of information processing
• Work assignments and tasks, to perform ad-hoc activities
• Projects, to perform one-time enterprise endeavors

These structures are used to direct performance of the enterprise and to produce results as separate entities, such as products, services, sales, and revenue.

None of the overlaid structures directs the actual business

The actual business consists of results produced, capital available in performance solutions, and performance to utilize solutions to produce each result. None of the overlaid structures direct the utilization of capital solutions to produce results. Most enterprise direction is up to the experience and capability of the manager to make decisions and take actions without a business framework.

Structures used to direct the enterprise do not relate to other management structures

The structures used to direct the enterprise do not relate directly to the structures used to organize, plan, control, and report the enterprise. A prior article showed that certain structures are used to plan the enterprise in strategic maps and corporate plans, financial plans and budgets, information technology plans and architectures, investment and capital development plans, and operational plans. The structures used to direct the enterprise are not connected to or do not necessarily refer to the structures that plan the enterprise. Enterprise direction and management is disconnected among a wide variety of structures that can be contrived and laid over any business, such as business process, administrative function, risk management, performance management, and information system structures.< [more...].

20^th century enterprise management used today lays various plans over the business

20^th century enterprise management cannot plan the business directly because the business is not organized. The enterprise is planned through various structures laid over the business. These overlaid planning structures include:

• Strategic plans using such structures as maps and corporate plans
• Financial plan and budget structures
• Information technology plans and enterprise architectures
• Capital development plans and investment analysis structures
• Human resource hiring and development plans
• Other operational plan structures

Each of these planning structures uses its own set of entities to describe the enterprise, uses different information systems, and requires its own support staff. Each plan must be maintained and updated with actual progress against the planned entities, and reported. The plans plan the enterprise in various ways depending on the particular structures implemented.

None of the overlaid plans plan the actual business

Since the business is not organized, the business cannot be planned. The results produced by the business cannot be planned as an interrelated set. Some results may be planned in isolation as separate entities such as product sold and revenue received. The plans are usually created from estimates rather than a period by period build up from the existing business. Since the business is not planned actual business data is not planned for actual measurement; such as performance costs, performance effectiveness, result value, result quality, capital worth, investment returns, etc.< [more...].

20^th century enterprise management used today does not organize the business

20^th century enterprise management lays a contrived enterprise organization structure over the business, instead of organizing the business. This is the fatal error of 20^th century management. If the business is not organized, the business cannot be managed.

The contrived organization structure follows one of many 20^th century organization theories to organize the enterprise. The business, which we have defined as “investments in capital as solutions of worth utilized for cost and effectiveness of performance to produce value and quality in results” is not organized. The rigid organization structure goes out of “alignment” with every new or closed result or change to a capital solution utilized. Eventually there is need for reorganization to contrive a new organization structure that is closer aligned to the actual business, and the cycle is repeated.

The need for reorganization shows that the business is not organized

Some may argue that their business is organized. Ask if they ever reorganize the business, and they will answer yes, of course. Reorganization is needed because the business is not organized. [more...].

20^th century enterprise management plans the future enterprise and does not plan the business

20^th century enterprise management used today develops strategies and plans using maps, corporate plans, budgets, etc that are laid over the business. Corporate plans plan the corporation and are unable plan the strategic value to be created by the business and the capital development needed to create strategic value. The business is not planned and strategies and plans become invalid as the business changes. New plans try to bring the enterprise plans in closer alignment with the current and future business.

The business strategy plans the actual future business needed for success

Business management defines the enterprise business as “the utilization of capital of worth in performance to incur costs to produce value in results”. This definition includes the current business that must be conducted every day to utilize capital the enterprise invests in to produce results needed for business success. The definition also includes the future business that must be the objective or the business strategy to produce strategic results utilizing capital that must be available when needed?

The management strategy plans the business at the strategic horizon

The strategic business is “the utilization of capital of worth in performance to incur costs to produce value in results at the strategic horizon”. The strategic business is described as management strategy capital. The business strategy, strategic business structure, and business plans to execute the strategy are management strategy solutions.< [more...].

Corporate Governance is one of the top 10 problems of 20^th century management!

Corporate Governance problems are “solved” my more imposed governance

The economic crisis and corporate failures of the past year exposed serious problems in cooperate governance. Governing the corporation is a big problem because we cannot manage the corporate business. We lay a myriad of contrived structures over the business to organize and manage the corporation through various entities like units, functions, activities, processes, objects, jobs, etc. Corporate governance itself may be through a contrived corporate governance structure laid over the business to extract and reconcile information from other overlaid structures.

Corporate governance problems are “solved” by adding to the problems with more stringent and costly requirements for outdated 20^th century accounting, auditing, and compliance reporting.

Corporate governance problems must be solved through governance of the actual corporate business

Corporations will be governed effectively only after corporation businesses are organized and managed. The strategic corporate business must be defined as strategic results and the new and improved capital solutions utilized in performance to produce the strategic results. Result goals and performance expectations must be established period by period to the strategic horizon. Corporate governance can then manage actual result value creation against goals and strategic estimates, corporate responsibility for actual business practices, and corporate information capital as part the actual business. The solution to the corporate governance problem is provided by Result-performance Management (R-pM) to organize the corporate business for 21^st Century Management. Review the article “Seeking Good Corporate Governance by strengthening Bad Governance” at Result-performance-Management.com.

The Corporate Governance Problem

We lay structures over the corporate business, and fail to organize the business

We do not organize the business. Instead, we lay many structures over the business for organization, strategy, planning and budgeting, business processes, information systems, performance management, accounts, administration, etc. We gather data on all the entities used and compile a wide variety of management and statutory reporting, but we cannot capture actual business data. Each overlaid structure creates business and information complexity, obscures the view of the business, and compounds the problem of corporate governance. [more...].

20^th century enterprise management has no consistent conventions, definitions, and standards

20^th century enterprise management, used by all enterprises today, lays a wide variety of organization and management structures over the business, and, therefore, cannot manage the business. A different set of conventions, definitions, and standards is used for each of the structures laid over the business. The many 20^th century enterprise management books contain different conventions, definitions, and standards. The many different business processes, information systems, IT architectures, costing and accounting, performance reporting, and administration structures each have their own set. The enterprise employs a wide variety of conventions, definitions, and standards to manage the enterprise, rather than one limited and consistent set to manage the business.

20^th century management does not support common solutions, collaboration, or measurement across enterprises

The lack of consistent conventions, definitions, and standards prevents business collaboration and integration, common solutions that any enterprise can use, business measurement for comparison across enterprises, common learning that can be applied to any business, educated and trained personnel that can fit into any business, and other long-unfulfilled business needs.

Rule No 10: Employ 21^st century business management conventions and standards

Rule No. 10 of 21^st century business management eliminates the problems of conflicting and confusing business conventions, definitions, and standards by providing one set related to directly organizing and managing the actual business. Terminology that is not related to the actual business and conventions and standards established to maintain structures laid over the business are not continued.

21^st century business management provides one set of consistent conventions, definitions, and standards for the actual business

21^st century business management is documented in the knowledge and procedures provided by Result-performance Management (R-pM). [more...].