Archive for 'Learn the Basics of R-pM'

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 cost 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.

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 business results. Capital is all the tangible and intangible assets available to be utilized by the business. Capital includes the business organization, processes and systems, humans and their capabilities, facility equipment and supplies, management plans and tactics, and information capital. Capital has a worth in the capability to create result value attributable to the capital over the remaining capital life.

20^th century management fails to organize and manage capital as part of the business

Today, people think of capital as items in an asset register or on the payroll, rather than as items to be managed and utilized as part of the business. Businesses invest in enormous sums of money capital and then fail to identify the specific capital solutions developed, the costs of developing the capital, the worth of the capital as developed, the utilization of the capital to create value, the cost of capital utilization or consumption as capital worth deteriorates, and the value created to return the original investment. [more...].

The business utilizes capital in performance to produce results

The business is defined as “investments in capital as solutions of worth utilized for cost and effectiveness of performance to produce value and quality in results”. Every business in the world invests in capital and expects a return on the capital investment. The capital must be organized as specific solutions that have worth in order to be of benefit to the business. Capital solutions are utilized in performance and incur performance costs for the direct costs or amortization of the solution. Utilization of capital effectively in performance produces output results of quality. Each business result has a customer who wants the result produced and is willing to pay a value for the result. The result value created provides the return on investment to date and the future capital worth over the remaining life of the solution. The three components of the business are capital solutions, performance domains utilizing a solution to produce a result, and the results produced.

The objective of every business is to produce results

Results are the outputs of value that must be produced across the business for success. Revenue management results include products, services, customer contacts, sales orders, revenues, and profits. [more...].

Administration is one of the top ten 20^th century management problems

As explained in other articles in the Business Change Forum, administration is one of the top ten problems of 20^th century enterprise management used today. Enterprises have large sums invested in the capital that is utilized in performance, but most do not even know the extent of this capital. There is no manageable organization of capital as specific capital items of worth to be managed and utilized to create value in the business. Much high-worth capital is labeled as “intangible assets”. Capital that is known is administered, rather managed for investment, development, and utilization in operations. Many capital items requiring very different inherent capabilities and skills to support properly are mixed together in artificial categories like information technology and financial management.

Conventional administrative performance does not manage capital

Capital is created day in and day out without being recognized as something of worth that should be managed and made available to improve performance. Enterprises may have an assets register and think of managing capital as utilization of assets. Many think that managing capital means assigning it to a responsibility center, which actually removes capital from management for the benefit of the enterprise. Typical responsibility center managers do not take responsibility for managing capital and are unable to manage capital that they share with other responsibility centers.< [more...].

The enterprises, where we work, do not manage the business

Enterprises today do not manage the business, which is defined as “investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results”. Instead of organizing the actual business, an organization structure organizes people, positions, functions, and reporting relationships and is laid over the business. The organization structure is the fatal error of 20^th century management. Once an organization structure is laid over a business, the business cannot be managed. The enterprise is managed using process, function, account, performance management, activity, and other structures laid over the business.

We utilize our capital in our performance to produce results naturally, utilizing common sense

We all know how to manage a business. We naturally manage our personal business using common sense. We do not lay organization charts, business processes, or functional procedures over our personal business. We manage our personal business as a chain of results to be completed: such as up and dressed, breakfast prepared, breakfast consumed, and arrived at work. In order to complete each result, we utilize our personal capital in our time, capabilities, knowledge, possessions, supplies, tactics, and process followed. [more...].

We must organize the enterprise to manage results and objectives as guided by Peter Drucker

Peter Drucker influenced management thinking with his fine works “Management by Objectives” and “Managing for Results”. Drucker showed that strategic objectives are defined by the future strategic results that the enterprise must produce. Near-term objectives are achieved by producing final results from business performance.

Peter Drucker showed that results contain economic value

Peter Drucker showed that results contain the economic value created by the utilization of enterprise capital in enterprise performance. Drucker said to focus on the result not the activity, a sound concept that largely is ignored today. Goods and services and other results must be organized first and the capital utilized and the activity or performance must be organized to produce the results.

Managers lacked a method to organize the business and put Drucker’s principles into practice

Drucker’s principles require that the business be organized in terms of results produced, capital utilized, and the performance producing the result. But, there was no method available to organize results, capital, and performance. So, Drucker’s results could only be valued as they left the enterprise. The only way to put Drucker’s principles into practice within the enterprise is to organize and manage the business. [more...].

The economic crisis arises from “failure to manage the business”

Many articles in the Business Change Forum cite “failure to manage the business” as the cause or the current and previous financial and economic crises and corporate governance scandals. What precisely is the business and why is the business not managed today?

What is the definition of your business?

Have you organized your business? Do you manage your business day by day? What is the definition of the business that you have organized and that you manage? Most managers think that they are organizing and managing their business. But when asked they cannot define the business that they have organized and are managing. They usually define the enterprise, rather than the business, since they have actually organized and are managing the enterprise, and not the business.

It is important to have a clear definition of the enterprise business

It is important to have a precise definition of the enterprise business that is organized and managed. [more...]s.

20^th century management structures laid over the business cause unsolvable problems leading to the economic crisis

Enterprise management today uses a variety of enterprise structures such as organization charts, corporate plans, account charts, processes, information system flows, administrative functions, scorecards, etc. The arbitrary structures do not define the actual business, but are laid over the business to manage the enterprise. The structures do not provide a structure for business management, but rather prevent the business from being managed. The structures are rigid and difficult to change, and the definitions used by the structures vary widely. Data is collected against the structures, not the business. Large quantities of management information are reported against overlaid structures, but actual business management information is not reported. The business changes continually, and conflicts with rigid unchanging structures, causing unsolvable 20^th century management problems. Eventually, there is upheaval in “business change” to align overlaid structures closer to the real business, and repeat the cycle.The overlaid structures prevent business management causing the fundamental problem of the economic crisis, the failure to manage the business.

Governments today are not able to solve the economic and financial crisis because they do not understand the underlying problem, the failure to manage the business, and they cannot gain actual business data needed to regulate corporations properly.

R-pM organizes the actual business to provide a structure for 21^st Century Business Management

Result-performance Management (R-pM) defines the business as “investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results”. R-pM simplifies business management to manage the business directly, rather than managing structures laid over the business. R-pM supports all phases of business management through the business structure. The structure design and framework is not subject to change, but is flexible to change and grow as business components and data entities change. Current and strategic business structures are used for all business organization, planning, direction, control, reporting, and governance. [more...]e.

Most managers think that they manage their business and make business decisions

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

No corporation, institution, or other enterprise manager manages the actual business today. The managers employ 20^th century management to administer the enterprise. Managers make enterprise decisions to manage and change the enterprise, rather than business decisions to manage and change the business. 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 dead-end 20^th century management to administer structures laid over the business, and do not define the actual business or teach us 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

We must separate performance from results using Result-performance Management (R-pM) in order to define and manage the business. R-pM defines the business as “investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results”. [more...].

When business started, the actual business was managed

The common definition of a business enterprise is “the activity of providing goods and services”. In other words, the business is “the utilization of capital in performance to produce value in results”. We all manage our actual personal business to utilize our capital in performance to produce value in results naturally, using common sense.

Several hundred years ago, all business was in individual or small enterprises that managed actual business activity in the utilization of capital available in humans with capabilities and knowledge of the business, business practices followed, management methods and intelligence on customers, and facilities in business locations, equipment, tools, money, and supplies available. They used this capital to produce output results in goods they had to buy, goods produced or improved and relocated, final results in goods and services they had to sell, and money received from sales.

They managed their business naturally by managing utilization of capital in performance to produce value in results. Common sense told them that costs were in the consumption of capital in business activity or performance, and that value created was in results leading to the final goods and services results sold. They realized that customer willingness to pay placed value on the total of raw material results and results in their chain. They realized that profit results came from result value-added that exceeded performance costs. They realized that they had to invest in capital as specific performance solutions to be able to produce results, and that result value had to increase to repay the investment. They realized that performance in capabilities and tools had to be effective to produce a high-quality result. They realized that capacity in time, capabilities, and facilities limited the volume of results produced. They realized that performance uncertainty in producing results as needed posed risk that final results would not be produced as planned. To reduce risk, they managed the performance utilized to produce each result one by one in the chain of results needed to produce final results for their customers.

When businesses grew, enterprises were organized and managed rather than the business

In recent centuries, as businesses grew, the complete sets of capital employed and results produced became difficult to manage. There were no information systems to help manage the actual business. So, enterprises in companies, associations, and institutions were formed. New structures were contrived to manage the business enterprise, rather than the enterprise business. [more...].

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

We all have heard of business change problems and the need for change management to solve these problems. We assume that business change changes the actual business, and that business change management manages change to the business. We think of projects like reorganizations, systems implementation, business process re-engineering, etc as changes to the business. We think that the business never changes until there is a periodic business change project.

One problem with 20^th century management is that no one knows what the business is that is supposedly being organized, managed, and changed, because there has never been a precise identification and definition of the “business”. The fact is that 20^th century “business change” is not change to the business. The actual business is in a continual state of change that we are not aware of because the business has never been defined and organized. The most common 20^th century definition of the enterprise business is the “activity of providing goods and services”. The business changes with each change in business activity, which is the utilization of capital as performance solutions, and each change to goods and services, which are economic output results. 20^th century management has never precisely defined and organized the “activity of providing goods and services”, so actual business change has never been managed as business change.< [more...].