Why control the business?
Submitted by bcfc on November 27th, 2009
20th 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...].

