Archive for the 'Management Capital' topic

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

Corporate Governance problems are “solved” my more imposed governance

We have all heard of the recurring crisis in cooperate governance. Governing the corporation is a big problem because we cannot manage the corporate business. We overlay a myriad of contrived structures on the business to organize and manage 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Corporate governances problems are “solved” by adding to the problems with more stringent and costly requirements for outdated 20^th century accounting, auditing, and compliance reporting.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 performance solutions 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 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.

Corporate Governance Problem

We overlay structures on 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 management reports against structures laid over the business

The generally-accepted definition of enterprise business is “the activity of providing goods and services”. In order to organize and manage the business, we must organize and manage both the activity or performance involved in providing and also the goods and services provided to our customers.

20^th century management does not provide a structure to do this. Instead of organizing the business, an organization structure is laid over the business to define organization units, functions, and positions. Since the business is not organized, management structures must be laid over the business. A business strategy defines visions, objectives, owners, requirements, and other entities. The chart of accounts defines centers, objects, and codes. The business process defines process objectives, stations, performance activities, performance quality, and other entities. Information systems have their own built in file structures and entities. Cost accounting gathers known costs against activities, centers, selected final products, or other entity. Performance management systems require reporting on other sets of entities concerning the process, training, customer actions, etc. The many structures laid over the business produce business complexity and hide the actual business.

Overlaid structures capture vast amounts of data and report mountains of information, but not on the actual business

None of these structures captures actual business data or reports actual business information. [more...].

What is management capital? Management capital is not the capability of our managers. That is part of our human capital. Management capital is the capital provided by management so that the enterprise can develop and execute a successful strategy.

You hear of management strategies, management tactics, and management intelligence; but do think of it as management capital? You likely do not, because 20^th century management does not organize and manage management capital as the capital that is utilized to plan, and direct the enterprise business. 20^th century management has functions like corporate planning, internal audit, public relations, legal, marketing, etc. that may administer some management capital, but few, if any, really manage management capital. Many enterprises have problems due to inadequate management capital.

Logically all capital must be defined as performance solutions to be deployed and utilized to produce a specific result. [more...]

Capital Management is the management of enterprise capital in performance solutions to produce results of value needed by the enterprise. Capital management is an important part of 21^st Century Management.

Capital is not managed in 20^th century management

20^th century management does not manage capital. 20^th century management provides administration functions like finance, accounting, human resource administration, purchasing, information technology, and corporate planning to administer selected tangible capital. Most capital is not identified or managed by the enterprise. Much capital is created and used in the enterprise, but is known only in the department that keeps it. Much enterprise capital is assigned to a responsibility center and managed no further. The capital in administrative units is administered rather than managed to provide solutions, control costs, create value, and increase in worth.

Capital investments are not managed to develop specific capital to produce value in results

Enterprises invest significant sums in the capital used, but these investments are not managed to provide the specific returns. The tangible capital is normally developed as a lump sum for an asset or a project. [more...]

Corporate Planning Managers are important capital managers

Are you a Corporate Planning manager, responsible for strategic planning, alignment of corporate and lower-level plans, and reporting against the plan. Corporate planning is defined and organized differently from enterprise to enterprise. You likely provide top management support such as planning research, intelligence analysis, option analysis, and other functions. How do you approach your work? As a routine function? As a responsibility for corporate or enterprise strategy development, and to ensure that corporate strategy is coordinated and executed properly?

If your answer is closer to the latter, you will clearly benefit from R-pM.

20^th century management does not provide a framework for Corporate Planning

20^th century management manages the enterprise by laying organization and management structures over the business. One of the structures laid over the business is the corporate plan. 20^th century management does not provide a framework or a capability to plan the actual corporate business. [more...].

Business Solutions are specific capital items that are utilized to produce specific business results.

Business solutions are the specific items of capital that are supported and are utilized to produce specific results. Business solutions are broken down to provide the specific management support capabilities needed, and to integrate with other solutions utilized to produce a specific result. The set of solutions is organized in the business solution structure. This means that the business solutions must be structured into two dimensions.

• The capital management and support dimension so that solutions can be supported by the proper human capability solutions
• The result management and utilization dimension to group like solutions that must be integrated to work together to produce a result

In the capital management support dimension, solutions should be categorized by the kind of human capability capital needed to develop, support, and provide cost-effective business solutions. In the result management and utilization dimension solutions should be classified by the way capital is organized to actually produce results.

Today, some capital is administered by functions, but most is undefined and unmanaged

In today’s enterprise, most capital is administered in different categories. Human capital is separated as human resource administration. Tangible facilities like financial and fixed assets and accounting records fall under finance and accounting or an administration department. [more...]s

The Intangible Asset Problem

Financial Management is one of the top 10 problems in the 20^th century enterprise!

The 20^th Century enterprise concentrates on financial capital in cash and accruals, which is the easiest capital to understand and manage. But all capital is created by spending and investing money and must have a corresponding monetary worth. Separating financial capital from other capital causes other high-worth capital to be ignored and mismanaged.

R-pM eliminates intangible assets

Result-performance Management (R-pM) categorizes all capital to be professionally managed and classifies capital to be utilized to produce results. All performance costs are known and are charged against to value created in results to manage result value-added. Visit result-performance-management.com to download “Organizing and Managing Performance”.

Intangible assets are ignored by conventional financial management that does not managed capital

We keep hearing about intangible assets like there is something mysterious about the assets we utilize in our enterprise. If we have intangible assets we also have unknown costs; since we incur cost when we utilize our assets. Intangible assets are of high worth in a modern knowledge and technology-driven enterprise. But, by considering the assets as intangible we make them impossible to manage to increase their worth and the value they provide. [more...].

In an article on 1 March 2006, we discussed “Evaluating strategies that create future value“, to investigate what value is being created. Value tended to appear at the end of the strategy, and not defined in detail from the start and added to throughout the execution of the strategy.

Value is not just a contrived or calculated number. Value must be planned and managed day by day by organizing the business and managing results. Strategic value is not an estimate or hype. Strategic value is planned by improving current results and developing future results. This is explained in the R-pM community download “Organize your Business with R-pM“.

Many corporations have a mission to create strategic value or customer value

It is difficult to develop a strategy that creates future value, if the enterprise cannot manage the value that it has on hand today. Where is the value in your enterprise today? [more...]

What is management capital in the modern enterprise?

Management capital is of real worth to an enterprise and is essential to success. But, what is management capital? Is it the capability of our managers? Is it the capital provide by management to plan and direct the enterprise? What things in our enterprise do we consider as management capital? How should management capital be managed? How can any enterprise develop strong management capital?

Management capital enables the enterprise to develop and execute a successful strategy

Management capital is not the capability of our managers. That is part of our human capital. [more...].

What is strategic value creation and how is strategic value determined?

We keep hearing corporations proclaim a strategy to create future value. Whenever I investigate what value is being created, I find vague answers about providing a good customer value proposition or generating stakeholder value by increasing profits. Strategic value management seems to be formulas that can calculate a number that is labeled as value. Value is something that appears at the end of the strategy, rather than value that is defined in detail from the start and added to throughout the execution of the strategy.

How does your enterprise create and determine day to day value?

Does your enterprise have a strategy to create future value? Has anyone clearly defined the value they are creating with their strategy? How is the value determined or calculated? What is the starting point that is built on to create value? [more...]>