Archive for the 'Measuremant and Standards' topic

20^th century management used today cannot manage business risk as part of the business because the business is not organized or managed. 20^th century risk management is separate from the business and concentrates on areas of proven risk, but does not cover the normal risk that is present and should be managed in everything the enterprise does.

Risk is inherent in every business and must be managed as part of the business. But, risk can be managed as part of the business only by using Result-performance Management (R-pM) to organize and manage the actual business.

Risk tends to be managed by a risk management process

Most enterprises say they manage risk. Many have risk management functions or processes to prove it. Risk is managed by risk management structures laid over the business.

There are specialists and companies devoted to risk management. Many books have been written on risk management. But, do they point us in the right direction or tell us what we really should be doing to manage day-to-day risks we face in our businesses?

Risk is an inherent part of the business

We all face the risk that things we want done or to happen will not be done or happen as wanted. [more...]

The business is defined as “the utilization of capital of worth in performance to incur costs and produce value in results”. Every business in the world invests in capital, the capital is utilized in performance, and utilization of capital in performance produces output results. The three components of the business are capital, performance, and results.

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. Revenue support results include advertisement run, market surveyed, customer followed up, etc. Capital management results include payroll paid, human training executed, asset maintained, marketing tactic devised, information created, etc. Investment management results include new product developed, information system implemented, new equipment procured and installed, etc. Every output that must be produced by the business is a result. Results must have a value that exceeds the cost of performance to produce the result for a successful business. [more...]

Methods like Total Quality Management and ISO 9000 Standards did not provide the quality management needed

We have had structures like Total Quality Management (TQM) and the ISO quality system for ISO 9000 standards and certification, which were found lacking as a management method. We also reengineered our business process with BPR, specifically to help us manage performance quality. But, performance quality proved difficult to comprehend and manage. Six Sigma provides another structure for our final production quality. Now we have business process and performance management (BPM) to manage the quality of our processes and performance. Even with all this, we still have not found a way to manage quality as the business routine of everyone in the enterprise.

R-pM manages customer determined quality result by result

Result-performance Management (R-pM) organizes the business by organizing results produced across the business as one-off results or as result chains and by organizing the capital utilized as performance solutions to produce each result. With an organized business, the company can manage quality as an attribute of results, not performance, and can manage real quality for any result, not just final results from production. Every result has a customer who is willing to pay a result value for a determined level of quality. Quality and value of each result must be acceptable to the customer. [more...].

The enterprise business is “the activity of producing goods and services”

The common definition of a business enterprise is “the activity of producing goods and services”. If the enterprise is to organize and manage the business, it must organize “the activity of producing goods and services”. Business activity is business performance and goods and services are business results. Performance is the utilization of enterprise capital to produce results. Therefore, to organize the business the enterprise must organize capital, performance, and results.

The enterprise must abolish all the outdated organization, strategy, process, account, performance management, information architectures, and other structures now laid over the business that create enormous overheads and prevent the business from being organized and managed.

R-pM organizes the business to simplify 21^st Century Management

Result-performance Management (R-pM) goes back to the basics to organize the business to utilize capital in performance to produce value in results. R-pM structures the results to be produced to create value and the capital in performance solutions available for deployment in as a business structure. The business is organized when specific performance solutions are deployed to produce specific results. The responsible organization unit is deployed as a business organization solution and the responsible manager is deployed as a human personnel solution to produce the specific result.< [more...].

20^th century management cannot capture and report essential business management information

20^th century management lays separate structures over the business for management organization, planning, direction, control, and reporting, such as:

• Organization charts, reporting relationships, and job descriptions for organization
• Strategy, corporate plan, investment, and budget structures for planning
• Work flow, function, project, process, and system structures for direction
• Financial and statistical accounting, activity and project costing, and quality structures for control
• Financial statements, performance management, and strategic enterprise management structures for reporting

Each structure defines inconsistent and conflicting entities like business unit, department, center, function, activity, project, responsibility, etc. The overlaid structures can produce enormous amounts of information producing business and information complexity. But 20^th century management cannot capture and report essential business management information.

20^th century management does not define the entities that contain cost, value, worth, and return

In order to capture data and report information about an entity, the entity must be defined and recorded. 20^th century management attempts to report cost, value, worth, and return without defining the entities that contain cost, value, worth, and return.

Costs are attributed to some known tangible assets and collected against contrived entities like activity, project, and accounts that were not produced by the costs. Numbers for value are produced by certain contrived methods and formulas to lay value chains over the business, without defining and managing the entity that contains value. Worth is defined by arbitrary depreciation formulas for fixed assets, but ignored for human and other capital. Much high-worth capital is labeled as “intangible assets” and not accounted for or managed. Capital development does not identify the precise capital items that are being acquired and developed or the planned utilization of the capital in the business to provide return on investments. [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...].

All business decisions boil down to “what result must be produced as output by the business, what human capital should be responsible, and what other capital should be utilized to produce the result?” Strategic decisions involve the strategic results needed in the future and the capital investments to acquire or develop the capital as performance solutions to produce the strategic results. Management goals involve results to be produced within a certain time. Performance expectations involve the level of performance expected from the human and other capital utilized as specific performance solutions.

Business decisions can be managed only by separately managing results to be produced and the performance solutions to be utilized.

20^th century management does not support business decisions

20^th century management does not define the results to be produced by the business or the performance solutions utilized in business activity as specific managed items, to support business decision-making. Both results accomplished and actions executed have been defined as performance, dating from the 15^th century.

Management decisions are often stated in terms of performance as tasks, activities, jobs, work assignments, etc instead of output results to be produced by when. If management makes a decision to produce a result by whom and by when, the decision can not be implemented and managed as part of the business.

Decisions must be implemented and managed through separate structures laid over the business. The organization structure is updated to say who should carryout the decision. [more...]

Result-performance Management (R-pM) is the conventional way to organize the business for 21^st Century Management. An adjunct to the development of R-pM is the development of 21^st Century Management to provide a common business framework for business operations and development, business collaboration, business learning and education, common business services that can be applied to any enterprise, and common business software and solutions that any enterprise can utilize.

21^st Century Management is one consistent and clearly-defined set of business organization and management descriptions, conventions, standards, and definitions that eliminate the contradictions, inconsistencies, and unsolvable problems of 20^th century management. R-pM adheres to 21^st Century Management conventions and standards.

21^st Century Management is documented in the R-pM Toolkit

R-pM is documented in the R-pM Toolkit, your 21^st Century Management Manual. 21^st Century Management descriptions, conventions, standards, and definitions are also documented in the R-pM Toolkit. The R-pM Toolkit is under continuing development. The R-pM Toolkit already contains the fundamental documentation needed to begin learning, implementing, and utilizing R-pM. Those downloading the R-pM Toolkit today receive a subscription to all R-pM Toolkit and 21^st Century Management documentation updates through 2009.

21^st Century Management documentation includes:

• 21^st Century Management Descriptions: The specific concepts and approaches that constitute 21^st Century Management
• 21^st Century Management Conventions: Specific business operation and development methods that are followed by all 21^st century businesses
• 21^st Century Management Standards: Specific rules, goals. [more...]

What is the definition of “enterprise business”?

We all have our personal business in the things we accomplish in life, and may work for a business enterprise. But, what is the definition of the business, be it our personal business or the enterprise business? When we organize and manage a business, what is the precise business that we organize and manage?

In our personal business, we naturally utilize our capital in our performance to produce desired results

In our personal business we naturally utilize our time, capability, knowledge, cash, tools, outsourced services, a process, etc to produce a result, such as prepared dinner, arrived at destination, cleaned suit, repaired house, completed report, purchased product, enjoyed night out, etc. The value of the result we produce must exceed the cost of producing the result in order for us to be happy with the result.

The enterprise business is no different than our personal business

The enterprise business is the same. The enterprise utilizes capital in performance solutions, such as human time and capabilities, cash and supplies, equipment, a process or system, etc to produce economic output results, such as a product produced, a service delivered, payment received, a completed report, etc. This is reflected in the common definition of the enterprise business as “the activity of providing goods and services”. This definition shows that the business has two parts; “the activity of providing”, which is business performance, and “the goods and services provided”, which are business economic output results.

The enterprise business definition is “the utilization of capital in performance to produce value in results”

This enterprise business definition as “the activity of providing goods and services” can be reworded as “the utilization of capital in performance to produce value in results”. Therefore, in order to organize and manage the business, we must organize and manage “the utilization of capital in performance to produce value in results”. Read the details in the article “What is the definition of an Enterprise Business” in 21^st Century Management Magazine at r-pm.net. .

What does performance really mean?

Performance is one of the most widely used words in describing how the business is organized and managed. Performance is used in business performance management, human performance management, key performance indicators, performance management systems, and methods like control panels and scorecards, and performance evaluations. Therefore, it is very important to have a precise and usable definition of performance.

How do you define performance? What is the definition put forward for your performance management methods or solutions? What does your dictionary say? Does the definition make sense? Are your key performance indicators actually performance indicators? Do your performance management methods actually manage performance? What is performance in our enterprise, and how should we define performance?

Both the activity of performance and the result of the performance are defined as performance

If you look up the definition business enterprise, you will likely find a definition, “the activity of providing goods and services”. If you look up the definition of performance or performance management, you likely will see that “performance” defines not only the activity as performance, but also defines the goods and services and other output results produced by the activity as performance. [more...].