Since the beginning, enterprises have implemented organization, process, account, performance, project, IT architectures, administrative functions, and other structures. Each of these many structures must be maintained and managed producing business complexity. Many conflicting entities that define each structure produce information complexity, prevent consistent and accurate management information, and require high-cost information technology overheads. Each structure is fixed and rigid and conflicts with the ever-changing business. Periodically, reorganization and change management is required to bring the fixed structures into closer alignment with the business.
Over the years, there have been many efforts to create one simple and consistently-defined structure for complete and consistent business data capture, reliable communications, accurate management information, use of common solutions, business collaboration, and other needs. The answer, so far, is to lay higher-level management structures over existing structures to reconcile data from various unrelated structures and to consolidate information. However, until now, no one has defined the one integrated structure that can replace all existing structures and be used to organize and manage any enterprise in any industry.
There is one structure. It has been there all along! That structure is the business itself!]]>
20th 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.
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. ]]>
Enterprises have a well-known problem in relating knowledge to business needs.This is because enterprises do not organize and manage the business. Dead-end 20th century management used today lays organization, business process, administration, and a variety of other structures over the business to manage the enterprise. Knowledge is not related to the business; knowledge is related to contrived structures laid over the business, such as an index of subjects and topics.
The business is “investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results”. Knowledge is capital consisting of specific solutions of worth utilized to improve the utilization of other solutions for cost and effectiveness of performance to produce value and quality in results. Knowledge is human capital that increases human personnel capital worth by improving their performance in utilizing various capital solutions effectively and producing higher value-quality results. Knowledge is used to develop specific human capability solutions that are utilized to produce specific difficult results to be of high value-quality,
Enterprises need a systematic way to identify specific business results that must be supported by knowledge, identify specific capital solutions that must be utilized properly to produce the result, define the precise knowledge needed, to relate knowledge to the capability of the user applying the knowledge, to link knowledge to where and by whom it is needed, to understand the value created by knowledge that gives worth to the knowledge, and to get feedback and improvement on the knowledge. This can only be done by managing the actual business.
Many enterprises make large investments in knowledge, but 20th century methods that we use to manage knowledge limit the value created and the return of the investment:
Conventional methods hamper the application of knowledge by using structures that are defined through various contrived entities like department, activity, and object, while organizing knowledge by topic, subject, etc. These fundamental problems prevent knowledge from being leveraged to be high-worth capital utilized in a managed business.
Knowledge is human capital that must be created and managed specifically to increase human capital worth through the value of results produced. Knowledge is also information capital that must be integrated with business data and delivered where needed to produce specific results and to support human capabilities utilized. ]]>
Do you manage your business? What is the definition of the business that you manage? Ask a manager if he manages his business, and the normal response is yes. Ask for the definition of the business they manage, and they do not have a precise definition. Most will describe the enterprise rather than the actual business.
No company, corporation, institution, or other enterprise manager manages the actual business today. The managers employ 20th century enterprise management to administer the enterprise. It is impossible to manage the business today, because the business has never been defined or organized properly.
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 20th century management to administer structures laid over the business, and do not define the actual business or teach us how to manage the actual business.
Outside of our explanations of business management, 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.
So today, results, capital solutions, and performance in the utilization of capital to produce results continue to be confused by the definition of performance. We must separate results and capital utilized from performance in order to define and manage the business. ]]>
An adjunct to the development of business management is the development of 21st century management conventions and standards. 21st century management is one consistent and clearly-defined set of business organization and management descriptions, conventions, standards, coding structures, and definitions that eliminate the contradictions, inconsistencies, and unsolvable problems of 20th century management. R-pM and business management adhere to 21st century management conventions and standards.
Business management is documented in the Business Management Toolkit, your 21st Century Management Manual. 21st century management descriptions, conventions, standards, and definitions are also documented in the Toolkit. The Business Management Toolkit is under continuing development. The Toolkit already contains the fundamental documentation needed to begin learning, implementing, and utilizing business mManagement. Those downloading the Toolkit today receive a subscription to all future Business Management and 21st Century Management advances and documentation as updates to the Toolkit.<]]>
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 20th century reporting structures, such as:
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.
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:
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. ]]>
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 20th 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.
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.
The only reason to invest in capital is to provide the capability to produce results. ]]>
The operations and development of the enterprise today are controlled by structures laid over the business for:
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.
In order to control the business the actual business must be organized, planned, and directed as explained in previous articles. ]]>
When you talk to a company manager about employing a standard solution the response is often “Our business is too complex for a standard solution”. This is said with a measure of pride in being associated with a complex business. Is a complex business something to strive for or to be proud of? What is the alternative to a standard solution? Do non-standard solutions simplify the business? What is better, simplify the business to use standard solutions, or continue to develop non-standard solutions that compound existing complexity?
Enterprises today introduce business complexity as soon a they implement an organization structure that is laid over the business. Since the business is not organized, they must lay more structures for strategy, accounts, business processes, performance management, etc over the business in order to manage the enterprise. Each additional structure introduces more entities with conflicting definitions to be managed and increases business and information complexity.
Business complexity is a misnomer. The business is not complex; enterprise management through rigid structures laid over the changing business is complex. The answer is to clear away contrived overlaid structures and organize the business for simplified 21st century business management. All business organization, planning, direction, control, reporting, and governance employs the current and strategic business structures and only the essential business data entities.
Business complexity is built in to 20th century enterprise management methods, so business complexity is accepted as normal. We have no straightforward method to identify and root out business complexity and then to prevent future business complexity. ]]>
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:
These structures are used to direct performance of the enterprise and to produce results as separate entities, such as products, services, sales, and revenue.
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.
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.<]]>