Since the business is not organized or managed 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 Result-performance Management (R-pM) 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 the capital to produce results. ]]>
We all know stories about managers who resist change to protect their own power and authority. How do we prevent damage from vested interests in the enterprise? Is it just up to the Board and CEO to know what is going on? How does the Board or CEO find out? Whom does the CEO listen to? Is there a way to support those with change ideas that are widely considered as good and to counteract those widely considered as bad? Whose head is on the line if profits suffer because beneficial change is delayed? Is it the lower-level manager responsible or the CEO?
20th century management methods provide only one reporting line. Responsibility for performance includes responsibility for capital invested, responsibility for utilization of capital as solutions, and responsibility for output results produced. ]]>
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 known entities and certain elements. Financial control covers capital for tangible assets and finances for cash receipts and expenditures, cost control is limited to known costs against selected elements like activity or project, non-financial control is sporadic depending on individual management, and quality 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 range or performance solutions developed are not controlled and may be classified as intangible assets. No method or information is provided to plan and control return on specific capital investments in performance solutions. Projects are not organized to capture development 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. ]]>
The June 2008 issue of BPM Business Performance Management Magazine carries a lead article explaining the business organization and management breakthrough with Result-performance Management (R-pM). The article, “Redefining BPM: Why Results and Performance must Be Separated”, explains the superiority of R-pM over 20th century management methods like BPM, be it business performance management or business process management. The article explains problems with 20th century management and why R-pM as the only way to organize the business for 21st Century Management to eliminate 20th century management structures laid over the business.
One of the main problems of 20th century management methods like business performance management (BPM) is the definition of performance to include both the utilization of capital in actions executed and results accomplished. Performance management methods and Key Performance Indicators (KPI) mix together capital utilized, performance at an ongoing level, and results produced as economic outputs in a time period. Business Performance Management (BPM) does not identify or manage results, capital, and performance as entities and sets of items to be managed. This prevents the business, which the article defines as “the utilization of capital of worth in performance to incur costs and produce value in results” from being managed.
Result-performance Management manages results separate from capital, and the utilization of capital in performance. ]]>
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 manage 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 performance 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.
Before the business can be directed, the business is organized using Result-performance Management (R-pM) in the current business structure, and the business is planned in the strategic business structure with result goals and performance expectations by time periods from the current business. ]]>
Every day new enterprises are started-up around the world. New enterprises have the one-time opportunity to organize and manage the enterprise business from scratch. These new enterprises unthinkingly adopt obsolete 20th century management and doom themselves to the burden the unsolvable 20th century problems discussed here at the Business Change Forum. They waste the precious “green field” advantage of no legacy structures and the opportunity to do it right from the start.
Conventional wisdom says copy an existing business model or organization theory and do not “reinvent the wheel”. This “wisdom” replicates other enterprises’ problems.
Many new start-up enterprises retain management consultants to conduct an organization study. Management consultants still recommend that new enterprises lay obsolete 20th century management structures over the business, rather than organizing and managing the business for significant competitive advantage.
Once a new enterprise lays a rigid organization structure over the business, the business can never be managed. The enterprise must lay additional management structures over the business. The many inflexible structures conflict with the business causing unsolvable 20th century problems with business change, unknown costs and value creation, unknown capital worth and investment returns, excessive IT and other capital overheads, mismanaged capital development, business and information complexity, unsupported corporate governance, alignment, collaboration, and so on.
New start-up companies have the opportunity to do it right from the start by using R-pM to organize the business for 21st Century Management. ]]>
20th century management cannot plan the business directly because the business is not organized. The enterprise is planned through various structures laid over the business. These overlaid planning structures include:
Each of these planning structures uses its own set of entities to describe the enterprise, uses different information systems, and requires its own support staff. Each plan must be maintained and updated with actual progress against the planned entities, and reported. The plans plan the enterprise in various ways depending on the particular structures implemented. It is difficult to understand and manage the actual business from these plans.
Since the business is not organized, the business cannot be planned. The results produced by the business cannot be planned as an interrelated set. Some results may be planned in isolation as separate entities such as product sold and revenue received. The plans are usually created from estimates rather than a period by period build up from the existing business. ]]>
The typical corporation spends enormous sums on Information Technology and has a large IT overhead with many complex information systems. But with all this, the corporation still does not have the one information system really needed to manage the actual business. Information systems lay additional structures over the business or manage other structures laid over the business. This produces enormous business and information complexity. Corporations invest in additional systems for data reconciliation and information management, rather than simplifying information to one consistent set that reports the actual business.
The corporation has much capital administered as Information Technology instead of being managed for corporate benefit, and has much information administered as technology instead of being managed to provide information solutions for business and management results. There are no unifying business entities to be referenced to control all information in, entering, or leaving the enterprise, including emails, Internet downloads, and file transmissions.
Result-performance Management (R-pM) uses IT to manage the actual business as one simplified Result-performance Management System. R-pM manages other simplified application programs as performance solutions integrated with the business process, where needed, to produce a specific result.
R-pM eliminates overlaid 20th century business information systems and the need for a large IT overhead. ]]>
20th century management lays a contrived enterprise organization structure over the business, instead of organizing the business. This is the fatal error of 20th century management. If the business is not organized, the business cannot be managed.
The contrived organization structure follows one of many 20th century organization theories to organize the enterprise. The business, which we have defined as “the utilization of capital of worth in performance to incur costs and produce value in results” is not organized. The rigid organization structure goes out of “alignment” with every new or closed result or change to a performance solution utilized. Eventually there is need for reorganization to contrive a new organization structure that is closer aligned to the actual business, and the cycle is repeated.
Some may argue that their business is organized. Ask if they ever reorganize the business, and they will answer yes, of course. Reorganization is needed because the business is not organized. ]]>
20th century management consultants unknowingly propagate obsolete 20th management practices. The objective is to organize and manage the business enterprise, rather than the enterprise business. Consultants lay high-cost organization, process, information system, and administration structures over the client business, preventing actual business organization and management.
There is no framework for the 20th century enterprise management. Any kind of solution can be contrived and laid over the client business. All solutions are by definition bad solutions, because they aggravate and do not solve unsolvable 20th century problems.
There is no model for 20th century management consulting and “business” consulting services. 20th century management consultants can employ any business practice both good and bad. 20th century management consulting creates problems for the client and makes it more difficult for the client to compete against 21st Century Management.
There is only one method to organize the enterprise business for 21st Century Management, Result-performance Management (R-pM). ]]>