Poor corporate governance allows economic crises and large business losses

Many experts rightly point out that one of the main causes of the economic crisis is the lack of corporate governance. But the solutions they advocate are stronger government regulation and stricter reporting requirements. Corporate regulation is not corporate governance.

How much more will corporations spend conforming to corporate regulations, before we realize that the whole approach to corporate governance is wrong? Today corporations measure and report contrived overlaid structures, rather than the actual business. Corporations govern by enforcing policies and rules, instead of governing approved business strategies and plans. Corporations and authorities address the symptoms of the corporate governance problem from the governance side with more rules and regulations, instead of solving the problem from the corporate side, by organizing and managing the business. We are now repeating the same past mistakes in response to the current economic crisis.

Good Corporate Governance manages the transition of the current business to the approved strategic business

Corporate governance is internal so that the corporate management has the capabilities to ensure continuation of a strong and ethical corporate business that is planned and managed to create strategic result value, maintain and manage capital worth, and control on-going performance costs. Rule No. 6 of 21^st century business management: Plan and govern the transition from today’s value to approved strategic value. Business management eliminates contrived 20^th century structures that cause our corporate governance problems and, instead, organizes the business itself as one integrated structure for 21^st century business management and governance. The future business is planned and approved in the strategic business structure to plan the value of strategic results and the result research, capital solution development, and strategic value creation needed. Result goals are set and managed time period by period to the strategic business. [more...]

20^th century capital development is ad-hoc and separate from the business

Capital is not acquired, developed, or managed as part of the business today. Capital financial investments are made by a financial unit in isolation from the business or returns needed for the business. Capital development investments are normally ad-hoc projects to produce a new fixed asset or to lay a new structure over the business. The specific solutions involved, the investment cost by solution, or the output results of benefit to be produced by the investment rarely are known.

Capital development must develop specific solutions to utilize in performance to produce measured results

Capital solutions needed by the business must be planned and developed by result to be produced by utilizing the capital. Each result absorbs a portion of the investment cost and provides a value-added to contribute to the return on the solution investment. The full set of solutions needed to produce the result must be planned and integrated to produce results successfully with a high value-added. Capital solutions must be produced as results of a development project to utilize project capital and capture full costs of the solution. The solution is implemented with the investment balance to be amortized against the results produced over the solution life.

21^st century capital development produces result value-added for solution return and worth

Implemented solutions are utilized to produce each volume of output results. The performance costs are captured against each result and reduce the unamortized investment balance and capital worth to pay back the investment. The result value-added over total performance costs should be positive to provide a further gain on the investment. The future solution worth is determined by the continuing absorption of performance costs until paid back and the future result value-added from solution utilization over the remaining life and later sale or disposal. [more...]

Business information is inconsistent, incomplete, and inaccurate in today's enterprise

Enterprises have much to gain by properly organizing and leveraging information to provide value. Information is not managed properly for support and utilization in today’s enterprise. The business is not organized and managed to capture information produced directly by the business and to apply information directly to the business. The categories of information are not supported as information capital to produce business results. There are no precisely-defined data entities to integrate information from the various systems into a business information base for consistent management information. Most direct business data is never captured, management information is reported in conflicting and inaccurate sets, and actual business management information remains unknown.

The information complexity and accuracy problems are addressed by additional information technology investments

Each management structure and information system defines the enterprise differently producing the information complexity and accuracy problem. Large information technology investments for data reconciliation, enterprise information management, IT architectures, specialized knowledge and records management, etc produce excessive enterprise overheads and never solve the problems.

The managed business integrates actual data, knowledge, records, and intelligence in one Business Information Base

The only solution is to manage the business directly to capture actual business data and produce information capital solutions needed to manage the business directly. Business management provides the proper support for information capital to provide information solutions, to utilize solutions to capture data and apply information directly for the business, and to integrate information on the business in one consistent and accurate Business Information Base for transparent management and good corporate governance. [more...]

Business processes and information systems laid over the business today prevent management of costs, value, and quality

20^th century management lays monolithic business processes and information systems over the business to manage business performance. Results produced by the business are defined as performance and are not specifically identified and managed as a set or chain leading to final results that go to the customer. This prevents to business from managing the cost of producing a result, the result value, the result quality, and the result value added. Much time and money is wasted trying to reconcile ill-defined processes and systems for business collaboration, since result chains cannot be organized or managed.

Rule No. 2 of the 10 rules of 21^st century business management: Generate profits from a chain of managed value and quality

21^st century business management organizes the capital investments available to be utilized in business performance, performance producing each result, and business output results as value-quality chains. This allows capital solutions to be utilized in cost-effective performance to produce value-quality results leading to high-value and high-quality customer results.

Customer results are outputs from managed result value-quality chains

Business management redefines business processes and information systems as process solutions by the results produced and manages each result in the result value-quality chain starting from input results from the supplier, result value added along the enterprise result chain, and the final result to the customer. Result value-added is managed across the chain to contribute directly to the profit result. The business can integrate and manage the chain to help suppliers meet enterprise input needs and to add more value by meeting customer needs. [more...]

20^th century management does not maintain accurate financial and non-financial records on the actual business

Management needs complete and accurate information on the actual business for good corporate governance and business management. This is not possible with 20^th century management used today, which does not organize or manage the actual business. Records are not kept on the capital investments utilized as capital solutions by the business as a set or on the economic output results produced by the business as a set. Thus, there is no set of complete and accurate records on the business to provide actual business management information. Instead, information is maintained against contrived structures laid over the business, such as organization, planning, budget and account, and reporting structures.

Instead of accounting for the business, a chart of accounts is laid over the business. Accounting maintains a sub-set of enterprise records in financial and statistical accounts. The full cycle of performance costs incurred and result value created is not recorded. Many non-financial records that should be maintained are not considered as accounting responsibility and are never recorded and managed as information capital.

The records management problem is getting serious with the explosion in email, file transfers, and other records created, entering, and leaving the enterprise. The enterprise has no way to reference records to the actual business, to prevent records being lost due to information complexity, and to properly manage records as information capital.

Rule No. 4 for 21^st century business management: Keep financial and non-financial records on full business operations and development

21^st century business management requires accurate financial and non-financial records for the full cycle of business operations, along the chain of results produced by the business, and across the operation-development continuum. Business management maintains financial and non-financial records on the actual business to provide accurate and complete management information. The actual business is recorded so that one consistent set of accurate and complete facility records can be maintained on the business and accurate reports on the full business cycle of cost-effective performance producing value-quality results, the results from supplier-provided input results and through enterprise business results to final customer results, and the investment costs in new capital solutions and the return in new result value are provided. 21^st century business management broadens traditional accounting to professional records management for complete financial and non-financial business records. [more...]

20^th century enterprise management cannot optimize operations in the capital solutions that produce output results

The 20^th century enterprise today is organized, but the business is not organized. Capital investments in the business are not organized to implement and utilize capital solutions as part of the business. Therefore, business operations in the capital utilized as specific capital solutions, the performance of the solution to produce specific output results, and results produced cannot be managed. If business operations are not managed, performance cannot be optimized to produce high-quality results and the result value-added that contributes to the profit result.

Rule No. 5 for 21^st century business management "Operate to optimize operations, result value-added, and the profit result"

The ten rules for 21^st century business management help each enterprise to understand how well positioned they are to compete with the coming 21^st century business environment. Rule No 5: "Operate to optimize operations, result value-added, and the profit result" establishes an enterprise routine of managing and supporting capital solutions, managing the utilization of a solution in performance to produce a result, managing the results produced, and managing the return on investment and contribution to profits over time.

21^st century business management manages cost-effective performance to produce value-quality results and profits

Capital is managed to capture the cost of development or improvement, to ensure solutions are qualified to produce the desires results, to capture the result value created to determine the return of investment and the continuing solution worth, and to optimize the investment, qualifications, capacity, and reliability of each solution.

Performance, in the utilization of a solution to produce a result, is managed to meet expectations in performance, to work together with other solutions to produce the same result, and to optimize the cost, effectiveness, capacity utilization, and uncertainty of each solution utilized.

Results are managed to utilize integrated solutions to reach result goals, to create result value greater than total performance costs for result value-added, to produce a high-quality result, to produce the expected volume of results on time, and manage the risk of a poor result.

Results are managed with the capital solutions utilized and performance as the routine, High-value results are periodically optimized by managing the volume, value, quality, goals, and risk of results by optimizing the capital solutions utilized and the performance of the solutions. Optimizing ensures that performance is cost-effective to produce high value-quality results, to return investments in capital solutions, to manage and maintain capital worth, and to provide the result value-added that contributes to the profit result. [more...]

Actual costs and value cannot be managed today, because the business is not managed

Real costs and value cannot be managed today because the business is not managed. Instead contrived structures are laid over the business to collect known cost data on tangible assets and charge the costs against activities, centers, jobs, projects, and other data entities that are not related to the business. Cost accounting and financial accounting utilize separate contrived structures that do not account for the actual business. Value cannot be managed today. Numbers called "value" may be contrived through various rules and formulas, but the value does not represent real business value.

Business costs are incurred by capital solution utilization in performance to create value in results

Costs are incurred by the utilization of specific capital solutions in business performance. Value is created in the output result produced by the utilization of all capital solutions to produce the specific result. Value is determined by the willingness to pay by the customer who receives and uses the result in his part of the business. The result value less total performance costs incurred provides the result value-added, which is managed along result chains that stretch across the business.

The only way to manage costs, value, and value-added is to manage the actual business

The actual business must be managed in order to manage real business costs, business value, and value-added across the business. Financial, cost, and statistical accounting and other business record keeping is integrated and consistent against the one business structure. Contrived activity costing and financial account structures laid over the business today are needed no longer. [more...]

Today's information systems do not capture and report actual business data

Today's enterprise uses a myriad of management structures and information systems creating enormous information complexity. Each structure and system defines its own set of data entities and reports separate information. Enterprise management information systems attempt to reconcile data and integrate information into meaningful reports for management. But, no system today captures actual business data and no management information system reports actual business management information.

The business must be managed to capture business data and report business management information

21^st century business management organizes the business in order to manage economic output results produced, capital investments implemented, and the utilization of capital to produce results, as complete data sets. The business is organized as one integrated business structure to capture data on the utilization of capital in specific solutions to produce economic outputs in business results. Business data is captured in an integrated Business Information Base to provide access to one complete set of comprehensive business management information.

Data is reported on all results produced, capital invested in solutions, and capital utilized to produce results

Data is captured on capital solution capacity, qualifications, worth, and return; performance capacity utilization, cost, and effectiveness; and the volume, value, and quality of results produced. Strategic results and the solutions needed are maintained in the strategic business structure with plans for time periods and updated strategic estimates. Complete and comprehensive management information is reported on the actual business for effective 21^st century business management and good corporate governance. [more...]

It is impossible to manage capital development properly today with 20^th century management

20^th century management used today does not provide a framework for proper capital development. Capital development develops specific solutions that must be utilized by the business. Capital development incurs the costs of development and sets up the cost of capital utilization. But today, capital is not defined and managed as a set of capital solutions available to the business. Capital is categorized as employees, fixed assets, intangible assets, etc.

Implemented capital is utilized in business performance to produce output results of value. Result development provides the benefits of development and the value-added that provides the return on investment. But today, results are not defined and managed as a set to be produced by the business. Some results are managed as separate items, such as product, sales order, revenue, etc. 20^th century management manages capital development separate from the business to develop certain known capital.

The business must be organize to enable result-capital development

21^st century business management organizes the business in results that must be produced for business success, capital that must be invested in the business to produce results, and performance in the utilization of specific implemented capital as solutions to produce specific results. Once the business is managed, it is straight forward to identify new results required to improve and expand the business. Once the business is managed, it is also straight forward to identify the capital solutions needed to produce the results. New result development and new capital solution development is planned and managed as part of the business. [more...]

The inability to manage capital worth is a large problem that contributes to the economic crisis

Many financial institutions and corporations cite the inability to know and manage "asset value", which is actually capital worth, as a contributor to the economic crisis. Usually, capital worth is not managed until it comes time to sell or liquidate the asset, when the actual worth turns out to be much less than worth in the books causing large and sudden write-downs. In other cases, corporations are forced to state the worth according to an arbitrary rule like "mark to market", which may not reflect the plan for utilization of the asset in the business.

The business must be managed to manage capital solution worth as part of the business

Corporations do not manage the business today, so capital worth cannot be managed as part of the business. Capital is not managed as specific solutions utilized to produce results of known value, with many solutions unknown or labeled as intangible assets. Results are not managed as a set to determine the costs absorbed and value-added in the utilization to produce the result and value-added in the disposal of the solution, which determines the worth of the solution.

Total capital worth and result value-added must be managed to manage total business worth

Since capital solutions and results are not defined and managed as data sets today, actual business data cannot be captured and actual business information cannot be reported to management. This includes the positive worth of asset and negative worth of liability solutions utilized by the business, which adds up to the total business worth. The total business worth is also assessed by the total result value-added to be produced by the business over the future business payback period at the cost of capital or other return desired. This again can only be estimated in an unmanaged business. [more...]