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 accounting does not keep complete or accurate financial records on the business

Today's enterprise faces many obstacles to professional record capital management because of several 20^th century management problems. Financial accounting is often seen as enterprise records management, but maintains a professional view of what it will record, and acts as an administrative function. Financial accounting records some financial data against a chart of accounts laid over the business. Financial accounting does not keep complete and accurate financial and non-financial records of the actual business. Most actual business data is not captured in financial, statistical, or cost accounts or other enterprise records today. Most other enterprise records are not maintained as information capital to be available to provide needed management information solutions. Problems with intangible assets, unknown value creation, unknown costs, unknown capital worth, inaccurate business net worth, etc have never been solved. Records management is a growing problem in today's enterprise requiring a comprehensive professional records management solution.

21^st century business management maintains complete and accurate financial and non-financial records of the actual business

Business data and record transactions are captured against one business structure to integrate organization, planning, directing, control, and reporting. Structures laid over the business and irrelevant bases of data collected against the structures are removed. Management information includes result value, performance costs, result value-added in excess of costs, capital worth, and capital investment returns that are "unknown" today. Tangible information capital is maintained as facility records to record all financial and non-financial business transactions and activity in computer records, documents, images, archives, etc. Accounting continues independently but can be incorporated as one sub-set of professional records management.

Business management provides an opportunity for accounting to broaden to professional records management

Managing the actual business provides a unique opportunity for the accounting profession to expand to professional records management and eliminate unsolvable accounting and financial management problems. Professional facility records management maintains financial and non-financial facility records of the actual business, and provides information capital solutions from records, where needed to produce results at all levels of business management. [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...]

Effective business collaboration is prevented by 20^th century management

Each enterprise today lays a different collection of structures over the business, and each structure defines the enterprise differently, and captures inconsistently-defined data against the various structures. The 20^th century method of business collaboration is for businesses to lay the same process, information system, or data reconciliation and information reporting structure over the business. This is very expensive and still does not provide a satisfactory solution, since none of the collaborators actually organizes or manages the business.

Rule No. 9 of 21^st century business management: Collaborate to maximize shared value and minimize shared costs

Effective business collaboration and outsourcing requires that the business of each collaborator be managed. If the business is managed, there are common definitions for value creation, performance costs, quality levels, and other business measures that can be managed consistently for each business and across businesses. 21^st century business management requires that businesses be managed to enable collaboration by maximizing shared value and minimizing shared costs.

One simple business structure is used by all businesses to enable collaboration and integration

21^st century business management organizes the business as one consistent structure to define the results, capital investments, and capital utilization in performance to produce results. Results produced by the business are defined to know result volumes produced, result quality, result value, result costs, and result value-added across the business. The capital investments in the business are defined as capital solutions to know investment amounts and unamortized balances, investment returns, and capital solution worth. Capital solutions utilized to produce each result are defined to know performance costs incurred against the result and the value added to the result. The business structure can be managed within a business or across businesses to create result value-quality chains where each result is produced for the highest value and quality for the lowest cost. [more...]

Unreliable and inadequate accounting arises from failure to manage the business

Incomplete and inaccurate accounting is one of the major outgrowths from the failure to manage the business of enterprises today. Since the business is not managed, actual business transactions are not recorded and actual financial and non-financial management information is not reported. Many managers complain about the shortcomings of today's accounting, but the problems and shortcomings continue to be ignored by the accounting profession. Financial statements only report known capital and expenditures in whatever accounts are maintained, and often mislead management, shareholders, and regulators.

Today's accounting does not record the business or provide the information needed for business management

Significant problems arise due to the failure to account for capital invested in the business as specific solution investment balances, capital worth decline in performance costs as solutions are utilized or consumed, business result value and value-added after performance costs, return on solution investments as payback in costs and gain in result value-added, capital solution worth (asset value) in the value of utilization and disposal over the remaining life, and business performance statistics that add meaning to financial and cost records.

The business must be managed in order to account for the business

Since the business is not managed the business cannot be accounted for. The actual business structure in results produced, capital solution investments, and utilization of solutions to produce results provides the only valid business recording (or account) structure. In the absence of a valid structure, a generally-accepted chart of accounts is laid over the business for hit and miss 20^th century accounting to record actual and accrued cash expenditures and known capital. Therefore the first step to complete and accurate 21^st century financial, cost, statistical, and qualitative records management and accounting is to learn and organize the actual business. [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...]

The "alignment' problem hampers all enterprises today

All of us have heard of various alignment problems to align the organization, processes, information systems, human resource administration, financial and IT strategies, knowledge and capability development, accounts, capital development, outsourcing, supplier specifications, customer needs, tangible and intangible assets, etc with the business. All of these alignment problems are caused by rigid 20^th century organization and management structures that are laid over the business. The rigid structures conflict with the actual business, causing business change problems, and go further out of alignment as the business changes. Periodically new organization, accounting, process, administration, and other structures must be redesigned to align them closer to the business, and then the cycle is repeated.

All attempts to solve the alignment problem have failed and the problem remains unsolved today

Hundreds of books and solutions exist to solve the "alignment" problems, but alignment problems remain unsolved. Alignment problems can never be solved by laying new structures over the business, or by contriving methods to align overlaid structures with each other. The overlaid structures cannot be aligned with the business, because the actual business has never been defined or organized.

21^st century business management eliminates 20^th century alignment problems

The solution to the alignment problem is obvious. The generally-accepted definition of the enterprise business is "the activity of providing goods and services". The business has two components: "the activity of providing" and "the goods and services provided". We must organize the business to align the business activity in capital solutions utilized performance with the goods and services provided as results. This eliminates alignment problems by organizing the business for 21^st century business management. [more...]

Today we have many generally-accepted accounting problems

Accounting is a major problem in the 20^th century enterprise. Management is faced with generally-accepted accounting problems. The actual business is not accounted for. Financial records are missing for much of the business cycle. Financial management information is inconsistent, inaccurate, and incomplete. Many well-known problems like intangible assets, unknown costs, unknown capital worth, unknown investment returns, unknown value creation continue unsolved. Accounting is often equated to records management. Most enterprise non-financial records are scattered, missing, and mismanaged.

Organize your business for professional records management of all financial and non-financial facility records capital

21^st century business management organizes the actual business and builds professional records management to provide complete financial and non-financial facility record capital solutions. 21^st century business management manages the full business cycle to keep accurate records on all performance costs, performance effectiveness, result volumes, result quality, result values, result value-added, tangible and intangible assets of positive capital worth, liabilities as specific solutions of negative capital worth, and accurate enterprise business net worth. 21^st century business management provides one set of accurate management information on the strategic, planned, actual, and historic business. [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...]

Today it is not possible to manage businesses as part of a corporation, industry, or economy

Companies and corporations today are arbitrarily organized and managed through structures laid over the business. The business is not organized, actual business data is never captured, and real business management information is never generated, recorded, or consolidated to describe the actual company, corporation, industry, or economy in real business terms.

Businesses must be organized as business structures that build up to multiple-business corporations, industries, and economies

Businesses must be organized instead of companies or corporations. The business organization structure must define economic output results produced in chains of results across the complete business, all investments made in the business as specific human and other capital solutions implemented to produce specific business results, and the utilization of each solution to incur the costs and to create the value in each business result. The consistently-defined organized businesses can then be consolidated into the complete economic output results produced by a corporation, industry, or economy. All capital investments are managed to know and consolidate the return in result value-added to date and the capital worth (asset value) in the projected continuing future result value-added. The utilization of all capital solutions in performance to produce results are managed to know and consolidate all result volumes produced, performance costs, result value created, result value-added over performance costs, performance effectiveness, and much more vital and accurate business management information.

21^st century business management provides the structure required to manage each business and consolidate multiple businesses

21^st century business management structures each enterprise business to manage all capital investments, the performance of each investment in the business, and the economic output results produced from the utilization of specific capital investments. Enterprise businesses are consistently consolidated to the corporation business to record and manage all businesses within the corporation. Consolidation is possible for all the businesses in an industry, market, economy, or other business indicator against which enterprise business data is collected. [more...]