Eliminate “Alignment” problems by managing the Business

What is the unsolvable 20^th century alignment problem?

We keep hearing about alignment problems that hamper the management of every enterprise today. Alignment problems include aligning the organization and the business, so that the organization is updated each time a change is made to the business.  Alignment problems include aligning financial strategies, information technology strategies, investment strategies, and corporate planning, so that there is one consistent strategy to create future value. Alignment problems include aligning information systems with the business, so that business changes are not delayed or prevented by the need for extensive system change or new system capabilities. Alignment problems include aligning business processes with operations to provide flexibility in new or changed capital utilized. Alignment problems include aligning accounting with the business, so that all new or discontinued business activity is accurately reflected in financial and management reports. Alignment problems include aligning outsourced services with internal operations, for consistent and effective achievement of business results. Alignment problems include aligning human resources and business needs, so that human capabilities are available whenever needed to produce new business results. Alignment problems include aligning tangible assets and intangible assets, so that all capital investments are measured, amortized, and managed for a high return.

How many books have written and methods proposed for solving these and other alignment problems? Despite all these books and methods, the unsolvable 20^th century alignment problems remain. We say we need to align our structures and solutions with the business, but to this day, we have never defined the business or defined how to align overlaid structures with the business. The solutions proposed attempt to align one overlaid structure or solution with another overlaid structure or solution.

The alignment problem is eliminated by organizing and managing the actual business

20^th century enterprise management used today manages the enterprise, and is unable to manage the business. The enterprise is managed using various organization, corporate plan, financial accounting, cost accounting, business process, information system, administration, performance management, reporting, and other structures.  These structures are laid over the ‘business”, which remains largely an abstract concept. There are then attempts to align structures with the business in order to manage effectively.

21^st century business management eliminates the alignment problem by organizing and managing the actual business, “investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results”. The business organizes economic output results in a result structure, capital investments as solutions in a capital structure, and capital solutions utilized to produce results in a performance structure as the three components of the business. The structures form one integrated business structure used for the current and strategic business. The one structure is used to organize, plan, direct, control, report, and govern the business. The 20^th century enterprise management structures now laid over the business are cleared away and unsolvable problems are left behind.

The alignment problem has two causes: multiple structures laid over the business and the focus on performance within a structure

The unsolvable alignment problems are caused by 20^th century enterprise management mistakes:

1. Failure to organize and manage the business, instead laying multiple organization and management structures over the business
2. The flawed definition of performance that defines not only activity and actions executed, such as human performance, but also output results accomplished, such as sales performance, as performance

Rigid structures laid over the business go out of alignment with every change to the business, and must be periodically realigned with the actual business. Defining results as performance forces us to align performance with performance, and prevents us from defining and relating results to build a result structure, and aligning capital solutions utilized in business performance with the output result produced.

Organization and management structures, laid over the business, go out of alignment with each business change

Every enterprise has an enterprise organization structure that defines various functions, departments, positions, reporting relationships, etc. The rigid organization structure organizes the enterprise, not the enterprise business. Once an enterprise organization structure is laid over the business, the business can never be managed. The enterprise is managed by laying separate management structures over the business for strategy, planning, business processes, accounting, performance, projects, information systems, supply chain, production and logistics, customer service, management information, etc.

Each contrived structure is rigid and defines its own entities, interrelationships, and work requirements, instead of defining the business. The business results produced, capital invested in the business, and capital solutions utilized in business performance change continually, while the structures remain rigid as contrived. This causes the structures to move further out of alignment with the actual business. Eventually, the organization structure is reorganized. Strategies and plans are revised. The business process is redesigned. A new chart of accounts is drawn up. Management reports are reformatted. Then the cycle starts again as the new rigid structures go out of alignment.

20^th century enterprise management aligns performance with performance

We try to align overlaid structures with other overlaid structures. Within each structure, we try to align performance with performance and solutions with solutions. The alignment problem will never be solved until tangible and intangible investments in the business are defined and managed as specific capital solutions, and economic outputs produced by the business are defined and managed as specific results. Then capital solutions utilized in business performance are aligned against the output results the solutions must produce in a performance domain. Our organization, strategy, processes, information systems, outsourced services, tangible and intangible assets, internal operations, etc. all are capital solutions that are utilized in business performance to produce results. We can solve the alignment problem by defining, relating, and structuring our results to have something fixed in place, against which to align all capital solutions by implementing the solution to produce a result in a performance domain.

We can no longer define results as performance. We must separate results, capital solutions, and performance domains as distinct components of the business. All tangible and intangible investments in the business must be defined and documented as specific solutions. Results produced by the business must be defined and documented to know the value created in result chains across the business. Effective utilization of solutions in the business must be managed to know all costs against the value of results and result value-added by the business to contribute to the profit result.

The business structure aligns capital solutions utilized with the result produced

All the entities like organization, strategy, information systems, processes, intangible and tangible assets, outsourced solutions, internal solutions, etc. must be defined as specific solutions in one capital structure covering all business investments. All the results to be produced by the business must be defined in a result structure. The performance structure is like a spreadsheet that has one row for each capital solution and one column for each result. The capital solutions are entered in the cells or performance domains where they are implemented to produce a result. Solutions that must be integrated and utilized together in performance are aligned in different cells in the same row to produce the same result, such as a product, a sale, an invoice, a maintained machine, a learning student/day, etc.

With 21^st century business management, the business is always organized and solutions are aligned with results. A strategic business structure shows the planned results to be produced, capital investments needed to produce results, and the aligned capital solutions to be utilized for each result at the strategic horizon.

The integrated business structure is all that is used to organize and manage the business. The accounting structure, which is updated and maintained to record the actual business, is retained until external requirements change, but all other overlaid structures are abolished.

Result-performance Management (R-pM) provides the knowledge for actual business management

Result-performance Management (R-pM) is the only source of knowledge and expertise on how to manage the actual business. Forward-looking enterprises are now using R-pM guidance to organize and manage their business to gain breakthrough advantages over competitors burdened by unsolvable 20^th century management problems. Business management is explained and documented in the Business Management Toolkit. The Toolkit provides procedures for actual business management and maintains emerging 21^st century management conventions, definitions, and standards. Management consultants who base 21^st century business management services on R-pM knowledge are licensed to help enterprises learn, organize, and manage the actual business. Business management knowledge and the Business Management Toolkit are available and supported today at result-performance-management.com.

The Solution to the Economic Crisis is explained in free downloads

Three free white papers explain the dead-end 20^th century management problems, such as the failure to plan, account for, and manage the actual business, that caused the economic crisis, the way to eliminate the problems, and a government program to address the crisis by stimulating the economy, solving the problems, building a structure for financial and economic management, and organizing local businesses to flourish in the eventual recovery.

• How to Eliminate Problems that caused the Economic Crisis explains the major unsolvable 20^th century management problems and the solution to eliminate the problems
• Business management; the only Solution to the Economic Crisis explains how to plan and manage the business to capture business data and provide management the information needed for actual business, corporation, industry, and economic management
• A Government Business Management Program to Answer the Economic Crisis outlines a government program to encourage business management, stimulate the economy, restore confidence, organize businesses to flourish in the recovery, and manage economic cycles to prevent future crisis

These three white paper downloads are available to R-pM Community Members at result-performance-management.com. There is no cost or obligation to join the R-pM Community. Join by entering your email address and personal password. Your email address is protected and used only for download problems, product updates, and occasional R-pM Member news and white papers.