Employ Good Best Business Practices, not Bad Best Practices to Prevent Management Crises

The current financial crisis prompts many to call for new best business practices

Many commentators correctly point out the need for new best business management practices to prevent the corporate management problems that led to recent business failures and government take overs. However, the examples they present, such as requiring customer loan deposits, improving accounting practices, and adding more government regulations are not best business management practices.

People do not know real best business management practices, since no corporation today employs best business management practices, because no corporation manages the actual business. All corporations manage the corporation by laying organization and management structures over the business. This prevents corporations from managing the actual business to manage capital worth, capital investment returns, economic output result value, actual performance costs, and value-added to the business by results produced in chains across the business.

What are best business practices?

Best business management practices are best practices used to manage the actual business. In my years as a management consultant, I was involved in many projects to implement best practices or the business methods that were the fad at that time. I invariably found many shortcomings in the practices or methods being promoted. I found that they were not actual business practices, but arbitrary structures contrived and laid over the business. No best business practice or method actually organized or managed the business. The enterprise was simply replacing one set of unsolvable problems with another set of unsolvable problems. The need to eliminate these unsolvable problems led to Result-performance Management (R-pM) to organize and manage the actual business to determine, prove, and apply the best practice by acquiring or developing the best set of capital, by utilizing the capital in cost-effective performance, and by producing high value and quality in each output result across the business.

R-pM builds in best business practices to organize, develop, operate, or manage a business. Result-performance-Management.com defines the business as “investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results”. R-pM manages the business through three components; capital acquired and developed as solutions of an investment cost and future worth, performance in the utilization of a capital solution to incur a cost and to produce a result of value, and output result value-added to provide the investment return and profits.

How do we define best business practices today? Wikipedia entries say:

• Best practice is a method, incentive, or reward that is more effective at delivering a particular outcome than any other
• Best practice is the most efficient (least amount of effort) and effective (best results) way of accomplishing a task

Both of these entries indicate that best practices have two components; the method, effort, or performance component, and the outcome or result component. This supports our definition of the business, so we can say best business practices are “the utilization of the most appropriate capital as solutions in the most cost-effective performance to produce the best value and quality in results”.

The 20^th century enterprise does not manage the business to employ best business practices

If we accept that a best practice is the best utilization of appropriate capital in performance to produce value and quality in results, we face a problem. The 20^th century enterprise does not manage the business.

Capital from large investments in the business is not defined or managed as capital solutions in a set of capital solutions to manage capital worth and return on capital investments. Performance is not defined or managed in the utilization of a specific capital solution to produce a specific result in a set of performance to manage costs and effectiveness. Results are not defined or managed as results in a set of results to manage value and quality created. Therefore, it is hard to define or manage a particular best practice as utilization of the best capital in the best performance to produce the best value and quality in results.

20^th century best practices are methods laid over the business that have shown success elsewhere

20^th century management lays organization, process, system, account, performance, administration, and other practice structures over the business, so best practices cannot be applied to the actual business. 20^th century best practices are practices that have proven successful elsewhere, where they were laid over the business, and are assumed to produce success, when laid over a different business. Best practices normally are directed to performance of a process or information system, rather than creating value and quality in results. Best practices do not have to fit into a business whole, so various arbitrary practices can be laid over the same business. The proliferation of structures and practices produce business and information complexity and require excessive IT resources. Many celebrated best practices in business process management, activity-based costing, performance management, integrated information systems, and other contrived structures prove to be disappointing in actual practice.

Best business practices must be based on operating and managing the business

Best business practices must be the most appropriate capital utilized as solutions in the most cost-effective performance to produce the best value and quality in results. Every result is produced by performance utilizing a set of capital solutions, including the process, system, information, management strategy and tactics, facility equipment and supply, plus human time and capabilities. Therefore, best practices must be the best combination of human and other capital in specific solutions, performance effectiveness in the utilization of solutions, and value and quality in the result produced.

Result-performance Management is the only means to apply and manage best practices

Result-performance Management organizes the business as specific capital solutions utilized in performance to produce specific results. R-pM eliminates structures laid over the business and unsolvable 20^th century management problems. R-pM instills best practices across the business by managing the capacity, investment cost, qualifications, reliability, investment return, on-going worth, and potential of capital solutions; the utilization, cost, effectiveness, uncertainty, contribution to value-added, and expectations in the performance of each capital solution to produce a particular result; and the volume, total cost, quality, risk, value, value-added, and goals of each result produced. R-pM employs information technology to manage one consistent, complete, and accurate set of actual business data to provide one consistent set of business management information. R-pM clarifies and simplifies the best business practice problem by defining and organizing the value and quality of results required by the business first, then determining the most appropriate capital solutions to be deployed to produce the result, with back-up as needed, and then providing knowledge and guidance to utilize and manage each solution to be cost-effective in performance to reduce risk and produce the value and quality in each specific result.

R-pM builds in best practices by managing the investment and qualifications of each specific capital solution acquired and developed, the cost and effectiveness of performance in utilizing each solution, and value and quality of the result produced. The full or partial set of capital solutions deployed to be utilized to produce a result or set of specific results can be documented and managed as a capital module. The best capital module among alternative modules could be defined as a best practice. But, best practices can not be arbitrary; they must be precise to the result and built into the enterprise business structure.

Do not employ bad 20^th century best practices, but instill the comprehensive best practices of 21^st Century Management

All 20^th century best practices are bad business practices, since they do not manage the actual business. The capacity, costs, and effectiveness of performance cannot be measured or assessed against the volume, value, and quality of the result produced. Capital investments in solutions cannot be managed or measured to know the costs of investments, qualifications to produce results, solution reliability, the actual return on investment, and the current and future solution worth. Corporations and financial institutions do not know the actual total of tangible and intangible assets that provide assets of positive worth, liabilities in solutions of negative worth, and the real business net worth. The financial crisis arose because financial institutions are unable to manage the worth of their capital in the attributable future value-added from results over the solution life that leads to a justified and managed disposal worth.

Best practices copied from one enterprise to another is not a 21^st Century Management concept. 21^st Century Management qualifies all solutions for the best performance to produce the desired value and quality of result. Standard capital modules that contain proven good solutions to be utilized with guided performance to produce a specific set of results may be defined as best practices to produce the same results elsewhere. Vendors may define best practices in capital solution modules for typical capital or investment results produced by every enterprise, or revenue results for a particular industry.

Governments should support the use of R-pM for best business management and transparent business management reporting

Many governments are considering measures to improve corporate and other enterprise management and reporting to prevent future crises. R-pM is the only real solution for financial institutions and other enterprises to manage the business effectively. Governments should support enterprises to learn, organize, and manage their business and provide transparent business management reports to responsible regulators. Governments also should support local management consultants, software providers, and other solution providers to adopt R-pM as the basis for a set of services and solutions to support the effort. The move to R-pM to manage the actual business provides returns to the enterprise, government, and economy in significantly increased competitiveness in the world economy. The R-pM solution is explained further in the article “Governments seek New Best Business Practices to prevent Future Financial Crises“.

The only best practice is to use R-pM to organize the business for 21^st Century Management and instill actual best practices across the business. Do as many are now doing. Visit Result-performance-Management.com to learn more about organizing your business with R-pM for 21^st Century Management, and subscribe to the R-pM Toolkit, your 21^st Century Management Manual.