Corporate Governance is an unsolvable 20th century problem
Corporate governance problems arise because 20th century corporations do not organize, manage, and report the corporation business. Instead, the corporation is managed by laying organization, strategy, process, performance management, accounting, and management reporting structures over the business, and reporting on contrived departments, objectives, activities, objects, etc. that do not report the actual business. Since we do not have one fundamentally correct way to organize and manage the business, we contrived a myriad of different structures for corporate management and a myriad of ways any corporation can be presented. We govern by enforcing rules and regulations, because we cannot directly organize, plan, manage, and report the business.
Good corporate governance is a fundamental part of 21st Century Management
The solution needed for good corporate governance is provided by Result-performance Management (R-pM), to organize the business for 21st century management.
Every corporation business is defined by only two entities:
- Results: The specific economic outputs of value that management and the board want produced by the business
- Performance Solutions: The specific capital the corporation invests in and must utilize to produce specific results.
R-pM organizes business results and performance as one integrated business structure for all management. The business structure shows specific performance solutions that are utilized to produce specific results. All corporate costs, including executive compensation and external contracts, must be charged against the value created in approved results.
R-pM manages the corporation business in three dimensions:
- Result: Manage economic output to create value and maximize revenues
- Performance: Manage invested capital to control costs and gain returns
- Management: Manage by time period to develop capital and execute the strategy
R-pM measures and records business data not recorded today for performance costs, result value, result value-added, and capital worth. R-pM manages facility records capital to provide integrated financial and non-financial records and reports on planned and actual capital consumed in performance and value-quality created in results.
R-pM reports and manages specific performance costs, effectiveness, capacity, and expectations against specific result value, quality, volume, and goals, as needed, to enable management to optimize the business.
Good corporate governance ensures creation of strategic value in the strategic business structure
The enterprise strategy is defined by a strategic business structure that shows the result value to be created and costs of performance to produce approved strategic results. Result goals and performance expectations are planned time period by period to the strategic horizon. Capital development projects are planned to add planned value to strategic results through the cost of developing specific performance solutions needed. The return on investment is managed by measuring actual result value created and actual development and operating costs of solutions in operation.
Corporate governance oversees the transition period by period from result value-added in the current business structure to the approved and latest estimated result value-added in the strategic business structure. Any change in strategy to produce different strategic result value requires planning a new and approved strategic business structure.
Use R-pM for transparent management and good Corporate Governance
We can prevent malpractices and achieve good corporate governance by employing R-pM for 21st century corporate management, to manage the substance of cost-effective performance producing value-quality results period by period on the planned and approved road to strategic value creation.
The R-pM Toolkit, your 21st Century Management Manual, provides the guidance to organize, manage, and govern the corporation for 21st century management. This article is detailed further in the article “Seeking Good Corporate Governance by strengthening Bad Governance“.
Visit Result-performance-Management.com to learn more about organizing your business with R-pM for 21st Century Management, and the R-pM Toolkit, your 21st Century Management Manual.
