One simple secret to improve business management that no-one has ever tried: Manage the business!
Conventional Business Management does not Organize and Manage the Business
Conventional enterprise organization and management structures are contrived as overlays on the business, forcing the business to adjust. There are continuous conflicts between enterprise structures overlaid on the business and the actual business, which creates unsolvable 20th century operation and development problems.
We have contrived hundreds of structures and written thousands of books on solving fundamental problems with alignment, business and information complexity, collaboration, corporate governance, development benefits, intangible assets, investment planning, project management, quality management, reorganization, unknown costs and capital worth, value chains, and on and on. All we do is work around fundamental unsolvable problems that can never be solved by changing overlaid structures or overlaying more structures.
Business Organization Structures
Before we can begin to manage the business, we need to organize the business. But, instead of organizing the business, we organize units, positions, and reporting into an enterprise organization structure that is laid over the business. If we organize the business, the organization must change with business change to keep the business organized. However, the business changes, while the organization structure remains rigid, building pressure until there is abrupt change in re-organization to align the organization structure closer to the actual business, and repeat the cycle. The fatal error of 20th century enterprises is to overlay an enterprise organization structure on the business, rather than organizing the business.
Once an organization structure is laid over the business, the enterprise cannot avoid unsolvable 20th century organization and management problems!
Business Planning Structures
It is difficult to plan the business, if we have not organized the business and do not have a consistent understanding of the business. We try to plan based on the organization structure, but encounter difficulties. This has prompted us to contrive other structures to plan functions, processes, activities, maps, missions, etc. that are additional overlays on the business. We often have different strategies and plans for corporate, finance, IT, marketing, sales, etc., that plan many different entities, but do not plan the business.
Business Management Structures
Since the business is not organized, the business cannot be managed. Therefore, we must manage the enterprise through management structures like business processes, account charts, career paths, performance management, project management, executive information, and other overlaid structures. We end up managing a wide variety of contrived entities like account codes, activities, customer relationships, cycle times, objects, responsibility centers, supply chains, tasks, work flows, etc. The overlaid structures and entities produce business and information complexity.
Defining the Business to be Managed
Last week, we discussed the problems with the definitions used for the business today. If we are going to manage the business, we must define the business we are to manage. The generally accepted definition of the business is the activity of providing goods and services. This definition recognizes that the business has two components.
- The Activity: The actions and utilization of capital invested in the business, which we call performance
- Goods and Services: The economic outputs produced by the business, which we call results
The activity of performance utilizes the full spectrum of enterprise capital. People are human capital, so people are one part of the performance needed. We also have other capital that humans utilize to produce a specific result.
The results include the outputs of value that can be measured. Results are produced by all capital utilized across the scope of the business. We can say that the business utilizes capital in performance solutions to produce value in results.
Managing the Business with Result-performance Management
Rule No. 1 of the 10 rules of 21st Century Management: Organize and Manage the Business. The knowledge and instructions needed to organize and manage the business of any enterprise is provided by Result-performance Management (R-pM). Modern information technology facilitates organizing and managing the business.
R-pM organizes business activity as performance solutions, and organizes business goods and services and other economic output as results. This produces one integrated result-performance business structure, where the results to be produced by the business are organized with the specific performance solutions to be utilized to the produce results. Special extracts from the business structure can define a result area, such as region, product group, organization unit, project, etc.
Once the business is organized, the business organization changes with each change to a result produced or a performance solution utilized. The same business structure is used to plan, direct, account for, report, and optimize the business. No additional structures should be overlaid on the business, although accounting structures may have to be rationalized with the business over time.
The Transition to a Managed Business
We can benefit immediately by understanding Result-performance Management to improve current business management. We can begin education and experimentation to understand the on-going business in terms of results produced and performance utilized, without actual change. When we have the need for change, we can isolate the problem and apply Result-performance Management to manage change properly. We can redefine entities in existing systems in terms of results and performance solutions to reduce information complexity.
We should immediately develop new strategies and plans with Result-performance Management and then restructure the management information we produce, to record and manage results and performance solutions. We can define the results, performance solutions, and time periods of R-pM in financial management systems. The other entities used by R-pM: suppliers, solution providers, and customers should already be in the system. We can define one integrated result-performance business structure to work with existing conventional structures. Then we can gradually redefine and incorporate conventional structures into the business structure, and benefit from 21st Century Management.
The Benefits of a Managed Business
R-pM provides one integrated result-performance business structure that eliminates the unsolvable problems of conventional overlaid structures. R-pM enables value-quality chains, planned and managed investment benefits and returns, business collaboration, good corporate governance, integrated information capital, and many other benefits of managing the business. R-pM is the only way to improve your business management, by managing your business through 21st Century Management.
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.
