It is impossible to itemize the costs and benefits of capital development today
In my years as a management consultant, I managed and was involved in many capital development projects, mostly management improvement projects to develop or implement information systems, re-engineer business processes, reorganize enterprises, etc. Invariably I faced problems in planning the project to understand the specific capital to be developed to itemize the costs of development and to understand the specific benefits to itemize the return on capital development investments.
I tried to get the client to itemize the business improvements they wanted in specific results needed from development. This was resisted because managers never thought of the business in terms of results other than such high-level results as products produced, sales booked, and revenues generated. It is easier to estimate an increase rather than build up specific result value improvements, since results produced by the business were not defined and managed as a set.
The same applied to the capital to be developed. The focus was on tangible assets like new software package or computer hardware or the project as a whole without sub defining the range of specific capital to be developed, particularly those “intangible assets”. Again, the problem was that capital was administered as assets, employees, systems, etc rather than being managed as all the capital invested in the business as specific performance solutions utilized by the business. Project planning turned out to be a lot of guesswork.
Nevertheless, projects were planned to the degree possible to determine specific business results to be improved by the project to provide value-added benefits and specific performance solutions required to produce the results. The project was organized to develop specific solutions and the needed results by utilizing the enterprise and consulting capital assigned to the project as project solutions to manage solution development and capture the costs of the project against the solutions developed. Of course, the accountants resisted breaking down the project to specific solutions to be developed and specific project costs incurred. They could not measure new results and performance solutions implemented after the project to determine the return on the enterprise investments. Their 20th century accounting principles lumped costs by the project and major tangible assets to be depreciated.
20th century management does not provide a way to manage capital development
20th century management does not manage the enterprise business, defined as “the utilization of capital of worth in performance to incur costs and produce value in results”. The business has three components: 1. capital investments in the business available as performance solutions, 2. results required for business success, and 3. performance in the utilization of a specific solution to incur costs and produce value in a specific result.
20th century management does not define specific results produced and performance solutions utilized to be managed as sets. Added result value cannot be managed to provide benefits and specific performance solutions developed cannot be managed to know costs. Capital development projects are difficult exercise separate from the business context to develop performance or tangible assets to produce some estimated return on investment. Much capital development and performance solution implementations fail to create the added result value needed for the return on investment.
All capital development should develop capital, plus business results for return on investment
Every business enterprise must produce output results that lead to goods and service results to create value. An expanding enterprise must produce new results of increasing value. The enterprise needs additional capital in order to produce new results as part of the business. The capital must be acquired or developed, implemented as specific performance solutions, and then utilized to produce improved or new results of increased value. The value added to new business results must justify the capital expenditure to acquire or develop needed solutions and provide the return on investment.
All capital development is really result-performance development to develop capital as performance solutions to be utilized to create additional value in output results produced by the business. The additional value of output results provides the return on the capital development investment. If the performance solutions utilized and the results produced by the business are not managed, result-performance development cannot be managed properly and the return on investment cannot be measured. Even physical capital development, like a new building, produces performance solutions to produce results, be it the enterprise office facility solution or a facility solution to produce lease or rental income results.
Result-performance Management (R-pM) organizes results, capital, and performance as part of the business
The answer for all future result and capital development is Result-performance Management (R-pM) to organize the business for 21st Century Management. R-pM organizes the business as results to be produced, capital needed as specific performance solutions to produce results, and performance in the utilization of a specific solution to incur costs to produce value in the result produced. Once the business is organized result managers understand and manage the full scope of results needed across the business. Capital managers have defined and managed the full set of capital in their category to be utilized by the business. Performance managers provide and monitor the specific solutions utilized by result managers. Once the business is organized and managed, experience is gained in managing result value, capital worth and returns, and performance costs and value added for both operations and development. New solutions needed to produce the results and the costs to be incurred in development and future operations can be determined.
R-pM manages result-performance development as part of the business for measured and managed return
R-pM utilizes result-performance development to manage capital development as both capital development in performance solutions to be utilized by the business and result development to develop the business results to be produced to plan and manage the value added to results. R-pM manages new performance solution development to produce new or improved results. R-pM manages each result-performance development project as part of the business with its own project business structure. R-pM manages implemented solution development and operating costs and the additional value-added to results to measure the actual return on investments. R-pM is the essential approach for any new result-capital development.
R-pM can be used today to manage capital development and to organize and manage the business
Result-performance Management (R-pM) organizes the business for 21st Century Management. R-pM provides the Result-performance Operation and Development continuum to manage the full cycle of result and capital development to produce planned and managed result value-added return on investment.
R-pM is the only way to manage any result and capital development properly, even if R-pM is not utilized to organize the business. The download “How to Manage Projects in the 21st Century” describes result-performance development and proper development project management. Full R-pM learning, procedures, and case examples are provided in the R-pM Toolkit, your 21st Century Management Manual. The downloads are available at result-performance-management.com.
