What is management capital in the modern enterprise?
People know instinctively that management capital is of real worth to an enterprise and is essential to success. But, people ask what constitutes management capital? Is it the capability of enterprise managers? Is it the capital provided as management solutions to plan, direct, and control the enterprise?
Management capital enables the enterprise to develop and execute a successful strategy
Management capital is not the capability of enterprise managers. That is part of human capital. Management capital is the capital that provides solutions to management at all levels so that the enterprise can develop and execute a successful strategy. Rule No. 6 of the 10 rules of 21st Century Management with R-pM: Plan and govern the transition from today’s value to approved strategic value, requires effective management capital.
20th century management uses corporate planning, internal audit, public relations, marketing, legal, etc. that may administer some management capital, but few enterprises, if any, really manage management capital. Many enterprises have serious problems due to inadequate management capital.
Well-managed management capital is required for good corporate governance
The successful enterprises tend to have strong management capital. Strong management capital is required for good corporate governance. The enterprise needs to understand what constitutes management capital and manage it as capital, so that management can make sound decisions, define and substantiate a viable strategy, and provide proper guidance to the enterprise to execute the strategy.
But, well-managed enterprises need to put in much extra effort and expenditure, since management capital is not organized for routine capital management and is not focused on developing and providing accurate and timely management solutions, directly related to the business, to enable good management results.
Most enterprises have problems organizing and managing management capital because the business is not organized
Again, the fundamental 20th century management problem is the unorganized business that cannot be managed . An enterprise organization structure is laid over the business, preventing business management and dooming the enterprise to unsolvable management and governance problems.
The management strategy cannot be based on the actual business, since business results, capital invested in the business, and business performance were never defined and organized. There are helpful methods for strategic planning, like strategy maps, etc. But, even these methods must develop a strategy as another structure that is laid over the business.
Tactical management to execute the strategy is based on other overlaid management structures like charts of account, performance management structures, and the various information entities that are maintained and reported by business processes and information systems. Each overlaid structure defines the enterprise with different names and meanings and produces a variety of management reports. Management is faced with the massive information complexity problem, requiring various management information, executive information, strategic enterprise management, and other systems for data reconciliation, cross-referencing, drill downs, etc.
Management intelligence requires extensive data analysis of conflicting entities. There is no one set of entities to consolidate data derived from various overlaid structures and to relate internal data with external business and competitive intelligence. In all of this data collection and reporting there is no specific collection of actual business data or reporting of actual business management information.
Result-performance Management professionally manages management capital
The answer is Result-performance Management (R-pM) to establish professional capital management based on an organized and managed business. R-pM bases all management planning, directing, and control on six entities: results, capital as specific solutions, performance in the utilization of capital solutions to produce results, time periods, business descriptors, and enterprises including suppliers, solution providers and customers. All enterprise products, services, employees, assets, roles, responsibilities, opportunities, and threats can be sub-records or attributes of these six entities.
Management capital is organized in management strategy, management tactics, and management intelligence. Each category is managed by specialists, who become professionals, to provide the management solutions needed.
- Management Strategy: Responsible for developing and maintaining strategy solutions to produce strategic results, invest in the required capital solutions, and manage stakeholder value from current to strategic result value. Management strategy capital includes the strategic business structure. Management strategy solutions are readiness capital to plan results and the capital solutions needed for performance to produce results
- Management Tactics: Responsible for management solutions to guide results and to evaluate results, assess performance, and optimize cost-effective performance to produce value-quality results and ensure business competitiveness. Management tactics solutions are production capital to support actual utilization of capital to produce results.
- Management Intelligence: Responsible to analyze data and records and perform external research to provide solutions that inform management, at all levels, of external opportunities and threats and internal status, forecasts, problems, and advantages. Management intelligence solutions are information capital integrated with business data, human knowledge, and facility records solutions
Management capital supports and informs management directly on the business for effective 21st Century Management and good corporate governance. Management capital is explained in the R-pM Toolkit and at the R-pM website result-performance-management.com.
