Replace Administration with Capital and Performance Management

According to the Business Change Forum, administration is one of the top ten 20^th century management problems. Enterprises have large sums invested in the capital that is utilized to produce results, but most enterprises do not even know the extent of this capital. There is no manageable organization of capital, and much is labeled as “intangible assets”. Capital is administered, rather than managed for operation, development, and utilization.

Now there is a solution to the problem, Result-performance Management (R-pM), which defines all tangible and intangible capital to be developed and managed as specific solutions that are utilized in managed performance to generate costs against the value created in results.

20^th century administration does not manage capital

Capital is created and developed day in and day out without being recognized as something of worth that should be managed and made available to improve performance. Enterprises may have an assets register and think of managing capital as utilization of assets.

Many think that managing capital means assigning it to a responsibility center, which actually removes capital from management for the benefit of the enterprise. Typical responsibility center managers do not take responsibility for managing capital and are unable to manage capital that they share with other responsibility centers.

Other capital is administered under an administrative function like accounting, information technology (IT), purchasing, human resources, corporate planning, etc. These functions do not actually recognize a responsibility for managing capital, and most have no perception of helping the enterprise gain benefit from the utilization of capital. They perform day-to-day functions that might help to develop or support capital.

The modern enterprise utilizes high-worth intellectual, information, business, and management capital. In most enterprises, this capital is labeled as “intangible assets” and is not accounted for and is not managed to create value.

Intangible assets, poor investment returns, unknown costs and worth, and unmanaged capital are problems of administration

We have well-known problems because administrative units administer some know capital rather than managing all capital for cost-effective utilization in performance to produce value-quality results. Some capital solutions that require very different professional capabilities are mixed together in administration. IT and the CIO have problems administering technology, equipment and network facilities, business process and data capital, and strategic management capital. Accounting is expected to maintain facility records and provide management intelligence. Business, human, equipment and supply facilities, and management capital are mixed together to be managed as a monolithic business process.

Many equate capital management with the financial management function. Financial management is a sub-set of capital management to manage cash and accruals. Much of the historic fundamental need for financial management has decreased through advanced methods and technology. The separate emphasis on financial management prompts neglect of higher-worth enterprise capital.

We administer information and information systems as technology, rather than managing it as capital. We administer human resources as employees, rather than managing human capital. We administer assets and supplies, rather than managing utilization and the supply chain. Accounting information systems record cash and accruals, but not financial record capital for result value and performance costs. Non-financial records are rarely administered as capital. Much other capital is developed, which has no administrative responsibility, and ends up unrecorded or ignored as ‘intangible assets”.

Administrative functions invest in new capital, but do not manage the return on investment

Administrative units make large investments in capital that are paid back only when the capital is employed to provide benefit through increased result value. But, they do not manage capital utilization for benefit or measure the return in result value-added. Every enterprise has much benefit to gain by managing capital and optimizing the utilization of capital. Capital must be managed to understand the needs and to carry through with capital improvement and development to add value to results produced.

All enterprises utilize capital solutions in performance to produce value in results. But, the enterprise has never specifically organized capital as solutions to manage performance in utilization and has never defined what it does with the capital it utilizes. So, today’s 20^th century enterprise cannot manage the utilization of capital in performance to produce value in results.

R-pM enables professional capital and performance management

The problem is eliminated by Result-performance Management (R-pM). R-pM organizes the three components of the enterprise business: 1) results of value required for business success as outputs from performance and 2) capital solutions of worth available to be utilized in performance, and 3) performance in domains where a specific solution is utilized to incur costs to produce a specific result. R-pM replaces administration with capital management to manage defined performance solutions directly.

R-pM provides two important responsibilities to replace administration with capital management.

• Capital Management: Manage and support capital by producing capital results, so that capital continues to operate and function properly; so that capital is regularly improved, reassigned, or replaced; so that new capital is developed as needed; and so that capital utilization for benefit is managed from the capital point of view
• Performance Management: Organize and manage the implementation and maintenance of capital utilized to produce results to assist result managers

Capital is categorized as business, human, facility, or management capital to apply professional capabilities required to produce capital management results. Performance Management results are a subset of Capital Management results.

Capital Management manages the development, improvement, maintenance, and support for a category of capital. Performance Management manages the implementation and effectiveness of qualified solutions in utilization for a category of capital. Result Management then manages the utilization of each capital solution to produce a value-quality result. Result managers work with performance managers to solve performance problems and optimize performance in the utilization of capital solutions to maximize result value-added and quality.

R-pM enables any enterprise to organize the business and manage capital and performance

R-pM provides the means to gain control of capital to manage development, improvement, and support. R-pM implements capital solutions in performance domains to produce specific results to enable management of solution performance.

• Identify all the capital available in the enterprise, whether tangible or intangible
• Evaluate the unique management and support capabilities required get the most out of the capital
• Organize capital requiring specific professional capabilities to be managed together by category for operation and development as business, human, facility, or management capital
• Organize capital within each category into classes by the way capital is utilized to be ready to produce results, to actually produce results, or to provide information and document results
• Identify categorized and classified capital as specific capital solutions
• Develop and deploy personnel solutions with the professional capabilities needed to manage and support each category of capital
• Replace administrative functions with capital management responsibilities to manage the complete life cycle of planning, development, implementation, and utilization of all capital to provide a healthy return on capital investments
• Assign performance managers, within each capital management responsibility, to deploy, implement, and maintain the solutions utilized to produce results
• Implement qualified solutions in domains in the performance structure, integrate solutions in each class, and test solution utilization to successfully produce a value-quality result
• Support result managers in their responsibility to utilize capital solutions properly to produce value-quality results

Once R-pM concepts and the attributes of capital solutions are familiar, this will not be as difficult as it may appear. Capital and performance management are not requirements of R-pM, but are required to manage the actual business.

R-pM improves profit margins through professional capital management

Capital is managed to be of high-worth, by being utilized for a managed performance cost to create greater value in the results produced. All enterprises can improve profit margins by using R-pM to manage their capital properly. But, enterprises can never manage capital or the return on capital investments while much capital developed is unknown, capital lies in centers hidden from view, capital is classified as “intangible assets”, and those who should be managing capital are performing administrative functions.

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.