Rule No. 5: Operate to optimize operations, result value-added, and the profit result

Rule No. 5 of the ten rules of 21^st century business management is Operate to optimize operations, result value-added, and the profit result. This rule requires that the capital solutions utilized to produce each result are optimized to be cost-effective and produce a high value-quality result, so that all business operations are optimized.

21^st century business management organizes capital investments, capital performance, and each result produced

Business operations cannot be optimized unless the business is organized in order to manage the specific performance that produces a specific result. The 21^st century business is organized using Result-performance Management (R-pM) knowledge and procedures, so the business can be optimized, by ensuring that capital solution investments are developed and implemented to be qualified to produce the desired results and integrated to employ the most cost-effective performance to produce the highest value-quality result.

21^st century business management organizes capital investments as specific solutions

21^st century business management organizes the capital the enterprise invests in as specific capital solutions that are implemented to be utilized to produce one or more specific results. This allows the enterprise to assess and manage capital solutions for:

• The investment cost of acquiring, developing, or improving the capital solution
• The planned result value to be created over the useful solution life that justifies the investment
• The amortization or depreciation of the capital as the solution deteriorates or becomes outdated
• Total performance cost s incurred in the utilization of the solution for all results produced
• Capacity of the capital to produce a volume of results
• Qualifications of the capital to create result value, when implemented to produce the result
• Reliability of the solution to perform when and in the manner needed for value-quality results
• Return provided on the investment in the capital from the contribution to result value created to date
• Worth of the capital assessed from the planned contributions to result values to be produced over the remaining solution life
• The causes of performance problems due to an unqualified or unreliable solution and the improvement to the capital to provide the solution
• The potential of the solution to contribute to meeting performance expectations to achieve result goals

Capital measures are captured and maintained to show the status of each capital investment in the business and the share of capital solution worth as a part of total enterprise business worth.

21^st century business management organizes each capital solution utilized and the result produced in a performance domain

Capital solutions are deployed and implemented in performance domains to be utilized to produce specific results. This allows the enterprise to assess and manage the performance of each solution producing each result for:

• Utilization of capital capacity to produce the planned volume of results
• Performance cost of consumption or utilization of the capital in operations as utilization costs are incurred and as solution worth declines over the solution life
• Effectiveness of performance in using the capital to produce a high-quality result
• Uncertainty of the performance of the capital and the risk of a poor result
• Contribution of each capital solution utilized to result value or value-added created
• Performance problems identified in the utilization of solutions that cause result symptoms
• Level of performance of the capital against expectations

Capital solutions are categorized as business, human, facility, or management capital so that a performance manager with specific capabilities can be responsible for providing qualified solutions. Within each category, solutions are classified as one of three classes; as readiness solutions to prepare an organization responsible for a set of results, as production solutions to be used or consumed in producing each actual result, and as information solutions to support or document results. Capital solutions are integrated by capital class for utilization to produce a result. The performance of each solution to produce a result is measured in performance indicators that are maintained for each performance domain.

21^st century business management organizes the outputs from business performance as specific results

21^st century business management organizes the inputs incorporated and outputs produced by the enterprise as results. Results are tangible items of value that can be counted. Each result has an internal or external customer that wants the result produced and is willing to pay a value to receive the result. This allows the enterprise to evaluate the:

• Volume of results as defined counted from utilizing the capital solution capacity
• Value of the result produced in a chain of result values
• Quality of the result against standards and quality determinates
• Risk that a poor or defective result will be produced
• Total capital solution performance costs absorbed against the value
• Result value-added in result value less total performance costs for each volume of results produced
• Symptoms of performance problems that appear in late, poor quality, or negative value-added results
• Result goals to achieve a volume or value of results over a time period
• Actual against goals to produce a quantity or quality of the result for each time period

Results are categorized as revenue results in a chain of results that produce revenue and profit results, capital results that manage capital and support performance, and investment results that implement new or improved capital solutions to increase future result value. Results are measured in result metrics that are maintained to describe each result produced and results produced for each time period.

21^st century business management optimizes capital solutions and solution performance to optimize result value-added and the profit result

21^st century business management manages the performance producing each result and evaluates results and assesses capital solutions utilized and the performance of each solution to optimize the result. Each capital solution is under a performance manager and each result is under a result manager. Each manager has a continuing responsibility to ensure cost-effective performance to produce a high value-quality result. Result value-added (result value less total performance costs) is maximized. Result value-added contributes to the profit result.

High value or strategic results are periodically optimized from the bottom up with each result manager in coordination with the performance manager for each set of solutions utilized. Results and performance are also optimized from the top down by investment management for return on investments and senior management to identify and rectify problems.

Capital solutions are assessed by capital class to ensure that they are integrated to be effective in producing the result. Result goals are reviewed against the expectations of performance and potential of solutions to ensure that goals can be reached by the solutions provided. Result value is evaluated against the performance cost of each solution and the total cost of solutions to know and improve the result value-added. Result quality is evaluated and the performance of each solution is assessed to ensure that performance of each solution is effective and that any poorly-qualified solution is identified. Capital solution reliability and performance uncertainty is assessed to identify the risk of a poor result to modify or insure the result or reinforce performance. Capital solution capacity utilization in performance to produce a volume of results is assessed to ensure that the lowest capacity solution is sufficient and that the cost of overcapacity in other solutions is minimized.

21^st century business management makes operating to optimize operations and the profit result part of the routine of result, performance, and investment managers.

Result-performance Management (R-pM) provides the knowledge and procedures for actual business management and reporting

Result-performance Management (R-pM) is the only source of knowledge and expertise on how to manage the actual business. Forward-looking enterprises are now using R-pM guidance to organize and manage their business to gain breakthrough advantages over competitors burdened by unsolvable 20^th century management problems. Business management is explained and documented in the Business Management Toolkit. The Toolkit provides procedures for actual business management and maintains emerging 21^st century management conventions, definitions, and standards. Management consultants who base 21^st century business management services on R-pM knowledge are licensed to help enterprises learn, organize, and manage the actual business. Business management knowledge and the Business Management Toolkit are available and supported today at result-performance-management.com.

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