Top Ten Problems with 20^th Century Management

20^th century management does not organize and manage the business! The enterprise business is defined as the activity of providing goods and services. The activity is performance utilizing enterprise capital. Providing goods and services is producing results as economic outputs from the activity.

The actual enterprise business is defined by only three entities that have never been defined as sets to be organized and managed in 20^th century management:

• Results: The specific goods and services and other economic outputs of defined value produced across the totality of the business
• Capital Solutions: The capital invested in the business available as specific solutions of worth
• Performance Domains: Capital solutions implemented and utilized in business activity to incur costs and produce value-added in specific results

The enterprise must organize and manage results, capital solutions, and performance in order to organize and manage the business. The business changes when management decides to produce a new result, deactivate a finished result, or utilize a different capital solution in performance. But results, capital solutions, and performance are not defined in the 20^th century management used by all enterprises today.

Failure to organize the business is the cause of unsolvable business problems

The failure to organize the business causes unsolvable management, business, and performance problems in 20^th century management. The 20^th century definition of “performance” includes not only the capital solutions utilized in execution of actions, but also the results accomplished. Because of this flawed definition, we are not able to separate and organize results, capital, and performance. So, we contrive various organization and management structures as overlays on the business and manage contrived entities like departments, jobs, positions, accounts, functions, and processes. This creates business complexity and makes the enterprise difficult to operate and develop.

The Business Change Forum series of articles on the top 10 problems with 20^th century management, provides the basis for our top 10 problems.

We cannot solve 20^th century management problems until we organize the business

We continue to lay new structures over the business and write thousands of books, but we have never solved the top 10 problems with 20^th century management.

1. Reorganizations: 20^th century organization theories do not organize the business. We end up organizing people, positions, power, and politics and lay rigid contrived organization structures over the business. The organization structure is the fatal error of 20^th century management, preventing the business from being managed. The business must adjust to the organization. The business changes whenever a management decision is implemented, to change a result produced or a solution utilized. The rigid organization structure hampers change and business changes made create more conflict with the organization, until there is a major upheaval called the reorganization. We then contrive a different rigid organization and repeat the cycle.
2. Accounting and Financial Management: Historically, the enterprise needed to protect cash and so set up actual and accrual cash accounting and financial management. Business accounting and financial management retain this legacy and, consequently, prevent modern records management and comprehensive capital management. Accounting prevents records on specific investments, performance costs, value created, value-added, investment returns, actual capital worth, and non-financial business data. Financial management manages tangible cash and financial investments through separate structures and models, and not a part of the business. Financial management takes priority over other high-worth capital that is “administered” or that is labeled as “intangible assets”, and not managed or accounted for at all.
3. Investment Analysis and Capital Development: The enterprise is unable to itemize and plan the benefits of capital development investments, to manage capital development projects as part of the business, and to measure benefits and return on investments. Investment benefits are estimates that cannot be managed. There are no management goals to create result value from the utilization of developed capital solutions, to ensure the return.
4. Administration: Administrative performance is difficult to measure and manage. Administration performs functions, rather than producing results, and prevents proper capital management. The enterprise invests in capital that ends up being administered, rather than managed for beneficial utilization to add value to results, continuing improvement, and a high return on the investment.
5. Performance Management: “Performance” is defined to include not only the actions executed, but also the results accomplished. This means that performance and the results produced are mixed together as key performance indicators (KPI) and in various performance management structures. This prevents separate capital management to ensure that solutions are acquired, developed, and improved; performance management to implement and support qualified solutions; and result management to utilize solutions to produce value in results.
6. Business Complexity: Every corporate plan, re-engineered process, chart of accounts, or other overlaid structure uses different entities and definitions and adds to business complexity. Contrived entities are managed, preventing understanding and management of the business. Management reporting is against overlaid structures producing discrepancies and information complexity, rather than accurately reporting one consistent view of the complete business. New results and capital solutions are added, but are not managed as sets for improvement or removal when not needed.
7. Information Technology: Information systems and solutions are organized as technology and not as capital to be utilized. IT covers strategy, planning, business applications, technology, data models, information solutions, and architecture management. This prevents one integrated enterprise strategy and integrated business capital and support. The diverse capital requires many capabilities to manage, creating the CIO problem. Applications are managed as technology rather than as business solutions, and business change ends up in the technical backlog. Information is not professionally-managed as capital to provide capital solutions to produce results.
8. Change Management: We need change management because we do not organize the business so that business and organization change are one and the same. We mismanage change, since we do not manage the business, human, and management capital to be changed and utilized for benefit. The business changes regularly, but contrived structures remain rigid. So change is through disruptive projects that change structures laid over the business, rather than business change as part of the routine. Since we do not manage results, capital solutions, and performance, business change is a mystery that is difficult to plan and manage. Change management services address symptoms in overlaid structures, but do not solve the unsolvable business problems
9. Corporate Governance: We try to solve corporate governance problems from the governance side by strengthening the problems in accounting, auditing, and compliance reporting. This is futile. The problem can only be eliminated from the corporate side, by clearing away contrived structures and organizing and managing the business for transparent management. Then we can govern the transformation of current result value to create strategic result value.
10. Alignment: Many methods have been developed and many books have been written on aligning the business with the organization, strategy with the business, information systems with the business process, outsourced processes and internal processes, tangible assets and intangible assets, etc. This also is futile. We cannot align solutions with solutions! We can only align solutions with the result produced. Solutions utilized to produce the same result are aligned and integrated.

Has your enterprise ever solved any of these problems? Do you think you can solve the problems by contriving new 20^th century management structures and laying them over your business, your organization structure, your performance management system, your chart of accounts, and the various other structures that hide your actual business?

Unsolvable 20^th century management problems are the underlying cause of the financial crisis

Financial institutions blame their problems on unknown and changing “asset value”, which is actually the unknown worth of capital solutions that are not managed as part of the business. Financial institutions manage asset value, risk, performance, and other areas through structures and models laid over the business, rather than as attributes of capital solutions and results. Real asset value is actually solution worth in the future value-added by results produced over the remaining solution life and through solution disposal, less the cost of capital invested in the solution. Solution worth less the unamortized investment balance is the gain or loss on the solution investment which must be continually managed. The gain or loss is unknown today since total investment amounts, return on investments, value of results produced, disposal result value for the solution or collateral backing the solution, performance costs as solution worth declines, the result value-added after performance costs, the unamortized investment balance, current solution worth, and other important business data remains unknown and unaccounted for.

Other enterprises in trouble report other problems that can be traced to the top ten problems of 20^th century management. The top ten problems also prevent governments from gathering actual business data and creating an architecture to manage industries, markets, and various sectors of the economy to manage supply, demand, and business cycles.

Result-performance Management (R-pM) replaces 20^th century management with 21^st Century Management

The enterprise must simplify the business to focus on results and performance, by organizing the business for 21^st Century Management of capital solutions utilized in performance to produce value in results. 21^st Century Management is simplified to manage three dimensions:

• Results produced to achieve goals
• Performance provided to meet expectations
• Management over time periods to measure actual against planned goals and expectations to carry out the strategy

Result-performance Management (R-pM) organizes the business for 21^st century management to leave all 20^th century management problems behind. Visit Result-performance-Management.com to learn more about organizing your business with R-pM for 21^st Century Management, and download the R-pM Toolkit, your 21^st Century Management Manual.

While at the site, join the R-pM Community for free to download a free 34-page report “A Business Management Program to Answer the Financial Crisis”. The original and breakthrough report describes the only solution available for governments and businesses to alleviate the crisis, eliminate problems with 20^th century management to prevent a future crisis, and establish systematic business, financial, and economic management for ongoing stability.