Why do we have to reorganize every few years? Why not organize just once and reorganize gradually as the business changes?
There are many 20th century business organization theories and methods. Hundreds of books have been written on how to organize the enterprise, organization development, and organization change. There are many so-called business organization methods and structures, but these structures organize the enterprise and are laid over the business. The structures do not organize the actual business, causing the unsolvable reorganization problem. If the business is not organized the business cannot be managed. Additional management structures must be laid over the business to manage the enterprise. This is why the enterprise organization structure is the fatal error of 20th century enterprise management.
The business enterprise is defined commonly as “the activity of providing goods and services“. ]]>
20th century enterprise management lays a contrived enterprise organization structure over the business, instead of organizing the business. This is the fatal error of 20th century management. If the business is not organized, the business cannot be managed.
The contrived organization structure follows one of many 20th century organization theories to organize the enterprise. The business, which we have defined as “investments in capital as solutions of worth utilized for cost and effectiveness of performance to produce value and quality in results” is not organized. The rigid organization structure goes out of “alignment” with every new or closed result or change to a capital solution utilized. Eventually there is need for reorganization to contrive a new organization structure that is closer aligned to the actual business, and the cycle is repeated.
Some may argue that their business is organized. Ask if they ever reorganize the business, and they will answer yes, of course. Reorganization is needed because the business is not organized. ]]>
20th century management historically has separated cash from other capital to be managed in financial management and to be accrued and recorded through accounting. The need for the separation has decreased due to technology and advanced solutions. Technology has also led to high-worth information and intellectual capital that needs to be accounted for and managed. But the separate focus on cash tends to prevent other capital of worth from being managed professionally. Capital and cash transactions that are recorded are recorded against a contrived chart of accounts, rather than accurately recording the complete financial status of the actual business.
The business organizes all capital, including currently undefined capital and “intangible assets”. The business manages accounts and other records of the business as facility records capital and provides capital solutions from records as information capital. Facility records are the tangible information capital of the enterprise. Facility records go beyond the limitations of accounting to record:
Business management broadens 20th century accounting to professional records management to keep records on the actual business and to make records solutions available to produce high-value results.
Due to 20th century management problem number one, the business is not organized. ]]>
20th century enterprise management used today develops strategies and plans using maps, corporate plans, budgets, etc that are laid over the business. Corporate plans plan the corporation and are unable plan the strategic value to be created by the business and the capital development needed to create strategic value. The business is not planned and strategies and plans become invalid as the business changes. New plans try to bring the enterprise plans in closer alignment with the current and future business.
Business management defines the enterprise business as “the utilization of capital of worth in performance to incur costs to produce value in results”. This definition includes the current business that must be conducted every day to utilize capital the enterprise invests in to produce results needed for business success. The definition also includes the future business that must be the objective or the business strategy to produce strategic results utilizing capital that must be available when needed?
The strategic business is “the utilization of capital of worth in performance to incur costs to produce value in results at the strategic horizon”. The strategic business is described as management strategy capital. The business strategy, strategic business structure, and business plans to execute the strategy are management strategy solutions.<]]>
The early 20th century enterprise was concerned about managing and protecting cash. Financial management fundamentals were established to manage actual and accrued cash from the point received until the point that it is invested or spent. Financial management problems such as unknown capital worth, unknown costs, unknown value creation, and unknown return on capital investments have never been solved by traditional financial management. Financial management tends to be equated with capital management. This allows non-financial capital to be administered, rather than managed, or to be labeled as “intangible assets” and not accounted for or managed. Today, financial capital is managed largely by computers. Non-financial capital and intangible assets are an increasing percentage of enterprise worth and must be managed properly.
Financial capital must be managed as part of the business and not administered separate form the business. 21st business management utilizes financial management capabilities to manage all tangible facility assets. Financial assets and facilities are a sub-set of reusable facility equipment capital, cash is a sub-set of consumable facility supply capital, and accounts are sub-set of facility records capital.
All facility capital requires similar application of expertise to operate and maintain, to supply, and to record. In a managed business, all facility capital is supported for operation and development and for utilization to produce value in results.
The business also integrates financial parts of other results that have been separated out. Management strategy capital includes financial strategies as an integral part of management strategy solutions. Investment management results manage shareholder funds for investment, capital development, and shareholder value results.
Now, as we go into the 21st century, there is a growing need to go beyond financial management fundamentals and change the way enterprise capital is managed: ]]>
Business management defines the business as “investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results”. Every business in the world invests in capital, in order to have the capital needed to produce output results. Every business in the world must produce specific economic output results in order to be successful. Business performance is the actual utilization of capital to produce results.
The 20th century definition of performance used in business today includes both the actions executed and results accomplished. This definition causes many 20th century management problems and prevents actual business definition and management. Business performance management, capital development, business processes, management reporting, key performance indicators, etc mix both performance and results produced together as performance. This causes problems today in actually distinguishing and separating results produced from the performance executed. Sales performance includes the both utilization of human salesmanship capability in actions executed and the volume and value of sales accomplished.
Actual business performance does not include things accomplished or business results. ]]>
How does your company analyze strategic investments in capital development? Does your company perform a cost-benefit analysis? Are all the specific investments needed for business success planned? Are the costs of the investment analyzed, itemized, and scheduled? Are the benefits of the investment analyzed, itemized, and scheduled? Is the value to be added to the business planned and set up as goals to menage the return on investment?
For the most part, 20th century investment management cannot itemize the costs or benefits of investment, particularly investments in management improvement and business change. Costs are project expenditures rather than investments in specifically-identified capital items. Benefits are usually estimates of increases in revenues or reductions in costs.
21st century business management manages the economic outputs of the business as specific results and manages the invested capital utilized to produce results as specific capital solutions. ]]>
Capital development projects for internal management or business improvement today tend to be ad-hoc and conducted separate from the business. We have unsolvable problems in 20th century capital development project planning, management, and return on the project investment, so we cannot:
The unsolvable 20th century enterprise management problems hamper project management, particularly for enterprise internal capital development and management improvement.
Business management provides new breakthroughs for planning and managing enterprise capital development and planning and managing the capital development project.
Capital development develops two things:
When we plan and manage a capital development project, we must plan and manage two things:
Business management utilizes Result-performance-Management knowledge and procedures to do both. ]]>
The business is defined as “investments in capital as solutions of worth utilized for cost and effectiveness of performance to produce value and quality in results”. Every business in the world invests in capital needed, in order to utilize capital in performance, in order to produce output results. The capital must have a worth that justifies the investment costs for acquisition or development and implementation as capital solutions.
The only reason to invest in capital is to provide the capability to produce business results. Capital is all the tangible and intangible assets available to be utilized by the business. Capital includes the business organization, processes and systems, humans and their capabilities, facility equipment and supplies, management plans and tactics, and information capital. Capital has a worth in the capability to create result value attributable to the capital over the remaining capital life.
Today, people think of capital as items in an asset register or on the payroll, rather than as items to be managed and utilized as part of the business. Businesses invest in enormous sums of money capital and then fail to identify the specific capital solutions developed, the costs of developing the capital, the worth of the capital as developed, the utilization of the capital to create value, the cost of capital utilization or consumption as capital worth deteriorates, and the value created to return the original investment. ]]>
20th century administration performs a function involving fixed routine tasks. Responsibility is for the function or the process of administering, rather than producing results. Administration is responsible for managing enterprise capital, but few administrators recognize this responsibility, in effect preventing proper capital management. Much capital is assigned to centers or labeled as “intangible assets”, removing it from professional management. Other capital is loosely administered through functions, instead of being specifically managed to produce benefit and achieve a return on the enterprise investment. The emphasis is on administrative performance rather than capital result management.
All enterprises invest large sums in the business to acquire or develop capital solutions. All enterprise capital investments must be organized for professional 21st century business management for operation, support, development, and utilization to produce results. Administration is replaced with capital management. Capital managers must produce capital management results to develop, maintain, and improve the worth of capital to provide specific solutions. ]]>