Organize The Business For 21st Century Management

The business of any enterprise is defined by only two specific entities:

- Results: The specific economic outputs produced by the full scope of the business

- Performance Solutions: The specific capital utilized in performance to produce the specific results

But, the 20th century enterprise does not organize and manage results and performance and, therefore, does not organize and manage the business. This leads to contrived overlays on the business for organization, strategy, account, process, performance management and other structures that prevent management of the business. The problem is solved by Result-performance Management (R-pM), which simplifies the business to results and performance solutions for 21st century management.

R-pM provides one integrated solution to organize, plan operate, develop, report, and govern the business through only results and performance solutions. This simplifies 21st century management to eliminate 20th century problems.

The Business cannot be Organized Because of the 20th century definition of “Performance”

The main reason the business is not organized in the flawed definition of performance. 20th century “performance” is defined to include not only the actions of performing, but also the results as a performance. This definition causes results and performance to be treated as the same thing. The conventional definition of performance is still being used today in key performance indicators and performance management methods and books.

Many structures are overlaid on the business preventing, direct business management

20th century organization structures evolve and new methods and organization theories are continually contrived. This is possible only because the business is not organized. Organizations are structured from contrived entities like departments, functions, jobs, processes, etc. The objective is to organize people, positions, and power. People are organized in a rigid organization structure, and the business is forced to adapt to the organization.

The 20th century enterprise needs other structures for strategy, plans, recordkeeping, operations, capital development, business processing, management reporting, etc. A myriad of other structures are contrived using various other entities like business units, line items, centers, objects, account codes, processes, teams, reporting categories, etc.

These other contrived structures and entities are additional overlays on the business. The enterprise management views the business through contrived entities that prevent viewing and managing the business in terms of the results that are produced, but are not defined and managed; and the performance solutions that are utilized, but also are not defined and managed.

The 20th century business is managed by rules and principles

Since the 20th century enterprise has never managed the business, it was always difficult to directly understand and control what was happening.

This led to methods of accounting to control the money utilized by the business, rather than the business itself. Generally accepted accounting principles are adapted so that accounts can be kept by rule rather then recording what is actually happening in the business. An account structure and chart of accounts is contrived to account against centers, object, or account. Financial reports show money received and money spent as well as some investments in assets and some obligations to pay out money. But these reports only provide views of the fringes of the business and are distorted by the obligation to follow rules that take precedence over accurately recording business reality.

Management reporting is against contrived entities rather than the actual business

Management reporting is through performance management or management information systems that report contrived entities like organization units, function, processes, etc. The results and performance solutions that are identified are managed as distinct entities like products and revenue or employees and fixed assets. They are mixed together and are not specifically reported or managed, as results or performance solutions.

21st century business organization needs differ from the basis of the 20th century enterprise

Now, we find that the requirements to organize and manage the 21st century enterprise are quite different from the 20th century enterprise requirements that spawned today’s organization and management methods. There are significant differences, such as:

- There is competition and opportunities from around the world that increase the need for management flexibility and fast response

- The capital employed is changing from traditional tangible assets to business, information, intellectual, and management capital that must utilized and managed, and can no longer be labeled as “intangible assets”

- There is extensive collaboration and the need for solutions to manage shared costs and value

- Technology has simplified the work in understanding the specific details of what the enterprise is producing, the value being created, the costs being incurred, the relationships to plans and the strategy, the benefit and impact of change, and the worth of the enterprise and its capital.

These differences make it mandatory that the 21st century enterprise organize and manage the business to compete in the new environment. These differences also facilitate the effort involved in defining business reality and managing the business in practice. The 21st century enterprise must take advantage of technology that was not available when 20th century methods were contrived.

R-pM organizes the business for 21st century management

The only right way to organize the business for 21st century management is through Result-performance Management (R-pM). R-pM simplifies business management by organizing the only two entities that are actually involved in the business:

- Result: The specific economic output produced by the full scope of the business

- Performance Solutions: The capital employed as a defined solution to produce a defined result

R-pM enables complete and direct the 21st century business management in three dimensions

- Result: To manage the value and quality of enterprise outputs to exceed revenue and other goals

- Performance: To manage the cost and effectiveness of capital utilized to exceed expectations and reach profit margin goals

- Management:To manage results and performance by time periods to develop new performance for a return from the result value created and to carry out plans to create strategic result value.

All other entities used to describe the enterprise organization or responsibilities are described in terms of specific results and performance solutions. There are no more departments, jobs, functions, etc. that mean nothing in terms of the business.

R-pM directly manages the attributes of results for value-quality

It is important to understand the 21st century enterprise in terms of results produced as outputs across the enterprise. Every result has an internal or external customer. Results embody the quality produced by the enterprise and appreciated by the customer. Results embody enterprise value created through the consumption of capital in performance. Results embody enterprise risk that the result will not be produced completely and on time. Results can be counted and comprise the volume of enterprise outputs. Value must be added to specific results to justify performance improvement. Value must be created in new results produced to justify capital development. Results are the inputs to and outputs from performance. Results are transformed across the enterprise to reach final results. This provides a value-quality chain that enables collaboration within the enterprise and across enterprises.

R-pM manages the attributes of performance for cost-effectiveness

It is important to understand the 21st century enterprise in terms of performance solutions utilized. Performance solutions must be defined to identify specific performance utilized with the specific result produced. Performance solutions involve the consumption of capital. A performance solution must be defined and utilized to generate a cost. Performance effectiveness is the proper utilization and performance of solutions to produce quality in results. Performance capacity is required to produce a volume of results. Performance uncertainly is the chance that performance will not be carried out completely or on time, creating much of the risk that the result will not be produced.

R-pM manages performance utilized against the result produced to optimize 21st century management

A result must be defined to properly absorb the cost against the value created. Absorbing performance costs in result value gives manageable result value-added. Managing performance with the result produced optimizes quality, capacity, and risk. The volume of results is constrained by the lowest-capacity solution. Other performance solutions have excess capacity. Result risk is reduced by managing performance uncertainty.

Result symptoms indicate problems in performance solutions. Performance expectations must be met to enable achievement of result goals. Performance improvement costs money and can only be justified by adding value to specific results. Performance development involves investment that is justified by producing valuable new results.

The advantages of 21st century management are not possible in the 20th century enterprise

The 20th century enterprise does not manage results and performance and thus cannot create value-quality chains, re-link value-quality chains across collaborators for shared value and costs, define the value-added from investments, understand value as added across operations and not as a contrived calculation, manage the quality of results rather than performance, reduce result risk by managing performance uncertainty, balance result volumes with performance capacity to gain high capital utilization, or detect result symptoms and relate them to specific performance problems.

The enterprise must organize the business for 21st century management

But when the enterprise organizes the business for 21st century management, it will be able to manage results and performance, and it will leave all of the 20th century problems behind.