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Capital Management and Cost-effective Utilization in Performance
Capital solution investments are managed for capacity, qualifications, potential, reliability, return, and worth
Every enterprise invests significant amounts in capital solutions to be able to perform to produce results. Capital solutions include financial facilities and other assets, people, organization units, processes, data utilized, human capabilities and knowledge, supplies consumed, records kept, management plans or directives, and intelligence developed and utilized. Capital must be acquired, developed, implemented, and supported as specific capital solutions to manage capital worth and the return on each solution investment. Capital is organized as solutions in the capital structure to be supported by professionals with the required capability. A capital solution is implemented in the performance structure to incur costs to produce value in specific results in the result structure.
Most capital solutions are not defined or managed today
Most enterprises do not know what capital solutions they have. Organization units are arbitrarily structured rather than defined and implemented to produce specific results. Human personnel are administered as employees and facility equipment is administered as financial and fixed assets, rather than managed as solutions. Information is administered rather than managed as specific solutions needed for management and governance results. Humans are trained for a position, rather than developed continually to produce higher-value results. Knowledge created is administered for availability, rather than managed as solutions to produce results. Many solutions are developed, but are never identified or managed as capital. Much business, information, and management capital is labeled as "intangible assets".
Capital solutions are utilized throughout the business to produce results. R-pM organizes capital solutions by capital category to enable professional capital and performance management and support by those with the required capabilities. Within each category, solutions are organized by capital class to integrate related solutions as readiness capital to produce results in a business organization unit solution, production capital to produce a specific result, and information capital to provide the information needed and to document results produced.
Why manage invested capital?
Many essential business attributes and data elements are not recorded or managed today, because capital investments in the business and capital deployed to be utilized as solutions are not managed. Capital available to the business must be organized as specific solutions in the capital structure, and managed as one set of capital solutions for effective 21st Century Management, since:
- Solutions provide the capital that must be utilized to produce economic output value in results
- Solutions deployed to the performance structure to produce a result must be integrated and managed together for a high value-quality result
- Solutions must be managed to plan investments in to produce added result value-added and manage the utilization of invested capital for the return on investment
- Solutions must be managed to manage capital potential and set performance expectations
- Solution capabilities must be managed to provide appropriate and qualified solutions for performance effectiveness to produce specific results
- Solutions must be planned, developed, improved, and supported by human capital with the appropriate professional capabilities
- Solutions provide measures for business capacity, investments, capabilities, reliability, worth, and potential
- Solutions have common attributes like performance manager, category, class, type, capital group, investment amount, support unit, vendor, etc. that form manageable solution sub-sets
- Solution contribution to producing result value-added is attributed to know solution return to date and future solution worth
- Solutions needed to produce new or improved results must be defined to know specific solutions to develop, and to capture investment costs to be amortized to future results
We must manage the capital solutions utilized to produce results as one complete set, to develop, improve, support, and manage the capital that must be available to produce results. Capital management units manage the acquisition, development, improvement, and operational support for each capital solution.
Why manage performance?
Performance is the utilization of each specific solution by the business to incur costs and to produce economic outputs of value in specific results. Performance is the actions, activities, processing, tasks, functions, work on jobs, or work flows that produce results. Performance must be organized in capital deployed to the performance structure to produce specific results. and the utilization of capital to produce results must be managed as a performance information set for effective 21st Century Management. Capital management units also provide performance management to work with result management to define result requirements and specifications for new solutions, implementation of qualified solutions, and the effective performance of solutions in utilization. Peformance management is required in every business, since:
- Solutions deployed to the performance structure to produce a result are utilized in performance as a component of the business
- Solution utilization in performance provides indicators for utilization, costs, effectiveness, uncertainty, contribution to result value-added, and expectations
- Rules or exceptions must be defined in the performance structure, as needed, to record performance and manage performance indicators
- Solutions must be deployed to a result for performance to charge costs to the result of value, to know effectiveness for result quality, to utilize capacity for result volumes, and to manage uncertainty to control result risk
- Business data entities in results, capital solutions, enterprises, business descriptors, and time periods must be updated from performance data
- Business transactions must be generated from performance to update capital solution, performance, result, and enterprise financial and non-financial records by time period
Capital must be defined as specific solutions to be managed
Capital should be broken down into specific solutions in order to deploy capital to produce specific business results. Solutions include any capital utilized, such as:
- You, your capabilities, and the knowledge you use as human capital
- Your organization, the process and software systems, and the data that directly describe results and related entities, like customer, as business capital
- Your company infrastructure and computer and communication networks and financial and equipment assets, supply lines and working capital, and the records kept on results, as facility capital
- Your company strategy and plans for results, tactical policies and guidance, and customer and business intelligence that show the right results, as management capital
Capital solutions are utilized at a level of performance. Performance can be planned and expectations can be set for each solution over time periods.
Capital must be managed to provide solutions that produce results
Capital solutions must be organized in a capital structure to provide the specific capabilities needed for capital management and support, and to integrate with other solutions utilized to produce a specific result.
The capital structure applies the specific capability to develop, improve, and support the capital in four categories: business, capital specific to a particular result; human, people who produce the result; facility, tangible assets and documentation; and management, the capital that plans and controls results. A capital management unit is responsible for capital and performance management results for each category of capital.
The capital structure organizes solutions to be utilized in three classes: readiness, to be able to produce a set of results; production, to produce a specific result; and information, to provide and capture information.
The capital structure organizes four capital categories by three capital classes to give twelve solution types:
- Business capital: Business organization, business process, and business data
- Human capital: Human personnel, human capability, and human knowledge
- Facility capital: Facility equipment, facility supply, and facility records
- Management capital: Management strategy, management tactics, and management intelligence
Capital is deployed to the performance structure to be utilized to produce a result
The business is organized when specific solutions are deployed from the capital structure to a performance domain in the performance structure to be utilized to produce a specific result in the result structure. The performance domain is defined by a result identifier and a solution identifier and is managed in the performance structure to generate business performance transactions and to capture the costs and effectiveness of utilization of the solution to produce the result. The performance structure shows all the solutions deployed to produce a specific result and all the results produced by a specific solution. The performance structure summarizes performance costs, effectiveness, capacity utilization, uncertainty, problems, and other attributes of performance and controls detailed business performance transactions.
Capital solution use in performance produces costs, capacity utilization, effectiveness, and uncertainty
Every well-managed enterprise wants to control costs. Performance consumes and utilizes capital solutions to generate costs. Unknown solutions produce unknown costs. Performance costs charged to activity, center, or other entity not produced by the performance, provide limited meaning. Performance costs must be charged against the result value created. We must know costs for all solutions utilized, in order to determine the value added to a result.
There is no such thing as performance quality. But, every solution must be provide the capabilities needed and perform effectively to produce a quality result. One ineffective solution can produce a defective result. The volume of results is limited by the lowest-capacity solution utilized. All other solutions have excess capacity. Performance uncertainty such as unreliable capital, sick personnel, poor application of capability, equipment breakdown, etc. creates risk that a result may not be produced as planned. The details or exceptions for each capital solution utilized to produce a result is set up in the performance structure to control and summarize the performance producing a specific result.
Specific capital solutions must be managed for capital development
It is important to define and manage capital solutions for business change and capital development. The costs of change and investment arise from developing and implementing specific solutions to increase the value of specific results. Solutions must be defined to know all solutions that need to be developed, all investment costs from solution development, and then continuing investment costs in solution operation, in order to know the costs to charge to results. The added value-added to results with the solution must provide the benefits and return on the solution investment. Each solution needed must be developed and implemented as a managed result in the development project business structure to capture investment costs. Investment costs can be systematically amortized against results produced as the solution deteriorates or becomes outdated. The actual added value-added contribution to results attributable to the solution is assessed to know the worth of the solution and the return on each solution investment.
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