The 20th Century Problem; Failure to Manage the Business

Rigid organization and management structures conflict with the changing business, creating unsolvable 20th century problems

The worldwide financial crisis and recession is caused by one fundamental problem, the failure of financial institutions and corporations to manage the business. 20th century management, used today manages the enterprise by laying rigid structures over the business, and is a dead-end that can never be improved by adding or improving structures. The changing business and overlaid structures conflict, creating unsolvable problems with reorganizations, alignment, capital development, unknown costs and value, unknown capital worth and returns, intangible assets, planning, corporate governance, "business change",  "change management", rampant IT overheads, business collaboration, and on and on. The only solution is Result-performance Management (R-pM) to organize the business for 21st Century Management and leave 20th century management structures and problems behind.

The organization chart, the fatal error of 20th century management

20th century management does not organize the business, but organizes units, positions, and reporting relationships. An arbitrary organization structure is contrived by management and consultants, with a dose of politics. The rigid enterprise organization structure then is laid over the business, restricting business flexibility and conflicting with business change. Once the organization structure is implemented, rather than organizing the business, the business can never be managed!

The rigid structure goes out of alignment with each business change, creating the unsolvable re-organization problem. When the business is organized, the organization changes with the business, eliminating re-organization.

20th century management lays structures over the business

Since we did not organize the business, we cannot manage the business. We must manage the enterprise, through contrived structures laid over the business for corporate strategy, financial accounting, administration, asset management, human resource management, business process management, performance management, supply chain management, production and logistics management, customer relationship management, cost accounting, project management, management information, and so on. The many structures create the "business complexity" problem, and are managed by complex and costly overlaid information systems. Each structure uses its own set of conflicting entities that are irrelevant to the business and create the information complexity problem. The actual business in results, capital solutions, and performance is never defined and lies hidden under the structures. The underlying business changes while the overlaid structures remain rigid, causing unsolvable 20th century management problems.

 

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Practices used for investment planning, financial accounting, administration, asset management, capital development, cost control, alignment, collaboration, and so on have never solved the problems. We contrive new 20th century structures and write 20th century management books to improve practices, but never solve the problems. We never recognize the fundamental problem that we have never organized or managed the business.

20th century management uses a flawed definition of "performance"

20th century management cannot separate results from performance, due to the flawed definition of "performance". "Performance" is not only the utilization of capital in actions executed, but also results accomplished. The definition of "performance" prevents the business from being organized to manage results, capital, and performance as separate entities. Results and actions executed are mixed up today in Key Performance Indicators (KPI), business processes, performance management, and other overlaid structures.

20th century results are economic outputs that leave the enterprise

20th century concepts like "Managing for Results" and "Business Process Management" say results are economic outputs from the enterprise. This external view quantifies goods and services results as they leave the enterprise. Some results produced within the enterprise are described as separate entities like product, sale, completed work order, etc. Results within the enterprise, and their common attributes, are not managed as one information set.

20th century management does not capture or report business data

Some results are identified as separate entities like material recorded into inventory, product produced, production waste recovered, order fulfilled, etc. But the full sets of results along the value chains, from supplier-provided input results to final results that are customer input results, are not identified, recorded, or managed.

Some capital solutions are recorded for administration, such as cash, employee, fixed asset, etc. Many high-worth solutions are developed, but not recorded to be managed. Capital is assigned to responsibility centers and neglected, placed under an administrative function to be "administered", or labeled as "intangible assets".

Since we do not know the costs incurred by unidentified capital solutions, the value created in unidentified results, or the worth of unidentified capital; we cannot measure or record the essential business data needed to manage the actual business: complete performance costs, result value, result value-added, and capital worth.

R-pM organizes the business into one integrated business structure

Result-performance Management (R-pM) uses common information systems to organize the business, “investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results” in a simple, easy-to-manage business structure that consists of three components:

  • Results: Economic outputs of value that must be produced by business performance
  • Capital: Capital of developed worth organized as solutions to be utilized to produce specific results
  • Performance: Utilization of a specific capital solution to incur a cost to produce a specific result

The business structure can be viewed like a spreadsheet for any part of the business. Results are organized across the columns. Capital solutions are organized down the rows. The business is organized when solutions are implemented in cells with rules to be utilized in performance to produce the specific result. The business re-organizes with each change to a result, capital solution, or solution utilized in performance to produce a result.

The organization structure is not a management prerogative!

The business organization is a professionally-managed business capital solution utilized to produce results. Management does not create an organization structure. Management decides on strategic results to produce and strategic investments to develop new capital solutions needed to produce strategic results.

After results are organized, personnel are deployed where they have the capability to manage and produce specific results. Personnel, their capabilities, and knowledge they use are human capital solutions.

A business organization solution is implemented to be responsible for the result. Other solutions are implemented for the business system and process, tangible facility capital, management capital for planning and guidance, and information capital needed to produce results to complete the business structure. The business structure is inverted to show the results under the responsibility of a business organization or result manager solution.

Eliminate 20th century organization and management problems with R-pM

This section shows why we must organize the business to eliminate unsolvable 20th century problems. R-pM replaces haphazard and outdated 20th century management conventions with specific new 21st Century Management Standards. R-pM goes beyond 20th century thinking to increase your human capital worth, so think to learn why you need to organize and manage your business for new 21st Century Management.

There are five topics:

Once you know why you need to manage results and performance, join the R-pM community, to download the valuable R-pM Toolkit, your 21st Century Management Manual, and the only source of procedures and guidance to organize your actual business for 21st Century Management.