Specific Problems with Organization and Management Methods

Administration that produces Unmanaged Capital and Intangible Assets

We administer tangible assets and known costs rather than managing all capital and all costs.

By: Harry Greene

Enterprises have large sums invested in the capital that is utilized in performance, to produce results. Most enterprises do not even know the extent of this capital. There is no manageable organization of enterprise performance capital. People talk of “intangible assets” like there is a black hole somewhere with all that high-worth performance capital that we do not understand and cannot cost or manage.

Intangible assets, unknown costs, and unmeasured investment returns are symptoms of the many problems with conventional financial management, accounting, and administration. Administration prevents high-worth capital from being managed in performance to produce value in results and thereby establish its worth.

Much enterprise capital is not recognized as capital of worth

So, much of our capital is not recognized as something of worth. Much capital is not documented or under management control. Performance capital is created day in and day out without being recognized as something of worth that should be managed to improve performance and results.

Capital management is not the same as asset administration

Enterprises may have an assets or property register and think of control of assets or location of property as managing capital. Many think that managing capital means assigning it to a responsibility center, which actually removes capital from management for the benefit of the enterprise. Typical responsibility center managers do not perceive any responsibility for managing capital. They are unable to manage capital that they share with other responsibility centers. Much enterprise capital resides underutilized within the confines of a responsibility center with rare enterprise attention paid to it.

Administrative functions do not recognize a responsibility to manage capital

Other performance capital is administered under an administrative function like finance and accounting, information technology (IT), purchasing, human resource management (HR), corporate planning, etc. These functions do not recognize a responsibility for managing capital, and most have no perception of helping the enterprise gain benefit from the utilization of capital, especially those “intangible assets” with all their "unknown costs". They perform day-to-day functions that might help to operate or support capital.

Administrators often lack the capability to manage assigned capital

We have well-known problems because administrative units manage capital that requires very different professional capabilities. IT and the Chief Information Officer (CIO) have problems managing technology facilities, business process and data capital, and strategic management capital. Financial accounting is expected to do facility record-keeping and provide management intelligence. Business, human, facility equipment, and management capital are mixed together to be managed as a monolithic business process.

Capital management is more than financial management

Many equate capital management with financial management. Financial management is a sub-set of capital management to manage cash and accruals. Cash and accruals are a subset of tangible assets in facility capital. Much of the historic need for financial management has decreased through advanced methods and technology. The separate emphasis on financial management prompts neglect of higher-worth enterprise capital. Financial management capabilities should be utilized where there are strengths in facility capital management, strategic management, investment management, etc.

Capital investments are paid back only when capital is utilized for benefit

We make large investments in capital that are paid back only when the capital is utilized to provide benefit. Every enterprise has much benefit to gain by managing capital and optimizing the utilization of capital.

All enterprises utilize capital in performance to produce value in results. The conventional enterprise has never specifically organized capital to be managed in utilization and has never defined what it does with the capital it utilizes. Performance capital must be managed as specific capital items or performance solutions utilized by the business to know the needs and costs of capital improvement. The results produced by the business must be managed to utilize specific performance solutions to improve the business and provide the return.

R-pM replaces administrative functions with capital management responsibilities

The problem is eliminated by Result-performance Management (R-pM). R-pM organizes one integrated enterprise business structure, based on only two entities:

  • Results produced as economic outputs from performance to create value
  • Performance solutions that provide the capital utilized to incur the cost of creating result value

R-pM manages results in the units responsible to utilize deployed performance solutions to produce specific results. R-pM replaces administration with capital management to manage defined performance solutions directly, and with performance management to provide the specific cost-effective solutions to produce value-quality results.

Capital management responsibilities include performance management to utilize capital properly

R-pM replaces administration responsibilities with two important capital management responsibilities.

  • Capital Management: Operate, develop, and support the capital by producing capital results, so that capital continues to operate and function properly; so that capital is regularly improved, reassigned, or replaced; so that new capital is created or developed as needed; and so that capital utilization for benefit is managed from the capital point of view
  • Performance Management: Organize and provide qualified performance solutions to produce specific results and monitor the performance of capital in utilization for the benefit of the enterprise

Capital management results operate, support, and develop assigned capital, while performance management results see that cost-effective performance solutions are developed, deployed, and utilized to produce value-quality results.

R-pM provides the means to organize and manage performance capital of worth

R-pM identifies and manages all capital utilized to produce results as performance capital. R-pM provides the means to gain control of performance capital for management and support.

  • Identify all the performance capital available in the enterprise, whether tangible or intangible
  • Categorize capital as business, human, facility, or management to apply the unique management and support capabilities required get the most out of the capital
  • Establish capital management responsibilities at all levels for both operations and development
  • Incorporate financial management and information technology within the appropriate category of capital
  • Classify the way capital is utilized to be ready to produce results, to actually produce results, or to provide information and document results
  • Identify categorized and classified capital as specific performance solutions to be deployed to a specific result or set of results
  • Assign human personnel and capability solutions, who possess the professional capabilities needed to manage and support each category of capital
  • Support the result managers utilizing the capital so that they have the capital needed to optimize result value
  • Expand facility financial records to document capital, capture the worth of capital, cost all capital utilized to results produced, and relate performance costs of capital consumed to the value of results produced
  • Replace administrative functions with capital management responsibilities to manage the complete lifecycle of all performance capital to provide a healthy return on capital investments

R-pM establishes four capital management categories with specific professional capabilities required to manage the capital.

  • Business organization, process, and data capital to manage capital that directly produces a result and cannot, generally, produce another result. Business capital requires business knowledge and analytical capability
  • Human personnel, capability, and knowledge capital to support and develop the worth of human capital. Human capital requires human handling, development, and coaching capabilities
  • Facility equipment, supply, and record capital to manage reusable and consumable tangible assets and records. Facility capital requires expertise with specific capital
  • Management strategy, tactics, and intelligence capital to plan results and performance investments, to keep on course, and to know opportunities and ward off threats. Management capital requires management analysis and research capabilities

Each category of capital requires one specific set of different human capabilities for capital and performance management.

R-pM relates the management of capital to the integration and utilization to produce results

R-pM provides the means to utilize capital for the benefit of the enterprise, by organizing capital in the way that it is used by result managers to produce their results.

R-pM integrates performance solutions deployed to produce results with the business solutions by three classes:

  • Readiness to integrate personnel, equipment, and strategy with the business organization to be ready to produce results
  • Production to integrate capabilities, supplies, and tactics with the business process to produce a specific result
  • Information to integrate knowledge, records, and intelligence with the business data to provide information and document results produced and performance utilized

R-pM separately manages the capital in each category to get ready to produce results, to produce actual results, and to provide the information needed and to document results produced. R-pM supports those utilizing capital so that they utilize it properly, and see the potential for improvement. R-pM responds to result user needs to change or improve capital, to redeploy capital, to define specifications for developed capital, and to utilize improved or developed capital

All enterprises reap significant benefit by replacing capital administration with capital management

All enterprises have much to gain by using R-pM to managing their capital properly. But, enterprises can never manage capital while it lies in responsibility centers hidden from view, while it is classified as “intangible assets”, and while those who should be managing it are performing administrative functions. The R-pM Toolkit shows how capital should be organized and managed.