The 20th century enterprise does not manage business reality! Business reality is defined by two entities:
– Results: The specific economic outputs from the totality of the business
– Performance Solutions: The invested capital specifically utilized to produce specific results
The enterprise must organize and manage results and performance solutions in order to organize and manage business reality.
The failure of the 20th century enterprise to organize and manage business reality creates unsolvable management, business, and performance problems. The 20th century enterprise defines both the performance solutions utilized and the results produced as performance. This flawed definition prevents management of business reality. So, instead, we contrive various other methods as overlays on the business and manage entities like departments, jobs, positions, functions, and processes.
We continue to overlay new methods and write thousands of books, but we have never solved the top 10 management problems in the 20th century enterprise.
1. Reorganizations: We have never organized the business. Instead, we organize people, positions, power, and politics and overlay rigid contrived organization structures on the business. The business must adjust to the organization. Business change makes it more difficult to adjust, until there is a major upheaval called the reorganization. We then contrive another arbitrary organization and repeat the cycle.
2. Accounting and Financial Management: Historically, the enterprise needed to protect cash and so set up cash and accrual accounting and financial management. Accounting and financial management retain this legacy and, consequently, prevent modern records management and comprehensive capital management. Accounting prevents financial records on costs, value created, and comprehensive capital worth. Financial management concentrates on easy-to-manage cash and financial investments and prevents management of high-worth capital that is “administered” or is labeled as “intangible assets”.
3. Investment Analysis and Capital Development: The enterprise is unable to itemize and plan the benefits of capital development investments, and is unable to manage development of benefits and return on investments. Investment benefits are contrived estimates that cannot be managed. There is no management responsibility for the utilization of developed performance solutions, to ensure the return.
4. Administration: Administration performs functions, rather than producing results, and prevents proper capital management. The enterprise invests in capital that ends up being administered, rather than managed for beneficial utilization, continuing improvement, and a high return on the investment.
5. Performance Management: Performance is defined to include not only the actions of performing, but also the results produced. This means that performance and the results produced are mixed together as key performance indicators and in the various performance management methods employed. This definition of performance prevents the 20th century enterprise from managing business reality.
6. Business Complexity: Every new method, re-engineered process, implemented system, chart of accounts, etc. is an overlay on the business and adds to business complexity. Contrived entities are managed preventing understanding of business reality. New results and performance are added but are not managed as an enterprise whole, for improvement or removal when not needed.
7. Information Technology: Information systems and solutions are managed as technology. IT covers strategy, planning, business application, technology, and architecture management. This prevents one integrated enterprise strategy and integrated business capital and support. The diverse capital requires many capabilities to manage, creating the CIO problem. Applications are managed as technology rather than as business solutions, and business change ends up in the technical backlog.
8. Change Management: We need change management because we mismanage change. We do not manage the business, human, and management capital to be changed and utilized for benefit. Change is through disruptive projects, rather than as part of the routine. Change management services address symptoms and do not solve fundamental problems.
9. Corporate Governance: We try to solve corporate governance problems from the governance side by strengthening the problems in accounting, auditing, and compliance reporting. This is futile. The problem can only be eliminated from the corporate side, by organizing and managing business reality.
10. Alignment: Many methods have been developed and many books have been written on aligning strategy with the business, information systems with the business process, outsourced processes and internal processes, tangible assets and intangible assets, etc. This also is futile. We cannot align solutions with solutions. We can only align solutions with their input and output results.
These and other unsolvable management problems are discussed in detail at www.businesschangeforum.com These problems can never be solved by overlaying more contrived 20th century methods, or by reading books on improving the 20th century enterprise. All 20th century methods are now obsolete.
The enterprise must be redefined as a 21st century enterprise that is organized to utilize capital in performance to produce value in results. Result-performance Management (R-pM) provides the means to build the 21st century enterprise, and leave all 20th century management problems behind.