The company of the 20th century does not manage the business reality! Business reality is defined by two entities:
– Results: The specific economic outputs of the entire business.
– Return solutions: invested capital used specifically to produce specific results
The company must organize and manage results and performance solutions to organize and manage business reality.
The failure of the 20th century company to organize and manage business reality creates intractable managerial, business, and performance problems. The 20th century company defines both the performance solutions used and the results produced as performance. This faulty definition impedes the management of business reality. So instead, we devised 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 20th century business.
1. Reorganizations: We have never organized the business. Instead, we organize people, positions, power, and politics and superimpose rigid, invented organizational structures on the business. The company must adapt to the organization. Business change makes it more difficult to adapt, until a major disruption called reorganization occurs. Then we devise another arbitrary organization and repeat the cycle.
2. Accounting and financial management: Historically, the business needed to protect cash and thus establish cash and accrual accounting and financial management. Accounting and financial management preserves this legacy and consequently impedes modern records management and comprehensive capital management. Accounting avoids financial records about costs, value created, and comprehensive value of capital. Financial management focuses on easy-to-manage financial and cash investments and avoids managing high-value capital that is “managed” or labeled an “intangible asset.”
3. Capital Development and Investment Analysis: The Company cannot itemize or plan the benefits of capital development investments and cannot manage the development of benefits and return on investments. Investment returns are artificial estimates that cannot be managed. There is no management responsibility for the use of performance solutions developed, to guarantee the return.
4. Administration: The administration fulfills functions, instead of producing results, and prevents the proper management of capital. The company invests in capital that ends up being managed, rather than managed for beneficial use, continuous improvement, and a high return on investment.
5. Performance Management: Performance is defined to include not only performance actions, but also the results produced. This means that performance and the results produced are mixed as KPIs and in the various performance management methods employed. This definition of performance prevents the 20th century company from managing business reality.
6. Complexity of the business: each new method, redesigned process, implemented system, chart of accounts, etc. it is an overlap in the business and adds to the complexity of the business. Controversial entities are managed preventing the understanding of the business reality. New results and performance are added, but not managed as a company as a whole, to be improved or removed 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 precludes an integrated business strategy and integrated capital and business support. Diverse capital requires many skills to manage, creating the CIO problem. Applications are managed as technology rather than business solutions, and business change ends in technical backlog.
8. Change management: We need change management because we manage it poorly. We do not manage business, human and management capital to change it and use it for profit. The change is through disruptive projects, rather than as part of the routine. Change management services address the symptoms and do not solve the fundamental problems.
9. Corporate Governance: We try to resolve corporate governance issues from the government side by strengthening accounting, auditing, and compliance reporting issues. This is useless. The problem can only be eliminated from the corporate side, organizing and managing the 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 is also useless. We cannot align solutions with solutions. We can only align the solutions with their input and output results.
These and other intractable management problems are discussed in detail at www.businesschangeforum.com. These problems can never be solved by overlaying more artificial 20th century methods or reading books on how to improve 20th century business. All the methods of the 20th century are now obsolete.
The company must redefine itself as a 21st century company that is organized to use capital in performance to produce value in results. Results and performance management (R-pM) provides the means to build the company of the 21st century and leave behind all the management problems of the 20th century.
