Conventional methods invest in costs and prevent investment in benefits. Invest in enterprises that employ R-pM.
By: Harry Greene
You likely invest in corporations. As an investor, you try to identify precisely how you are to gain a return on your investment and have some idea of what that return should be.
Do you realize that the corporations that you invest in have no way to do the same when they use the money you have invested. Corporations do not have a fundamentally strong means to plan and manage the return on their investments, from initiation through to measuring the return. So corporations rarely really invest, they either spend or speculate.
Many corporations approach investor funds as money to spend rather than considering use of the funds as an obligation to gain a return on the funds used. The money simply disappears into normal operations.
Even when corporations attempt to invest in capital development and growth, they face difficulties because they are not structured to plan and manage investments. They cannot identify the precise points that benefits are produced to build up the individual benefits that justify the investment. And if they cannot plan these benefits, they certainly cannot manage benefits through to the return.
Corporations estimate the return for core business investments like a new production line. But they rarely have a precise idea of the return from investments, particularly for investments in business change. The objective of business change investments is performance improvement or solution implementation. Investments meeting these objectives are investments in costs, but provide no benefit per se.
Most investment projects itemize the cost of the investment, but do not correspondingly itemize the benefits or return on the investments. Return on investment is a estimate of how much certain entities like sales or revenues will improve. The estimate is often camouflaged as a sophisticated cost-benefit or internal rate of return analysis.
Rather than estimating how an investment will increase sales and revenues, the corporation must itemize and manage the individual benefits of each improvement to justify investment and follow through to see that the actual individual benefits add up to increased sales and revenues.
Those of you familiar with conventional development methods will wonder how to do this. Conventional development methods follow such steps as identify the problem, design the solution, plan the cost of the solution, acquire or develop the solution, test the solution, train users on the solution, implement the solution, and operate the solution. All of these steps are on the cost side of the investment. There are no steps on the benefit side.
This problem has existed, since the beginning of business. 20th century corporations are structured to incur and manage tangible costs, but they are not structured to manage unknown costs and to create and manage the value required to provide benefits and the return on investments. Corporations do not manage the utilization of each item of capital in operations, so they have no professional capabilities to manage the development of capital.
Since corporations find investments so hard to manage, many do not develop the internal capability to manage investments. They bring in consultants to manage the investment for them. The consultants face the same problem. Their methods do not plan or manage the benefits or return on investments.
Corporations and consultants will never be able to manage investments with conventional development methods that develop and manage contrived entities like processes, systems, and activities, rather than business reality.
Result-performance Management (R-pM) organizes, manages, and develops the business through the only two entities that directly portray business reality; results produced and performance solutions utilized.
R-pM provides a way for the enterprise to develop results in addition to performance. The value and benefit of investment come from result development; the costs come from performance development. The corporation must use R-pM to take three fundamental steps to be able to manage investments properly:
o Structure corporation results to plan and manage value, including the value-added by investments
o Structure capital as performance solutions to be professionally managed in development and operations
o Develop a professional investment management capability to plan and manage development over time
Value can be planned and managed only through results. So, only when the corporation has structured its results properly, has structured its capital, and has the professional capability to manage change over time, will the corporation be able to plan and manage the benefits of investment and measure of the precise return on investment.
It is only when a corporation is structured through R-pM that we as investors can be confident that the corporation will plan and manage the utilization of our investment for a planned and managed return.
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Harry Greene is American, with over 40 years’ experience in business change. He participated
business solutions for 100 enterprises and 20 industries. Harry is a career management
consultant, primarily involved in information system and business process design and utilization. As a consultant Harry refined his personal approach to performance solution
development and utilization that has evolved into Result-performance Management (R-pM). R-pM is a new breakthrough in managing the 21st century enterprise that is explained at result-performance-management.com.
Harry Greene is the author of the books "Eliminate Unsolvable Performance Problems with R-pM" and "R-pM Foundation and Advantage". Harry has worked in North and South America, Europe, and Asia with such professional firms as Booz Allen and Hamilton, Arthur D. Little, A.T. Kearney, and Price Waterhouse.
Today, Harry is the President of Result-performance Management Limited, a firm dedicated to the development and utilization of R-pM. Contact: harry@result-performance-management.com
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