The contrived organization structure is the fatal error of 20th century management

We are all familiar with the organization structure. The organization structure often emerges after political in-fighting and examination of alternatives. Since the organization structure is one of many alternatives, it is arbitrary. The organization structure is fixed and rigid and is implemented over the actual business.

The common belief is that an organization structure is good, since it shows departments, positions, reporting relationships, etc. In reality, the organization structure is the fatal error of 20th century business organization and management. Once an organization structure is laid over the business, instead of organizing the business, the business can never be managed. Therefore, additional management structures for business processes, information systems, accounts, performance management, administration, and other needs are laid over the business creating more unsolvable problems.

The organization structure creates the unsolvable reorganization and "change management" problems

We also are all familiar with the re-organization problem, when the organization structure goes out of alignment with the changing business and a new structure is contrived to align the organization closer to the actual business. For many years, people have recognized the problem of a fixed and rigid organization structure, which is like a straight jacket placed on the business that constrains business flexibility and hampers business change. The difficulties in restructuring to a new rigid organization became known as the "change management" problem. Many books on organization theories and solutions to organize the business have been produced to solve the fixed organization structure, re-organization, and change management problems. Management consultants introduced "Change Management" services to help with the problems. But, despite all the "solutions", the problems remain unsolved today.

There is only one structure to use to organize the business; the business itself

The solution to organize the business is obvious, if anyone stops to think. Only one structure can be used to organize the business; the business itself. The solution to organize the business is to organize the actual business. Rule No. 1 of 21st Century Management is Organize and Manage the Business to leave the re-organization problem and all other unsolvable 20th century management problems behind.

The business is organized by organizing "the activity of providing goods and services

The enterprise business is defined commonly today as "the activity of providing goods and services". The definition of the business can be more precise as "investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results". These two definitions show that the business has three components:

• Business results produced as economic outputs of value from the business, including all goods and services and internal results needed

• Capital solutions available to the business in the specific human and other capital utilized in business activity to provide results

• Performance in actual business activity to utilize specific capital solutions to produce specific results

Results and capital solutions can be organized like a spreadsheet to show results across the columns and performance solutions down the rows. The business is organized when capital solutions are deployed, with rules such as cost per result, to cells to be utilized in performance to produce results. The cell can record business activity, when specific solutions are utilized to incur costs and produce specific results. Each column totals the performance costs of capital solutions utilized to produce a volume of results to know the value-added. Each row totals all performance costs incurred by a solution to produce all results for capital management.

This structure is the organized business structure. The structure automatically re-organizes with each new result produced, completed result closed, or change to capital solution deployed to a result. This offers complete business organization flexibility, and eliminates the unsolvable re-organization problem.

Every organization unit produces results; the set of results can also define the organization

Business results are the outputs of value produced by the organization. Every organization unit produces a set of results. Instead of defining the organization unit and then assigning results to produce, we can define the results that must be produced together as a set and deploy responsible solutions like result organization unit and responsible manager. All the results that the enterprise must produce can be organized into sets to organize the complete enterprise. Organized results can be inverted to be viewed by organization unit, responsible manager, result chain, or other attributes. The set of results for any organization unit or responsible manager can be viewed as its own business structure, showing the results to be produced and the capital available to be utilized.

Every organization unit has assigned capital utilized to produce results

Every organization unit or responsibility center utilizes capital in the human capital, fixed assets, business processes and information systems, supplies and petty cash, management plans and guidance, etc. to produce results. Much of the capital utilized today is not defined precisely. Much has been developed internally and used to produce results, but was never recorded as enterprise capital of worth. Much usable high-worth capital has been labeled simply as "intangible assets" and left un-managed.

The business must be organized and managed to know the costs of performance and the value created in results

When this capital is used or consumed, costs are incurred. Therefore, to know the actual costs incurred in business activity or performance, we must define all capital down to the individual capital entity utilized, the capital solution. These performance costs create value in the result produced. The effectiveness of each capital solution contributes to the quality of the result. We must organize the business, and use basic information technology, in order to manage cost-effective performance to produce value-quality results.

The set of results for any organization unit or responsible manager can be managed as its own business structure. The result manager is responsible for the result value produced and the performance costs incurred to manage the value-added to each result and all results in the structure. Certain results in the structure can be viewed as a result value-quality chain and integrated with results under the responsibility of other organization units and managers to form an enterprise value-quality chain business structure, under the result manager responsible for the result chain.

This is 21st Century Management, where each result manager manages the business organization showing the results under his responsibility, the capital solutions utilized to produce results, and the relationships to other results.

Use R-pM to organize the business for 21st Century Management

Result-performance Management (R-pM) is the only one way to implement 21st Century Management, and shed the organization structure and other overlaid structures that cause the unsolvable problems faced today. The guidance is provided in the R-pM Toolkit, your 21st Century Management Manual, which is offered at a nominal cost to enable research into R-pM and wide use of R-pM. The R-pM Toolkit is available now at result-performance-management.com.