Lars Östman towards a general theory of financial control

The topical perspective and the fundamental perspective

  

 

Almost constantly, fundamentals justify the question of how an organisation should view 

long-term opportunities and requirements. Ultimately, room for action is at stake. The timing 

and magnitude of actions call for a standpoint. Generally speaking, two conflicting views 

with almost moral dimensions may be propounded. The first says that economic actions 

cannot wait – those who cut powerfully and early are the clever ones. Besides, it may be a 

good idea to take an extra step when insights about a crisis are established. According to the 

alternative view, it is a virtue not to allow plans to be constrained by financial aspects that 

may become urgent only later on. The ideal is to extend ambitions so that financial capacity 

is clearly strained and to give financial indicators a very broad context. What is the wisest 

line – and how far should one go?  

It is difficult to get a complete score of the state of activities. An assessment cannot be 

based merely on what is currently visible. Other variables to be captured are the ability to 

make choices in the future and exposure to uncertainty. Efficiency and productivity are vital 

concepts, but they are often extraordinarily difficult to depict with a sufficient range of 

nuances. They can be viewed either in terms of external output or with regard to the way in 

which organisations function in their entirety. Many resources can be quantified rather 

easily, while it is often hardly meaningful to calculate what is achieved, especially not in 

financial terms.  Nor can final results in some cases be given a meaning independent of the 

resources used.  

Financial problems become visible when there is a risk that certain financial limits will be 

exceeded. Information tends to be regarded as a kind of reality in itself. If so, it is interpreted 

not merely as one representation of processes and states. Formulated in terms of an 

individual occasion, problems that are identified often rest on narrow grounds in relation to 

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fundamental financial needs. Evaluations and actions may possibly focus on marginal 

changes or expressed expectations, for example in the form of budgetary values or implicit 

stock market variables, rather than absolute amounts and entireties. An impression of an 

immediate crisis may emerge in some cases but not in others, without any important 

fundamental differences. To some extent, “financial crises” are not problems in the same 

absolute sense from one occasion to another.  

An organisation may create room for action either through a solid financial position or 

through a manifest ability to master current financial emergencies. Strong processes centred 

on topical circumstances determine many actions, both externally and internally. Each 

evaluation appears in the context of immediate observations and comparisons. The perceived 

character of the occasion plays an important role for process atmosphere, for the formulation 

of a problem picture and for measures taken. Reference points inevitably differ from those 

that may seem natural in the light of a pattern of events constructed at a much later date. The 

starting point for a series of numbers is particularly decisive.  

Continuous measuring points have become increasingly frequent, and the intensity of 

actions has also increased. More actions are initiated, with repercussions far ahead in the 

future. In order to achieve congruence between activities and financial limits, a small set of 

steps is primarily considered on each occasion. The handling of certain demarcated variables 

becomes a determining factor. Financial limits tend to result in a temporary one-sidedness in 

actions, depending on what is currently considered movable and influential with sufficient 

potential. Fundamental issues, however, are extensive and complicated, especially in relation 

to the narrow problem pictures presented in the short-term reports that are an essential 

driving force in the management process. A break-through may possibly wait around the 

corner. For many organisations, however, problems are not temporary, nor are they solved 

by single actions when they become visible. It is in the nature of things that most actions 

only have, at best, a temporary impact on the financial situation. Fundamental cost processes 

continue and it is mostly a question of time before financial limits are again exceeded. 

Actions take place against a background of demarcated perspectives for activities and 

financial matters, rather than after analyses of connections in any deeper sense. Powerfulness 

is evident and based on the strong logic of control systems. A basic question is whether those 

systems promote exchange perspectives or use perspectives.