Lars Östman towards a general theory of financial control
Structure and control systems
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Structure and control systems
The overall economic structure contains many types of organisations: Pay-driven companies are growing with potential buyers´ purchasing power as a driving force and they have a world-wide impact on product markets and labour markets. National and local companies are pay-driven. Function-driven organisations are funded by taxes, primarily within national borders. Constellations of pay-driven and function-driven units are common, as well as many variants of relations from operational or financial points of view, for both private and public activities. Function-driven non-profit units, for example within popular movements, work within areas that other organisations do not deal with. The basic logic behind pay-driven units is the search for horizontal functions that could be satisfied for those who have the capacity and willingness to pay. Big business groups are almost borderless. Their preconditions and modes of operation make such an extension a natural consequence of powerful ambitions. Many people are concerned, as workers, users of output or savers. Only rather rarely are function-driven units borderless. Often their existence is based on the fact that certain defined groups should be served or satisfied, for example citizens of a nation or a municipality or the members of a non-profit association. The horizontal flows of many function-driven units are contingent on continuous decisions by allocating units. This is the case for tax-financed activities. In turn, however, allotments to them and their financial capacity are conditioned by the development of pay-
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driven activities in several ways. Not only is funding affected by private income generation. Also, pay-driven units normally have better opportunities for selection and improving productivity in some real sense. For this reason alone, costs of output tend to increase continuously in many function-driven operations. Nowadays, a substantial number of organisations are, directly or indirectly, occupied with financial allocation systems such as financial markets and tax systems. A large proportion of actors in emerging structures and control systems have weaker contacts than before with low-level, non-financial horizontal flows. In large organisations, relatively unconditioned decentralisation is not common. At the same time, there are obvious difficulties in organizing powerful subjects at really high, super-national levels where global problems can be addressed. Intermediate levels have grown – larger and larger groups of people and organisations that are specialised in administrative, financial, communicative and controlling techniques. These have been regarded as extremely important, there have been great ambitions to create incentive systems to direct and reinforce their work on a local and time- bound basis. Traditional control subjects have lost some of their weight, both group executives and national leaders. Power has moved upwards – to the representatives of owners and super-national bodies, respectively. Those who represent
an organisation at the top are often professionals or politicians who are at distance from most substantial horizontal flows. Top-level representatives have their mandates from unorganised individuals who are at an even greater distance from activities tending to disregard the relationships between their various, conflicting interests. Parties may spatially and mentally be far from each other, but ultimately they are mutually dependent. Thus, top-level representatives have some interaction with large groups of anonymous individuals: voters, consumers or investors. For many pay-driven organisations, interaction is strong between vertical principals and customer groups that have purchasing power. These organisations aim at target groups with such power and they adjust products and costs accordingly: for what and how much do they believe customers are willing to pay? Functions-driven organisations should serve some specific group, for example citizens of a nation. Often this does not prevent them from defining target groups within that frame, even if it has no substantial effect on payments. In part, needs are humanitarian. Output must be modified with regard to allotted funds, which develop in their own way.
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