Lars Östman towards a general theory of financial control

AN  ORGANISATIONAL  PERSPECTIVE  –  COMMON  AND 

CONFLICTING INTERESTS 

 

The concepts of “organisation” and “financial entity” 

 

My definition of “organisation” concerns entities that are working continuously, not 

temporarily – this does not necessarily mean that they tend to be eternal. Each organisation 

consists of units that together have two types of tasks: handling operations directly or 

indirectly and handling financial issues, both on a continuous basis for this particular entity. 

The boundaries of an “organisation” are not self-evident. My concept is also influenced by 

my analytical starting points: dependencies and independencies between economic activities 

and between human beings. Fundamentally, an organisational entity can hardly function in 

isolation, standing totally by itself and disregarding its surroundings. On the contrary, there 

are always reciprocal relationships between an organisation and its environment, close and 

remote, short-term and long-term. But this is a question of degrees. Some activities have 

strong mutual relationships and are at the same time relatively independent of other ones, 

---

 

10 

 

operationally and/or financially. This is my main basis for defining the limits of an 

“organisation” from a financial point of view. Some degree of autonomy is required. 

A horizontal series of events always has a financial side for the organisation: the level of 

incoming prices and costs in relation to output and prices, if any. Financial flows are 

attached to different parties and ambiguity is very limited. A flow is referred to each 

organisation, credited and debited. I label some organisations “financial entities”. These are 

rather independent from an activity point of view and/or a financial point of view; financial 

autonomy concerns their position in relation to financial sources. Some are not included in a 

resource allocation system of any superior principal and are autonomous in this sense. Others 

are somewhat autonomous, even if they receive their money from a superior principal. They 

have to bear the consequences of how volumes and prices develop without (full) 

compensation through allotment from other parties. Categorization, especially in the second 

respect, is a matter of degree.