Lars Östman towards a general theory of financial control

 

 

An overview of main trends  

 

At an early stage, pay-driven companies were managed by circles close to an owner and a 

family, on their conditions. People in the neighbourhood were dependent on their attitudes 

and financial capacity. Most sub-units within the pay-driven organisations concerned 

functions. Function-driven organisations were not so numerous and so large. This was also 

the case within the State and municipalities. They were evaluated and financed by 

representatives as principals. 

During the 20

th

 century, vertical structures and processes developed fundamentally. They 

were strengthened, both outside and within organisations. Power distribution along the 

vertical line varied, but generally there was a clear trend towards conditioned 

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decentralisation. Shorter time periods were followed up more frequently. Not only wealthy 

individuals but also people in general became dependent on rates of return on stock markets 

as a financial source. This change, implemented through institutional ownership, affected 

how the economy worked. Also, the vertical structure became more and more multinational 

for private organisations. In certain cases, owners came from various countries, group 

management and headquarter from another country than most of the owners, subsidiaries 

were located in a third and operating units in a fourth country, which might be the same as 

for some of the higher levels. For nations, not least in Europe, super-national levels 

developed in critical respects.   

Structures and control systems were more and more oriented towards relating costs in one 

step of the horizontal flow with immediate and tangible functions in the next step. Pay-

driven organisations were established wherever possible. Function-driven organisations 

often developed a pseudo-commercial nature. Some of them were given financial 

independence in the sense that their income-generating capability was decisive for activity 

volume. There was a general move away from function-driven units that were managed in 

traditional cost-based forms. Strictly identifying output, and assigning prices, rather than 

emphasizing common and less distinct functions, was one of the most noticeable ideas in 

financial control during the latter part of the 20

th

 century. A tendency towards 

“commodification” evolved. For function-driven organisations too, some kind of “product” 

is delivered from producers to users, who are human beings or organisations and who may 

have a real option or not.  

In the horizontal line, thus, structures and financial control systems were more and more 

oriented towards specific use, immediate use, target groups or at least pronounced views of 

target groups. The period in and around the 1970s was an exception to this development, 

with a heavy emphasis on union and employee perspectives. At the same time as the focus 

on tangible use gradually increased, the activities of many units had more distant 

connections to end use. To an increasing extent, horizontal flows were extended across 

national borders. Thus, interdependences were more complex, including being more 

comprehensive spatially. Technology and the internet changed patterns and distances 

between organisations and users. Efficient relations with an output user from an 

organisation´s point of view did not necessarily mean routines that favoured pre-use 

contacts, accessibility and contacts at the moments of use from the users´ point of view. 

Often, experiential functions of output required flexible human use contacts rather than the 

technical properties of a computerized communication system.