Lars Östman towards a general theory of financial control

Dynamics of the re­orientation of organisations  

 

The re-orientation of an organisation takes place with uncertainty as a main condition. It can 

be intentional, in the sense that processes start with the manifestation of a strategic will, 

founded on some financial basis; “core activities” are conceived in a new way, extended or 

narrowed. An explicit ambition is present to change relationships with one or more 

surrounding parties, with their separate interests. Activity extensions are changed: the 

number of parallel activity flows of a financial unit increases or decreases, or alternatively, 

more or fewer activity elements are integrated, forwards or backwards. What is done within 

the unit afterwards can have a different weight to others in a larger system. Experiences 

accumulated and institutional working modes can be more or less pivotal in relation to 

external activity elements or to individuals that primarily care about their own identity. 

All shifts in a unit´s function in relation to outside interests create new conditions for the 

dynamics of the larger system: where the driving forces are, where ideas grow up, from 

whose perspective they are evaluated. On whose conditions does the process operate: 

through forces inside or outside the individual organisation or through interplay with other 

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parties? Shifts can fundamentally affect the working mode of an organisation in the long run. 

In what respects does it take initiatives and in what respects does it adapt to moves by other 

parties? What are the impulses and with whom does it interact? In what way are certain 

potential employees attracted and others repelled? Thus, action capabilities are also affected. 

Dependence on external circumstances, financial and operational, is crucial for the individual 

unit. The narrower and stricter the framework, the less there is opportunity to play a leading 

and flexible role. Borderlines in the financial respect are important, in both the short and the 

long term. Financial functions can be handled either on a self-sustained basis or through 

being a part of a larger coordinated whole that either promotes the development of the 

particular unit or not.  

A shift in one unit´s relationship with other parties along horizontal or vertical lines may 

gradually appear, and may, initially, not even be easy to observe. Such a shift can be due to 

long-range changes in the surroundings and in ongoing actions that are possible within 

financial limits. Cost processes tend to lead to room for action of a permanent organisation 

standing in opposition to other interests, such as the financial principals´ opportunities to use 

resources in alternative ways, the output and prices offered to users and working conditions, 

including remuneration. Economic actions become less and less neutral. The interest in and 

the ability to see problems lurking around the corner vary. For some of those who defend an 

organisation on the basis of a special interest and special knowledge, it may be natural to see 

approaching problems and wonder what actual roles are emerging under new conditions. For 

decision-makers and observers with other ties, there is less reason to consider what functions 

could be fulfilled in a future society. For those who are assigned to express demands at a 

distance, without links with internal core processes, such aspects weigh rather lightly in 

comparison with the more obvious need to reduce costs. 

Often in resource discussions, conflicting and partly implicit ideas clash over what 

ambitions are consistent, what should be aimed for and what must, unfortunately, be 

abandoned. The opinions of various parties as to what should be given priority are governed 

by mental models that focus either on the actual working mode in an organisation or on a 

general and externally oriented view of functions and possibilities. Ways of achieving major 

cost advantages are proposed, and reference is made to financial necessity or to other factors. 

This may result in high priority for some external requirements, low priority for others, new 

de facto restrictions on activities or changes in working modes within the organisation.   

Each narrowed strategy causes particular risks in terms of the deteriorations of the long-

range capabilities of an organisation and its position in relation to surrounding parties. No 

one can know for sure what the society of the future will look like, and what functions and 

ideals would then prevail. What an organisation can offer later on should comply with 

functions that users, financiers and cooperating parties want at that point of time. This 

determines long-term attractiveness, vertically and horizontally. 

A more common set of impulses tends to hit many organisations, sometimes in a rather 

one-dimensional manner. When more people act more often in response to similar signals 

via similar processes, there are new prerequisites to establish an organisation of a special 

nature which can be justified as an independent unit and as a provider of output that is 

attractive and different from what other organisations achieve. In such processes, figures on 

one occasion may give a temporary picture in comparison with a long-term view. Elements 

of rhetoric are manifold. All this tends to be found in topical actions and strategic 

transformation, even in cases when long-term developments of revenues and costs are on 

their way.  

 

 

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