The first article in this three-part series introduced the cultural web as a way of understanding an organisation’s financial culture. In this second instalment, Simon Perks takes a deep dive into organisational structure, power structures and control systems, and explores how we can use them to bring about positive cultural change.
Organisational structure
In the cultural web, organisational structure is about how the different bits of the organisation fit together. It’s about who reports to whom, who makes the decisions and which teams sit where on the organisational chart. And it’s important because it gives a clear indication of how we want things to work.
To create a culture of financial awareness and accountability, some organisational structure ‘must-haves’ include:
- a clearly-identified individual who has responsibility for the organisation’s finances and who is a full member of the organisation’s senior leadership team;
- a dedicated finance team that has sufficient capacity and resources to fulfil its role and to provide support to other teams across the organisation; and
- clear oversight of the organisation’s finances at trustee or board level, with at least one trustee having professional financial expertise.
Strong financial leadership is vital to a culture of financial awareness and accountability. Consequently, organisations need to demonstrate through their structure that they value such leadership. Failure to do so risks the organisation lurching rudderless from one financial crisis to another, never really getting a grip on the causes of its problems.
Power structures
If organisational structure is about how we want things to work, power structures are about how things actually work. It’s about who has influence, relationships and the ability to get things done, regardless of where they sit on the organisational chart. And they’re important because they set the tone for how seriously people take the rules.
We can use power structures to create a positive financial culture by:
- having a robust set of financial regulations that are clear, well-communicated and adhered to – and seen to be adhered to – by everyone across the organisation;
- ensuring that the finance team is involved in all significant decisions and that the chief financial officer has the authority to veto unaffordable expenditure decisions; and
- keeping a tight rein on rogue spend, vanity projects and contracts that bypass normal approval processes – even for the CEO (in fact, especially for the CEO).
The perception that the strictures of financial discipline do not apply to everyone equally is one of the things I see most frequently in organisations with a poor financial culture. We have financial rules for a reason. And they need to apply to everyone, no matter who they are, who they know or how they might feel about it.
Control systems
Control systems are how we make sure that what we want to happen does happen. They’re the financial rules, procedures, systems and processes that govern how we manage our money, and the ways we allocate resources and monitor performance. They’re important because they help us to achieve our goals – and to avoid running out of cash.
Control systems that can help to create a culture of financial awareness and accountability include:
- the development and implementation of a financial strategy that sits alongside the organisational strategy and sets out how the latter will be funded and financed;
- detailed consideration of the financial impact of all significant organisational decisions, such as the introduction of new activities; and
- clear accountability for devolved budgets that allows income and expenditure challenges to be addressed at source, rather than simply blamed on the finance team.
Organisations with a positive financial culture recognise that all strategic and operational decisions have a financial impact (and vice versa) and that organisational activity and financial performance are, in essence, two sides of the same coin. Trying to pretend otherwise is, in my experience, one of the biggest threats to an organisation’s financial sustainability.
In an ideal world, an organisation’s structure, power structures and control systems will be in alignment with each other and with its financial objectives. But they must also be aligned with the ‘softer’ elements of the cultural web, namely rituals and routines, symbols and stories. And it is to these that we turn in the final article in this series.
For Simon's full series exploring organisational and financial culture, read part 1 and part 3.