The Close Relationship Between Financial Leadership and Financial Goal Setting of Top SMEs - Dissertation Example

?Background Leadership is the human trait and activity that emanate from a person in ity which enables other people to work and gain results (Rowe, 2007). Leadership is necessary and critical at the top or strategic level of an organisation as well as the functional units (Ryan, 2002) The finance department is a crucial unit of every organisation (Bragg, 2011). The finance department is responsible for the design and maintenance of accounting systems like performance management and control systems, sourcing for funds and the investment of excess funds (Bragg, 2011). Generally, this requires a finance strategy (Bender & Ward, 2009) that seeks the maximisation of sales, market share, profits, earning per share, return on investment, growth, stock price and stockholders' well being (Bierman, 1999). Finance leadership is important in attaining good results for corporate entities. Financial leadership involves strategic thinking, innovation, management of business risks and change (Militello & Schwalber, 2000). Strategic thinking entails the use of structured and emergent systems to plan and attain results for the whole organisation over a long period of time. A leader has the responsibility of considering the internal organisational and external environmental factors in order to come up with a good strategy. When a strategy is in operation in an organisation, the leaders will have to identify inhibitors and other factors that can prevent them from attaining their objectives and solve them through a comprehensive risk management system. Innovation has to do with the continuous improvement of systems, processes and products of an organisation and it requires deep thinking and analysis to be attained. Financial management requires four things: Leadership, Ethics, Structures & Responsiveness (Blore et al, 2004). In other words, a financial leadership structure must be sensitive to the technical elements of leadership as well as the ethical concerns of leadership. It should also have structures of rules and regulations that would regulate activities throughout the organisation and be responsive to emergent matters and situations that would come up. The distribution of authority in organisations is done through a defined organisational structure which sets out the relationship between various units of the organisation (Stevens & Loudon, 2005). For the sake of accountability, there is the need for reporting to be done by subordinates to people in authority (Stevens & Loudon, 2005). Therefore people who have power delegated to them have the duty of reporting to their leaders at regular intervals. Some of these reports include financial reports like management financial information from lower units which culminates in the creation of income and position statements that are used by various stakeholders for decision making. Problem Statement In practical terms, there is a questions about how these necessary qualities of financial leadership relate to businesses and their goals. For instance one would wonder why some companies are growing quickly financially whilst others are folding up in the UK. It is true that the global recession is making business difficult but how come some are growing fast and some are growing slowly? It therefore suggests that some businesses are getting some principles of finance right whilst others are not. What are the structures in financial systems and structures that affect financial goals of an organisation? What are the effects of the human resource capabilities of financial managers on financial goals? What is the role of financial leadership on financial goals when there are changes in the external environment? This leads us to the research question which states: “What are the elements of financial leadership the fastest growing businesses the UK?” Aims & Objectives The of the research is to identify the actual relationship that exists between the type of financial leadership in the UK and the financial goals of an organisation. The main objectives of the research will be: 1. To critically assess the quality and structures of financial leadership in UK's fastest growing businesses. 2. To evaluate the system through which the financial leadership of the fastest growing UK businesses contribute to financial goals. 3. To critically examine the effects of the quality and involvement of financial leadership on a business' financial goals. Research Design The research will study ten of Britain's firms with the fastest growing profits. These businesses are identified by the Sunday Times as to include R & R Ice Cream, Power Perfector, Moonpig.com, McLauren, Supacat, Liquid Capital, Adey Heating Solutions, Ramsden, UPP and Fridays (Sunday Times, 2011). The research would begin by the examination of key concepts and principles in existing literature. It would attempt to define the elements of financial leadership from two angles. First the structures and systems of good and ideal financial departments. Secondly, there would be an examination of how emergent matters are incorporated into organisations. The literature review, which will focus on secondary sources will look at economic situations and conditions in recent times including a review of the credit crunch and its effects on finance as a department of businesses. The next thing would be to define the variables for the two objectives of the research. The first would be to define the elements of the structures for financial leadership in modern time. This will lead to the creation of ordinal variables that can be tested. After that, data of the variables would be collected from the various companies under study. This would be followed up by analysis of these information on how they affect the financial goals of these businesses under study. Data Collection The data for the paper will identify the main nominal variables: Financial Structures/Systems. The elements of financial systems and structures would be identified from secondary sources. In other words, they would be deduced from the literature review and they would be put into ordinal variables according to the best ways and systems to reflect the realities in practice. These would be put into the form of questions to be sent to the various companies to find out about the state of their operations through telephone interviews and conversations. The questions will be closed questions that would either be yes/no questions or it would involve gradings from 1 to 5. These questions would be presented to the financial and treasury departments of the ten organisations at hand. The questions will revolve around the variables of the financial structures and systems. It will find out about important matters like Leadership Systems, Reporting Systems, Financial Modelling, Responses to the Austerity measures, and the unique financial leadership structures they put in place that will be identified from the literature review. Also, there would be follow up interviews after the data collected in the data has been analysed. These interviews would seek to help in the confirmation or rejection of the ideas and concepts that would be deduced from the data collected. Data Analysis The data of the ordinal variables in the elements of financial leadership and Systems would be entered into an SPSS software. The data collected from each of the companies studied in the review would be input into the spreadsheet and then processed. The trends and averages of each ordinal variable would be identified and noted in a summary format. This format would be used as yardstick for the next phase. Interpretation The research would be a deductive research. The trends, averages and findings from the data analysis would be generalised and then theories would be propounded from the findings. This would lead to the deduction of trends and common financial leadership systems and structures that are used by these ten fast growing companies in this era of serious economic conditions and crises. Ethical Concerns & Limitations The research is meant to communicate with the finance departments of the fastest growing businesses in the UK. This means that the research would be dependent on the cooperation of each of these companies. However, in the event of the researcher not being able to get information, the next company in the list of 10 most profitable companies in the UK would be examined in its stead. The limitation of the research's deduction will be the fact that there is no clear way of quantifying certain elements of research in organisation like management's manipulation, dominant personality and some emergent issues. References Bender, Ruth & Ward, Keith (2009) Corporate Financial Strategy Oxford: Elsevier-Butterworth-Heinemann. Bierman, Harold (1999) Corporate Finance Strategy Frank J. Fabozzi Associates New Hope Pennsylvania. Blore, Ian; Devas Nick & Slater, Richard (2004) Municipalities & Finance: A Sourcebook for Capacity Building London: Earthscan. Bragg, Steven (2011) New CFO Financial Leadership Manual 3Edn John Wiley & Sons. Militello, Fredrick C. & Schwalberg, Michael D. (2000) Leverage Completencies: The Key to Financial Leadership Success Financial Times/Prentice Hall, NJ, Upper Saddle. Rowe, W. G. (2007). Cases in Leadership. Thousand Oaks, CA: Sage Publications Ryan, Johnson (2002) Strategy in Modern Business New York: McGraw-Hill Stevens, Robert & Loudon, David (2005) Marketing Planning Guide London: Routledge, Taylor & Francis Group. Sunday Times (2011) Profit Track 100 “Britain's Private Firms with the fastest Growing Profits” April 17, 2011 Read More