The Effectiveness of Various Organizational Functions that Involve the Controller - Term Paper Example

Organizational Analysis Managing various organizational operations for an efficient organization is complex set of process in today's dynamic economic environment. This paper analyzes the effectiveness of various organizational functions that involve the controller or senior financial officer of the organization and discusses various operational issues faced by organizations. Paper also suggests the appropriate means of resolving various concerns faced by controller or senior financial officer. Introduction Effectiveness of various organizational functions depends upon the relationship between organizational functions and management. It is most crucial for success of an organization. Effective organizational functions make the building blocks of an efficient organization. Different organizations develop different approaches for organizational functioning in order to protect the interests of various stakeholders, while leaving managers enough freedom to take managerial decisions and actions. The effectiveness of organizational functions depends on decision-making and on the execution of decisions. Controller or senior financial officer of the organization plays major roles in planning and managing different organizational functions. Their capabilities and efficiency is often reflected in the organizational efficiency. Organizational functions that are based on the principle of profitability for all of organization's stakeholders assure the most effective behavior of enterprises. With the evolution of modern organizational management practices, the owners and different stakeholders of the organization hire professional managers to manage organizational functions. This helps in development and optimal exploits of organizational functions. These professional controller or senior financial officers strive for most efficient coordination between various organizational functions. Relationship between strategic planning and budgeting Planning and budgeting are essential components of any effective and efficient organizational function. Planning and budgeting are always intertwined in any organization; a proper balance is required between these processes to optimize the overall results on efficiency of the organization. Budgeting process, though run in congruence of planning process, should not interfere with planning process in the same way planning process should also take care of budgeting and should not pursue unrealistic visions without any consideration of economic feasibility. It has been pointed out by various studies on relationship between strategic planning and budgeting that a better strategic planning results in reduced budgeting constrains and more efficient organization and in turn a reduced budgeting constrain and efficient organization results in better strategic planning. The budgeting process should always involve organization's strategic and operational plans. Budgeting in organizations should match the organization's vision and goals. It should facilitate the planning process to enhance operational efficiency of organization. At the same time planning process involves the consideration of budgeting. Planning process should not conflict with budgeting; however, it should follow the budgetary constraints. A right kind of balance is always required between these processes for efficient and smooth running of business. Strategic planners assert that strategic planning is essential for financial health of any organization (Steiner, 1979; Thompson & Strickland, 1987). Strategic planning to set and achieve targets for an organization require cost or budget. Budget requirements generally increase as the planning process move up on organizational ladder. An optimal organizational planning within budgeting constraints is required from controller or senior financial officers. Owners and various stake holders judge the efficiency of these professionals on the ground of better planning and budgeting ratios. Use of technology including financial and management information systems in your organization Information management is a cycle of processes that support the organization's learning activities: identifying information needs, acquiring information, organizing and storing information, developing information products and services, distributing information, and using information [Choo]. Modern and efficient organizations heavily depend upon various information systems to achieve their strategic objectives. Controllers of these information systems should be well equipped with understanding of organization's visions and business aspects. With the growth of various business dimensions in global market place task of senior management and finance officers has been significantly complicated. Though a huge amount of data is available to organizations from different communication channels, managing this data for efficient use in strategic planning is becoming more and more complicated. Decision makers and senior finance managers devote most of their time in the analysis of this available data to find out enticing market trend that may help in strategic decisions for a more efficient organization. Controller or senior financial officers are also responsible for exploiting the information in information systems available with the organization to optimize organizational processes by swiftly identifying scope and potentials of the system, and automation and reengineer of underlying business processes. Organizations need to develop a holistic approach towards financial and management information. Financial and management information systems should combine tacit, rule-based, and background knowledge at all levels of the organization. Use of measures and standards for cost controls Cost control does not mean reducing cost at the expense of efficiency or sub standard organizational expenditure. It refers to managing required resources at a lowest possible price without compromising quality or other organizational requirements. Cost control directly affects the survival of any organization in today's highly competitive economic scenarios. A good cost control measure is all about continuous exploitation of cost reduction opportunity keeping the efficiency of organizational operations in view. Cost control can be achieved by a good strategic planning. Controllers and senior finance officers of organization need to explore all possibility of reducing cost of various organizational operations individually without affecting their efficiency. Some of the basic steps taken by decision makers for cost control are: Identification of cost reduction and business improvement opportunities Better reporting and ownership of costs Greater awareness and control of everyday costs There are several methods for cost control. A comprehensive evaluation of organization's unique internal operational environment should be done by senior management before deciding on cost control measures. Cost control measures used by one organization may yield negative effects on other organization. The best way of cost controlling may be the use of latest technologies. Developments in IT field have helped many modern organizations to control their operational costs, but again it depends on individual organization. For example smaller organization may not be able to get expected benefits of using IT when compared to big organizations. Use of accounting information for decision-making in your organization Accounting information form the basis of almost every organizational process either it is strategic planning or cost control measures. Accounting information is used in measuring current performance and setting targets for future. Finance managers in organizations manipulate accounting information to point out most and least profitable operations and the areas where they can work to improve efficiency of organization. Finance officers today are facing problem of abundance. It is difficult to analysis huge pile of accounting information without errors and finding patterns of that. Finance managers have various information analysis tools at dispense today which help in analysis accounting information and detecting predefined patterns from information. Organization's internal control systems Organization's internal control systems form an integral and dynamic component of the process to overcome operational deficiency and achieve its mission and vision. The main objectives of an organization's internal control system are [3]: To enable orderly, ethical, economical, efficient and effective various organizational operations To fulfill accountability obligations; To complying with applicable laws and regulations To safeguard resources against loss, misuse and damage Internal control is set of process devised to ensure an organization's proper functioning. It encompasses all basic management process of planning, executing and monitoring of organizational operations. Internal control is geared to the achievement of a separate but interrelated series of general objectives. These general objectives are implemented through numerous specific sub-objectives, functions, processes and activities [3]. These controls affect organizational operations individually and also as a whole. Integral controls are necessary for success of any strategic planning and budgetary constraint. Their effectiveness depends upon how it is intertwined with organization's operations and how it supports the goal of increasing operational efficiency. Many research papers directly link the efficiency of organization with the success in implementation of internal controls. Internal control systems and its implementation are greatly affected by the controllers and senior finance officers. They are also responsible for setting the organization's business objectives and accordingly develop the internal control system. Though, senior management is responsible of control implementation, everyone in organization play equally important role at their level. Organization's performance measures Performance measurement is also a very critical component for improving operational efficiency. It provides input to strategic planners and finance managers for setting their goals and work areas. Operations whose performance is not up to mark and drag organizations efficiency can be give more attention compared to others. Organization's overall performance depends upon the performance of all operations and each individual within organization. Performance measurement also gives rise to ethical issues such high performers should get reward for their work should get better chances to move up in organization. Senior management should treat the issue of performance measurement very carefully. Complete performance measurement process should be fully transparent and consider multidimensional contribution of each individual and organizational operations. Conclusion Efficiency of different organizational operations depend on strategic planning, budgeting, information systems, cost control measures, accounting information, internal control systems and their mutual relationships. Senior controllers and finance manager's role is very crucial for an efficient organization and achieving its vision. References: 1. Willie E. Hopkins, Shirley A. Hopkins Strategic Management Journal, Vol. 18, No. 8 (Sep., 1997), pp. 635-652 2. Chun Wei Choo, Information Management for the Intelligent Organization: Roles and Implications for the Information Professions, Faculty of Information Studies, University of Toronto 3. GUIDELINES FOR INTERNAL CONTROL STANDARDS FOR THE PUBLIC SECTOR, Internal Control Standards Committee, the Belgian Court of Audit. 4. 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