Many people I have worked with over the years have tried to tell me what the biggest problem was with whatever company we were working for. No company is perfect; there is always some sort of organizational friction. Technical people thought it was because we didn’t have the latest tools or equipment. The creative types said the company didn’t know how to create an innovative environment. For those with more social sensibilities, the problems were due to poor leadership or teamwork. Almost everyone blames management for something. While some of the problems were definitely valid, the proposed solutions only addressed part of the organizational challenges. This became even clearer after I became a manager. The organizational difficulties had to be rooted in the business itself. At the end of the day, every company we work for is a business and its main goal is to make money. Organizational challenges must stem from that.
At this point, I should make myself very clear: I only have the deepest respect for all the Finance people with whom I have worked. They have a tough job trying to maintain some sort of financial accountability and control to ensure their companies generate profits. However, those same financial structures become the root of many organizational problems when the Finance department becomes disconnected from how the company works day-to-day.
Take the case of projectized organizations where all the budgets are confined to the projects, which are primarily the people assigned to those projects. If there are no time sheets or other systems for tracking cross-charges between projects, project managers may discourage cross-team collaboration because they don’t want to pay for the benefit of another project. Even in organizations that do have these systems, project managers may then obsess over charges for teams that may not directly benefit their projects, but are for the benefit of the entire the company. In both situations, the financial structure is contributing to social issues.
Then there is the other side of the spectrum – companies with little financial controls while going through explosive growth. This creates the perfect environment for an empire-builder to hire an army of warm bodies that may become a drain on the organization. This is also the perfect environment for entrepreneurial companies to focus only on revenue, not profit. The excesses of Silicon Valley during the late 90’s provide plenty of case studies for both those behaviours.
So how do we solve this? Financial structures should be set up to drive the behaviours needed in an organization. Leadership from all the functions in the company need to have a common vision of how the teams need to work to meet business needs and then collaborate with the Finance department to create the appropriate accountability and control. The collaboration needs to go both ways, since some financial processes are required by law or for tax purposes. Complying with those needs the participation of the operational side of the company and not just be left to the Finance team to deal with during the annual financial audits. Finance does not need to be the team that makes decisions that affect the entire company from behind locked doors in some corner of the building. Finance and operations working in a balanced partnership is the foundation of creating the company cultures we want.