How Organizational Culture Impacts Financial Planning & Performance

culture impacts financial planning & performance - XLerant

Culture change and financial performance

There’s a phenomenon that occurs as organizations grow.  To facilitate expansion and support rapid growth, they create dedicated departments. But over time, the creation of these dedicated teams can eventually have a negative impact on growth – affecting communication, reducing transparency, and shifting allegiances. In a nutshell, it changes the culture.  And the culture impacts financial planning & performance. This was a hot topic at NACUBO – a conference for business officers and financial leaders we recently attended.  While the conference was for higher education institutions – the themes we heard transcend industry borders.  These issues impact the financial planning, budgeting, and bottom-line of businesses, governments and non-profits alike.

Here are the top 3 ways finance executives shared that culture impacts financial planning & performance:
1. Re-gaining institutional trust.

Communication becomes less organic and more structured as organizations expand. Decisions are made and filtered through the organization – but as time passes, less and less of the “why” behind each decision is communicated. Small misunderstandings or gaps in knowledge go unaddressed.  Employees often have a limited view of the total organizational landscape. Historical knowledge and context are lost as new employees come on board. Objectives and incentives focus primarily on the unit or department’s scope of work. Each of these small, innocuous issues taken together can result in a lack of trust in “upper management” or organizational leadership.

2. Creating organizational allegiance.

Or – more simply stated – moving from an “It’s us against them!” culture, to a culture that recognizes “We’re all in this together!” Easier said than done – especially in context of the issues discussed above.  Add to that: it’s not always easy to see what other departments or teams are contributing in a larger organization.  Conversely, the impact those departments can have on your own performance is often immediately apparent.  For example: delays in a much-needed report or product specification, or cost-sharing for administrative services your team doesn’t even use. Over time, these “wrongs” can grow the division (and mistrust) between already disparate silos.

3. Equipping employees to manage-up.

We have expectations that managers will be good at managing their staff.  And we also expect them to be good at communicating with leadership.  But effectively managing without authority is not necessarily something we prepare our staff for. What happens when an employee’s job requires them to manage colleagues, peers, or even their own manager? This is especially relevant for organizations with a matrix design, or those that are large enough to support a dedicated finance representative in key departments. These “remote” representatives often find themselves drawn into team dynamics and may struggle to effectively navigate their dual role as both a member of the finance team and the department they are dedicated to support.

And what are they doing to affect change?

It will probably come as no surprise that communication was the paramount issue to address for most of the finance executives that spoke. Here are just a few of the communication-based strategies we heard.  The finance teams and their leadership:

How are you tackling these issues?  We’d love to know! Email us with your strategies and we’ll update the post.

Interested in learning more about culture and organizational change?  Check our eBook on employee engagement or our webinar on strategy execution with a balanced scorecard.

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