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Financial Strategy on Organization

Strategy is how an organization proposes to create value for its stakeholders--from the employees, shareholders and investors, and even prospective customers. Financial strategy is of utmost importance, especially to the middle and senior line managers, who face numerous financial problems within the organization on a daily basis. The success of an organization using financial strategy depends on how well managers are able to execute it.

  1. Good Financial Strategy

    • A good financial strategy includes finance and accounting measures. The idea is to plan for a financial objective of maximizing the share value by improving the internal accounting performance measures. The trouble usually comes when translating the plan to operational terms. An organization fails to implement the strategy when it remains an upper management initiative and doesn't reach the objectives of lower-level employees.

    Strategic Measures

    • Many developments in the field of strategy have happened over the years. One of the most important strategic measures used by organizations is the Balanced Scorecard. This strategy, developed by Harvard Business School scholars Robert Kaplan and David Norton in the 1990s, recognized the weakness of the traditional single-pointed focus management approach. Both believed the traditional approach didn't provide a clear or "balanced" view of the organization's financial perspective. As organizations become more customer-focused, Kaplan and Norton realized that simply measuring the financial metrics alone would not help decisions made at a strategic level.

    Strategic Plan

    • Financial strategy aligns business activities to the vision of the organization and helps to continuously monitor the organization performance against these goals. This scorecard combines nonfinancial performance measures to the traditional financial metrics, giving senior and middle managers a more "balanced" view of the performance of the organization. This strategic plan not only helps in identifying the objectives to be done and to be measured, but it also helps executives implement it on a daily basis.

    Significance of Financial Strategy

    • This strategy does not deny the importance of traditional financial data. The decisions are still based on historical financial data, showing the profit/loss and the financial gain made at the end of the evaluating period. But the strategy emphasizes the need for integrating other perspectives like the business process, customer views and growth perspective. This provides the platform for an ideal strategic-planning and performance-measuring system.

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