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Financial Management to Promote Organizational Success

Regardless of which industry(s) businesses operate in, it could be said that they are all in the business of financial management. A business could become unviable and close to shutting its doors if it loses control over its financial state. There are many companies that fell into this category, such as Enron, Blockbuster, British Home Stores (BHS), Woolworth, Comet, Kmart, Compaq, Northern Rock, Lehman Brothers, and countless others not as prominent as these. Managers can better avert this fate by analyzing companies’ financial practices resulting from the decisions made given their current processes, as well as by making the most appropriate and ethical financial decisions based on the evidence available. In this Discussion, you will examine the practices and culture of an organization in regard to financial management and how those aspects impacted the organization’s success.

Note: For this Discussion and for the Discussions throughout this course, you will be asked to refer to personal and professional experiences, as well as use examples from your research. In doing so, it is important to remove any personal biases that you may have about organizations you discuss and instead focus on the areas of financial management. For example, you may have disliked a previous employer, but that should not prevent you from extracting important financial lessons from them, whether the lessons are good or bad. Or, if you admire a company or business leader that you plan to research, be careful not to allow your preconceived ideas about them sway your observations. Aim to focus on the financials, allowing the numbers to speak for themselves.

Additionally, as noted in the Course Introduction, the Business Skill for Good for this course is evidence-based decision making, and therefore you are encouraged to keep this in mind as you discuss organizations and their financial situations. You may not always have access to real financial information due to it being proprietary or undisclosed, but you should aim to use as much evidence as possible to justify your assertions in the Discussions for this course.

Consider a company where you have worked (or one with which you are familiar) that demonstrated solid or poor financial practices. Be prepared to discuss the company, as well as provide some details on how the financial practices were demonstrated.
Post an analysis of the impact of an organization’s financial management practices on its success.

Briefly describe the organization you selected. Note: When using specific examples from your professional experience, be sure to disguise the names of any individual or organization and/or any proprietary or sensitive information.
Identify the practices within that organization that reflect good financial management (or a lack thereof).
Describe the aspects of the organization’s culture that support those financial practices (whether good or bad).
Examine how the organization’s financial management practices have impacted on its overall success. Be sure to include at least one specific example of how the company was successful.

Sample Answer

Financial Management and Organizational Success: A Case Study

Every organization, regardless of its industry, lives and dies by its financial management. The examples of Enron and Lehman Brothers serve as stark reminders that fundamental failures in financial practice and culture can lead to catastrophic results. This analysis will examine an organization (disguised for privacy) that demonstrated largely solid financial practices and how those practices, supported by its culture, contributed to its sustained success.

The Selected Organization: Global Logistics Co. (GLC)

The organization I am familiar with is a large, multinational company specializing in global third-party logistics (3PL). GLC operates in a highly competitive, low-margin industry where efficient capital management and tight cost controls are essential for profitability. Its business relies heavily on fixed assets (warehouses, transportation hubs) and managing complex, high-volume transactions across multiple currencies and regulatory environments.

Financial Practices: Strengths in Management

GLC demonstrated several practices that reflect good financial management:

Rigorous Capital Budgeting: The company employed a strict, evidence-based process for all major capital expenditures (CapEx), such as new automated warehouses or fleet upgrades. They routinely used metrics like Net Present Value (NPV) and Internal Rate of Return (IRR), setting high hurdle rates to ensure that new investments provided returns significantly greater than the cost of capital. This prevented "pet projects" and ensured efficient allocation of scarce resources.

Decentralized Expense Control: While financial policy was set centrally, cost center managers were given clear, measurable budgets and were held directly accountable for variances. Monthly reports detailing actual versus budgeted expenses were mandatory, fostering a culture of ownership and preventing unchecked spending drift.

Effective Working Capital Management: Due to the nature of 3PL (moving goods and then billing clients), managing the gap between paying suppliers (e.g., fuel, labor) and receiving customer payments (Accounts Receivable) is critical. GLC maintained stringent targets for Days Sales Outstanding (DSO) and optimized inventory (spares, supplies) using Just-In-Time (JIT) principles to minimize cash tied up in working capital.

Organizational Culture Supporting Financial Discipline

The solid financial practices at GLC were deeply rooted in and supported by the organization’s culture:

Culture of Frugality and Ownership: Despite being a large, profitable company, the culture was deeply cost-conscious—a legacy of its founder who had succeeded in the cutthroat logistics industry. There was an unspoken expectation that every dollar spent had to be justified. Managers were celebrated not for high spending, but for efficiency gains and cost avoidance.