Implementing a Financial Strategy: Managing Financial Capital, Investing in People, Balancing Risk and Developing Critical Resources

This chapter argues that a financial strategy is more likely to be a positive catalyst for strategic change if it defines in explicit terms how the financial capital the organisation gains access to should be structured and transformed into human, risk and resource capital. This is because these categories of applied capital reflect the organisation’s unique institutional context and what it is key stakeholders want from the organisation. The problem for managers is that people can be employed, risks balanced and resources levered at organisations in a great number of ways. The capital-centric transformations achieved could represent value to different groups of stakeholders in vastly different ways at different times. It is also all too easy to assume that the same methods for acquiring and allocating financial capital are suitable to use indefinitely when this is not the case. This chapter draws on the relevant extant institutional, firm theoretic, corporate finance, corporate governance, organisational design and strategic management literatures, as well as an instructive framework to explicate these arguments. The chapter concludes with a discussion of the implications of its findings for researchers and practice.