Organizational capital refers to a company’s ability to efficiently use resources to implement and support strategies. It is measured by the additional revenue generated and savings incurred. Careful planning is necessary to allocate resources to core functions and new strategies.
Organizational capital is a term used to describe the efficiency with which a business or other organization can use resources to enable the implementation and support of some type of strategy. Because this process often involves identifying ways to use existing resources in new ways or allocating a portion of those resources to a new project without creating difficulties for other strategies that must continue to work, the ability to correctly evaluate and use the Organizational capital can be important to the continued growth of organizations.
One of the easiest ways to understand the concept of organizational capital is to consider a situation where resources need to be employed to improve some part of the overall operation. For example, if the project goal is to improve the efficiency of the accounting process, this may involve restructuring the current process by reassigning roles within the accounting department, implementing some new standards, and even investing in a new accounting software system which is able to automatically handle some tasks that are currently handled manually. Assuming the changes save the organization money, this can be seen as a wise use of resources that helps position the operation for future growth.
Typically, the efficiency of how organizational capital is used can be measured by considering both the additional revenue generated by the strategy and the savings that organizations incur by implementing the initiative. Both outcomes are desirable, as more revenue comes to the organization with more resources to work with. At the same time, strategies that reduce operating costs also improve profits, a situation that translates into significant benefits for all concerned.
The organizational capital assessment process is ongoing. With each proposed strategy, the details of how best to use resources will be crucial. This is especially important when the strategy involves activities above and beyond the core function of the organization. If so, careful planning will help ensure that sufficient resources are allocated to that core function, while at the same time allowing other resources to be diverted to the proposed strategy. By taking the time to create a workable framework for resource allocation and then projecting how that allocation works for the organization as a whole, it is possible to determine whether a particular strategy is actually in the best interest of the organization, or whether a different approach would be more beneficial in the long run.
Protect your devices with Threat Protection by NordVPN
