Effect of Creativity on Processes and Products in Finance Innovativeness - Coursework Example

School: Topic: Lecturer: Presentation: Introduction Creativity means the practice of doing things differently from the conventional patterns, changing the processes and shifting from the traditional decision making processes in financial management. Activities are carried out differently within an organization with the managers enjoying the freedom to change in their way of managing finances. It involves development of new thoughts and conceptions, or incorporating new ideas in to the existing ones to come up with better ways of accomplishing tasks. Bilton (2006 p 96) observes that creativity involves introducing something that is new in the financial system through imagination and thinking that is divergent from the conventional way. The financial managers develop a wide range of choices that are suitable for the solving financial problems, through getting detached from the former theories that were taken as the basis for solving problems involving finances. The previous limitations in regard to problem solving are not paid attention to. It is characterized by uniqueness in the ideas generated. According to Shirur (2003 p 67), creativity involves spawning, putting into operation and communication of the inventive ideas to others in the financial system. It takes place when people are capable of organizing their opinions in a manner that eventually directs them to an improved appreciation of the subject matter. Julier and Moor (2009 p 112) further argues that creativity is a course of action whereby those who make financial decisions develop sensitivity in regard to financial issues. They focus on the major financial drawbacks, insufficiency, knowledge gaps, the lacking components, dissonance and such issues that hamper financial advancement, and establishing their complexity, identifying a viable solution, making appropriate presumptions or preparing a hypotheses in regard to the shortages, trying them and eventually reporting to the stakeholders. In general, creativity is meaningful to finance. This essay is a critique of this meaning, and how creativity could affect the processes and products in finance. Effect of Creativity on Processes and Products in Finance Innovativeness Innovation is crucial in the organizational processes since it brings in new and better ways of improving the financial management of an organization. It also propels the organization towards accomplishment of strategic objectives for improvement of profitability. According to Proctor (1995 p 76), creativity is the origin of innovation. He defines innovation as putting in to practice creative ideas in order to improve the competitiveness of an organization, and to strengthen its financial system. Creativity allows the financial strategists to incorporate innovativeness in the organizational processes after careful analysis through imaginations of the impacts that it might have on the outcome. In general, without creativity, there can be no innovation in any financial system. It leads to innovation that transforms the factors of production in to useful components for the productivity of the organization. Management of Finances Creativity usually has a positive impact on the capability of organizations to allocate the available financial resources effectively. This helps in avoidance of misappropriation which can lead to insufficiency in an organization’s operations. It helps managers to imagine the results of engaging in particular ventures. With such hypothetical knowledge, it is easy to accomplish targets and identify means of acquiring funds. Effective budgeting is usually a result of creativity. Wind (2006 p 101) observes that it is through creative thinking that managers are capable of setting priorities for their business. For example, they are able to identify the expenses that should be settled first, and the ones that can remain outstanding for a longer period. Without such creative plans, it is possible to run short of funds for activities that require urgent attention. Creativity is also important when organizations solicit funds from financial institutions and donors. They are required to convince them on their prospects, and their capacity to make profits from the money acquired. Creative managers present realistic situations regarding before and after acquiring funds. This is because lenders usually seek to be assured of the capability of borrowers to repay their loans. They have to assess the plans of the borrower, whose creativity is the major determinant of the qualification for a loan or donation. When developing a fund raising proposal, the managers must use imaginations of the business prospects to present a credible argument on the possibility of the business to make profits (Howkins 2002 p 57). It is important that they possess the capability of assessing the possibility of external factors affecting the operations of the business. Through creativity, they are able to imagine how the profitability can change with changing operating environment; hence they can make important preparations. Consumer Preferences Consumer satisfaction is one of the major issues that contribute to the financial stability of an organization. Their preferences change with time depending on what competing organizations are offering in the market. They also depend on the prices of commodities and the ability of consumers to pay the cost. Financial stability in an organization depends on creativity especially in decision making regarding the prices at which to charge the products. Through imagination, the management should be capable of coming up with unique ideas that have been carefully analyzed to reflect the consequences of implementing a particular decision related to product prices. Selling the products at a certain cost may discourage consumers from purchasing products (Caves 2002 p 86). On the other hand, there are particular prices that may not be appropriate depending on the production costs and the rate of return. Creativity helps in making predictions regarding how to accomplish profitability while charging affordable prices in order for the organization to operate with a larger market share than competitors. Time Saving Managers need to have effective means of accomplishing tasks in order to make timely submissions of financial reports. The conventional processes of operation take long and at times managers may be unable to achieve the target especially when working in the contemporary operating environment which is changes fast. Creativity allows the manager to establish better and effective means of working. When future activities are predetermined, it is possible to save time since the manager goes directly to addressing specific tasks rather than beginning each task without an idea of what to expect. In other words, creativity aids in planning ahead and establishing which tasks to undertake first (Florida 2003 p 87). It helps in reducing the time it takes to reach the consumers through creative ideas. It helps in developing an appropriate way of communicating and establishing useful links to the business. For example, product advertisements are usually accomplished through creativity. It requires imagination on how customers are likely to respond to advertisements. This facilitates selection of the best choice that is likely to catch the attention of the targeted consumers. The power of creativity is demonstrated by the positive response of the consumers in regard to the advertisement. This is critical in maintaining profitability within an organization. Performance Management Creativity is essential in performance measurements, whereby the management determines the useful parameters that can be measured to give accurate results regarding the performance of the business. These parameters need to be congruent with the organizational goals. Since different organizations work towards the accomplishment of different objectives, managers in each of them have to be creative in order to determine which parameters will uniquely be useful in performance measurement. Important issues such as corporate social responsibility are effectively tackled through creativity (Caves 2002 p 86). Organizations such as Starbucks have flourished due to creativity, which makes them understand how best they can show appreciation to producers of the raw materials that they require. Starbucks has excelled in supporting community initiatives through offering finances to coffee growers. This helps the organization to maintain competitiveness (Starbucks Corporation 2008). The creative ideas generate a sense of ownership amongst the farmers towards the organization. This makes it possible for it to acquire raw materials at favorable prices than any other competing organization. Al-Saadoun (2006) argues that performance management is a not an easy task although it is what assists organizations to maintain organize assets and operations, as well as controlling costs. It can only be accomplished through creativity. For example, the performance of Saudi Aramco which is an oil company operating globally was always under pressure due to function economies, initiation of cutting expenditures and rising demand for oil. The manner in which the organization is distributed also contributed to the difficulties of maintaining consistency in operations. However, through creativity, the organization was able to embark on performance management, which made it possible for it to control and judge its performance through the use of parameters of performance which are unique to the organization. It uses the exploration achievement rates, result and progress costs, spending on operation and maintenance, energy strength, losses, overall refining limits, spill outs and possessions owned for the purpose of exploration amongst others. This is a significant strategy and as Fitz-Enz (2001) states, a company is likely to be successful if it includes as many parameters as possible that are unique to its operations through creativity. They are significant indicators for performance measurements. Improved Operations In many instances, organizational managers and overseers of organizational operations usually make a mistake of conceptualizing that the conduct of employees and the organizational operations are focused on the outcome. As Cokins (2004) observes, employees within an organization may seem to be busy to a great extent, while in reality they do not add to the realization of organizational goals. Such cases are evident amongst employees who pay attention to the instructions issued to them by the management and ensure that they complete every task and physically evaluate them instead of being creative. Generally, it is usually assumed that such a person is enthusiastic and committed in regard to the organization’s operations, which may form the basis of performance appraisal. However, the significance of creativity in organizational operations at all levels should not be ignored. Armstrong (2006) argues that there is need for employers to encourage creativity amongst their workers in order for them to be in a capacity to identify potential problems and solutions. For example in the banking industry, it would be important to encourage creativity amongst the credit appraisal team. The management can not issue a single appraisal mechanism that can be applied to all cases without requiring the creativity of workers due to the fact that borrowers have unique capabilities and limitations. The credit appraisal officers therefore have to use their discretion in determining the viability of offering loans, which can only be accomplished through creativity. If they have to depend solely on the rigid instruments of credit appraisal, a credit crisis is likely to occur. Conclusion Creativity is the practice of thinking beyond what is already being undertaken in an organization to accomplish its objectives. It usually results in to better ways of working out the daily processes. In finance, it is an important aspect that helps in upholding financial stability within an organization as well as maintaining competitiveness in the changing operating environment. It allows managers to focus on where they want to be in future, with reference to where they are now. Innovativeness in a business arises from creativity. The more the creativity in an organization the more innovative it is, which is important in maintaining competitiveness through offering unique products which are improved and better than the conventional products offered by the competing organizations. It facilitates the effective allocation of financial resources, which is important in preventing shortages from occurring. It also plays a significant role in supporting financing proposals presented to donors and lenders. Creative managers are able to understand the preferences of their customers. Production and advertisement are consumer focused, which enable them to operate with a large market share. It is also possible to save time through creativity. It allows managers and workers to perform their duties through the most effective procedures depending on the prevailing conditions in the operating environment. It also facilitates performance management in organizations through developing unique parameters for performance measurement. Organizations such as Aramco oil that have adopted this approach have reaped benefits which translate to higher productivity. Creativity amongst employees improves their ability to solve problems. They do not only await instructions from the managers regarding the approach to use in finding solutions to problems. Rather, they use their own creativity to find solutions. References 1. Al-Saadoun H. (2006). Saudi Aramco’s Experience in Preparing the Workforce for the Future. A Presentation at the Fourth HRD Forum, retrieved on 5th Sept. 2009 at < http://www.sma.org.sa/pdf/44/5.pdf.> 2. Armstrong M. (2006). Performance Management: Key Strategies and Practical Guidelines, Kogan Page. 3. Bilton C. 2006. Management and Creativity: From Creative Industries to Creative Management, Wiley-Blackwell 4. Caves R. 2002. Creative Industries: Contracts between Art and Commerce, Harvard University Press. 5. Cokins G. (2004). Performance Management: Finding the Missing Pieces, Wiley. 6. Fitz-Enz J. (2001). How to Measure Human Resource Management, McGraw-Hill. 7. Florida R. 2003. The Rise of the Creative Class: And how its Transforming Work, Leisure, Community and Everyday Life, Basic Books. 8. Howkins J. 2002. The Creative Economy: How People Make Money from Ideas, Penguin. 9. Julier G. and Moor L. 2009. Design and Creativity: Policy, Management and Practice, Berg Publishers. 10. Proctor T. 1995. Essence Management Creativity, Pearson Education. 11. Shirur S. S. 2003. Look Inside This Book Creativity in Management: Effective Decision-making by Thinking Differently, Deep & Deep Publications. 12. Starbucks Corporation. 2008. Corporate Social Responsibility, viewed on 22 April 2009 at, 13. Wind Y. 2006. Power of Impossible Thinking: Transform the Business of Your Life and the Life of Your Business, Pearson Education. Read More