MANAGEMENT ACCOUNTING

Management Accounting

Management Accounting

Introduction

This review of the chaning themes in management control builds on earlier reviews, such as [Hofstede, 1978], [Giglioni and Bedeian, 1974], [Merchant and Simons, 1986], [Parker, 1986] and [Macintosh, 1994]; and Otley et al., 1995. Giglioni and Bedeian reviewed the contribution of the general management and organisational theory literature for the period 1900-1972. Parker argued that accounting control developments lagged developments in the management literature and criticised accounting models of control for offering only imperfect reflections of management models of control. Hofstede provided an early survey of the behavioural approach to budgetary control, later also noting (1978) “the poverty of (the then) management control philosophy” while Merchant and Simons took a broader view of management control, giving attention to agency theory and psychology. (Simons, 1994) and (Simons, 1995) later contributed to the study of the strategic aspects of control. Macintosh organised his review around the methodological approaches of the researchers. Whilst appreciating the content of the earlier reviews, we will structure this review around the themes developed by Otley et al. (1995).

Otley et al. (1995) argued that one of the unintended consequences of Anthony's seminal work (Anthony, 1965) was that management control research developed in an accounting-based framework. They noted that radical theorists had given attention to the importance of wider issues of power in a society being expressed or replicated in management control and management controls. Otley et al. also reviewed a series of definitions of management control ([Anthony, 1965], [Lowe, 1971] and [Machin, 1983]), showing how they were broadening from Anthony's base. Otley et al. (1995) organised their review of management control research using Scott's typology of open and closed systems (Scott, 1981) mapped against rational and natural models of systems. These authors did not claim that such a mapping was complete or the four domains were always mutually exclusive. They noted that while a functionalist stance had been severely criticised (Burrell and Morgan, 1979) it was still a very common approach to management control research and practice. Further they suggested that the advent of powerful computers and high-speed software might have a considerable impact on control practice. Also it was observed that accounting was still an important element of management control, as it offered the possibility of integrating all aspects of an organisation's work into an over-arching economic calculus.

Otley et al. (1995) suggested “some lines of enquiry” that might prove to be fruitful. These were:

(a) The environment of control especially the change in organisational structures from large hierarchies to smaller and more focused units. This introduces a 'horizontal' element into control structures in relation to e.g. supply chains and the embedded firm

(b) The change from a focus on business planning to a wider focus on business strategy and strategic control processes. This includes the appearance of strategic information systems such as the then embryonic balanced scorecard (Kaplan and Norton, 1992)

(c) The impact of globalisation in introducing greater complexity, uncertainty and risk

(d) The methodological basis of management control research; to develop constructivist and critical research studies

(e) Control in multinational organisations ...