The illusion of managerial control

The design and implementation of organizational control systems based on a cybernetic model stand in need of revision. The revision is required by increasing numbers of reports of system ineffectiveness and, in some cases, failure. The paper suggests that a major reason for current difficulties resides in the “illusion of control” implied by theory and implemented in practice. An alternative definition of organizational control based in the concept of “multirationality” is proposed.     

The pattern of PPB rejection: Something about organizations, something about PPB

“Pathology” is defined in Webster's dictionary as “… the study of the essential nature of diseases and especially of the structural and functional changes produced by them”. Thus, a pathological study can reveal information concerning both a disease or toxin and the organism to which it is introduced.Planning, programming and budgeting (PPB) was introduced in not-for-profit organizations in order to improve organizational planning and control. It failed. The purpose of this paper is to conduct a study in pathology concerning PPB and the not-for-profit organization. PPB is considered to be the toxin. The not-for-profit organization is considered to be the organism. The scalpels employed in conducting the examination were forged in the organizational, planning and control, and general systems theory literatures.     

An “American Dream” theory of corporate executive Fraud

In this paper, we first describe a “Broken Trust” theory that was introduced by Albrecht el al. [Albrecht, W. S., Albrecht, C. C., & Albrecht, C. O. (2004). Fraud and corporate executives: Agency, Stewardship and Broken Trust. Journal of Forensic Accounting, 5, 109–130] to explain corporate executive Fraud. The Broken Trust theory is primarily based on an “Agency” theory from economic literature and a “Stewardship” theory from psychology literature. We next describe an “American Dream” theory from sociology literature to complement Albrecht el al.'s (2004) Broken Trust theory. Like the Broken Trust theory, the American Dream theory relates to a “Fraud Triangle” concept to explain corporate executive Fraud. Finally, we provide some anecdotal evidence from recent high profile corporate executive Fraud to explore the American Dream theory. We conclude our thoughts on corporate executive Fraud from a teaching perspective.     

The history of the gender division of labour in Britain: Reflections on “‘herstory’ in accounting: The first eighty years”

This article surveys the empirical research on the gender division of labour in Britain since pre-industrial times, seeking in particular to relate it to the history of the professions, which have been relatively little studied in this regard. It argues that industrialization brought about a less dramatic change in gender roles than is often believed. Neither simple economic nor simple biological explanations, or the influence of “domestic ideology”, can adequately explain continuing gender divisions.It relates the empirical data to the current state of feminist theory arguing that the “reserve army of labour” theory is not supported by the evidence, nor indeed is any existing body of theory. Rather a combination of theoretical perspectives, including those which incorporate male prejudice, must be used if we are to understand the long persistence of gender inequality in the workplace.     

Strategy and accounting in a U.K. conglomerate

This paper sets out to explore various aspects of the relationship between the use of accounting information for performance reporting and control and the formulation and implementation of business and corporate strategy. It does this by means of a case study of the acquisition and subsequent management of “ELB Ltd” by “Conglom Inc.” The case gives an account of the structuring of relationships both between the Corporate centre and ELB senior management, and within ELB itself. A very complex picture of the relationship between strategy and accounting emerges. Although accounting results are often taken as a proxy for the relative success of strategy, the case suggests that in this respect accounts typically conceal as much as they reveal. Especially with a conglomerate structure it is quite possible for corporate financial “success” to be realized at the expense of the long term strategic positioning of individual unit companies. The paper illustrates how the sharing and integration of market knowledge required for the successful formulation and implementation of strategy can conflict with the conformity and distorted communication encouraged by the hierarchical use of accounting controls. It also describes some of the positive effects that can be realized from deliberate attempts to integrate strategic decision making with routine accountability.     

Constructing, persuading and silencing: the rhetoric of accounting standards

Members of the Financial Accounting Standards Board (FASB) and its staff are continuously engaged in a variety of efforts to persuade individuals that the work of this entity is valuable, appropriate, useful and correct. In this paper, I focus upon the persuasive efforts that are employed in “official” accounting standards. These documents do more than simply detail new technical accounting requirements. The texts have been shaped to express a particular point of view about the significance of events and activities that occurred during the standard-setting process and contain numerous efforts to persuade readers to accept this perspective. In particular, I argue that the FASB employs rhetorical strategies in its accounting standards that construct (and attempt to persuade us) that a specific standard is “good”, that silence alternatives and possible criticisms of the standard and that construct the FASB as a “good” standard-setter. These strategies help to construct standards as technical products and thereby also work to maintain the myth of accounting objectivity.     

The average hospital

In 1998, the UK government introduced the National Reference Costing Exercise (NRCE) to benchmark hospital costs. Benchmarking is usually associated with “excellence”; the government emphasised the raising of standards in the 1997 White Paper “The New NHS: Modern, Dependable” that heralded the NRCE. This paper argues that the UK “New Labour” government's introduction of, and increasing reliance on, hospital cost benchmarking is promoting “averageness”. Average hospitals will be cheaper to run and easier to control than highly differentiated ones; they may also score more highly on certain measures of service improvement. The paper aims, through empirical investigation, both to demonstrate how the activities and processes of hospital life “become average” as they are transformed to comply with the cost accounting average and to indicate how the “average” is being promoted as the norm for hospitals to aspire to. To benchmark to average costs, comparisons are necessary. To compare hospital costs involves the creation of categories and classification systems for clinical activities. Empirical evidence shows that as doctors, patients and clinical practices are moulded into costed categories, they become more standardized, more commensurate and the average hospital is created.     

Accounting systems in organisational contexts: A case for critical theory

This paper starts from the view that accounting systems in organisational contexts are more than technical phenomena and that to understand and change these technical elements the social roots must also be both understood and changed. To develop these insights, it is argued, requires major changes in the methodologies we adopt. This paper is addressed to arguing a case for a methodological approach to further these purposes which is derived from a German philosophical school of thought called “critical theory” — more specifically from Jürgen Habermas' interpretation of this thinking which gives particular emphasis to the social and technical aspects of societal phenomena which includes accounting systems.     

The recognition and measurement guidelines of FASB concepts no. 5

In making recognition and measurement decisions, accountants often encounter complex and controversial issues. They must decide what events to record, when to record the events, and how to properly measure the financial effects. A framework that could provide guidance for those difficult decisions would be helpful.In 1984 the FASB issued Statement of Financial Accounting Concepts No. 5 (SFAC No. 5) titled “Recognition and Measurement in Financial Statements of Business Enterprises” to meet this need for guidance. The document bears special significance because it may be the “end of the line,” representing the culmination of the efforts of the FASB to develop a theoretical basis for accounting [Kirk, 1984, p. 20]. In this article we review the recognition criteria established in SFAC No. 5 and present a flowchart that may be helpful to accounting educators as a portrayal of those criteria. The article also may be useful in classroom discussions of theory formulation since it indicates that the adoption of SFAC No. 5 took into consideration the diverse views of accountants, statement users, and reporting firms.     

An institutional theory perspective on the DRG framework, case-mix accounting systems and health-care organizations

Case-mix accounting systems have been advanced as both reflecting the economic reality that underlies a hospital's various “product lines”, as defined by DRG prospective payment categories, and facilitating rational decision making regarding resource acquisition, deployment and use. This article uses the institutional perspective to extend this conceptualization of case-mix accounting systems. The institutional perspective proposes that many elements of organizational structure, like case-mix accounting systems, reflect as much a need to conform to societal expectations of acceptable practice as the technical imperative of fostering rationality. This article also extends institutional theory regarding the issues of power and decoupling by considering institutionalization to be an unfinished process in the health-care context, wherein the active agency of individuals and organizations is subjected to systematic examination. In this specific context, case-mix accounting may play a significant role in establishing and perpetuating — not merely supporting — the very social structure of legitimacy, and may consequently be considered an interest-oriented activity having the potential to penetrate and alter the internal operating processes of financially strained hospitals.     

Rethinking the profession-state dynamic: The case of the Victorian charter attempt, 1885–1906

Historical analyses of specific professionalization projects and of the profession-state axis have been suggested as possible remedies for the “unexciting routine” into which the sociology of the professions has recently slipped. Accordingly, this essay analyses an attempt by Victorian accountants to attain a Royal Charter from 1904 to 1906 and its antecedent world dating from 1885 to 1903. It tracks the shifting constraints upon, and opportunities available to key players in state agencies and accounting associations. It thereby accounts for the shifts in the aims and strategies of those, the intended and unintended consequences of their actions, and the ultimate outcome of the charter attempt. In doing so it questions the assumption of a tightly defined concept of occupational “monopoly” or “closure” associated with a stable set of strategic imperatives. It also questions the tight coupling of action, interest, and outcome implied by “crude” Marxian analyses, and supports the contention that “professions” are the dynamic outcome of the mutual interaction of “state” and “profession”.     

The accounting of interpretations and the interpretation of accounts: The communicative function of “the language of business”

The objectivistic philosophical assumptions which underlie contemporary research in accountancy, as well as economics and elsewhere, are challenged and an interpretive alternative is proposed. A “hermeneutical” view of decision-making is examined, first with regard to science in general, and then concerning the human sciences in particular, and finally with regard to economics. Human decisions are not seen as objective, mechanical or behavioristic but as meaningful utterances of minds, as part of a bidirectional communicative process. That is, scientific decisions, like everyday decisions, are mutually interpretive processes of communication in language. Although it is true that much of mainstream neoclassical economics is incompatible with this interpretive approach, the “Austrian” school can be seen as an interpretive version of neoclassicism. This school of economics indicates a way to understand the communicative function the accounting “language” itself serves in the economic process. The professional judgments made by both accounting researchers and practicing accountants, then, are treated as “matters of interpretation,” but as not, thereby, arbitrary.     

The business risk audit – A longitudinal case study of an audit engagement

This study examines the impact of the Business Risk Audit (BRA), a development in audit methodology implemented in the late 1990s, on actual audit practice and on practitioners. Evidence is presented through a longitudinal case study developed from a set of actual audit files over a five year period spanning the implementation of the BRA, together with interviews with audit team members. The study contributes to our understanding of the nature of the audit techniques underlying the BRA and the difficulties experienced in implementing them within the existing organizational structures. In addition, the study illuminates the potentially conflicting roles of audit methodology in its organizational context, both in mediating the complex relationship between the administrators and practitioners in the large accounting firms and as the knowledge management structure used to support delivery of the “audit product”.     

Men, children and the future of the family in the third millennium

This paper examines the effects of demographic change on the foundations of the family. The “first” demographic transition — the massive declines in fertility and mortality — is shown to have undermined the traditional male–female relationship based on parenthood. This has led to the gender revolution in the public sphere. The “second” demographic transition — the increases in divorce and cohabitation — is shown to have undermined the father–child relationship, reflecting women's control over children, a control that increased continually during the first demographic transition. This paper argues that the gender revolution needs to be brought into the family, increasing women's ability to compete in employment and men's ability both to choose whether to assume parental responsibility and to maintain active parental roles with their children.     

Towards an understanding of the phases of goodwill accounting in four Western capitalist countries: From stakeholder model to shareholder model

The objective of this paper is to illustrate that the change in shareholders’ attitude towards firms (from stakeholder model to shareholder model) influences the accounting treatments of goodwill. Our study is based on four countries (Great Britain, the United States, Germany, and France) and covers more than a century, starting in 1880. We explain that all these countries have gone through four identified phases of goodwill accounting, classified as (1) “static” (immediate or rapid expensing), (2) “weakened static” (write-off against equity), (3) “dynamic” (recognition with amortization over a long period) and (4) “actuarial” (recognition without amortization but with impairment if necessary). We contribute several new features to the existing literature on goodwill: our study (1) is international and comparative, (2) spans more than a century, (3) uses the stakeholder/shareholder models to explain the evolution in goodwill treatment in the four countries studied. More precisely, it relates a balance sheet theory, which distinguishes four phases in accounting treatment for goodwill, to the shift from a stakeholder model to a shareholder model, which leads to the preference for short-term rather than long-term profit, (4) contributes to the debate on whether accounting rules simply reflect or arguably help to produce the general trend towards the shareholder model, (5) demonstrates a “one-way” evolution of goodwill treatment in the four countries studied, towards the actuarial phase.     

Towards a rational strategy for the human settlement of space

This paper revisits the core issues of space policy from the viewpoint of optimal decision theory. First it argues for a metric: maximizing the probability that humans and their technology in space someday reach what Rostow called the “economic takeoff” point where autonomous growth becomes possible, not bound by the rate of growth on earth. Next it discusses three concrete requirements to reach that point: benefits to earth which exceed costs to earth, large and diverse enough “exports” from space to earth, and advancements in technology and infrastructure. Energy from space (ES) is now one of the most promising export possibilities, based on what was learned in the last open US government effort on that topic, “JIETSSP,” led jointly by NSF and NASA. I review several options for ES, and propose a new one which, while slightly riskier, offers real hope of electricity at a price that could compete with coal and fission-plus-enrichment.     

Linking control systems to business unit strategy: impact on performance

Rooted in continguency theory, this paper examines linkages between strategy, incentive bonus system and effectiveness at the strategic business unit (SBU) level within diversified firms. Data from 58 SBUs reveal (1) that greater reliance on long-run criteria as well as subjective (non-formula) approaches for determining the SBU general managers' bonus contributes to effectiveness in the case of “build” SBUs but hampers it in the case of “harvest” SBUs, and (2) that the relationship between extent of reliance on short-run criteria and effectiveness is virtually independent of SBU strategy.     

The accounting of “The Meeting”: Examining calculability within a “Fluid” local space

This study traces events in an empirical setting where a key local space, “The Meeting”, was made calculable. Building on field data from interviews and documentary sources at ABB Industry/Finland, the study theorizes in the interpretive genre, elaborating on the notion of the calculable space. It argues the following: Accounting can be extended into un-formalized and more elusive local spaces – into “fluid” spaces which are not clearly mapped within the organizational hierarchy, and which lie beyond recognized responsibility units or physically distinct cells at the factory floor. By opening visibility into the discretion of these “fluid” local spaces, a tighter alignment between programmatic ideals and real action at the organizational grass-root can be achieved. Self-devised non-financial measurement, mediating local tensions and the interests of “autonomous” actors, becomes the technology of government in this process of normalization – which is, however, not to be acknowledged as being unproblematic.