On the Idea of a Management Control System: Integrating Accounting and Management Control

Abstract

The Need for a Sjystem THE need for a planning and control system within a business organization flows from certain general characteristics of the nature of business enterprises, the chief of which are as follows: firstly, the enterprise has (by definition) organizational objectives, as distinct from the separable and individual ones of the members constituting the 'managerial coalition';l secondly, the managers of the sub-units of the enterprise must necessarily be ambivalent in view of their own personal goals, as well as have a good deal of discretion in deciding how they should behave and in formulating their part of any overall plan to achieve organizational objectives; thirdly, business situations (and people's behaviour) are full of uncertainty, internal4 as well as externally to the business enterprise; fourthly, there is a necessity to economize, in human endeavours we are invariably concerned with an allocation of effort and resources so as to achieve a given set of objectives using the minimum amount of total economic resources and effort; or alternatively put, to achieve a maximum amount of objective attainment, given a specified amount of resources and effort. Pur-ose of a SystemThe purpose of a unified management control system is to ensure that actions are in accordance with the firm's plans to achieve its objectives.Hence, planning and controlling are inseparable parts of an overall effective management control system and looked at in this way such a system is primarily concerned with the construction of an organization and with long range planning. Looked at from a functional viewpoint it is an attempt to enforce the integration of separate control devices2 and of the separate functional areas of the firm (marketing, production, product development, personnel, accounting, etc.) into one information-for-control network so as As defined in Cyert, R. M., and March, J. G., A Behavioural Theory o f t h e Firm, Englewood Cliffs, N.

Research in Management Control: An Overview of its Development

“…However, in the early 1970s there was a movement towards an open systems perspective, if only from a theoretical standpoint, an approach well illustrated by the collection of readings in the monograph New Perspectives in Management Control (Lowe and Machin, 1983). This approach was most cogently led by Lowe (1971) in an article which clearly recognizes the coalition of stakeholders involved in an enterprise (a concept used by Scott (1981) as an examplar of an open systems approach) and the need for adaptation to the external environment. It is further clarified in Lowe and McInnes (1971) article which adds the concept of resolution level.…”

“…A broader view of management control is suggested by Lowe (1971) in a more comprehensive definition:…”

Emerging themes in management control: A review of recent literature

“…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;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.…”

On the Nature of Accounting Methodology

“…A further possible channel to justify his systemic ideas for the future development of accounting is that they are already being put forward in this area. Although the application of concepts from systems theory and cybernetics do not feature very strongly in the accounting literature they are certainly present (see particularly Lowe 1971Lowe , 1972Lowe & McInnes 1971;Lowe & Tinker 1976a & b, 1977. In addition, but not quite as directly related to Feyerabend's, and systemic, ideas, there is a growing literature on a 'contingency' approach to the design of accounting (cf.…”