Accounting for management control

Abstract

SummaryWhile the limitations of the contingency approach are recognized, it seems heroic to assume that a single accounting information system will work equally well in all types of companies. We have identified one contingent variable — the incidence of non-programmed decision making — as a potentially significant influence in the design of accounting information systems. Within an organizational theory perspective, the multidivisional company was chosen to exemplify the difficulties of applying conventional accounting systems because of the high incidence of non-programmed decision making. Whether or not the conventional system can be modified or requires replacement is our concern in this chapter.Results, action and personnel controls are shown to be in conflict when the conventional accounting information system is applied to the multidivisional company. Furthermore, the encouragement given to divisional managers to mis-record, manipulate and bias does nothing to promote behaviour congruence. Hence there seems to be a prima facie case for change.De-emphasis of profit performance measures, adoption of nonfinancial measures and the use of profit conscious or non-accounting styles may be appropriate. But additionally, the significance of corporate culture and personnel development seem necessary for success. It must also be recognized that the design of management control systems must interact with corporate strategy. Our knowledge about how these systems are used over time is only beginning to emerge. Perhaps the single most important change for the management accountant is to develop feedforward controls to, at least, the same level of sophistication as feedback controls. To do this effectively, and to become a useful adviser, the accountant will need to monitor external as well as internal variables which critically effect divisional plans. Translation of changes in key variables to show the effect on financial plans may re-orient the accountant to make a more balanced commitment to providing information relevant for decision making, attention-directing and score-keeping.