38 ACCOUNTING FOR MANAGERS
Berryet al.(1995) defined management control as:the process of guiding organizations into viable patterns of activity in a
changing environment...managers are concerned to influence the behaviour
of other organizational participants so that some overall organizational goals
are achieved. (p. 4)Ouchi (1979) identified three mechanisms for control:
žthe market in which prices convey the information necessary for decisions;
žbureaucracy, characterized by rules and supervision; and
žan informal social mechanism, called a clan, which operates through socializa-
tion processes that may result in the formation of an organizational culture.
In this chapter we are concerned with management control as a system (a collection
of inter-related mechanisms) of rules.
Simons (1994) also took a broader view of management control systems in his
description of them as:
the formal, information-based routines and procedures used by managers
to maintain or alter patterns in organizational activities. These systems are
both pervasive and unobtrusive, but are rarely recognized as potentially
significant levers of organizational change. (p. 185)Simons described the actions taken by newly appointed top managers attempting
revolutionary and evolutionary strategic change, all of whom used control sys-
tems to overcome inertia; communicate the substance of their agenda; structure
implementation timetables; ensure continuing attention through incentives; and
focus organizational learning on strategic uncertainties.
Simons (1990) developed a model of the relationship between strategy, control
systems and organizational learning in order to reduce strategic uncertainty. The
model is reproduced in Figure 4.1.
Research by Simons (1990) found that the choice by top managers to make
certain control systems interactive provided signals to organizational participants
about what should be monitored and where new ideas should be proposed and
tested. This signal activates organizational learning.
We can distinguish systems for planning from systems for control. Planning
systems interpret environmental demands and constraints and use a set of numbers
to provide a ‘common language which can be used to compare and contrast the
results obtained by each activity’ (Otley, 1987, p. 64). These numbers may be
financial (resource allocations or performance expectations). They are represented
in accounting and in non-financial performance measurement. Otleyet al.(1995)
noted that:
accounting is still seen as a pre-eminent technology by which to integrate
diverse activities from strategy to operations and with which to render
accountability. (p. S39)