42 ACCOUNTING FOR MANAGERS
3 Internal learning amends the predictive model on the basis of past experience
and the measurement and communication processes associated with it.
4 Systemic learning or adaptation changes the nature of the system itself – inputs,
outputs and predictive models.
The problem of a predictive model is in understanding the complex and ambiguous
relationship between means and ends, or inputs and outputs. Ouchi (1977) argued
that there were ‘only two phenomena which can be observed, monitored, and
counted: behavior and the outputs which result from behavior’ (p. 97).
To apply behaviour control, organizations need agreement or knowledge about
means – ends relationships. To apply output control, a valid and reliable measure
of the desired outputs must be available. Ouchi argued that as organizations grow
larger and hierarchy increases, there is a shift from behaviour to output control.
Management planning and control systems and management accounting
Daft and Macintosh (1984) described six components of management control
systems: strategic plan, long-range plan, annual operating budget, periodic sta-
tistical reports, performance appraisal, and policies and procedures. Management
accounting should be understood in this broader context of management con-
trol. Emmanuelet al.(1990) believed that management accounting was important
because it represents ‘one of the few integrative mechanisms capable of summa-
rizing the effect of an organization’s actions in quantitative terms’ (p. 4). Because
management information can be expressed in monetary terms, it can be aggre-
gated across time and diverse organizational units and provides a means of
integrating activities.
Otley and Berry (1994) described how in management control:
accounting information provides a window through which the real activities
of the organization may be monitored, but it should be noted also that other
windows are used that do not rely upon accounting information. (p. 46)Otley (1994) called for a wider view of management control, with less emphasis on
accounting-based controls. Criticizing Anthony’s model of planning and control,
Otley argued that ‘[t]he split between strategic planning, management control
and operational control, which was always tendentious, now becomes untenable’
(p. 292).
Otley claimed that there was widespread agreement that undue emphasis was
given to financial controls rather than to a more ‘balanced scorecard’ approach,
hence the increasing importance given to non-financial (or multidimensional)
performance management in the study of management control systems.
Otleyet al.(1995) argued for expanding management control beyond account-
ing, distinguishing financial control from management control, the latter as: