RESEARCH IN MANAGEMENT CONTROL 285
Themes for future development
Here, we suggest some lines of enquiry which we believe it would be fruitful to
pursue in developing research in management control. These are our own views,
and we acknowledge we come to these issues from our own particular history and
perspectives, thus running the risk of being both biased and incomplete. However,
we believe they cover a wide-ranging agenda of important issues from both a
practical and theoretical perspective. This prospective part of the paper flows from
the retrospective review and is intwo sub-sections. The first sub-section considers
that the nature of the current environment and the needs this engenders are
significantly different from those that determined and yet developed the earlier
control approaches. The second sub-section considers the possibilities which could
be available in the context of a broadening of the theoretical and methodological
approaches adopted in research in the area.
The environment of control
The development of earlier MCSs theory took place in the context of large,
hierarchically structured organizations. It centred upon accounting controls and
developed measures of divisional performance,such as return on investment and
residual income. It considered the issues raised in utilizing accounting performance
measures to control large, diversified companies, in particular the construction
of quasi-independent responsibility centres using systems of cost allocation and
transfer pricing. The central theme was to produce measures of controllable
performance against which managers could be held accountable, yet the empirical
evidence (Merchant, 1987; Otley, 1990) suggests that the ‘controllability principle’
was more often honoured only in its breach. It can also be argued (seeOtley, 1994)
that changes in the business and social environment have led to the replacement of
large integrated organizations by smaller and more focused organizational units,
which require appropriate control mechanisms to be developed.
Several features of the business environment seem to point towards a change
in emphasis. A key trend is in the impact of uncertainty. It is a moot point
whether uncertainty has increased, but it is true that the rate of change in both
the commercial and governmental environment is rapid, requiring considerable
adaptation on the part of organizations. Change appears to be affecting a much
broader range of the population, whether it be technological, social or political
change. The process of adaptation can no longer be left to a few senior managers
who develop organizational strategies to be enacted by others; rather the process
of change has become embedded in normal operating practices, and involves a
wider range of organizational participants.
One consequence of this rapid rate of change has been encapsulated in ideas of
global competition and ‘world class’ companies. As the rate of change increases,
organizations need to devote more of their resources to adaptation and cor-
respondingly less to managing current operations efficiently. One method of
adaptation is planning, but this requires the prediction of the consequences of
change, which is becoming more difficult; an alternative response is to develop