ACCOUNTING AND ORGANIZATIONAL CULTURES 349
Senior accounting executives had long argued, both privately and publicly, that
allocation was neither possible nor meaningful. Fundamental to the Business
Managers’ appointments, however, was not just a profit-contribution responsi-
bility, but a ‘‘bottom line’’ responsibility, and this called for the allocation of
common costs.
In a definite way, this ‘‘bottom line’’ responsibility had a normative symbol-
ism – private sector managers were concerned with the ‘‘bottom line’’. But there
was a more practical logic: this was to ensure that one or other of the Business
Managers would be responsible for all costs, and motivated, as events unfolded,
to ask questions about the necessity and consequences of incurring cost. A Senior
Executive commented:
You appoint a Business Manager and say: ‘‘We believe this is freight’’.
The first thing he says is: ‘‘What’s mine? What are the boundaries of my
business?’’ Then he pursues questions such as: ‘‘How are costs being allocated
to me? I want to know more about it. Let me analyse and fillet all the cost
you are suggesting is mine’’...Then he asks: ‘‘How do these costs relate to
my revenues’’.An individual within the accounting department was appointed to develop
profit or loss measures by business sector. This person was in rather an invidious
position. Given senior finance officials’ former public repudiation of the possibility
of developing these measures, he had to tread carefully. He later recalled:
At first I was not convinced that it was either sensible or feasible. There’s a
whole history of avoiding cost allocations in the railway. But if the Business
Managers were to take responsibility, they needed different Management
Accounting. I was persuaded of this new way to run the railway. I wanted
Finance to play a fundamental part in supporting it.When I was appointed I spent several months bouncing ideas off walls – walls
not people – because finance people didn’t believe you could or should
develop the information they needed.He became involved in intensive discussions with the Business Managers, and
with representatives of the Chief Executive’s office. Different ways of apportioning
costs were discussed, and a firm of accountants consulted. The guiding principle
was ‘‘cost exhaustion’’ – all costs incurred by the railway had somehow to be
attributed to one or more of the businesses.
The precise details of the method of arriving at the profit or loss for each
business are unimportant here. It suffices to say that it was founded on principles
reflecting the primacy of use of resources, and that the development of computer
systems to operationalize the principle in full took some while. The significant
point is that these measures were introduced, manually at first, and that they were
fundamental to the emergence of the new culture.
Business Managers were appointed without any operational authority. Their
positions were an abstract economic construct. They were made meaningful