4
Management Control, Management
Accounting and its Rational-Economic
Assumptions
Management accounting needs to be understood as part of the broader context
of management control systems. In this chapter, we describe the theoretical back-
ground of management control and management accounting and its most recent
developments: non-financial performance measurement and strategic manage-
ment accounting.
Management control systems
In his seminal work on the subject, Anthony (1965) defined management control as:
The process by which managers assure that resources are obtained and
used effectively and efficiently in the accomplishment of the organization’s
objectives.Management control encompasses both financial and non-financial performance
measurement. Anthony developed a model that differentiated three planning and
control functions:
žStrategy formulation was concerned with goals, strategies and policies. This
fed into
žManagement control, which was concerned with the implementation of strate-
gies and in turn led to
žTask control, which comprised the efficient and effective performance of indi-
vidual tasks.
Anthony was primarily concerned with the middle function. Otley (1994) argued
that such a separation was unrealistic and that management control was ‘intimately
bound up with both strategic decisions about positioning and operating decisions
that ensure the effective implementation of such strategies’ (p. 298).
Building on Anthony’s earlier definition, Anthony and Govindarajan (2000)
defined management control as a process by which managers at all levels ensure
that the people they supervise implement their intended strategies (p. 4).