Accounting for Managers: Interpreting accounting information for decision-making

58 ACCOUNTING FOR MANAGERS

environments select organizations for survival on the basis of the fit between the
organizational form and the characteristics of the environment.Resource dependence
theoryemphasizes adaptation as organizations act to improve their opportunity
to survive, particularly through the relationships of power that exist.Institutional
theory(see Chapter 7) stresses the rules that are imposed by external parties,
especially by government; the values and norms that are internalized in roles as
part of socialization processes; and the cultural controls that underpin the belief
systems that are supported by the professions.
In their categorization of the nature of knowledge, Burrell and Morgan (1979)
proposed four paradigms – functionalist, interpretive, radical humanist and rad-
ical structuralist – based on two dimensions – one subjective – objective, the other
regulation – radical change. Figure 5.2 shows a representation of rational, interpre-
tive and radical (or critical) paradigms.
In his classification of the types of management control, Hofstede (1981)
separated cybernetic (rational) models from non-cybernetic ones, which were
dependent on values and rituals. The cybernetic model of control systems is located
in the functional paradigm. Non-cybernetic systems are located in interpretive or
critical paradigms.

Functional Interpretive Radical/Critical

Objectively knowable
world

Subjectively created

reality that is ‘socially

constructed’

Power and conflict

are central to how

organizations work

Aims to find the ‘one best way’
to achieve shareholder value

Aims to explain how

accounting is used in

the unique circumstances

of the organization

Aims to highlight the role of

the state, distribution of the

surplus and class issues

Accounting is rational and based on
economic principles emphasizing
planning and control mechanisms

Accounting as symbol

Accounting reflects values

and beliefs. Control through

culture

Role of accounting in maintaining

existing structures of power

Uses an understanding of accounting

to engage in changes in accounting

practices and processes

Cybernetic systems of control
Routine, expert and trial-and-error
(Chapter 4)

Non-cybernetic control systems

Intuition, judgement, ‘garbage can’, values based, political

Figure 5.2 Paradigms of understanding