Summary by Eileen Z. Taylor
Ph.D. Program in Accounting
University of South Florida, Spring 2004
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Covaleski and Aiken propose that accounting researchers can benefit by taking an organizational approach to investigating how accounting and its roles impact the coordination and control in an organization. They present a history of the development of accounting and then provide a framework that views accounting from a sociological perspective. This framework is then used to identify research opportunities for the study of accounting as an organizational control.
The beginnings of the idea of organizational control were found in the private sector, as individuals became employees and the ‘ “visible hand” of management replac(ed) the “invisible hand” of market forces.’ Cost accounting in this time was used to estimate actual labor conversion costs, that until then were determined by the marketplace. Subsequently, capitalists used accounting information to control the work process. This was marked by technical control and advanced measurement techniques. The public sector became involved with the advent of scientific management identified by the authors as first generation. The focus at the time was on fiscal control budgeting. Accountability and expenditure justification was the theme. The stock market crash of 1929 ended that movement. The second generation changed the emphasis to accounting as a system to aid in the social reform movement. Through budgeting, government agencies could be judged as effective (or not).
Control then went beyond control of the work process. In the private sector, this was evidenced by bureaucratic control; distinguished by its connection with social structures in the workplace. In an effort to concentrate capital and accumulate wealth, new tools were put in place; all with the effect of tying the employee to the organization and controlling all aspects of the business. The impetus for this development was the contradiction between production processes which were guided by scientific management, and distribution systems, which were still subject to market forces. Thus, the visible hand of management stepped in to organize the flows into and out of the firm. We know this as vertical integration.
Changes in accounting paralleled changes in the control structure. Where accounting once focused on production alone; it now was used to monitor and provide information throughout the firm. There was a focus on divisional budgeting and intra-organizational information transfer.
In the public sector, accounting was used for budgeting purposes. Planning and resource allocation were both facilitated through program budgets.
Interaction between Public and Private Sectors
Having covered the development in both the public and private sectors, the authors then focus on the interaction between the two. They point to Larson (1977) who states that the public sector’s progressivism led the way for the private sector to adopt scientific management principles. Kolko (1963) attributes the interaction to political capitalism. This led to a partnership between politics and big business that continues today (summary author’s emphasis).
The authors provide a review of the early organizational theories and sociological approaches to studying organizations. The table below list these theories and the related accounting research perspectives and represents an adaptation of their Table 1. Each theory is discussed below.
Table 1: A Historical Perspective on Theories of Organizations & Accounting Research
Early Organization Theories
Accounting Research Perspectives
|I. Scientific Management|| Application of
accounting in the
monitoring of individuals & work units.
|II. Classical or Administrative Management|| Application
accounting in terms of
|III. Human Relations|| Application of
accounting in a concern for
the motivation & aspiration levels of
individuals to be controlled.
|IV. Decision-making perspective|| Application of
accounting in management
decision making under conditions of
Accounting Research Perspective
||a. Functionalism|| Limited
emphasis on internal
emphasis on internal
& design of accounting
control systems contingent upon the
nature of the host organization.
|d. Population Ecology|| Limited
emphasis on internal
|II. Political Economy Perspective|| Concern for the role
of accounting in the
interplay of power, goals & exchange
|a. Marxists|| Concern for the role
of accounting in
the origin, design & workings of
control systems in organizations.
|b. Weber|| Concern for the role
of accounting in
the increasing rationalization of
Early Organizational Theories
Scientific management provides a strong link between organization and accounting research. Accounting information was used to support control over the work process in pursuit of efficiency and productivity. Taylor’s scientific management applied not only to control over individual workers, but structuring of divisions, and proper assignment of managers. Accounting allowed managers to best allocate resources, as well as evaluate performance. The “objective” nature of accounting made it especially well-suited to this type of organizational control.
Early theorist Elton Mayo introduced a human relations perspective into organizational theory. Specifically, organizations should consider social and psychological factors when designing production processes. This would enhance efficiency and communication. Argyris (1952) applied this perspective to accounting; specifically in the form of participative budgeting.
March and Simon (1958) brought forth the
decision-making perspective. It was characterized by an emphasis on individual
participants. These ‘decision-makers’ had an unfulfilled need for good,
relevant information that went unmet by the organization. Accounting provided
some of this information and thus assisted in reducing uncertainty in
Sociological approaches differ from early organizational theories in that the former takes the perspective of society, while the later takes the organization’s point of view.
The Functional Tradition
The functional tradition includes functionalism, comparative structuralists, comparative structural contingency, and population ecology. Early functionalists studied societies, their subparts, and how the integration of the subparts led to the survival of the group. Comparative structuralists analyzed organizations as a static structure, and did not examine organizational processes. Neither of the two provided an opportunity for accounting-related research.
The advent of comparative structural contingency, however, opened the door to accounting research topics. Contingency theorists examine the organization and its reactions to changes in technology and environment. Contingency theory of budgeting is just one example.
The population ecology model “attempts to explain how various environmental factors select those organizational forms that best fit given environments”(p.312). This approach has been criticized for eliminating human factors and focusing only on organizational structure. Hence, the authors do not see an opportunity here for accounting organizational research.
Political Economy Perspective
The political economy theory of Mayer Zald appears to offer opportunity for accounting research. This approach considers power structures and politics as drivers of the organization.
Marxist theory focuses on how the current system of social control came to be. The authors state that the most important contribution is the identification of issues of social control and coordination as the central issues in the study of work and organization.(p. 313). The focus on control provides the link between Marxist theory and accounting theory.
Weber is also mentioned; however, his approach pursues applied science. The authors do mention that Weber might provide opportunity for accounting research along the lines of examining the role of accounting in “…increasing rationalization and bureaucratization in society.”(p. 313).
Some Unresolved Questions
The authors conclude with some unresolved questions.