Provided by James R. Martin, Ph.D., CMA
Professor Emeritus, University of South Florida
Citation: Martin, J. R. Not dated. Developing a new conceptual framework for management accounting. Management And Accounting Web. http://maaw.info/FrameworkPuzzle.htm
The following Summary Exhibits are included below. Three additional recent articles related to the framework issue are listed at the end of this summary.
Exhibit 1 McGregor, D. M. 1957. The human side of enterprise. Management Review (November): 22-28. Reprinted from the Proceedings of the Fifth Anniversary Convocation of the School of Industrial Management, MIT, April 9, 1957. Also see the D. M. McGregor. 1960. The Human Side of Enterprise (McGraw-Hill).
Exhibit 2 - Blake and Moulton's Managerial Grid.
Exhibit 3- Ouchi, W. G. 1979. A conceptual framework for the design of organizational control mechanisms. Management Science (September): 833-848.
Exhibit 4- Caplan, E. H. 1966. Behavioral assumptions of management accounting. The Accounting Review (July): 496-509. (JSTOR link).
Exhibit 5- Ouchi, W. G. and A. M. Jaeger. 1978. Type Z organization: Stability in the midst of mobility. Academy of Management Review. (April): 305- 314.
Exhibit 6 and Exhibit 7 - Martin, J. R. 1993. The dichotomy of capitalism: A new framework for management accounting education. SEAAA Proceedings.
Summary of McGregor's Theory X and Theory Y*
|Management objectives, attitudes and assumptions||Theory X||Theory Y|
Overall objective of management:
|Organizing resources to produce economic results.||Organizing resources to produce economic results.|
Management attitude towards employees:
|Must direct their efforts, motivate, control and modify their behavior. Without active intervention, employees will be indifferent towards the goals of the organization. Thus, they must be rewarded and punished, i.e., treated as children. Emphasize external control.||Provide conditions and methods for people to achieve their own goals directed towards organization objectives. Employees are not by nature indifferent to the organization's needs. They become indifferent as a result of experience. Treat them as mature adults. Emphasize internal self control.|
|Managements assumptions about employee characteristics and behavior:||Employees are lazy, lack ambition, dislike responsibility and prefer to be led. They are self centered, indifferent to the needs of others, resistant to change, gullible and not very bright.||Employees have needs based on Maslow's hierarchy: Physiological - rest, exercise and shelter. Safety - protection from the elements. Social - friendship, belonging and love. Ego - self esteem, status and recognition. Self fulfillment - realizing potential. Behavioral problems are caused by need deprivation.**|
|Management attitude towards groups:||Groups are a threat to management and should be discouraged.||Groupiness can be beneficial to the organization.|
* McGregor, D. M. 1957. The human side of
enterprise. Management Review (November): 22-28. Reprinted from the
Proceedings of the Fifth Anniversary Convocation of the School of Industrial
Management, MIT, April 9, 1957. (Summary).
Also see McGregor, D. 1960. The
Human Side of Enterprise: 25th Anniversary Printing. McGraw Hill.
** Employee indifference to the needs of the organization, hostility and refusal to accept responsibility are not indications of inherent human nature, but symptoms of illness caused by the deprivation of social and egoistic needs. A satisfied need is not a motivator. In other words, once a person fills a need, it cannot be used to motivate that individual. However, a person deprived of some needs may attempt to substitute more of one for the lack of another. For example, although money cannot satisfy many higher level needs, in many organizations, demanding more money may be the only available means of attempting to do so.
Blake and Moulton's Managerial Grid
Summary of Ouchi's Three Control Mechanisms*
|1.||Social agreements:||Reciprocity.||Reciprocity and authority (i.e., the employee gives up autonomy for pay).||Reciprocity, authority and shared values and beliefs.|
|2.||Information needs:||Nature.||Explicit competitive price for each task or exchange.||Explicit rules and regulations - e.g., accounting systems.||Implicit - traditions, e.g., the U.S. Senate.|
|Completeness.||Complete.||Incomplete, but stated.||Complete, but unstated.|
|Accessibility and understandability to newcomers.||Accessible and understandable||Accessible and
|Inaccessible and not understandable.|
|How developed.||Supply and demand.||Must be created or designed.||Develops naturally.|
|Information systems capability of coping with participants heterogeneity and turnover.||Capable.||Capable.||Incapable.|
|3.||Applicable method of controlling people:||Self select based on price mechanism.||Select employees with little screening and design a system to instruct, monitor and evaluate them.||Select employees with careful screening to insure the skills and values needed.|
Exhibit 3 Continued
Summary of Ouchi's Three Control Mechanisms*
|4.||Cost of system: Search & acquisition. Training Supervision.||Variable. Zero. Zero.||Low cost. Low cost. High cost.||High cost. High cost. Low cost.|
|5.||Timing, need and feasibility of defining the process and measuring efficiency.||
Short run, critical need.
Long run, less significant need.
Process may be black box plus high interdependence and synergy.
|6.||How participant's commitment to organization's objectives is obtained.||Self interest based on price mechanism.||Self interest supported and motivated by training, rules and close supervision insure compliance.||Self interest based on common values.|
|7.||When the control mechanism should be emphasized, i.e., will be the most efficient method. (Note that high interdependence causes low clarity of performance measurement.)||When interdependence is low, or zero and there is a single task or exchange, or when it is feasible and economical to establish a competitive market price for each multi-task or exchange.||When the levels of worker diversity and employee turnover are high, the level of interdependence is low and the clarity of individual performance measurement is high. These requirements tend to produce many specialties and sub-specialties to reduce the interdependence. Rules and close surveillance are required for each specialty and sub-specialty.||When the levels of worker diversity and turnover are low and the level of interdependence is high. The clarity of individual performance is low and teamwork is critical.|
* Summarized from William G.
Ouchi, 1979. A conceptual framework for the design of organizational
control mechanisms. Management Science (September):
833-848. Also see Ouchi, W. G. 1980. Markets, bureaucracies,
and clans. Administrative Science Quarterly
25(1): 129-141. (JSTOR
** According to Ouchi, a group of people with a common specialization represents a profession, the citizens of a political unit make up a culture and the collection of individuals within a unique organization is a clan.
Note that all organizations have hybrid systems that contain elements of all three control mechanisms. Systems designers must decide how much emphasis to place on each form. "In a sense, the Market is like a trout and the Clan like a salmon, each a beautiful, highly-specialized species which requires uncommon conditions for its survival. In comparison the bureaucratic method of control is the catfish - clumsy, ugly, but able to live in the widest possible range of environments and ultimately, the dominant species. The bureaucratic mode of control can withstand high rates of turnover, a high degree of heterogeneity, and it does not have very demanding informational needs."
There is a conflict. American society is becoming more pluralistic, i.e., made up of more diverse ethnic, religious and cultural groups, but increasingly more interdependent. The need for Americans to work together is increasing while it is becoming more difficult for them to do so.
Summary of Caplan's Comparison of Traditional Management
Accounting and Modern Organizational Theories*
|Concept or Assumption||
|Modern Organizational Theory|
|Objective of organization:||Maximize profit. Assumes that sub-goals are divisible and additive (responsibility accounting).||The dominant members have goals, the organization cannot. Survival of the dominant members is the main goal and satisficing is second. Sub-goals are not divisible and additive and may conflict.|
|Human behavior:||Lazy man theory X. Motivation is economic need.||Motivation factors include psychological, social and economic factors. Mixed theory X and Y.|
|Management behavior:||Must control employees with close supervision to maximize profits.||Make decisions to balance the contributions from participants with organizational inducements. Control through assigning and obtaining acceptance of authority.|
|Management accounting:||Used to aid in maximizing profit with emphasis on bureaucratic control, but accounting is neutral.||Used to provide information for planning and controlling to balance contributions.|
|* Summarized from Caplan, E. H. 1966. Behavioral assumptions of management accounting. The Accounting Review (July): 496-509. (JSTOR link) and Caplan, E. H. 1968. Behavioral assumptions of management accounting - Report of a field study. The Accounting Review (April): 342-362. (JSTOR link).|
Summary of Ouchi and Jaeger's
Dimensions for Three Organizational Types*
|No.||Dimension||Type A - American||Type J - Japanese||Type Z - Modified American|
Length of employment:
|Short term - high employee turnover.||Lifetime - low employee turnover.||Long term - moderate employee turnover.|
|2.||Mode of Decision making:||Individual decisions.||Consensus decisions.||Consensus decisions.|
|3.||Type of Responsibility:||Individual based on merit.||Collective.||Individual.|
|4.||Speed of Evaluation and promotion:||Rapid.||Slow.||Slow.|
|5.||Dimension of control:||Explicit with formalized measures. (Emphasis on bureaucratic type control.)||Implicit, informal and subtle. (Emphasis on clan type control.)||Mixed implicit, informal control with explicit formalized measures.|
|6.||Degree of specialization:||Specialized career path. Bureaucratic control of individuals requires specialties and sub-specialties to reduce the interdependence.||Non specialized career path.||Moderately specialized career path.|
|7.||Extent of concern for the individual employee:||Segmented, non personal task oriented concern.||Holistic concern for employee's well being.||Holistic concern.|
|* Summarized from William G. Ouchi and Alfred M. Jaeger. 1978. Type Z organization: Stability in the midst of mobility. Academy of Management Review (April): 305- 314.|
A Broad Framework Based the Variant of Capitalism Embraced by the Firm
There are two very different variants of capitalism. One familiar variant is the system traditionally practiced in the United States. This is referred to as individualistic capitalism. The other variant is the system practiced in Japan and in the unified European community. This system is referred to as communitarian capitalism. These two variants of capitalism are important because most of the assumptions and practices underlying the individualistic system are incompatible with the assumptions and practices underlying the communitarian system. The particular variant of capitalism embraced by society, determines to a large extent how individuals interact with each other, how businesses interact with other businesses and government, and how companies are managed. The main point of this broad framework is that the management accounting system should be based on the variant of capitalism embraced by the firm. The concepts and techniques associated with just-in-time, flat organizations, and lean enterprise were developed within the communitarian system. These concepts are not compatible with the individualistic system where corporate governance and control systems emphasize individual and responsibility center performance. As firms adopt the lean enterprise concepts they must also revise their management systems to be compatible with the communitarian or collectivist concepts and techniques. A key idea is to shift from managing the parts or subsystems to managing the system as a whole.
Major Concepts and Assumptions Underlying the Economic System*
|Concepts and Assumption||Communitarian** Capitalism based on the Concepts of Producer Economics||
Based on the Concepts of
|Mix between cooperation and competition:||Cooperation at all levels will optimize the system. ***||Competition at all levels will optimize the system. ***|
|The key driving force in the economy:||The desire to build for the future.||The desire for current consumption and leisure.|
|Motivation for work:||Work provides utility. Individuals live to work.||Work provides disutility. Individuals work to live.|
|Responsibility for skills and training prior to employment:||Responsibility of society. Strong high schools and apprenticeship programs.||Responsibility of the individual beyond weak high schools. Few apprenticeship programs.|
|Relationship between government and business:||Government supports and cooperates with business to optimize the system.||Government regulates business to promote competition.|
|Government policy:||Promote growth in supply.||Promote growth in demand.|
* From Martin, J. R. 1993. The dichotomy of capitalism: A new framework for management accounting education. Proceedings of the Southeast region American Accounting Association meeting. Also see Martin, J. R. Management Accounting: Concepts, Techniques & Controversial Issues, Chapter 1.
**Note: Many authors use the terms collectivist and collectivism rather than the terms communitarian and communitarianism. For example, see Wagner, J. A. III. 1995. Studies of individualism-collectivism: Effects on cooperation. Academy of Management Journal (February): 152-167. (JSTOR link).
*** See the Johnson, Maruyama, Johnson, Nelson & Skon summary for some research on the effectiveness of four goal structures on achievement and productivity.
Major Business Concepts Attitudes and Practices*
|Concepts Attitudes & Practices||
Communitarian Capitalism based on
the Concepts of Producer Economics
Based on the Concepts of
|Main objective and focus:||Building for the future with long term focus.||Profit maximization with short term focus.|
|Hierarchy of organization's constituencies:||
|How profits are used:||As fuel to keep investing and building.||To increase consumption and leisure for stockholders.|
|Employment and job security:||Lifetime employment promotes bonding.||Uncertain employment discourages bonding.|
|Responsibility for training after employment:||Companies provide cross training and job rotation.||Individuals are mainly responsible for their own skills.|
|Management's attitude toward teamwork:||Teamwork and cooperation are essential for optimizing the system.||Teamwork is risky. Individual performance will optimize the system.|
|Management behavior in economic downturn:||1. Cut dividends. 2. Cut management compensation. 3. Cut workers pay and jobs as last resort.||1. Cut workers pay and jobs. 2. Cut management compensation. 3. Cut dividends.|
|Route to management:||Long multi-function internship.||From college, to single function, to management.|
|View of leadership:||A leader manages processes or work.||A leader manages results.|
|Management attitude toward problems:||Blame the system.||Blame individual employees.|
|Tools of management:||Employee empowerment, group praise and profit sharing. Statistical control. Managers facilitate, counsel, teach and provide resources for teams to improve processes.||Management by objectives, merit ratings, incentive pay, quotas, standard rates and quantities, piecework and annual ranking of employees. Count results.|
|* From Martin, J. R. 1993. The dichotomy of capitalism: A new framework for management accounting education. Proceedings of the Southeast region American Accounting Association meeting.|
Recent articles related to developing a conceptual framework:
Epstein, M. J. 2012. Challenges of governing globally: A strong understanding of the three distinct corporate governance systems around the world will help managers conduct business more effectively in other countries. Strategic Finance (July): 26-34. (The global corporate governance systems include: Anglo American, Communitarian, and Emerging markets).
Ferreira, A. and D. Otley. 2009. The design and use of performance management systems: An extended framework for analysis. Management Accounting Research (December): 263-282. (Summary).
White, L. R., A. Van der Merwe, B. D. Clinton, G. Cokins, C. Thomas, K. Templin and J. Huntzinger. 2012. Conceptual Framework for Managerial Costing: Draft Report of the IMA Managerial Costing Conceptual Framework Task Force. IMA. (Summary).
Other related summaries:
Blake, R. R. and J. S. Moulton. 1962. The managerial grid. Advanced Management Office Executive 1(9). (The Grid).
Fullerton, R. R. 2003. Performance measurement and reward systems in JIT and non-JIT firms. Cost Management (November/December): 40-47. (Summary).
Fullerton, R. R. and C. S. McWatters. 2002. The role of performance measures and incentive systems in relation to the degree of JIT implementation. Accounting, Organizations and Society 27(8): 711-735. (Summary).
Johnson, D. W., G. Maruyama, R. Johnson, D. Nelson and L. Skon. 1981. Effects of cooperative, competitive, and individualistic goal structures on achievement: A meta-analysis. Psychological Bulletin (89): 47-62. (Summary).
Kalagnanam, S. S. and R. M. Lindsay. 1998. The use of organic models of control in JIT firms: Generalising Woodward's findings to modern manufacturing practices. Accounting, Organizations and Society 24(1): 1-30. (Summary).
Martin, J. R. Not dated. Chapter 1: Introduction to Managerial Accounting, Cost Accounting and Cost Management Systems. Management Accounting: Concepts, Techniques & Controversial Issues. Management And Accounting Web. http://maaw.info/Chapter1.htm
McGregor, D. M. 1957. The human side of enterprise. Management Review (November): 22-28. Reprinted from the Proceedings of the Fifth Anniversary Convocation of the School of Industrial Management, MIT, April 9, 1957. (Summary).
Ouchi, W. G. and A. M. Jaeger. 1978. Type Z organization: Stability in the midst of mobility. Academy of Management Review. (April): 305- 314. (Summary).
Pallot, J. 1991. The legitimate concern with fairness: A comment. Accounting Organizations and Society 16(2): 201-208. (Summary).
Williams, P. F. 1987. The legitimate concern with fairness. Accounting Organizations and Society 12(2): 169-189. (Summary).