Chapter 4

Management Control, Accounting and its Rational-Economic Assumptions

Accounting needs to be understood in its broader context as part of a management control system. In this chapter, we describe management control systems and their relationship with accounting; and planning and control systems including the role of feedback and feedforward, with particular reference to cybernetic forms of control. This chapter also explains the importance of non-financial performance measurement and introduces the Balanced Scorecard and strategy mapping processes. We conclude with a brief introduction to a theoretical framework for 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:

  • Strategy formulation was concerned with goals, strategies and policies. This fed into
  • Management control, which was concerned with the implementation of strategies and in turn led to
  • Task control, which comprised the efficient and effective performance of individual tasks.

Anthony was primarily concerned with the middle function. Otley (1994) argued that such a separation was unrealistic and that management control ...

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