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«Paul M. Collier Aston Business School, Aston University Accounting for Managers Accounting for Managers: Interpreting accounting information for ...»

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Hopper et al. (1987) introduced the labor process perspective to accounting by contrasting this perspective from both functional and interpretative understandings of managerial accounting. Their central argument was that management accounting cannot be properly understood, except in the light of the social relations of production. They argued that to view organizations as united by a common purpose is to fictionalize what is, in fact, a site of irreconcilable conflict. Such organization goals as the maximization of the net present value of future cash flows transforms what is the goal of one sectional interest into the overriding goal of all, thus obscuring the class-based distributional conflicts inherent in all capitalist organizations.

Accordingly, labor process theorists deny that management accounting is a neutral tool serving the general interests of efficiency and emphasize its role in legitimizing partisan interests, in contributing to the control and domination of labor, and in reinforcing the dominant mode of production, i.e., capitalist production, albeit in a contested terrain. Moreover, management accounting also is capable of showing up the ambiguous position of managers within capitalist firms. Where on the one hand, they are ‘‘materially privileged’’ agents of the capitalists’ class and must accordingly serve the interests of the latter, they are on the other hand, wage labor and to that extent interested in ‘‘securing their own employment, and in fighting for an improved share of available resources’’ (Hopper et al. 1987, 450–451). Thus, managers are at once ‘‘both agents and victims of control’’ such that phenomena such as budget games and divisional budgeting slack must not be seen as the consequence of some ‘‘individual pathology’’ but rather as the ‘‘deep effects of exploitative and oppressive social structures’’ that are embedded and presupposed in the capitalist system of production.

While Hopper et al. (1987) offered a programmatic introduction to the labor process perspective and distinguish it from the more functionalist and interpretive traditions, a later paper by Hopper and Armstrong (1991) presented a historically rooted reflection on the development of management and cost accounting since the middle of the nineteenth century, in part by challenging the very popular reading of the history of cost and managerial accounting given by Johnson and Kaplan (1987) (see also Johnson 1972, 1981, 1983). Deploying a transactions-cost approach, Johnson and Kaplan (1987) argued for understanding the emergence and prevalence of cost accounting as techniques which contributed to increasing operational efficiencies, and for ROI and budgets as techniques which reduced the costs of managing large vertically integrated bureaucracies as opposed to securing market-based coordination. In contrast, Hopper and Armstrong (1991) challenged this interpretation by linking the presence and even subsequent absence of cost


and managerial accounting practices to the changing forms of control over the labor process that are in turn linked to different phases of capitalism.

Accordingly, Hopper and Armstrong (1991) suggested that for the early factory organizations of the mid-nineteenth century (they especially consider Lyman Mills which was also the focus for Johnson and Kaplan (1987)), increases in profits were secured primarily from extending the number of hours worked without significantly changing the wages and from applying a closer degree of control over the labor process. Such ‘‘innovations’’ as the ‘‘stretch-out (an increase in the number of machines supervised by each operator), the speed-up (an increase in the operating speed of machines),’’ and ‘‘a premium bonus system’’ for overseers to enforce productivity, were monitored and achieved by accounting records, while such labor practices as firing workers for trade union activity and disciplining dormitory behavior of workers by the ‘‘moral police’’ ensured a relatively docile labor force which was the precondition for managerial action that is based on cost accounting information (Hopper and Armstrong 1991, 414–415). Hence, they argued that some of the accounting and cost information was not used for making the production process more efficient but rather used to intensify the extraction of labor from the labor force.

Moreover, the decline of internal contracts (outsourcing products and skilled labor) during the late nineteenth century was based on appropriating the profits made by subcontractors, though it involved increased costs for the companies (from replacing contractors with college trained executive who lacked knowledge of production processes). Where previously ‘‘companies kept no records of the hours worked by the contractors’ employees, or of how much and on what basis they were paid,’’ by paying workers directly, companies began to keep a host of new records including ‘‘work records’’ (Hopper and Armstrong 1991, 416).

Consequently, the creation of these new records, which also ‘‘laid the foundation for the later development of standard costing systems’’ had ‘‘nothing to do with the efficiency of the conversion process... but was a means of redistributing [the] profits... made by the contractors to the companies’’ (Hopper and Armstrong 1991, 417). Furthermore, these records not only transferred ‘‘financial knowledge from the worker to the factor owner’’ but also fostered the ‘‘imposition of an additional system of activity surveillance’’ (Hopper and Armstrong 1991, 417).

Again, they argued that accounting records are hardly neutral but are deeply intertwined with the expropriation of profits, the intensification of the labor process and the surveillance of worker activities.

Regarding the late nineteenth and the early twentieth century, Hopper and Armstrong (1991) said that such developments as standard costing, ROI measures, and budgets cannot be understood except in the context of the correlative destruction of craft labor. Management accounting was one element in the development of a vast paper bureaucracy (measured by the increase in record-keeping and the swelling ranks of white-collar employees) by which the production process should be replicated, monitored and controlled. In the continual attempt to control the labor process, owners, and by now also managers, sought to redesign, fragment and simplify the labor process ‘‘so that skill levels were reduced and


the mental aspects of production incorporated into management’’ (Hopper and Armstrong 1991, 419).

The labor process perspective has illuminated not only historical issues but also has been successfully applied to contemporary times. For example, Knights and Collinson (1987) found that British workers in one factory were unable to contest management’s accounting reports, even when these reports led to worker layoffs. They suggested that accounting has inherent characteristics which make it difficult for workers to challenge these numbers, thus accounting information is not contested by labor on the grounds that its cultural values of ‘‘objectivity’’ and ‘‘hard facts’’ mirror the ‘‘masculine values’’ on the shop floor. Similarly, Oakes and Covaleski (1994) examined organized labor’s involvement with accountingbased incentive plans, and the role this involvement played in labor-management relations. This study involved cases studies of profit-sharing plans implemented at three firms, Parker Pen, Kaiser Steel, and American Motors, in the 1950s and early 1960s, suggesting that ‘‘accounting takes on characteristics or is constructed in ways that make it more or less likely that it will be contested at certain periods of time’’ (Oakes and Covaleski 1994, 595). Bougen et al. (1990) (see also Bougen

1989) documented the appearance and disappearance of accounting in British coal industry labor debates. Their study showed the partisan nature of the disclosure of financial reports to trade unions, the contested and sometimes self-defeating results of such disclosures, and of the many alternative managerial mechanisms (joint consultations committees and profit-sharing schemes) that attempt to gain cooperation by persuasion and cooperation.

In summary, labor process theory is consistent with the other organizational sociological perspectives such as contingency theory and interpretive work in the sense that it embeds management accounting in a wider context than more orthodox approaches. However, labor-process theory departs from these alternative approaches by focusing on the structural antagonism between classes inherent in capitalist societies. Also consistent with other organizational and sociological perspectives, labor-process theory offers a relatively non-technical understanding of management accounting in that management accounting appears within the context of a class-divided society to aid economic expropriation. Finally, the labor-process perspective moves towards considering accounting as a social practice rather than merely a technique, arguing that political events and ideologies, status, class, trust and technological changes impel people to act in certain ways, all potentially impinging on the roles served by management accounting.

The Foucaultian Perspective Michel Foucault (1926–1984) was both a philosopher and historian who used history to raise philosophical questions.6 A central motif that runs through his work and one which has also been productive for accounting scholarship is perhaps best A solid entry into the work and thought of Michel Foucault is the Paul Rabinow, ed. (1984) Foucault Reader. The introductory essay is an especially good and clear statement while the selection of readings is representative.


described in his own words: ‘‘... the goal of my work during the last twenty years... has been to create a history of the different modes by which, in our culture, human beings are made subjects’’ (Foucault 1983, 208). To begin to unpack this seemingly innocuous statement let us consider the key word here – ‘‘subject’’ – in both the meanings that it admits: ‘‘subject to someone else by control and dependence, and tied to his own identity by a conscience or self-knowledge. Both meanings suggest a form of power which subjugates and makes subject to’’ (Foucault 1983, 212). While the first meaning is a relatively familiar one (hierarchical employment relations, prisoner-guard, parent-child etc.), the second hints at the radical and innovative nature of Foucault’s thought. What is equally significant regarding the exercise of this power, is the interrelation between power and knowledge which Foucault signifies by the slash in the term ‘‘Power/Knowledge.’’ Foucault argued that to properly grasp the conditions for the emergence of the ‘‘human sciences’’ – all those ‘‘sciences’’ that are concerned with describing, explaining, understanding, predicting and controlling human behavior – one must understand its complicity with the historically unprecedented presence of a widespread and general control of human beings. Foucault (1979, 191) argued that the ‘‘birth of the sciences of man’’ probably lies in the various written techniques (of notation, registration, columnar and tabular presentation, of measurement, classification etc.) by which individuals are turned into a ‘‘case.’’ Transforming a human being into a ‘‘case’’ (patient, student, prisoner, worker) simultaneously homogenizes (by classifying as one within a series) and individualizes (by measuring the individual differences). Implicit in such classification and measurement is the presence of normalizing judgments wherein the measurement of individual differences are made in regard to deviations from a norm (for example, students grades, standard cost, time and motion studies, budgets, benchmarks). According to Foucault, it was only by the late eighteenth century that this manner of describing, or more precisely, writing up individuals as cases became widespread and general. It furthermore

represented a reversal of historic proportions, as stated by Foucault (1979, 191):

For a long time ordinary individuality – the everyday individuality of everybody – remained below the threshold of description. To be looked at, observed, described in detail, followed from day to day by an uninterrupted writing was a privilege.... The disciplinary methods reversed this relation, lowered the threshold of describable individuality and made of this description a means of control and a method of domination.

Power, in this light, is not negative or repressive but rather positive and productive, because ‘‘it produces reality; it produces domains of objects and rituals of truth. The individual and the knowledge gained of him belongs to this production’’ (Foucault 1979, 194). Accordingly, for Foucault (1990, 98), power and knowledge are constitutive of, but not identical, to each other, since ‘‘between techniques of knowledge and strategies of power, there is no exteriority, even if they have specific roles and are linked together on the basis of their difference.’’ The scientific disciplines which generate our knowledge of human beings is thus also complicit in their disciplining, or as Foucault (1979, 222) suggested, ‘‘The ‘Enlightenment,’ which discovered the liberties, also invented the disciplines.’’


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