,&counting Organizations andSociety, Vol. 15. NO. 5, pp. 47-98, 1990. 0361-368290 S3.00+.

00
Primed in Great Britain Pergamon Press plc

MAKING ACCOUNTANCY PRACTICAL*

PETER MILLER
London School of Economics and Political Science

and

TED O’LBARY
University of Illinois at Urbana - Champaign

Abstract

Accountancy is generally assumed to have a practical function. This function is that of guiding decisions
within firms towards the end of economic efficiency. Even when this function is considered to have been
lost, it is by reference to such a notion that calls for reform are made (Johnson, H. T. & Kaplan, R. S.,
Relevance Lost (Boston: Harvard Business School Press, 1987)). This paper questions the self-evidence of
this category, arguing that the notion of acountancy’s practical function is the end point of complex
processes of conceptual invention, rather than an apriorigrounding. The paper argues that these processes
are neglected in recent influential studies of accounting innovation, and examines how certain key
concepts that enable accountancy’s practical function to be represented as unproblematic are “made up”.
These processes of conceptual invention are argued to be an important and neglected aspect of accounting
innovation. To illustrate this thesis the paper addresses one set of concepts formed during the 1930s in the
U.S. that was of decisive importance in elaborating the notion of accountancy’s “practical” function.
Particular rhetorical devices drawn from political culture and articulated in the administrative literature of
the period made it possible for accountancy’s practical function to be represented as one clearly
differentiated from political and moral objectives. Two aspects of “making accountancy practical- are
identified: firstly “making up the corporation” as a democratic and contractual entity; secondly, “making up
the individual” as a person endowed wnh the ability to make decisions and assume responsibility, and
representing leadership as an essential executive function.

In recent years managerial accounting has be-
come the subject of a set of “worries” (Hop-
wood, 198%). Accounting systems have al-
legedly come to frustrate rather than enable
economic decision making in corporations
(Johnson & Kaplan, 1987; Bruns & Kaplan,
1987). Whereas they were perceived as playing
a positive role in the strategic management of
firms in the early decades of this century, more
recently accounting systems have come to be
seen as enmeshing executives within subopti-
mal decision structures across a range of con-
cerns, including capital investment, inventory
management, product quality, factory layout and
the control of overhead costs. The key to this
change of role is held to be a “lag” in the adapta-
tion of managerial accounting to the modem,
computer integrated world of enterprise (Rap-
Ian, 1985). Worries such as these have led to an
interest in the processes of innovation in ac-
counting. Attempts to explain how new prac-
tices of accountancy emerge in practice, what
barriers obstruct the process, and how these
might be dealt with are among the issues addres-
sed. The intent is to “make accountancy practi-
cal” once again, to speed up the recovery from
accounting lag and to forestall its recurrence
(Kaplan, 1985; Bruns & Kaplan, 1987).
This interest in internal accounting change
represents a particular way of addressing the in-

*We are obliged to Chris Argyris. Richard Boland, Peter Booth, Anthony Hopwood, Bd Ketz, John Meyer and Larry Tomassini
for helpful discussions and comments on an earlier draft.

479
 480 PETER MILLER and TED O’LEARY

fluences on accounting practice and the organi- ence (Bruns & Kaplan, 1987; Johnson & Kaplan,
zational consequences of accounting (Hop- 1987). This can be illustrated by considering the
wood, 1985a). It rests on a proposition that man- question of values.
agement accounting appeared when economic Firstly, if culturally ingrained values are a con-
exchange began to take place within business or- dition of organizational success, and if one is
ganizations rather than in external markets concerned to assess accounting’s contribution
(Johnson & Kaplan, 1987, p.19). Management to that success, it is important to register that the
accounting in this interpretation is not merely a abstract rationales and vocabularies of accoun-
passive or reactive component of organizational tancy are themselves a part of such values (Bur-
change, but is itself considered to have facili- chell et al., 1980; Burchell et al., 1985; Hop-
tated the growth of large-scale firms (Johnson & wood, 1984, 1988b, 1987; Miller (zr O’Leary,
Kaplan, 1987, p. 2 1). By focusing attention on 1987,1989a; Thomas & Meyer, 1981). The con-
the potential gains to be had from internal coor- cepts of decision, responsibility and authority
dination of economic exchange, management appealed to so readily and self-evidently in the
accounting encouraged manager-entrepreneurs accounting literature are themselves cultural
to increase the size of their firms (Johnson & artefacts that have a history and were invented in
Kaplan, 1987, p. 2 1). This concern with internal very specific socio-cultural contexts (Meyer,
accounting change rests also on the argument 1986; Meyer et aZ., 1987; Miller & O’Leary,
that management accounting is not an autonom- 1989a). The articulation of roles for accounting
ous activity within organizations, but is itself systems within firms depends in important part
linked to and contributes toward organizational on an elaborate and culturally specific vocabul-
success (Johnson & Kaplan, 1987, p.63). The ary for thinking about, talking about and repre-
careful delineation of lines of authority and re- senting the aims and ends of accounting systems
sponsibility in centralized organizations did not and managerial activities. Accounting is in-
bring about the gains sought by owners of multi- volved in much more than directly facilitating
activity firms all by themselves. Additional managerial decisions, indeed its capacity to fulfil
mechanisms were needed to ensure that the per- such a role and the culturally specific ways in
formance of one department was aligned with which it is constructed are themselves depen-
the goals of the owners for the firm as a whole. dent on particular values and norms invented in
Congruence between the parts and the whole specific contexts.
was not left to chance, but sought through ac- Secondly, if the rationales and vocabularies of
counting systems as well as other mechanisms. accountancy are themselves aspects of cultural
Amongst these other mechanisms were “cent- values, the analysis of accounting innovation
rally planned mathematical models, decen- needs to extend beyond the internal world of en-
tralized price systems, and culturally ingrained terprises (Hopwood, 1987). Values do not re-
values” Uohnson & Kaplan, 1987, p. 63, em- spect organizational boundaries, but flow across
phasis added). and through them. However the analyses under-
This concern to locate accountancy as one of taken in the current field studies tradition
the multiple conditions of organizational suc- largely assume that the principal research site is
cess suggests there is a need to address a wide the internal world of the enterprise (Bruns &
variety of issues if a full understanding of ac- Kaplan, 1987). Ifanalyses of accounting innova-
counting innovation is to be achieved. Not only tion are to take note of cultural influences, then
the mechanisms and techniques of accounting it is important that they extend beyond the
itself, but other managerial practices within boundaries of the enterprise, and explore the
firms as well as cultural factors more generally terrains within which the core values of ac-
would be included in such a research agenda. counting are formed.
But this broadly based agenda is not matched by Thirdly, and more generally, if cultural values
the analyses carried out within its terms of refer- are to be viewed as an important aspect of ac-
 ,WNG hCCOUNTANcY PRACTICAL 481

counting change and organizational success, tual invention that take place in specific and
then ways of representing and thinking about ac- localized political cultures, and how these make
counting systems should be viewed as much it possible and sometimes necessary to irtstah
more problematic than is customary. Ways of particular types of calculative mechanisms (Mil-
representing accounting systems and manage- ler & O’Leary, 1987,1989a, 1989b). We need to
rial activities do not emerge effortlessly and im- explain how and why an accountancy that was
mediately in response only to “practical” needs once considered practical is no longer viewed in
such as that for cost consciousness concerning such terms, and to do so without recourse to the
inventories and customer credit (Johnson 8t strained notion of “accounting lag”. And we need
Kaplan, 1987, p. 40). Rather, they are made pos- to ask what effects are produced when the com-
sible in important part by the complex and often petence and expertise of accountancy is rep-
fraught attempts to formulate ways of thinking resented in a particular form. Only by addressing
about and representing the concerns in ques- these often difficult but important issues can we
tion. Notions of managerial authority and re- appreciate the complex and multi-layered cul-
sponsibility were not devised overnight and in tural aspects of accounting innovation.
response only to concerns with organizing econ- A large domain of what can be termed cultural
omic exchange within enterprises (Miller & analysis is opened up if accounting innovation is
O’Leary, 1989a). Nor was cost consciousness, at understood in these terms. Some important fea-
least in the UK context, a direct response to the tures of this domain have already been identified
need to internally administer enterprises efft- in the literature. Accounting’s involvement in
ciently and effectively (Loft, 1986). Other pro- the establishment of an economic language of
cesses and concerns external to enterprises in- organizational motive, and its implication in the
tervene and affect the tempo of accounting inno- construction of operational concepts of accoun-
vation. The analysis of internal accounting tability, responsibility and performance are sig-
change needs to take seriously the complex net- nificant aspects of accounting innovation (Hop-
work of political and cultural debates within wood, 1985). If the analysis of innovation is
which accounting is enmeshed, rather than as- broadened to include such issues, investments
suming it away. in organizational practices that sought to create
“Making accountancy practical” is thus much a more disciplined and controllable work force
more than a call to pull together in the name of and to foster a legitimacy for managerial
practice. Proposals for making accountancy authority and influence become a central part of
practical entail a very particular conception of the research agenda (Hopwood, 1985). The rise
the constituent elements ofpractice, the terrains of an economic rhetoric of accounting (Hop-
upon which one might study innovations, and wood, 1988a, 1984; Zeff, 1978) indicates the
the ends to which these innovations contribute. changing nature of the discourse in which
For certain purposes intra-corporate models can specific accounting reforms are embedded,
be very fruitful. But they are seriously limiting highlighting how abstract notions of the roles
and incomplete as a basis for explaining the cul- and potential of accounting are implicated in the
tural aspects of accounting innovation. To con- practical processes of accounting change.
strue innovation as mainly an internal economic Accounting innovation understood in these
process is simply to leave out too much. To terms is thus not only a matter of the internal
achieve a full picture of innovation we need to processes through which organizations seek to
identity the ways in which diverse types of enact new systems and tasks. Accounting inno-
events-institutional, technical, political, moral vation includes the wider external authority and
- are linked together to provide the conditions validity of the knowledge claims upon which it
which make certain types of innovation possible draws. Accounting practice is not only aligned
(Miller & Rose, 1988, 1990). We need in par- with the perceived requirements of a task, but
ticular to understand the processes of concep- with the requirements of a modern rational soc-
482 PETER MILLER and TED O’LEARY
iety (Hopwood, 1988a; Meyer, 1986; Thomas &
Meyer, 1984). The roles of accounting are exter-
nally as well as internally constructed, and they
are sometimes only weakly linked to the detailed
functioning of accounting practice. The positive
roles accounting is called upon to play within
particular organizational contexts are in many
cases defined prior to and independently of the
practical tasks they are to address (Hopwood,
1987). Abstract networks of ideas, categories
and theories are appealed to in attempts to de-
fine and direct accounting’s “practical” func-
tions. Accounting draws upon the adjacent yet
separate disciplines of administrative science,
economics and psychology in setting out and de-
fining its roles within organizations. Thus the
concepts of management and the manager were
actively constructed in a particular way in a par-
ticular sociocultural context, and in relation to
concerns and problems that went considerably
beyond the internal world of the corporation
(Hopwood, 1987).
Much has already been accomplished by those
seeking to understand accounting change by re-
ference to extra-corporate as well as intra-cor-
porate factors. But “the history of the develop-
ment of an accounting discourse remains to be
written” (Hopwood, 1988a, p. 5). Indeed one
can talk here of a multiplicity of possible his-
tories of accounting innovation (Armstrong,
1987; Cooper et al., 1988; Hoskin & Macve,
1986, 1988; Lehman & Tinker, 1987; Miller,
1986; Ruxty et al., 1987; Rea & Cooper, 1989;
Robson, 1988). One direction for such research
would be to focus on the very specific linkages
between individual instances of accounting in-
novation and the rationales to which they were
linked and through which they were articulated.
Thus one can study the ways in which rationales
for accounting practice came to be articulated
and changed in relation to legal requirements for
audit, the regulatory and revenue raising ac-
tivities of the State, legal monopolies granted to
specific groups of economic calculators and the
financial reporting of the corporate sector (Hop-
wood, 1988a). One can attend to the ways in
which conceptions of depreciation or inflation
accounting came to be brought to bear on ac-
counting practice. The concern here would be
with the conceptual conditions that made possi-
ble and furthered the advance of such proposals.
One can explore how the fine details of produc-
tion processes come to be related to more
abstract aims for the organization as a whole, the
resultant changes being the outcome of a com-
plex interplay between rhetoric and the specific
problems to be addressed (Hopwood, 1987).
And one can analyse a particular accounting
event, such as the sudden upsurge of interest in
value added in the late 1970s in the U.K. in terms
of the disparate arenas within which value added
became a focus of concern (Burchell et al.
1985).
The aim of this paper is to extend and develop
these concerns by examining the broader
rationales that made it possible to represent the
corporation as a space administrable according
to certain principles. We are particularly in-
terested in the ways in which a set of loosely as-
sociated concepts of the enterprise, formulated
in the political and administrative debates of a
particular period, made it possible to represent
accountancy’s role within enterprise in certain
terms. We are concerned with the processes of
conceptual invention that took place within
these contexts, and that provided a resource that
could be drawn upon in calls for “making ac-
countancy practical.”
Three themes characterize the analysis in this
paper of the processes involved in “making ac-
countancy practical”. Firstly, making accoun-
tancy practical entails “making up the corpora-
tion”, and in a very specific manner. Accounting
innovation cannot be fully understood as a cul-
tural process without reference to particular
ways of thinking about, understanding, concep-
tualizing and knowing the corporation as a gov-
ernable and administrable entity (Miller &
O’Leary, 1989a; Miller & Rose, 1988, 1990). “In-
novation” is not simply a matter of practical
people doing things. Innovation requires a com-
plex of terms, vocabularies and images which
enable different forms of accounting practices to
be understood as, and to occupy their role qua
innovation. Innovation depends in important
part on the formation of new ways of thinking
 ,‘LZWNG ACCOUNTANCY
about the processes in question, new voc-
abularies for understanding the roles of accoun-
tancy, new rhetorical forms for representing the
signihcances of particular calculative routines
(McCloskey, 1985; Miller & Rose, 1988). Once
invented, such forms of representation provide
highly general models from which organizations
can derive their identity and structure, and to
which appeals can be made by the proponents of
“innovation” (Meyer et al., 1987). Representing
and intervening thus go together (Hacking,
1983). In the accounting literature little atten-
tion has been paid to these preconditions of in-
novation (Arrington & Francis, 1989; Hopwood,
1987; Miller & O’Leary, 1989b; Thompson,
1988). For economics, Williamson ( 1985, pp. 5-
7) addresses the matter cursorily, concluding
that concepts emerge from the brilliance of indi-
vidual authors who provide us with ways of se-
eing the nature of things clearly. We argue that
this misses an important aspect of the processes
of innovation, that we need to examine the con-
cepts through which executives, accountants,
politicians and academics “make up” the enter-
prise, that we need to understand how these dif-
ferent groups represent the enterprise in ways
intelligible to each other, and in ways that ren-
der “innovations” congruent with the problems
they seek to address.
Secondly, making accountancy practical in-
volves “making up people” (Hacking, 1986). In-
dividuals, we are told, are contractors, decision
makers and responsible actors. Accounting sys-
tems operate through the mechanism of “human
nature as we know it” (Knight, 1965, p. 270). Ac-
counting systems have enabled individuals to
create and fulfil complex contractual relations,
decide rationally (Johnson & Kaplan, 1987;
Simon, 1958; Williamson, 1985) and be held re-
sponsible for their economic obligations. Ac-
counting systems are practical in that they
merely serve these self-evidently important di-
mensions of individual and collective well being.
But individuals did not walk into these roles
“ready made”, The capacities of contracting,
choosing and assuming responsibility are attri-
butes of individuals that were literally “made
up”. Such individuals have not always populated
PRACTICAL 483
the enterprise. The individual conceived in
these terms is an “institutional myth”, one that
has developed out of particular theories of econ-
omic, political and cultural action (Meyer et al.
1987). The attributes of individuals are the end
product of definite belief systems and tech-
niques. Sociological, anthropological and histor-
ical studies have demonstrated that the produc-
tion of individual attributes has been the object-
ive of programmatic and codified systems of
ethics and mannners (Douglas, 1987; Elias,
1978; Hirst & Woolley, 1982; Miller, 1987; Oes-
treich, 1982; Rose, 1989; Sennett, 1976). The
emotional and subjective capacities of individu-
als have a sociology and a history, and cannot be
appealed to as absolute and invariant founda-
tions for accountancy systems and organiza-
tional forms.
“Making up people” in this particular form
helps to articulate a crucial role for accountancy
within the firm. At the core of modern manage-
rial accountancy is the proposition that it exists
to make people’s behaviour within the enter-
prise more rational and responsible. Without the
essential supports which accounting offers, ac-
cording to emergent case studies of accounting
in action (Bruns & Kaplan, 1987) individuals
are misled in critical decisions. They fail, for in-
stance, to perceive the centrality of product
quality to competitive advantage in many indus-
tries, the true costs of products, the inherently
costly nature of inventory holdings, or the sig-
nificance of overhead cost management to
strategy attainment (Kaplan, 1985; Cooper &
Kaplan, 1987; Johnson, 1987; Patell, 1987). At
the core of modern managerial accountancy is a
further proposition: that the aim of accountancy
systems is to make individuals responsible for
the economic consequences of their actions and
decisions, even though the joint, interactive
nature of many organizational actions makes this
a difficult endeavour. While the point is rarely
made explicit within the accounting literature,
an important implicit assumption is that indi-
vidual and collective well being will result from
accounting systems economizing upon rational-
ity and responsibility in collective affairs, pro-
ducing as much of these goods as is warranted by
484 PETER MILLER and TED O’LEARY
the costs of doing so. “Making up” individuals in
this particular way thus creates a space for ac-
counting to fill. Accounting systems come to
take charge of those frail individuals “made up”
as lacking in rationality and responsibility.
Thirdly, we argue that “making accountancy
practical” takes place in specific and localized
political cultures. These cultures give rise to dis-
tinctive and variable ways of representing the
corporation and the roles of accountancy within
it (Miller & O’Leary, 1989a, 1989b). We argue
that the techniques, vocabularies and language
of accountancy are invented in relation to a par-
ticular complex of political, social and moral
concerns (Hopwood, 1986). Shared voc-
abularies and rationales enable relays and link-
ages to be established between groups such as
managers, academics and politicians who are
otherwise formally independent. The specific
ways in which the roles of accountancy come to
be represented can be fully understood only by
reference to the alignment they seek to bring
about with prevailing cultural values, social ex-
pectations and political concerns. The particular
issue that concerns us here is how a distinctive
competence has been attributed to accounting
systems within firms: the ability to correct the
rational and ethical defects of the poem. Rather
like the courts or the educational system, it is
claimed that accounting is able to produce indi-
viduals as responsible and rational social actors.
Accounting systems and managerial hierarchies
more generally enable enterprises to “outper-
form” other social institutions such as the law,
the moral code and the market (Coase, 1937;
Williamson, 198 1, 1985). Within responsibility
centres, accounting systems support the deci-
sion making of individuals, and make it possible
to monitor their performance to exact responsi-
bility. The concern of this paper is with how the
categories of responsibility and decision-making
that are so central to accountancy were “made
up” in a particular cultural context.
We address these three themes concerning
the practical roles of accounting systems in two
stages. In the first section of the paper we de-
monstrate that accounting systems have not al-
ways been practical instruments of economic
action. The nature of enterprise, and of account-
ing systems and hierarchies within it, has been
deeply contested in history. We examine the
fundamental challenges directed at corporate
concentration in the depression years of the
1930s in the United States. And we show how a
particular set of concepts addressing such con-
cerns were elaborated during these years out of
social debate and political argument. These con-
cepts sought to “make up” the firm as a “democ-
ratic organization”, an essential component of a
democratic polity rather than its antithesis. We
argue that it was within this particular way of
representing the firm that the practical econ-
omic role of accountancy systems was given the
status of obviousness and simple truth. In the
next section of the paper we examine how the
literature of administration which has been so
influential for contemporary accountancy sets in
place an image of the individual as often incapa-
ble of rational and responsible action, and an
image of leadership as an essential function.
These conceptions of the individual were in-
vented in a particular body of administrative lit-
erature. The conceptual couplet of a rationality
deemed to be bounded and a responsibility to be
installed is held to be central to a particular way
of “making up” the democratic individual in the
administrative literature of the 1930s. The no-
tion of leadership as a particular capacity of indi-
viduals and as an indispensable aspect of suc-
cessful organizations is a further aspect of “mak-
ing up” the individual in this period. Through the
notion of leadership an indispensable social role
was articulated for the executives oflarge corpo-
rations.
MAKING UP THE DEMOCRATIC
ORGANIZATION
From both the White House and the academy,
during the 1930s critiques were voiced which
identified the large-scale corporation as the very
antithesis of American democratic principles.
The object of these critiques was the modem
corporation that in the previous decade had
been the site for the development of the most
 SMKINC ACCOUNTmcY
significant of today’s accounting systems and
practices (Kaplan. 1985; Kaplan Pr Johnson,
1987). Yet in the 1930% only a decade after
these innovations, the entity that they helped to
control was seen to be associated with quite the
opposite of economic advance. Systems and
hierarchies, it was argued, could in no sense be
viewed as practical instruments for social or
economic advance. Rather, they were held to be
deeply implicated in the subversion of the
democratic state itself. In the 1930s managerial
expertise and accounting systems did not oc-
cupy the neutral role accorded them today, but
were profoundly embedded in political debate.
It is with ways of representing the corpora-
tion, ways of “making up” its characteristics and
attributes, that we are concerned in this section
of the paper. We begin by outlining the critiques
that were directed at the large corporation dur-
ing the 1930s in political and academic debate.
We then examine a number of “responses” to
these critiques. These include the responses of
business leaders, accountants and the academy
more generally. Particular importance is ac-
corded to the “response” provided in the writ-
ings of Chester Barnard. These formulate a con-
ception of the enterprise that has had lasting in-
fluence on ways of thinking about and represent-
ing the nature of managerial authority. This par-
ticular way of “making up the corporation” de-
fines it as a pre-political space, one within which
the technical expertise of accountancy can be
called upon and deployed. This way of repre-
senting the corporation is held to be an import-
ant aspect of the cultural processes of account-
ing innovation. Whilst accounting innovation of
course depends upon the creation of new caI-
culative and inscription devices such as Return
on Investment or Discounted Cash Flow tech-
niques, if innovation is in part a cultural process
then a decisive moment is that when such caI-
culative practices can be linked to abstract pro-
grammes for governing the enterprise. “Making
up the corporation” as an entity whose rational
administration is understood as a key aspect of a
democratic society is held to be an important as-
pect of the cultural elaboration of roles for ac-
countancy.
PruCTIcAL 485
During the 1930s a parallel was drawn in polit-
ical argument between corporate concentration
at home and fascism abroad. The authority exer-
cised by the few who headed America’s largest
corporations was said to equal in its autocratic
implications the political fascism emergent in
several European nations. The equivalence was
suggested by Franklin Roosevelt in an address to
Congress in 1938. “Among us today a concentra-
tion of private power without equal in history is
growing” (Roosevelt, 194 1, pp. 305-6). The ex-
tent of this concentration ofprivate power could
be demonstrated, Roosevelt argued, by means of
detailed statistics on asset and earning concen-
trations within American corporations. But it
was the wider significance of the statistics that
counted. This could be understood by reference
to “unhappy events in Europe”. These, Roosevelt
claimed, should remind Americans of two sim-
ple truths about the liberty of a democratic
people. Firstly, this liberty cannot survive an ex-
pansion of private power if that power exceeds
that of the democratic state itself, for that “in its
essence is Fascism” (Roosevelt, 1941, pp. 305-
6). Corporate concentration was a pressing
example of such an expansion of private power.
Secondly, liberty is jeopardized when an en-
trenched business system fails to produce and
distribute goods and income with equity and in
adequate amount. The Depression was a power-
ful indictment of corporate America on both
these counts.
Autocratic authority in large corporations was
a central theme too in Berle & Means’s The Mod-
ern Corporation and Private Proper4~ ( 1932).
The joint effect of resource concentration and
dispersion in stock ownership had been to
create a new social category - that of “econ-
omic autocrats”. These were the groups of
executives and minority stockholders in control
of resource allocation in America’s largest cor-
porations (Berle & Means, 1932, pp. 124-5).
The rise to power of this group had severed the
traditional economic and legal bonds which at-
tached capitalism to a democratic social order.
Protection of private property was no longer the
driving principle of economic and social welI
being for the average American. Large tracts of
 486 PETER MILLER and TED O’LEARY
the nation’s resources were no longer within the
active direction of the average American. Con-
trol of these resources had been abdicated to the
economic autocrats in a handful of large corpo-
rations. To reconnect economic activities with
democratic principles and mechanisms, enter-
prise would have to be transformed into a social
institution. This should involve the instatement
of a “purely neutral technocracy” (Berle &
Means, 1932, p. 356) within enterprise to allo-
cate its product across all participants according
to equitable principles framed by public policy.
This would allow the corporation to be addres-
sed “not in terms of business enterprise but in
terms of social organization” (Berle & Means,
1932, p. 352).
These critiques of Roosevelt and Berle &
Means were not isolated outbursts. Even if his
policies did not always match the acerbity of his
words, an open hostility toward big enterprise
and concentrated corporate power was a central
plank in Roosevelt’s addresses in the campaign
of 1936. This was the election which secured his
return to power by an unprecedented margin
(Schlesinger, 1960, pp. 502-5, 643-4). This
powerful association of the large corporation
with the impassioned terms of fascism and au-
tocracy “made up” the enterprise in a very par-
ticular form. The internal organization of the
large corporation could in no sense be under-
stood as self-evidently the practical outworking
of economic efftciency. Rather, it was firmly
linked with anti-democratic political connota-
tions.
These critiques of the large corporation
brought a number of diBerent “responses”. The
riposte from prominent leaders of the nation’s
largest corporations was as sharp as the critique
itself. The President’s policies were themselves
declared the antithesis of the American way of
life, and the Liberty League advanced as a means
of its protection (Schlesinger, 1960, pp. 515-
23). For many, the events of 1938 in Europe pro-
vided text for a further assault on Roosevelt’s
policies and on his allegedly dark ambitions. It
was these, the argument ran, that constituted the
real seeds of fascism within the nation
(Leuchtenburg, 1963, pp. 275-98). But such ar-
guments did not sever the corporation from
politics. Rather, they served to further link con-
ceptions of the internal organization of the large
corporation to major political issues of the time.
A different “response” established linkages be-
tween the arguments of Berle & Means (1932)
and those of Littleton (1933, 1934 and Scott
(1931, 1939). As already noted, Berle & Means
argued that to bring the large scale corporation
back within the hold of democratic institutions
required the instatement of a neutral technoc-
racy of management (Berle & Means, 1932).
Public policy and the interests of all enterprise
stakeholders, rather than solely the pursuit of
private gain, should shape managerial policies
and actions. Attaining such a result, A. C. Little-
ton argued in a series of papers in the Account-
ing Reviau, created a pivotal role for accoun-
tancy. Littleton envisaged an evolutionary pro-
cess in which accountancy would be an essential
element in the refashioning of American institu-
tions to meet the demands of democracy in a
technological world. Littleton (1934, p. 70) ag-
reed with Walter Lippmann that a great corpora-
tion is in its essence a social institution and
should evolve accordingly. Its capital beingpub-
licly subscribed, its financial management was in
the nature of a public trust. Identifying three
evolutionary phases in the long sweep of history,
Littleton characterized these in terms oftheir re-
lationships to American democratic ideals. Ex-
pressing concern with the New Deal regulatory
initiatives because of their perceived problema-
tic relationship to American political ideals, Lit-
tleton proposed an “associational” path for de-
velopment. The organizing of business self-
government in the social interest, and no longer
that of an “excessive” and “unsocial” indi-
vidualism, would involve “the relinquishment of
direct control over business by bureaus or indi-
viduals connected with political government,
and in its place the organization by business -
capital and labor together -of its own organs of
self government” (Littleton, 1934, p. 71).
Government would participate in this associa-
tional order “to join the voice of the general pub-
lic with capital and labor, but without thought of
dominating” (Littleton, 1934, p. 71). Following
 MAKING ACCOUNTANCY
Schluter’s Economic Cycles anct Crises (1933)
Littleton envisaged a full “socialization” of ac-
counts in which records would be fully open to
the associative parties in enterprise. Large cor-
porations would thus be made “democratic”,
thereby eliminating excessive greed and indi-
vidualism at their apex.
There were other cultural responses during
the 1930s that sought to create a role for ac-
counting in counteracting the alleged irrespon-
sibility of management and the large corpora-
tion. One of these articulated a significance for
concepts of capital and income in terms of the
contradictory demands that regulatory agencies
and the courts were likely to impose upon the
accounting profession (May, 1936, pp. 149-
368). Conceptual and theoretical clarification in
this field was depicted as a matter of public
policy (Howard, 1937, p.2). The abstract mean-
ings and the necessary operational characteris-
tics ofcapital and income were thus linked to the
experience of economic depression (Paton,
1932; Littleton, 1934, 1936, 1937).
Within the academy more generally such con-
cerns with the abilities of managerial expertise
were prominent also. But here the Depression
seemed to confirm the utter inadequacy of all
knowledge of the managerial process. The possi-
bility of professions of management and control
was called into question. The profound ignor-
ance expressed on the crucial issue of how to un-
derstand the internal space of enterprise was de-
cisive here. Dean Wallace Donham of Harvard
Business School noted that effective responsibil-
ity for the economy had passed “from capital to
a new managing class, the executive heads of
great corporations and firms.” This group was
now in control of “powerful social institutions”,
yet they lacked the basic knowledge to fulfil
their trust (Donham, 1932, p. 420). As Donham’s
colleague Elton Mayo put it, there was “no uni-
versity in civilization” ( 1933, p. 177) which
knew how to train the administrator needed to
function in an industrialized and urban social
setting.
However there was a further “response” to
these critiques of the large corporation which
was altogether more long-lasting and influential.
PRACTICAL 487
This was one that set out in highly abstract terms
a programme for governing the enterprise as a
democratic and pre-political terrain. If the
critiques by business leaders and some represen-
tatives of the academy only further embedded
the corporation in politics, the representation of
the enterprise provided by Chester Barnard was
both novel and of profound and lasting influence
(Perrow, 1986, p. 63). Through its formulations
of decision process, leadership, bounded ration-
ality and informal organization, Barnard’s key
work The Functions of the Executive (1938)
provided a framework within which the govern.
ment of the enterprise could be thought of as a
“democratic” process. Extended and developed
by the contributions of Simon ( 196 1) and many
others, this text had a major impact on those dis-
ciplines - information and control systems, ac-
countancy, management, organization theory
and political science - whose principal con-
cern has become the engineering of socially sig-
nificant decision processes to mitigate human
frailties (March, 1978).
Barnard’s contribution was to “make up” the
enterprise as a democratic organization, an es-
sential component of a democratic polity.
Through a particular conception of authority,
Barnard invented a way of thinking about the
large scale corporation as a socially constructive
entity. Barnard was blunt and unequivocal on
the issue of authority. A serious error of thinking
should be dispensed with, he noted at the outset
of his book. It concerns the origin and nature of
authority, and specihcally the thought that
authority comes from above, from the king, the
state or God. This thought is a “fiction”(Bamard,
1938, p. 17) Barnard declared. The correct view
of authority is “so contrary to the view widely
held by informed persons” and so opposed to
common experience that it may prove difficult
to instate. But ifonly it could be established, the
result would be to “deeply affect an appropriate
understanding of organization and especially of
the character of the executive functions” (Bar-
nard, 1938, pp. 163, 164). The correct view ac-
cording to Barnard is that authority always
comes from below. Authority does not inhere in
“persons of authority” or in those who issue or-
488 PETER MILLER and TED O’LESRY

ders. The decision as to whether an order has dent than “in the unrest of the present day”, the
authority or not lies with the persons to whom it overwhelming “evidences of world disorganiza-
is addressed (Barnard, 1938, p. 163). tion both political and economic” which re-
Managerial authority in this view is contrac- flected themselves most distressingly in the
tual and democratic. Authority always comes “moral disintegration of living men and women”
from below, even in the harshest ofsituations. At (Barnard, 1938, pp. 1, 294-5).
the limit, individuals can always refuse authority “Making up” the enterprise in this particular
by choosing death. Through history a countless way has had profound effects. Critics who argue
number had done so (Barnard, 1938, pp. 183 that Barnard reassigned the enterprise to a gen-
4). However Barnard’s concern was not primar- eral, abstract category of formal organizations
ily with such extreme cases, but with the flout- (Copeland, 1940) miss the significance of the re-
ing of authority in the America of his times. He definition that he brought about. By declaring
was astonished at how orders were generally dis- the enterprise to be a formal organization, Bar-
obeyed in all forms of organization. There were nard supplanted the arguments of Roosevelt and
rules and laws “which no one dares to bury but of Berle & Means. Barnard’s text invented a new
which are not obeyed” and conversely, practices register within which to inscribe the enterprise.
and institutions for which no authoritative jus- The meaning of the enterprise, ways of reason-
tification existed (Barnard, 1938, p. 163). The ing, thinking about and representing its exis-
concerns of those such as Roosevelt and Berle & tence and internal processes could now be un-
Means were wide of the mark. A proper under- derstood in quite different terms. Within this re-
standing of authority would explain not the pre- gister the enterprise did not stand out as a dis-
sence of excessive authority in the large corpo- tinct and troublesome “modern corporation” of
ration, but its disturbing absence. vast scale, an emergent form of economic autoc-
The rhetorical shift brought about by this racy. Rather, the firm could be spoken of as one
“democratic” view of managerial authority was genus of a species of formal organization that
decisive. It made it possible to think of the need was everywhere endangered. The arguments of
for effective authority in the large organization Roosevelt and Berle & Means could thus be seen
as equivalent to that which existed in all “formal as wholly misguided. The issue was not how to
organizations”. For Barnard this was a very broad curb authority in existing corporations. A series
category of entities, timelessly necessary to of new and very different questions presented
human existence. Formal organizations were themselves: how to make authority more exten-
knots of individuals to which conscious purpose sive and more effective across formal organiza-
in collaboration could be ascribed (Barnard, tions; how to protect existing corporations from
1938, p. 4). Instances were “governments, ... the apparently general process of decay arising
churches, universities, labour units, industrial from the declining acceptance of necessary
corporations, symphony orchestras, football authority; and how to add to the nation’s and
teams”, as well as “political parties, fraternal as- world’s stock of organizations. Only in addres-
sociations, ... armies, ... schools, families” (Bar- sing such questions could the moral disintegra-
nard, 1938, p. 65). The collapse of formal organi- tion of men and women be reversed.
zations through failure or rejection of authority These abstract concerns with extending
was a characteristic fact of human history. Only authority and making it more effective within
the Roman Catholic Church, a few nations, uni- large corporations were complemented by the
versities and municipalities could claim any sub- development of novel accounting practices that
stantive age in western civilization (Barnard, helped to give effect to such aspirations. Indeed
1938, p. 5). In the general case, only briefly and in certain instances these “practical” innovations
tenuously did authority persuade individuals to preceded those that took place at the cultural
submit to the rigours of collective endeavour. level. The development of these new accounting
Nowhere, Barnard thought, was this more evi- systems can be viewed as a response to an im-
 SMKING ACCOUNTANCY PRACTICAL 489

mediately “practical” problem: the likely indif- pect of innovation, such technical innovations
ference of the new breed of professional mana- need to be understood also in terms of the roles
gers to the goals of owners (Johnson & Kaplan, that they come to be accorded by the rationales
1987, p. 94). In this interpretation the success of and vocabularies that endow them with signifi-
the multidivision organizational form is due in cances and legitimacy.’ Viewed in such cultural
large part to the abilities of the management ac- terms, Return on Investment was an ideal tech-
counting system to provide an internal quasi- nique in that it provided a mechanism for instal-
capital market to monitor and discipline top ling and extending authority within large corpo-
managers of vertically integrated organizations rations in a manner that was “pre-political”. Con-
(Johnson & Kaplan, 1987, p. 99). The dire trols that might previously have been seen as ar-
prophecies of Berle & Means, according to this bitrary or political could henceforth be under-
view, were averted. This was achieved in import- stood as neutral and technical. The power of au-
ant part by the ability of management account- tocratic managers could be represented as hav-
ing systems to stimulate in the multidivisional ing been supplanted by those with expertise in
firm a market for professional general managers the technical (Hopwood, 1988b). The manage-
that was more or less non-existent before the ment of the large corporation could be sepa-
1920s. The management accounting system of rated from the domain of politics at the level of
the multidivisional firm, in providing a practice and at the level of ideas. The administra-
mechanism for evaluating general managers and tion of the large corporation could thus be
for channeling their self-interest toward the enacted in a manner congruent with the democ-
owners’ interest in profits, is thus held to have ratic ideals of American society.
been a central factor in the success of responses
to the political critiques of the large corporation
MAKING UP THE RATIONAL AND RESPONSI-
(Johnson 8c Kaplan, 1987, p. 99).
BLE INDIVIDUAL
Doubtless the introduction of strong incen-
tives for managers to seek profit-oriented goals, “Making accountancy practical” does not only
the use of increasingly discriminating internal require ways of thinking about the corporation
audits for linking performance to probable as a whole. Making accountancy practical also
causes, and the application of monitoring and entails appeals to a certain conception of the
measuring procedures for helping to allocate capacities and attributes of individuals. The indi-
cash flows to high-yield uses provided an elabor- vidual viewed as a decision-maker or as one who
ate calculative machinery within which the new can be held responsible has literally to be “made
professional manager could be enrolled. But up.” Of course these processes of making up the
these “practical” aspects of accounting systems individual include the calculative mechanisms
themselves need to be understood in cultural that assist the decision-making of individuals and
terms, by reference to their common contribu- allow responsibility to be exacted frequently
tion to an extension and redefinition of manage- and in detail. But again it needs to be emphasised
rial authority. The professional managers that that an elaborate process of conceptual inven-
were to populate managerial hierarchies from tion endows such practices with significance
the 1920s onwards were henceforth to be sub- and legitimacy. The practices and the rationales
ject to and in turn to exercise an authority that of decision-making and responsibiliq were not
was understood as legitimate and democratic. invented simultaneously in the inter-war years,
Whilst the “practical” development of new ac- but it was as an intluential ensemble that they
counting measures is of course an important as- came to function in the post-war years (Vatter,

’ The notion of an “accounting constellation” (Burchell el aL, 1985) and “accounting complex (Miller. 1986) deals with the
linkages between the abstract aims of accounting systems and the ways in which they are represented. Cf. also Miller ( 1989)
and Miller & Rose (1988) on the distinction between rationalities and technologies as a way of addressing these issues.
490 PETER MILLER and TED O’LEARY

1950; Horngren, 1962; Shillinglaw, 1961). The culture of individualism was required, he
concern of this section of the paper is firstly with argued, not shackled to “medieval religion” and
the distinctive conception of the individual that the “feudal period” but rooted firmly in the real-
was constructed in the America of the 1930s. ity of a technological order (Dewey, 198 1, pp.
This centres on the twin concepts of a rationality 609-20).
that was bounded and limited, and a responsibil- The notion of cultural lag was tied to the con-
ity to be installed. It was this historically specific cern to promote a new culture of individualism.
conception of the responsible decision-making The implications of an outmoded individualism
individual that would be appealed to in the ac- for business were addressed in the 1930s
counting literature with such self-evidence in through the writings of Wallace Donham and
the period following World War II. Secondly, the Elton Mayo of Harvard Business School. Donham
notion of leadership and the view that execu- and Mayo concluded that cultural lag meant an
tives play an essential leadership role in organi- inadequate network of social disciplines to en-
zations is examined as a further important and velop the lives of individuals. In preindustrial
related conceptual invention of the 1930s. society, individuals had been bounded in loyalty
The responsible, decision-making individual to family, community, church and craft by
has not always existed and did not emerge au- “[strong] social routines, institutions, habits,
tomatically. Such a conception of the individual traditions and customs.” These alone had been
was constructed out of a particular understand- substituted for “brute force” to “keep men’s
ing of the meaning of the Depression. In an inf- emotions within bounds, integrate society, and
luential body of social thought, the Depression ward off chaos” (Donham, 1936, p. 263). Within
was not viewed at root as an economic &dir. Its’ the social framework thus established, the exer-
economic face was considered to be but a cise of a limited but socially responsible indi-
symptom of a deeper malaise within the frame- vidualism had been possible. But America in the
work of America and of all the world’s indus- 1930s no longer possessed the mechanisms of
trialized nations. The problem was held to be in- social discipline in adequate degree. They had
stitutional, reflecting an inadequate response of been weakened by a century of industrialization
customs, values and social disciplines to the and urbanization, compounded by immigration
rapid pace of technological advance. The econ- (Donham, 1936, pp. 262-3). Social life had lost
omic disturbance of the Depression, historian that element of predictability necessary for busi-
Carl Becker ( 1936, p. 9 1) wrote, “that so aggra- ness confidence and investment, political
vates passions and darkens counsel appears to be leadership and economic theorizing. Effective
the surface symptom of a more profound social leadership could be restored only by substitute
dislocation”. The acquisition of new technologi- social disciplines, to “create something like SO-
cal “implements of power” had outrun the ad- cial and economic order in a nation rapidly be-
justment of habits and ideas. coming more rather than less disintegrate”
A phrase coined by sociologist W F. Ogburn (Donham, 1932, p. 429).
summed up the problem for social theorists of The destruction of traditional social discip-
the 1930s: “cultural lag” (Susman, 1984, p. 156). lines had profound implications for the indi-
A new “culture” was needed within which to vidual, it was argued. As the disciplines crum-
frame the life of the individual (Susman, 1984, bled, so did the desire and capacity of individuals
pp. 150-83). In 1930 John Dewey (1981) p. to engage in the collaborations necessary to indi-
609) proposed a distinction between the na- vidual and social survival. Governments
tion’s material and moral cultures. The former throughout the industrialized world, whether
was “verging upon the collective and corporate” “democratic, Fascist, or Bolshevik” in ideology,
while the latter remained “saturated with ideals faced a common peril in the destruction of such
and values of an individualism derived from the civilizing mechanisms (Mayo, 1933, pp. 138
prescientific and pretechnological age”. A new 79). Here was the root cause of that massive dis-
 hMKING.~CCOUNT~~NCYPRACnChL 491

affection with authority noted in Barnard. Indi- This novel way of thinking about and under-
viduals succumbed to the combination depicted standing the capacities of individuals was

by Emile Durkheim as anomie, no longer finding formed during the Depression period. The POS-
in work or even family a sense of its meaning or sibilities for personhood were changed, “new
function for personal and community welfare. ways for people to be” were created (Hacking,
Systematized factories and city life had sought ef- 1986, p. 223). The historically specific indi-
ficiency at the cost of the “relative annihilation vidual of bounded rationality emerged to inhabit
[of] the cultural traditions of work and the enterprise. But if rationality was at stake in
craftsmanship”. The high mobility of labour, the breakdown of social disciplines, SO too wzs
coupled with ethnic and racial diversity in responsibility. Responsibility, Barnard noted
America, had “seriously damaged the traditional carefully, is “the power of a particular private
routine of intimate and family life” (Mayo, 1933, code of morals to control the conduct of the in-
p. 159). The ultimate consequence, Mayo dividual in the presence of strong contrary de-
warned, could be the disintegration of the polit- sires or impulses” (Barnard, 1938, p. 263). Re-
ical state itself, whose existence presupposes sponsibility precludes shirking on obligations, it
“the desire and capacity of individuals to work is “the property of an individual by which what-
together” (Mayo, 1933, p. 160). ever morality exists in him becomes effective in
The notion of the “democratic individual” conduct” (Barnard, 1938, p. 267). But the
constructed out of these strands of social power of traditional morals to control and dis-
thought was the distinctly modern individual of cipline individual behaviour was itself a victim of
bounded rationality and flawed responsibility. social change. Religion, family, community and
The rationality of the democratic individual was craft were all losing the moral hold they once
seen to be severely limited, by virtue of the small had on the behaviour of the individual (Donham,
number of individuals who could act in accor- 1936). This was manifest in a wide range of de-
dance with its dictates, and by virtue of the effect viant social behaviour, and did not concern the
of the traditional social disciplines which large corporation only. Citing Clifford Shaw’s
hitherto had served to direct and regulate the study of delinquency in Chicago, Mayo dwelt on
lives of individuals. Only a minority of people, the responsibility derived from an ordered com-
Mayo contended, possessed the necessary intel- munity, “the inner compulsion to think and act
lectual capacity “to develop intelligent and inde- in a way that is socially acceptable” (Mayo, 1933,
pendent judgment over the whole system of in- pp. 121-2). As residential communities were
dividual living”. Even these, because life is busy, splintered by industrial development and by
“are compelled to accept the judgment of soci- national and ethnic diversity, so too were delin-
ety in most matters”. Rationality was but a “thin quency and criminality the spiralling conse-
veneer” upon “the crossgrained and knotty quences of the disintegration of this responsibil-
foundation of human emotions” (Donham, ity.
1936, p. 263). The traditional social disciplines Once articulated, these notions of the
provided a “nonlogic of social codes” which bounded rationality of individuals and the need
forced people to act without independent to install responsibility fed into new ways of
thought (Mayo, 1933, p. 150). As these discip- thinking about the practical role of executives.
lines crumbled, individual minds were called “Making up” the boundedly rational individual
upon to choose rationally where they could not. helped to set in place a new way of constituting
The consequence was a lack of predictability in the “functions” of executives in society. The
social affairs and an upsurge in baffling, irrational elaboration of the notion of leadership and its
individual behaviour. “The chief difficulty of our depiction as an essential function of executives
time”, Mayo wrote, “is the breakdown of the so- was central here. This gave an additional and im-
cial codes that formerly disciplined us to effec- portant twist to the concerns with the rationality
tive working together” (Mayo, 1933, p. 180). and responsibility of individuals. In the writings
492 PETER ,MILLER and TED O’LEARY
of Mayo and Barnard, leadership was rep-
resented as a positive means of promoting and
supporting cultural adaptation during the De-
pression.
The necessity for leadership to counteract the
world of dispersive forces acting against organi-
zation was stated by Barnard in the most ambiti-
ous terms:
The limitations imposed by the physical environment
and the biological constitution of human beings, the un-
certainties of the outcome of cooperation, the ditficulties
of common understanding of purpose, the delicacy of the
system of communication essential to organization, the
dispersive tendencies ofindividuals, the necessity of indi-
vidual assent to establish the authority for coordination,
the great role of persuasion in securing adherence to or-
ganization and submission to its requirements, the com-
plexity and instability of motives, the never-ending bur-
den of decision - all these elements of organization
spell the necessity of leadership (Barnard, 1938, p.
259).
This appeal to the essential role of leadership
in organizations had considerable rhetorical
force. By making leadership an essential compo-
nent of successful organizations, the critiques of
the autocratic authority of large corporations by
those such as Roosevelt or Berle & Means could
be shown to be fundamentally mistaken and in-
appropriate. The reality of the corporation in
Barnard’s depiction is that, however large and
seemingly robust, it is fragile to the core. What
flows through its hierarchies is an almost desper-
ate attempt to render individuals sufficiently ra-
tional and responsible for social action to be pos-
sible. Leadership is the “indispensable social es-
sence . . , without which cooperation is impossi-
ble” (Barnard, 1983, p. 283). Through leader-
ship individuals are enabled and inspired to
accept their responsibility to collaborate against
their own biological limitations, fear, selfishness
and emotional proclivities. Through leadership
it is possible to overcome the inevitable misun-
derstandings which can wreck organizations; in-
dividuals are provided with a framework and the
encouragement to decide rationally within the
cognitive and emotional boundaries of their
own minds. In all of this, the conscious act of
leadership reinforces and interprets social codes
in action. Leadership acts upon the “customs,
mores, folklore, institutions, social norms and
ideals” which are of “supreme importance” in
helping individuals to appreciate the moral and
practical necessity of collaboration (Barnard,
1938, pp. 1162934).
The notion of the indispensability of leader-
ship to any successful social order was a masterly
rhetorical invention. It rendered leadership a
pre-political capacity in Mayo’s terms (1933, p.
160) an ability possessed by certain individuals
for achieving specific goals. It removed the issue
of authority in enterprise from a political regis-
ter and inscribed it within a neutral and techni-
cal one. The key question which followed from
this shift was how could one know more about
the leadership process to make it more effective,
to further enable the miracle of formal organiza-
tion. This was critical because ifleadership roles
in business, politics and elsewhere could only be
restored, and a knowledge base developed to
support their functioning, then “very many of
our difficulties would dwindle to vanishing
point” (Mayo, 1933, p. 177).
This way of representing the capacities of indi-
viduals and the essential role of leadership was
novel in the 1930s. “Making up the individual” in
these terms had a lasting influence on adminis-
trative thought. In so far as accountancy has bor-
rowed from administrative science it has also
had a significant influence on ways of represent-
ing the roles of accounting systems (Hopwood,
1988b). Barnard’s conception of the enterprise
as a formal organization was a first step in enabl-
ing the internal space of enterprise to be under-
stood as a pre-political zone administered by
neutral expertise. Depicted in these terms the
enterprise was entirely divorced from partisan
political pursuits, without trace of autocracy,
wholly a support of American democratic forms
of citizenship. Conceived as a formal organiza-
tion and as part of the social organization, the
large-scale enterprise could assume a novel role
in American life. The authority exercised
through its hierarchies and accounting systems
could be cast as an essential discipline on the
lives of individuals, not unlike that exercised
previously by the family, the community or the
 MAKING ACCOU?JTANCY PRACTICAL 493

church. can also be called upon to rectify the deficien-

Bounded rationality and responsibility were cies of the boundedly rational manager in mat-
the distinctive attributes of the individuals that ters of investment appraisal (Miller, 1989) and
were to inhabit the “democratic” corporation. to evaluate managerial performance more gen-
The leadership role of executives was to super- erally (Hopwood, 1988b). The language of deci-
vise and direct the activities of individuals en- sion-making and installing responsibility enables
dowed with such capacities. These attributes accounting to be represented as a distinctive and
were “made up” in the administrative literature central component of technical managerial ex-
of the inter-war years separately and slightly pertise in the post-war years.
later than the new accounting practices that Contemporary appeals to the need to reestab-
were developed in immediate organizational lish accounting’s practical fimctionwithin enter-
contexts. But this does not mean that these con- prises in the face of changing production proces-
cepts of the individual are peripheral to account- ses, increased global and domestic competition
ing innovation. For it is these particular notions and vastly expanded information processing
of the individual that have provided an enduring capacities operate within the same intellectual
reference point for management accountingsys- terrain as that sketched out above (‘Johnson &
terns (Horngren & Foster, 1987; Horngren, Kaplan, 1987). Denunciations of existing ac-
1984). The concepts of decision-making and re- counting systems, notwithstanding the vigour
sponsibility as key attributes of individuals, for- with which they have been articulated, thus sit
mulated in the political and administrative relatively comfortably alongside classic state-
debates of the inter-war years, were to be woven ments of “accounting for decisions” (Vatter,
into the rationales of cost accounting after 1950; Shillinglaw, 1961; Horngren, 1962). De-
World War II (Vatter, 1950). Thuswhilst the no- spite suggested modifications and adjustments
tion of “different costs for different purposes” to costing systems and appeals to total quality
was present in the costing literature of the 1920s control, Just In Time inventory systems, the long
(Clark, 1923), it was not until the 1940s and term rather than short-term profits as well as
1950s that the concept of decision-making be- nonfinancial indicators of firm performance, the
came a central organizing rationale for manage- rationales and vocabularies of these contempor-
ment accounting that remains in place to this ary reassessments of accounting are in con-
day. tinuity with the tradition outlined above. Thus
Ways of representing the nature of the corpo- the notion of “different costs for different pur-
ration and the capacities of individuals thus pro- poses” outlined by Clark in the 1920s (Clark,
vide rationales and a legitimacy for accounting 1923) and Vatter’s (1950) notion of managerial
systems. Operating within the neutral sphere of accounting as a basis for decision-making are ap-
expertise, and acting upon the boundedly ra- pealed to almost nostalgically as exemplars of a
tional individual by making responsibility calcul- lost tradition, or a tradition that was never fully
able become abstract programmatic objectives granted its rightful place within the practice of
for accounting systems. Whilst the development management accounting (Johnson & Kaplan,
of new ways of calculating can proceed sepa- 1987, pp. 154ff.). These “eminently sensible”
rately from ways of “making up” the corporation pleas are considered to have gone unheeded at
and the individual, establishing linkages and re- the time and to have “remained unheeded until
lays between the practices and the rationales of very recently” (Johnson & Kaplan, 1987, p.
accounting enables a wider significance to be ac- 156).
corded to the activity of costing. No longer It is not the aim of this paper to enter the
should it be seen as a humble activity of “attach- debates over the adequacy of contemporary cost
ing” costs to products. Cost accounting can be- accounting. Rather, the concern in this section
come a decisive feature of overall managerial of the paper has been to examine through one il-
control of enterprises. On this basis accounting lustrative period how certain key concepts of ad-
494 PETER MILLER and TED O’LEARY

ministrative science “made up” the individual as sary instruments of economic action in society.
an entity endowed with very specific attributes. It is these concepts that help to make possible
It is in significant part these concepts of the indi- appeals to the “practicality” of accounting sys-
vidual that have been drawn upon in the con- tems. The calculative routines of accounting
struction of abstract rationales for representing self-evidently contribute to the attainment of in-
the roles of accounting. The success of these dividual purposes through collective action, Ac-
abstract rationales can be gauged to some extent counting systems facilitate rational choice of
by the intuitive appeal they appear to exert over collective ends and of means to attain them, and
certain commentators (Solomons, 1978). Nor is exact accountability from individuals for their
it the aim here to suggest that one can trace a responsibilities to the whole. They achieve this
direct line of descent from the administrative lit- on a “democratic” premise: accounting systems
erature of the 1930s to contemporary rationales act on individuals only with respect to contrac-
for accounting (Miller & O’Leary, 1989b). The tual obligations they freely assume.
notions of the individual and the concepts of the Our concern in this paper has been with the
corporation examined above, in so far as they range of events which have brought about these
have provided much of the foundations for ar- concepts of the enterprise. We have examined
ticulating rationales for accounting, are argued where these concepts have come from, the
to be an important part of the cultural processes terrains from which they have been approp-
of accounting innovation. If accounting prac- riated. We have looked at how the credibility,
tices in firms are examined and found to be relevance, and finally the self-evidence of these
wanting in respect to such abstract rationales concepts as defining the essence of enterprise is
this is hardly surprising. For the abstract
established. And we have analysed these events
rationales of accounting are distinct from, yet as a complex process of cultural innovation that
linked, to its practice. Rationales are precisely took place within a highly specihc political cul-
that, highly general ways of representing the
ture. In addressing these questions we have
ends and objectives of certain practices. Whilst
bracketed a set of answers which are already to
accounting abstractions are often implicated in
hand to explain this invention. We have adopted
practical processes of accounting change (Hop-
a different route to that which explains the ori-
wood, 1988a), they are a distinct cultural aspect
gin of concepts in terms of the brilliance of the
of accounting innovation and need to be addres-
individual authors who coin them, and which
sed as such.
takes it as given that concepts are supported and
held in place as experience shows them to be
true and useful. The self-referencing and circular
CONCLUSIONS
nature of such explanations makes it impossible
A loosely associated network of concepts of to understand how and why this innovation oc-
the enterprise and of the individual has been curred at this particular time. We have addres-
woven into the thought and practice of manage- sed the construction of particular vocabularies
rial accountancy. One is that the enterprise is a of the enterprise and of the individual, ways of
hierarchy of responsibility centres. Another is rendering such entities thinkable and manage-
that decision making constitutes the principal able. We have been concerned with the literal
activity within and across these centres. And a invention of such ways of thinking about the en-
further one is that the enterprise is driven by an terprise, and the rhetorical effects they produce.
economic mission, evolving across time in the The paper has illustrated such concerns by re-
interests of individual and social wealth. These ference to the Depression years of the 1930s in
concepts do not exhaust the representations of the United States. The two substantive sections
enterprise which inform and constitute manage- of the paper have examined ways of “making up”
rial accountancy. But they are profoundly inf- the enterprise, and ways of “making up” the indi-
luential in defining accounting systems as neces- vidual as rational and responsible. The aim of the
 MAKING ACCOUNTAXX PRACTICAL 195

paper has been to chart some of the ways in activity. We do not suggest any simple or au-
which a set ofconcepts ofcentral importance for tomatic connection between concerns with so-
managerial accountancy was set in place. The cial and economic decline and the advancement
analysis undertaken permits certain conjectures. of accountancy. Indeed these should be seen as
Firstly, we suggest that studies of innovation in only weakly linked, with changes in accoun-
accounting practices need to be extended in tancy often preceding or falling behind such
scope. Such studies have become increasingly concerns (Hopwood, 1988b). But the worries
popular and urgent in recent years. But with a addressed above are not unique. The promotion
number of significant exceptions (Armstrong, of discounted cash flow techniques for invest-
1987; Burchell et aL, 1980; Burchell et al., 1985; ment appraisal in the U.K. in the 1960s was
Cooper et al, 1988; Hopwood, 1987; Hoskin & closely linked to notions of the relative failure of
Macve, 1986, 1988; Lehman Sr Tinker, 1987; economic growth in that country (Miller, 1989 ).
Neimark &Tinker, 1986; O’Leary, 1987; Puxty et And currently, efforts to restate managerial ac-
al., 1987; Whitley, 1986) they are conducted countancy for the factory are interwoven with
from an intra-corporate, economic frame of re- theories of South East Asian economic superior-
ference. This perspective is unable to register ity which are used to point to a deep malaise in
and address the ways in which the concerns of a the American entrepreneurial culture (Miller &
particular social, political and cultural context O’Leary, 1989b). At the very least one can
come to literally “make up” the enterprise and suggest that perceptions of social and economic
managerial accountancy. It is unable to provide decline are important factors in accounting in-
the self-understanding of a discipline which the novation.
analysis undertaken here seeks to provide. Yet it Finally, we have attempted to rephrase the no-
is the complex and often conflictual endeavour tion of practice. We have defined practice to in-
of rhetorical innovation that makes it possible to clude an ensemble of concepts through which
demand such diverse things of accountancy roles for accountancy are constructed. Neither
(Hopwood, 1984, 1988b). the concepts nor the relations among them are
Secondly, the establishment of the enterprise given in advance. Rather, they are brought to-
as a zone of practical action has been shown to gether in a particular rhetorical form in a par-
be linked to concerns with social decline. We ticular culture. A more complex analysis of this
have traced the manner in which the enterprise, process would enable the resources and effects
through its accounting systems and hierarchical of this achievement to be traced in much greater
forms, comes to be represented as a practical in- detail. But the analysis above at least supports a
strument for reversing the disturbing lack of ra- view of accounting practice that includes pro-
tionality and responsibility in social affairs. On cesses of conceptual invention. Rationales of ac-
this basis managerial accountancy has been es- countancy are not a priori foundations of prac-
tablished as a neutral, technical and “practical” tice, but historically contingent concepts.

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