Understanding Management Control and Organisational Sense-Making

Understanding Management Control
and Organisational Sense-making
Understanding Management
Control and Organisational
Sense-making
Krister Bredmar
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Dedicated to my wife and my children

who help me make sense of life.
Contents
Foreword
ix
Introduction
The accounting heritage
Corporate epistemology
Thinking ahead
10
Part I The Essence of Management Control
15
Different perspectives
17
Understanding performance
21
The control concept in management control
24
Reports, communication and stakeholders
27
Part II The essence of sense-making
29
Organisational sense-making
33
Organisations as a set of social relations
35
Information systems and management control
38
Part III Individuals and organisations
43
Organisational structure
44
A social perspective
49
A decisions context
52
viii Understanding Management Control and Organisational Sense-making
Part IV Techniques and functions
57
Thinking and acting strategically
58
Accounting tools
64
Information and knowledge
74
The performance paradox
85
Part V and beyond.
91
Understanding processes of organisational sense-making
91
Understanding accountability
96
Understanding the context
Literature
105
119
Foreword
Management control techniques in general and management accounting methods in

particular can be described and understood in two ways, either as a technique or in
their context: the company. Obviously you cannot separate a technique entirely
from its context or vice versa. Macintosh wrote in one of his books that theory is
always there in practice, but in some research there is a tendency to neglect the
company in order to better understand the technique. I am grateful to my PhD
supervisor, Tomas Polesie, who taught me to look more at the company instead of
focusing too much on the technique, model or method.
Ever since my PhD project began, over 20 years ago, I have been interested in how
the models, techniques and methods within management control are used in a context.
This has made it important for me to study the organisation as such. Over the years
there has more or less always been an information systems dimension to my studies.
These three areas: management control techniques, organisations, and information
systems, remain my real interests. During my PhD project I came to know the concept
of organisational sense-making, in the way Peter Chekland describes it. A concept I
will likely follow throughout my career because it helps me understand why techniques
and methods are used the way they are in an organisation.
In this book I have summarised my knowledge thus far, from a theoretical point
of view and from my own reflections. Even though I have come to meet and talk to
and in many cases observe competent managers in different contexts, and done
several surveys with managers, this book does not carry any empirical material.
There are two voices in this text: my voice presented in the reflections and fellow
researchers that I have come to read over the years. I hope this book will trigger
your reflection and in the end you might find your own voice here.
I have spent, on and off, about three years on this project and there are many
people, especially colleagues, who I would like to thank for inspiring conversations
and their interest in what I write about. Torsten Sderberg foundation have also
given me a grant that made this project possible, for which I am thankful. Since
English is my second language, Leanne Johnstone has worked incredibly hard with
proofreading and any errors that persist remain entirely my own.
The best is yet to come.
Bordighera, a day in March 2016
Krister Bredmar
Introduction
Employees of an organisation want to act in a meaningful way regardless of the area

of work, or level of responsibility. What is meaningful is defined both by the
individual employee, but also by the group working together (Bredmar, 2002,
Checkland & Holwell, 1998). In a business, meaningfulness is continuously
collected into impressions that form the basis of judgments about what operations
have been performed, and where the firm is heading. This is done both individually
as well as in a group, where different impressions are compared to each other and
a common understanding is formulated. This is, in turn, the basis for how one
chooses to act, leading to new impressions being collected and evaluated (Macintosh,
1994). How a single employee identifies with their profession and the context in
which he/she operates therein, is where pride in behaviour is attributed.
In a sense, this is also a way to describe the meaning of responsibility. Being
responsible for a part of a business and having good intentions and ambitions for
that area, means acting meaningfully. It does not mean however, that everything is
done optimally, for example, from the perspective of profitability. Yet it is through
the understanding and intentions of the group, as well as those of various
stakeholders, that meaningfulness is defined. Being accountable for a decision is
also a way of taking responsibility for something that is normally entrusted to a
manager. A decision is based on the evidence and impressions of which the decisionmaker is more or less aware, and the interpretations which he/she or the group he/
she is working with has made. The decision is also taken in an organisational
context. It should be understood not merely in relation to the isolated decision
situation and decision-maker, but in relation to the expectations in the business
where the decision-maker operates. The decision and the subsequent act can then
be described as meaningful, as something for which the decision-maker has taken
responsibility.
As an activity is something ongoing, with a history and a future, it can be
conducted meaningfully and understood in light of a business trajectory. The
decision-maker is entrusted with something that has been worked at by someone
else and which will then be passed on to a successor. Taking responsibility is
expressed in understanding the conditions and acting upon them. The context and
the conditions applied in the operations history form the basis of the opportunities
that exist today and the challenges that lie ahead. The decision is thus understood
in what could be described as a time and space dimension, where it is meaningful
Understanding Management Control and Organisational Sense-making
not only here and now but also in the future. The ambition is that the future is
something for which we take responsibility, and the decisions taken earlier act as a
form of accountability that can be evaluated. The decisions taken in the context of
the business give it a natural time dimension whereby meaningfulness can be
understood.
Through the years, the decision-maker receives a cumulative understanding of
the business and the impact of different decisions. Over time, further experience and
insight may be added to the past and consequently, the ability to make decisions;
the decision-makers skills refine and improve gradually. Changing skills in one or
more respects is usually called learning. The competence to act as the head of a
business evolves in parallel with professional competency. Learning can be described
as an experience-based ability to handle the situations and contexts relevant right
now in an activity; an ability that builds on the companys history and that will lead
into the future. Management, i.e. the decisions and actions that occur in a business,
becomes itself the competence arrived at from understanding the business and the
impact of behaviour on the business.
Decisions and actions can be traced to the interpretation of a situation in the past
or present. Built into these decisions and actions is an idea about what is best for
the business and the decision-maker. Another factor affecting the decision is the risk
that the outcome will not be as expected. This uncertainty affects the decision and
the following behaviour so that it could be understood as a hypothesis, or an
assumption, about what should be done, yet without any guarantee of success.
When one acts on the assumption, it is done based on a conscious or unconscious
attempt to assess the risk of failure. To just be able to manage the risk that the
outcome will not be as desired is another ability or skill central to the expanded
professional role, something expected of the surrounding organisation. The
interpretation as the basis for the decision, must therefore include risk-management
in order to reach what is best for the business.
In the work associated with leading an organisation, how to change the business
to improve it is also important. A business or an organisation may have developed
and found its forms and ways to work by performing well, but there are new
conditions that are constantly appearing and changing the external context of its
operations. When change is made, different judgments about the changes are
needed, for example, based on activities that work less well, emerging opportunities
or threats, or because of competition. New models of how a business can/should be
managed can also be the basis for change. The potential for improvement is
analysed and the change implemented. The decision-makers ability to recognise
improvement options, small or large, will enable it to improve and develop.
Common to the areas outlined is that they form expectations from the
organisation to the employee appointed to make decisions and lead. Decisions are
often associated with areas and concepts such as responsibility, risk, learning and
change. The lowest common denominator is the decision-maker, someone who in
many cases was recruited for their expertise and skill within a specific professional
Introduction
area and a general commitment to the organisation. Employees in management

positions in modern organisations therefore face new challenges, where the
expectations from the surrounding context, such as different stakeholders, are clear.
The individual circumstances and understanding, the creation of meaning in which
the leader is a key ingredient, are crucial for a business to be able to operate
successfully.
Although the main focuses for performance reports are internal receivers, there
is an increased interest in how external actors and stakeholders can be provided
with information. This type of feedback has often been associated with accountability,
which means that someone takes responsibility for an activity or a part of an
operation, and in this case, management (Epstein & Birchard, 2000). The term is
somewhat ambiguous and can have different meanings in different disciplines, with
the concept not going undebated in the accounting field (Sinclair, 1995). An
important part of its meaning concerns the person given responsibility for a task, a
task where performance should be reported, not necessarily in financial accounting
terms (Gray, Owen & Adams, 1996).
An interesting question then is: to whom are the company and the management
responsible? Traditionally, it has been to the most important stakeholder, the
owners, but today the stakeholder group is broadened to include other direct and
indirect stakeholders and society at large (Benston, 1982). Authors such as Epstein
and Birchard (2000) list two strong parties in addition to the owners, the staff and
the customers, which today increasingly have an influence on multinational
institutions. In connection with the global financial markets and the growth of large
institutional investors such as pension funds, it has become increasingly important
to openly report business undertakings. Another strong interest is the non-profit
organisations which monitor specific issues, where Greenpeace is an obvious
example. In addition to these, as the news coverage of major companies has
intensified, media has become an increasingly important stakeholder. It has therefore
become more important to identify and work with such stakeholders.
The contact between an organisation and its stakeholders may take the form of
a conversation or discussion, both figuratively and in reality. When a contact is
developed through free and unlimited talks, it creates a base for accountability
(Rorty, 1989). This way of communicating can also be described as an ideal
situation in which various stakeholders are invited to present their positions as well
as discuss others (Broadbent, Dietrich & Laughlin, 1996, Habermas, 1992). In the
best of worlds, this means open and free conversation between an organisation and
its stakeholders:
an open, honest and unbiased ideal speech situation debate among all
stakeholders should therefore lead to the acceptance by all stakeholders of a
democratically determined consensus view of corporate responsibilities.
(Unerman & Bennett, 2004, p. 691).
The meeting between the organisation and stakeholders thus forms the meaning of
that for which the organisation and its management are responsible. There is a
difference between two synonymous concepts that could be worth mentioning. In a
discussion, two or more parties are trying to agree on an idea or a decision, while
in a dialogue they are trying to understand difficult and complex issues (Senge,
1990). The dialogue can be seen as an in-depth discussion and understood as a
process leading to accountability (Roberts, 1996). When the organisation meets its
stakeholders in an open dialogue a common understanding of what it is that the
entity should be responsible for is formed, basically a complex and ill-defined task.
This becomes especially clear when the organisation meets the stakeholders affected
by, or vulnerable to, the activities of the firm (Roberts, 2003). In the dialogue, the
organisation opens up for stakeholder ideas and thoughts, and accountability is
created.
The accounting heritage

Economic thinking plays such a dominant role in our lives that it becomes
difficult to think and act non-economically. The growth of accounting has
undoubtedly promoted the capability for economic understandings of ever
greater areas of our social world.
(Power and Laughlin, 1992, p. 132)
Different events taking place in a business must be documented. The way these
activities are documented is governed by norms, laws and different types of
practices. The historical documentation and accounts stand as proof that resources
are used properly and that capital has been managed appropriately. There is a need
based on the idea that someone has managed a resource and that someone should
examine how this was done. In addition, there is also a need to establish how the
examination of the operations and the control of the business should be carried out,
as well as by whom and at what point in time.
Organisational reports are a presentation of activities, which could be used to
assess whether or not resources have been used appropriately. The organisation may
have its numbers audited. However, control of the firms operations is usually in the
hands of its members. The basic idea behind auditing is that a person separate from
the company, or who manages a resource, examines how the activities taking place
in a business are presented and that the company accounts are accurate. In this way
it is possible for someone other than those running the business to understand the
financial consequences of actions. The rules on how accounts and reports should be
drawn up are general and apply to all companies.
By using common accounting principles, such as double-entry bookkeeping,
there is a possibility for someone else to get a picture of the company and, through
the financial reports, understand the organisations assets and liabilities. When
Introduction
several different individuals are using financial statements as documentation to

verify that the description of the company is correct, the accounts are considered to
be an objective representation of the company. The financial reports aim to show a
stable and continuous description, based on a form that includes the principles that
guide how, for example, assets should be valued over time. This creates comparability
between the various time periods and means that the principles of documentation
should be stable in nature and cannot be altered to any great extent.
A key starting point when examining or controlling a business operation is the
assumption of cause and effect. In order to understand an aggregated sum presented
in a report it is important to try to trace where that sum came from and what
activities led up to it, especially if there is an interest to control and perhaps alter
an operation. A simple example is the income statement, where one can determine
the result by taking the amount recorded as revenue in a given period, and reducing
it by the costs recorded during the same period. The result is then considered in the
financial statements to reflect a true representation of the enterprise, that is, the
financial conditions that apply to the current period. The reasoning and methods
then become the core of the philosophy on which financial statements are based.
It then becomes interesting to study how this methodology and accounting
philosophy can be understood, and the conditions that apply in order for it to be
valid; the underlying logic. A common way to describe the conditions for
management accounting and control systems is to use models that describe the
companies (Polesie, 1989, Polesie, 1995). A central part in the use of models in
management is that they are based on an assumption or an idea or understanding
developed over time. Usually, there is an underlying idea about some cause-effect
relation which applies to the operation managed. An example of this might be that
if we are to improve profitability, we do so by increasing revenues; a simple model
that demonstrates causal relationship. The idea may be the basis for what type of
data to collect, how to verify the assumption, and how to best analyse material to
reinforce the idea.
One can also see that a complete picture is built up of smaller parts. Company
activities are documented on a relatively specific level, but when you then analyse
the results, events are intertwined in different formations where individual accounts
combine to form groups. These are then compiled into various types of report.
If you want to break down the accounts, the greater image of running the business
presented in the financial statements is broken down into small parts. The
understanding of what is happening in the company can then be traced down to a
very low level. In this way, we can analyse a company using accounting methods
and reports to show that something has happened; an activity traced down to a
relatively low hierarchical level which infers back to the overall result.
Another way of understanding the financial consequence and tracing where
resources are used is through cost-calculations. With the help of this management
accounting technique, costs can be allocated to different products or services and
also to different customers. In many businesses this is as usual, as common and as
natural as knowing how to ride a bicycle. The different models and methods used
to allocate costs have changed over time and today it is common to talk about costs
allocated to activities. In a way, this is also about cause and effect, where the use of
resources traced in financial terms are calculated, making it possible to deal with
decisions, laying out plans or controlling the result. This also forms the basis for
understanding business success where the ability to trace financial success is a
means of understanding it.
The techniques and models forming the basis of traditional management control,
i.e., the way to lead the company based on what is actually performed, have by and
large been developed over a long time period, and most during industrialisation.
American researchers claim that by 1925, most of the management accounting
techniques used today had been developed (Johnson & Kaplan, 1987). Several areas
of modern business have since evolved, but not management accounting and
control. The manufacturing processes have changed, particularly with the high
degree of automation; the way to market has evolved and the financial system has
changed, especially due to the use of computers, leading to a situation where several
functions in a business require less manual labour.
It is clear that the general ideas about management have spread rapidly around
the world today. And, it is not only the Western world that stands as a model for
other countries. In the 1980s, there was much interest in how Japanese companies
were governed, leading to a rethinking of quality and production processes. When
a low-cost strategy grew among Western companies and an out-sourcing initiative
emerged, where Western production was moved to China for example, it became
even more important to work on quality issues. However, despite numerous
examples showing that the West in general and America in particular have been
influenced by other countries and cultures, it is still the case that most of the basic
techniques, models and ideas in management accounting and control have a long
history.
In the early 1990s, a number of ideas and models were developed and distributed.
Generally, two have remained relevant. The first model was for costing:
activity-based costing. This model is based on the notion that there are costs not
easily allocated to products and services which therefore need to be allocated in a
different way. A production process is divided into activities and, by allocating the
common costs, resources used by several products and services allow the allocation
to become more accurate. In the next step, some sort of volume in the activity is
established and the costs are divided and then further allocated to increase
accuracy.
The second model, the balanced scorecard, has several new embedded ideas. The
most obvious is that there are more areas, in addition to the financial, that need to
be followed in order to understand how operations are performing. The common
denominator is that the additional areas do not have a financial focus, but are based
on other quantifications. The model also employs logic, whereby it tries to deduce
what activities lead to a certain effect. These activities and areas can then be
connected into strategic maps, which themselves lead to a financial result derived
from an organisations operations.
Introduction
There have been other models that did not spread as widely as these two. In
addition, researchers, particularly from Europe, have argued that some elements
already existed within the older models, but as a whole they are packaged in a new
way.
Corporate epistemology
A company can be described and analysed through its various characteristics.
Among other things, researchers such as Polesie (1989) have been focusing on this.
Such characteristics may appear when talking with people in a company, or reading
its financial statements. A concept that can be used to describe this is identity, both
from an organisational perspective, but also from an individual perspective. The
values and norms that guide the daily activities of an organisation provide a basis
for organisational identity (Jnsson, 1988). Within identity other values that guide
actions of one individual could be understood. An important starting point in one
of the studies Polesie (1991) conducted is how identities change over time.
Organisations can be compared to organisms in motion:
When a companys conditions change, we see more clearly what its managers
can and cant cope. Their ability to do things with the resources at hand
becomes visible. The study casts light on judgments that have been made and
their preceding deliberations. We have inquired into how people have perceived
their situation.
(Polesie, 1991, p. 22)
When a new company is formed, through either changing an old one or by the
creation of a new organisational identity, it is partly based on the perception of
different individuals and their identities. An interesting aspect to study is how a
group is formed and how individuals act in the group, especially when the company
in a process of change still needs to have a fruitful collaboration in and between
groups. Different resources and actions are woven together in a dynamic game,
through which the companys identity can be observed.
Over the past 20 years, there have been various discussions around how
knowledge related to management could be developed. What researchers discussing
this topic have objected to is the attempt to compare and adjust social science to
scientific research, which among other things, can be illustrated by focusing on
quantitative research and ambition to generalise from a large data set. This has
effects on the knowledge that has been possible to extract from the studies and
managements actual work has in fact been difficult to study. To remedy this
problem, there has been an argument for case methodology (Scapens, 1990) and
field studies (Ferreira & Merchant, 1992). A methodological step in this direction
was presented by Jnsson (1998) which indicates that much of the management
work was done in a verbal context.
Hence, conversation and discussion form an important part of the work done by
management. This situation may be recognised in the conversations that take place
in face-to-face groups where information is not as stiff as in written documents, and
talks make information more alive. It is then interesting to study the interpretation
of the talks and various applications or implications resulting from them, which in
itself can be seen as a form of cooperation to achieve common goals. They become
accustomed to agreement, where both parties become dependent on each other in a
social bond.
Managers want to shape and change the organisation to something better, and
they do it with words. To achieve this they build networks of personal relations.
They may be assumed to behave this way not because they are stupid and
ignorant but because it works.
(Jnsson, 1998, p. 414)
This then becomes an interesting phenomenon to study, the micro-processes or
conversations that are the core of business. The stories and interpretations of events
in an organisation become a form of meaning for a single actor, who keeps
something true. Using this approach opens a new opportunity to examine and
interpret what management is all about.
In an organisation, a number of decisions, consciously and unconsciously, are
regularly made. This function or ability becomes evident for those who have the
responsibility of managing a particular resource. The person who will make a
decision wants to act in a meaningful way in relation to their responsibilities
(Checkland & Holwell, 1998). Traditionally, the decision-maker is the manager
who has the power to make decisions and initiate actions. This could take the form
of a plan or strategy which might be based on previous tactics and results. According
to these previous plans, new instructions are given and decisions are made. An
important part of this work, which is another important dimension in the creation
of meaning, is to interpret the social context for the individual in a meaningful way.
The decisions thus become a catalyst in an ongoing process of creating organisational
meaning and sense-making.
In the next step, the decisions lead to actions within and outside the organisation.
This is reflected in the relationships among various stakeholders and actors, which in
themselves, are grounds for meaningful negotiation (Silverman, 1970). The social
reality, however, is not given as an abstract system in a featureless environment, but
rather something continuously constructed and reconstructed by the actors in the
social context, for example in the form of an organisation (Berger & Luckmann,
1966). The actions and reports are a part of the sense-making function that a
particular employee in an organisation is undertaking. Different activities are linked
to each other in the organisation, and the change of behaviour in one part can lead to
a domino effect where several activities change. The interpretation and the creation
of meaning as an individual, both for employees at the lower level or for managers at
Introduction
a higher level, could effect what decision is made and also change how the organisation
as a whole acts.
Several models of management are, in one way or another, about the planning
and monitoring of an activity, which can be described as two sides of the same coin
(Emmanuel, Otley & Merchant, 1990). Early performance management was also
trying to understand different kinds of information, which in todays computerised
operations becomes even more central. Another model much used from the very
beginning of modern management was the DuPont model which helped managers
to trace profitability. In recent years, other types of concepts have come into focus,
such as learning, change, responsibility and risk. All of this is, more or less, clearly
related to how managers work, make decisions and act. The early concepts can be
seen as methods for tracing performance, while the latter concepts can be seen as
an expression of the leaders actions.
For managers in various types of organisations, it is ultimately two concepts that
form the core, directly and indirectly, of daily work. The executive directors at both
a high and low level of hierarchy, make decisions and act, with implications for their
own work and that of employees. The discussion then results in different decisions
when different perspectives and points of view have been considered.
In a discussion, decisions are made. In a dialogue, complex issues are explored.
When a team must reach agreement and decisions must be taken, some discussion
is needed. On the basis of a commonly agreed analysis, alternative views need to
be weighed and a preferred view selected (which may be one of the original
alternatives or a new view that emerges from the discussion). When they are
productive, discussions converge on a conclusion or course of action. On the
other hand, dialogues are diverging: they do not seek agreement, but a richer
grasp of complex issues.
(Senge, 1990, p. 247)
Working with information for decision-making, both in a higher hierarchical level
and at the lower level of day-to-day activity, there is a form of process that could
be recognised. Usually, information is not only what is presented in a written report,
but also what is gathered through conversation and other impressions that may be
stored. The information then, could be understood as both structured and
unstructured, consequently stored in one way or another, then analysed and
presented in different forums, making working with information a form of process.
When the information is seen as relevant, something that could both be judged
consciously and in some cases unconsciously, it provides the basis for decisions and
actions. This human processing of information is based both on different
considerations and judgments, but also on past experiences and mental models, and
in various ways ties together actions with effects which can be described as causal
patterns. This is usually not done in a mechanical way without different opinions;
behavioural factors also come into play.
10 Understanding Management Control and Organisational Sense-making
Decisions and actions will thus become a part of an ongoing effort to analyse and
evaluate the surrounding operations to identify anomalies and potential improvements.
The planning results in decisions involving action, which is controlled. The decisions
and actions thus become a bridge between planning and control, where planning
becomes the basis for decision, and action for control. An important point in this
argument is that these concepts are verbs, requiring someone to perform. The person
who is acting in the organisation is thereby contributing to both creating and
recreating patterns, as well as structures, procedures and systems. By using procedures
as such, the manager contributes to and acts within a social system and structure
formed by experience where new insights are added to the system- the procedures
(Berger & Luckmann, 1966).
Thinking ahead
One of the most important tasks that managers at the highest level are responsible
for is long-term planning. This is also called strategic planning, and traditionally
involves planning over several years. Macintosh (1994, p. 87) states with emphasis
that ...strategy formulation is the single most important task of top management.
The concept of strategy comes from the Greek word strategos, meaning the general
art of warfare (Bengtsson & Skrvad, 2001). This approach is based on the idea
that the company operates in a market, or in a context which in various ways could
be compared to a battlefield. The key is then to use small battles to win great
victories and wars. International companies such as Microsoft, speak from time to
time about the fight between different products and positioning. Strategic thinking
arose after World War II when researchers, particularly from the United States,
began to write about the concept in a systematic way.
In a business context, the strategy concept is used primarily to understand how
resources should be used to achieve a long-term goal (Bengtsson & Skrvad, 2001).
Today, there are some 20 different schools of thought and ideas which in a direct or
indirect way can be linked to a strategy tradition. The modern management strategic
concept can be traced to Andrews (1971) reasoning in the 1960s at Harvard
Business School. In Japan, companies came to work with a clear strategic focus after
World War II, and this was one reason why they could expand their production and,
by extension, national wealth, as quickly as they did. Japanese companies, for
example, were early to introduce systems to ensure high quality. In recent years,
Porter (1985) came to develop strategy as a concept with the help of his reasoning
about competition, and Mintzberg (Bengtsson & Skrvad, 2001) developed the
concept with its strategy process focus, to name two influential scholars in the
subject. It remains important to understand and work with strategy.
Just as Macintosh (1994) emphasises strategic planning as a task for management,
it can also be described as a process that has traditionally been understood in two
steps; first a strategy is formulated and then implemented (Andrews, 1971).
Introduction
11
In practice, this may mean that management guides, encourages and enables
employees to use the available resources to achieve specific goals (Ackoff, 1999). A
leaders characteristics also affect the direction the strategy takes, which in turn
affects organisational performance (Miller & Shamsie, 2001). This may, for
example, involve how management creates a common understanding of the
organisations mission, its core value (Hamel & Prahalad, 1989). In addition to the
managers ability and characteristics, it is also of great importance to relate the
strategy to the environment, which should, to a very large extent, affect the
managers decisions and actions (Hambrick, 1984). Operational control and
management is then largely about adapting operations to external expectations and
assumptions which, for example, can be described using contingency theory
(Emmanuel, Otley & Merchant, 1990). Managements task is then to a large extent
to get the organisation to survive in the long-term (Macintosh, 1994). The most
obvious is that management is able to affect the business both positively and
negatively (Day & Lord, 1988). Strategic planning is one of managements most
important tasks, and with its help, an organisations continued development can be
greatly affected.
There are several factors that affect the success of planning. Harris and Ogbonna
(2006) particularly highlight three areas that influence the initiation of the strategic
work. It involves the companys internal dynamics, partly on environmental factors
and partly on managements characteristics. In terms of management work with
strategic planning, there are several factors involved. If the management team, for
example, lacks specialised experience in planning skills, they prevent the planning
process from being successful (Carson, 1985). Similarly, boards that have external
members with experience in other industries, have a greater ability to formulate
unique strategies with clear focus (Geletkanycz & Hambrick, 1997, Hambrick &
Mason, 1984). The ability, most easily described as the skills and experience that
management has, therefore largely affects the strategic choices made (Boeker, 1997,
Hopkins & Hopkins, 1997). One of the most obvious factors influencing the
strategic planning process is management.
There are several other factors that influence how management chooses to work
with strategic planning. One such factor is how you look at the time period that
planning is intended for. Traditionally, strategic planning activities deal with plans
for several years (Emmanuel, Otley & Merchant, 1990). Planning for shorter
periods is usually classified as tactical or operational planning, where, for example,
the budget is a good illustration. One interesting factor is thus to what extent
management has a long-term or short-term perspective on decision-making {Aram
& Cowen, 1990, Gibb & Scott, 1985). If a shorter time horizon, and decisions
related to short time horizons, is prioritised, this could have harmful effects on the
conditions for long-term decisions (Harris, 1996). Another factor affecting
managements approach to planning is the type of accomplishments achieved during
previous periods (Harris & Ogbonna, 2006). If you have been successful in previous
periods, without having to work with the strategic planning, it is also probable for
future periods to rely on gut feeling (Thurston, 1983). Similarly, management also
chooses to plan to a lesser extent if there appear to be no imminent problems (De

Wit & Mayer, 1988). When it comes to working with long-term planning, there are
thus a number of different factors that influence how management chooses to work.
Many of those can be clearly related to how the person, the manager, chooses to
work and how he looks at the business function.
An initial starting point when dealing with long-term, strategic planning is the
context in which the business operates: its environment. Unless the business
manages to adapt to its environment, there is a risk that it will cease to exist.
Theories and work on strategic planning therefore become a matter of survival,
where the forces in the environment largely affect business conditions, which
Macintosh (1994) describes as follows:
These frameworks imply that environmental and historical forces are out there
beyond the organisations boundaries. This line of thought relies on a biological
metaphor or survival, organisms must adapt to their environment or become
extinct.
(Macintosh, 1994, p. 88)
This approach has also been described as the environmental school by Mintzberg
(1990), where the strategic work is seen as a more or less passive response to
external forces. In creating a strategy, there is also an internal dimension added to
the external. One of the most commonly used acronyms in terms of strategy
formulation is SWOT. The first two letters Strengths (S) and Weaknesses (W) refer
to the organisations internal capacity, while the two following, Opportunities (O)
and Threats (T), are based on external factors. With the help of the internal
strengths and weaknesses identified, a core competence is identified as the external
opportunities and threats create a picture of which areas require success in order to
survive. The use of the concept and ideas behind SWOT can be traced back to Philip
Selznicks (1957) book Leadership in Administration but the concept has also been
developed by authors such as Andrew (1971).
The external environment can be described as either stable or changing.
Traditionally, the process of strategic planning is to a large extent built on a stable
environment (Mintzberg, 1994). A stable market refers to a situation where events
in the market and among stakeholders, such as customers and competitors, largely
repeat themselves from year to year, and the demand and supply does not vary to
any great extent. A decision-maker knows with a decree of certainty what
information he/she needs to collect, which type of information analysis is
appropriate, what decisions should be made and what impact the decisions should
have (Alter, 1999). The decisions made are described as programmed, where the
decision-maker has an experience of what is required in a particular decision
situation. But, a decision or activity may also be its opposite: non-programmed
(Emmanuel, Otley & Merchant, 1990). Here the decision-maker does not have as
much experience on which to rely, and the uncertainty is greater. When the external
Introduction
13
environment is uncertain, the focus moves from the ability to properly analyse what
has happened in previous years. It becomes important to think more creatively and
in some cases seek questions over answers. When Mintzberg (1994) described
this work, he used the terms right-handed and left-handed planners.
The right-handed has a greater ability to accurately analyse historical development,
while the left-handed looks ahead and acts to catalyse innovative strategies.
There are several actors outside an organisation able to put pressure on its
activities. A common description of the various groups that determine the conditions
of competition in an industry was developed by Porter (1980), namely, the Five
Forces. It is based on the competitive intensity within an industry affected by the
bargaining power of suppliers and buyers. This description is fairly traditional, with
buyers and suppliers described as strong stakeholders. Porter then adds potential
new competitors and the threat of substitute products. In a way this describes the
forces affecting competition and the intensity and threat from potential entrants and
products. Gibb and Scott (1985) indicate that strategic planning and its
implementation are related to the competitiveness of the industry. In addition to the
actual, in many respects the physical, competition, there is also an underlying
ideology in every industry affecting and guiding operations and how management
acts (Harris, 1996).
An important external factor often associated with the strategic work is
technological development and the ambition to absorb it, thereby creating a
competitive advantage (Porter, 1996). Several studies show that competition from
the environment, for example in terms of what customers want, may be handled
through embracing more advanced production (Otley, 1994). When strategic
thinking and the introduction of new technologies have a close relationship, it leads
to profitability but also growth, shown for example by Schroeder and Congden
(2000) and Kotha and Swamidass (2000). However, it is important to remember
that the introduction of new, advanced technology should be widely linked to a
growing demand from customers, for example in terms of service, flexibility and
product innovation (Baines & Langfield-Smith, 2003). Customer expectations and
the opportunities that new technological advances allow, play a significant role in
determining the strategies formulated and then implemented.
Part I The Essence of Management

Control
One of the earliest texts dealing with management control was written by Anthony
(1965) in the 1960s. His book stressed how management control differed in a
hierarchical dimension, where the top management had a longer time horizon and
operations a shorter one. One of the first, and probably the most referenced,
definitions of management control was presented by Anthony in 1965 as:
the process by which managers assure that resources are obtained and used
effectively and efficiently in the accomplishment of the organisations
objectives.
(Anthony, 1965, p. 17)
Anthony developed the concept based on a relatively simple approach where
management control in the first place came to be the monitoring and controlling of
resources used to achieve strategic objectives. From a management accounting
perspective, the focus was on aspects that did not include behaviour in any
significant way (Johnson & Gill, 1993). However, several contemporary studies
would establish management control as a phenomenon in general, and the control
aspect especially closer to the behavioural approaches (Hopwood, 1974, Argyris,
1954, Gouldner, 1954, Selznick, 1953, Merton, 1957). Anthony Hopwood came to
stand as one of the scholars who wanted to develop the perception of concepts such
as accounting and management control from technological trading to be about
individuals and behaviour (Hopwood, 1974). This was reflected in his work with
the journal Accounting, Organization and Society, which published research
dealing with accounting issues in a social and organisational context. Notwithstanding,
other researchers have, in recent years, questioned the basic assumption on which
Anthonys first models were based (Puxty, 1989, Puxty, 1993, Macintosh, 1994).
Ultimately, great interest has been shown in the effects of technical progress in
computerised information systems, recognising the role of technology. Authors such
as Macintosh (1985) emphasised the necessity of studying not only the technological
development itself but relating it to the organisational context. The borderland
between business administration and information systems has been developed into
a theoretical area of its own, where the general theories, such as management
information systems, have been developed (Ahituv & Neumann, 1990, Alter, 1999,
Avison & Fitzgerald, 1988, Davis & Olson, 1984, Gorry & Scott Morton, 1971,
Gray, 1994, Lucas Jr., 1994, OBrien, 1993), and specific theories, in areas such as
accounting, have also received considerable attention (Bodnar & Hopwood, 1995,
Boockholdt, 1993, Bromwich, 1990, Brownell, 1982, Cooper & Essex, 1977,
Samuelson, 1990). But it is not enough merely to study a) the management control
that technology brings, b) the individual or organisation from a behavioural
perspective, or c) accomplishments due to technical solutions offered by information
systems and information management; these three areas need to be studied together,
from an eclectic perspective, to gain a better picture of what management control is
all about.
Modern enterprises and organisations present a comprehensive information
management system to support various employees willingness to act in a meaningful
way (Checkland & Holwell, 1998). This may involve, for example, policy makers
having the information they need to monitor what is happening in the company and
consequently, making decisions affecting the business. Information management is
handled largely by computerised information systems that store, process and report
data which is then interpreted by a receiver. The interpretation is based on a
meaning added to the data presented in the report. These systems have gained a very
important role in recent years (Macintosh, 1994). In large multinational
organisations, they can be compared to the central nervous system, which collects
and processes stimuli from different parts. These systems are often so central to
companies that operations would not work without them. For example, financial
functions to a large extent are dependent on the information that can be obtained
from the systems. These grew out of the need to be able to survey large organisations,
with geographically dispersed operations.
When operating a highly complex and multifaceted operation in over 150
countries around the globe, a common language is essential. That language,
even more universal today than English, is accounting and finance.
(Macintosh, 1994, p. 1)
One reason that these systems have been able to attain the important role they have is
that the cost of collecting and processing information has decreased (Johnson &
Kaplan, 1987). In many cases, the procedures and practices have existed since the large
organisations began to form, and have now moved over to modern computer systems.
The inability to take advantage of the new technology has meant that the systems have
been subjected to great criticism. The ongoing effort to lead a business requires
employees, at different levels, to process information of various kinds to be able to
understand what has happened during a particular period. This type of processing is
particularly evident at the middle management level, as they are accountable to senior
management while leading the work of the lower organisational level.
17
The information then handled and processed, often taken from accounting systems,
is an important function and may play different roles depending on its use. This data
may be seen as a language that can be used to communicate within and between
organisational units (Anthony, 1997, Macintosh, 1994), as well as an expression of
the actions that take place in the business (Hoskin & Macve, 1988) as a means to
create organisational visibility. Management control work will then have a deeper
meaning more about creating understanding and facilitating action in a firm.
Different perspectives
To understand the different descriptions and interpretations of management control
as a concept, a number of authors and their books were assessed. The idea was that
they would have treated the concept from different perspectives in order to
understand the various dimensions that characterise management control. The
point was to see how the authors describe management control as a concept, but
also to establish to what extent, and in what way, they take up organisational
aspects and information management, coupled with management control.
One way to describe management control is as a collection of control mechanisms,
which together allow for the exercise of direction within an organisation (Macintosh,
1994), which in turn will lead to the classic prosperity of the nation (Seal, 1993).
management control systems ... consist of a collection of control mechanisms
that primarily have an internal focus. The aim of management control systems
is to influence employee behaviours in desirable ways in order to increase the
probability that an organisations objectives will be achieved.
(Drury, 2000, p. 594)
Many authors accept Anthonys classical assumption of management control as any
process that will lead to regulation.
Our definition of managerial accounting focuses crucially on the notion of
organizational control, which is defined as the process of ensuring that an
organization is pursuing courses of action that will enable it to achieve its
purpose. And the purpose of an organization should be to genuinely satisfy the
needs of organizational members in the long run.
(Wilson & Chua, 1993, p. 37)
A key player in management control is the person who leads the work, whether it
is the whole company or the case of a small part of the company. This can be
described as the function of general managers, and is concerned with all aspects of
coordination and integration within the enterprise (Parker, Ferris & Otley,
1989, p. ). Thus, the process involves a strategy that is implemented.
Management control is the process by which managers influence other

members of the organization to implement the organizations strategies.
(Anthony & Govindarajan, 1995, p. 8)
An important task for staff or management is to motivate the employees who will
carry out the activities that enable the organisation to reach its goals.
Management control involves addressing the general question: Are our employees
likely to behave appropriately? This question can be decomposed into several
parts. First, do our employees understand what we expect of them? Second, will
they work consistently hard and try to do what is expected of them? That is, will
they implement the organizations assets or otherwise allow them to be dissipated
(such as through carelessness)? Third, are they capable of doing a good job?
Finally, if the answer to any of these questions is no, what can be done to solve
the management control problems? All managers who must rely on employees to
accomplish organizational objectives must deal with management control issues.
(Merchant, 1998, p. 5)
This is based, in turn, on the complex interplay of different contexts, including acts
and behaviour (Johnson & Gill, 1993). It also requires that various anomalies are
identified and addressed.
Management control is primarily a process for motivation and inspiring people
to perform organization activities that will further the organizations goal. It is
also a process for detecting and correcting unintentional performance errors
and intentional irregularities, such as theft or misuse for resources.
(Berry, Broadbent & Otley, 1995, p. 18)
The classical process is based on three phases: planning, implementation and
control (Lere, 1991). If you want to simplify the management control process
further, it can be described from a planning and control perspective that seeks to
obtain the best possible performance, something on which Euske (1983) focuses.
A management control system is designed to facilitate performance. Specific
outputs are identified, and measures of these outputs are generated that in turn
are used within the management control system. Each step depicted in the
model planning, control, evaluation, and measurement contributes to the
operation of the management control system. Planning occurs in generating
specification of how the organization is intended to affect the future. The goals
and objectives are a major statement of those intended effects. Control happens
when components of the management control system are used to insure that
the outputs are generated. Evaluation occurs as attributes of the outputs are
19
appraised in terms of the performance as specified by the goals and objectives.

Measurement is a necessary condition for planning, control and evaluation to
occur. Planning is primarily concerned with the relationship between
preconditions (such as goals and objectives) and causal factors (such as
components of the management control system). Control is primarily concerned
with the relationship between causal factors and actual effects (the attributes
measured of the outputs). Evaluation is primarily concerned with the
relationship between actual effects and desired effects (such as performance as
specified by the goals and objectives).
(Euske, 1983, p. 5)
However, it is important to remember that the planning and control of a business
are not two isolated activities, they interact to enable good management decisions,
as well as for the employees to feel motivated by what they are performing.
The foundation of control is the planning process. The outcome of planning,
whether it be a mission statement, long-range objectives, or operating budgets,
provides the basis for control. A management control system is a logical
integration of management accounting tools to gather and report data and to
evaluate performance. A well-designed management control system aids and
coordinates the process of making decisions and motivates individuals
throughout the organisation to act in concert.
(Horngren, Sundem & Stratton, 1996, p. 334)
Another common point of contact for planning and control is the performance to
be obtained. Management develops when various types of routines and structures
aimed at performance are implemented. These can be described as part of the
formal financial control, or management control process.
effective managers rely on performance measurement and control systems to
set direction, make strategic decisions, and achieve desired goals. This book
focuses on performance measurement and control systems, which are the
formal, information-based routines and procedures managers use to maintain
or alter patterns in organizational activities.
(Simons, 2000, p. 3, 4)
Several of the writers return to the role of information in the management control
process. Atkinson, Banker, Kaplan and Young (1997) go so far as to describe
management control as the process of providing information about the performance
of managers and operating units (Atkinson, Banker, Kaplan & Young, 1997,
p. 12). Information supply is an important part of the change and adaptation work,
which always occurs, and is part of the management control process.
The major part of this book is concerned with the provision of accounting
information to aid the process of overall organizational control. It must be
remembered that although such accounting information is an important aid to
such overall control, it is by no means sufficient. The process of ensuring that
an organization adapts itself to the circumstances in which it finds itself in
appropriate ways requires various skills, not least the generation of apt courses
of action in response to adverse conditions.
(Emmanuel, Otley & Merchant, 1990, p. 35)
This reasoning has in many ways been about three elements: process, organisation
and information. The interaction between them, which can be described as a
system, is summarised by Otley (1987).
A management control system (MCS) can therefore be seen as a set of control
mechanisms designed to help organizations regulate themselves Even when
accounting information can be used, it is the response of individual people to that
information that is crucial to its effectiveness in bringing about overall organizational
control. Management control is therefore as much to do with influencing human
behaviour as it is to do with the technical design of information systems.
(Otley, 1987, p. 14,15)
There are some common traits among the authors in the way they build up an
understanding of management control as a concept. The most obvious common
denominator is that it is really about two activities, planning and control. These
activities are then connected to each other in a process that also includes
implementation (Lere, 1991). A planning tool, which many authors assume is the
budget, is described as a practical translation of long-term plans at the operational
level. Planning at an initial stage, begins at the top of the hierarchy, and is then
translated downwards into the business. The control is thus what the business has
achieved. Management control will not only be about a resource allocation and
control work, but also the game and the process that takes place between higher
and lower organisational levels. Basically, this argument from Anthonys first
proposal, which has since been developed by, for example, Simons (2000), describes
management control as work on strategies and performance.
Several of the authors go further in their descriptions of what management
control means by also initiating a discussion of the behavioural perspectives. In
some cases, the understanding of the management control phenomenon is built
upon organisational sociology and other behavioural theories (Macintosh, 1994,
Johnson & Gill, 1993, Parker, Ferris & Otley, 1989). These authors based their
argument on the individual and group interaction, where concepts such as culture,
21
power and responsibility have central roles. Another emphasis assumes the
description of the organisation in terms of entities or centres with a specific focus,
such as: cost centres, revenue centres, profit centres or investment centres (Lere,
1991, Anthony & Govindarajan, 1995). Important concepts in the argument then
become structure, hierarchy and the ability to delineate a particular entity.
Information is considered an important prerequisite for effective management
control for all authors. This is described and discussed, however, in slightly different
ways. Several cases do not investigate the concept of information and how it is
managed in an organisation to any great extent. That there is access to relevant
information is taken more or less for granted. Several of the authors describe, for
example, information that is essential for effective decision-making, often without
reasoning about how well the information is adapted to the context in which the
decision will be taken. Macintosh (1994) describes the role of information systems
in modern organisations as a major nervous system. Others describe the management
of information as a way to deal with uncertainty (Macintosh, 1994, Seal, 1993,
Wilson & Chua, 1993). Further, some authors emphasise that an organisation
cannot rely on formal information systems without the need to supplement them
with informal ones (Anthony & Govindarajan, 1995, Emmanuel, Otley &
Merchant, 1990, Otley, 1987, Wilson & Chua, 1993). An example of a somewhat
more elaborate description is made by Lere (1991) who evaluates the usefulness of
information based on who should use it, the time period to which it applies, and
what flexibility there is in force reports. Added to this is an assessment of the
reports accuracy that can be calculated based on its various characteristic
features.
Traditionally, within the business management field, planning has been followed
by implementation that then generates some type of follow-up, all of which are
described as a management control process (Anthony & Govindarajan, 1995).
Many textbooks describe monitoring as reporting, often linked to an idea of
performance with a feedback function (Drury, 2000). However, reporting and
performance measurement can also be based on a desire to measure costs (Horngren,
Sundem, Stratton, Burgstahler & Schatzberg, 2008), or as performance in a value
chain (Atkinson, Kaplan, Matsumura & Young, 2007). In its simplest form, a
business can be described as a process that generates something for which a
customer is willing to pay; the business has generated an achievement. Conformity
between management ambition, and the direction of the strategic plan, can then be
evaluated in a form of control. Another dimension in the follow-up is how
stakeholders outside the business or organisation perceive the performances
generated. For example, how a customer looks at a product or service.
Understanding performance
Understanding performance touches upon how information is managed in the
organisation. A common assumption is that the accounting information managed
by the organisation is compiled into reports that reflect the performance, or the
resources expended, to generate a profit. Within the fields of financial and
operations management, there is a significant emphasis on the methods and ideas
that in many cases can be described as tools. This may involve, for example,
calculation methods such as activity based costing (Kaplan & Cooper, 1998),
valuation models such as EVA (Stewart, 1991), or methods of performance
measurement such as the balanced scorecard (Kaplan & Norton, 1992). When
models or methods are presented as tools, there is a risk that the user is focusing too
much on the specific tool itself and not the daily work of leading the organisation.
The understanding and measurement of performance are in themselves methods,
and can be understood as a monitoring system.
However, the central question is really about integrating the method as part of
the daily work of leading the organisation (Fowler, 1990). Work performance
measurement then becomes a part of the ordinary, everyday work where
management sets the tone for the future, monitoring the business achievement flows
to form an opinion and taking action if needed (Armstrong, 2000). Performance
measurement has today become one of the most central parts of modern business
management, not a separate method or a tool, but an important component in the
daily task of managing a business.
Performance, however, is not an easy concept. A traditional and somewhat
simpler definition of performance is about something accomplished or completed.
Achievements as phenomena are thus based on both the decisions and actions of the
one who generated the result. The abstract action leads to concrete results where
both the act and the result can be assessed (Brumback, 1988). This distinction can
also be seen as that between input and output, to which Armstrong points (2000):
This definition of performance leads to the conclusion that, when managing the
performance of teams and individuals, both inputs (behaviour) and outputs
(results) need to be considered.
(Armstrong, 2000, p. 3)
One of the major concerns with the concept of performance is that it is not clear,
but contains several dimensions, and to a large extent depends on the context in
which it will be measured (Bates & Holton, 1995). This may involve, for example,
expertise and capacity in the organisation, but also on how the goals are set and
evaluated, what Hartle (1995) calls the performance measurement mixed model.
Additional dimensions can then be added where performance is defined in a manner
internally and differently from the viewpoint of an external stakeholder (Meyer,
2002). Although performance is difficult to pin down, there are some common
starting points that should be emphasised. Performance should be seen as a result
that can be documented (Armstrong, 2000), something that an individual
relinquishes under a task (Kane, 1996), which is the outcome of actions related to
a strategic task (Bernadin, Kane, Ross, Spina & Johnson, 1995). Performance, in its
23
simplest form involves deliverables that can simultaneously be understood and

described as something multi-dimensional and more complex, to capture an
increasingly accurate picture.
Although performance can be seen as a single event at a relatively detailed level,
it is actually when the larger image is stitched together that a follow-up activity will
be most relevant. The organisations aim is that with each employees individual
effort, the conditions will be created for common goals to be achieved. Therefore,
performance measurement is most interesting when a more holistic approach is
taken where the entire organisations performance is assessed (Armstrong, 2000).
When made clear, performance also creates conditions for the organisation as a
whole, as well as individuals or teams, who will pay attention to the deliverables.
With that, performance becomes clear with improvements and changes made so
that the desired outcome is achieved. This echoes Philpott and Sheppards (1992)
definition of the purpose of performance measurement:
The fundamental goal of performance management is to establish a culture in
which individuals and groups take responsibility for the continuous improvement
of business processes and for their own skills and contributions.
Continuous improvements have come into focus, for example, in Japanese
companies, based on customised access to performance information. Armstrong
(2000) indicates that performance measurement itself is not an end, but should be
linked to work on improvements. Performance measurement allows for several
different types of development, for example in terms of productivity and efficiency.
This may mean that both staff and managers need to consider how they can
develop, and how their work can be improved. Yet, it can also be about how
reporting and performance measurement functions act as a means to communicate
and engage with both internal and external stakeholders (Epstein & Birchard,
2000). Performance measurement in itself is also an area that needs to be developed
(Meyer, 2002). The lack of progress in financial tools was one of the most basic
observations Johnson and Kaplan (1987) highlighted in their relevance lost debate.
Performance measurement and performance measures are key areas for management,
but really come into their own when used to improve a business.
Much of the criticism forming the basis for the development of the balanced
scorecard was about the financial dimensions not describing the operations
satisfactorily (Olve, Roy & Wetter, 1999). While there were strong voices advocating
a search for non-financial measures that causally linked the critical functions of a
business, there were also voices arguing that non-financial dimensions were too
difficult to develop. It would thus be more fruitful to develop the financial
dimensions instead (Epstein & Birchard, 2000). Another division of the measurements
can be made based on whether they are external or internal, and whether they are
simple or multi-dimensional measurements (Meyer, 2002). A further subdivision
can be made, namely, whether they capture a financial, production or social
dimension (Epstein & Birchard, 2000). These act as a matrix where business
stakeholders are presented.
One of the great challenges of working with performance measures is that no
single measure is comprehensive either in general, or specifically for future
performance (Meyer, 2002). In terms of economic performance, there is an
imminent risk to using history as the basis of future measurement. Although the
dimensions are used as targets and different objectives, defined dimensions have
also tended, over time, to lose their function. The dimensions will be so natural and
obvious, and in some cases self-fulfilling, that they do not really function as a mirror
of the business, forming the basis for decisions and actions (Epstein & Birchard,
2000). Although a quantified measure can be perceived as fact, and in some sense
true, building an understanding of what it is that performance has achieved, is to a
great extent based upon a subjective judgment rather than objective truth (Jnsson,
1981, Lebas & Euske, 2002). The measure is thus an indicator of the performance
but is not the performance itself (Euske, 1983). An important part of the monitoring
work regards understanding how performance will be measured and what
performance measures really show.
The control concept in management control

One of the activities guiding the more classical areas is monitoring or control, but it is
also one of the areas which has in recent years undergone the greatest change. It is in
many ways about developing the means to measure performance, primarily associated
with the development of the balanced scorecard (Kaplan & Norton, 1996, Olve, Roy
& Wetter, 1999). Although much of modern management control assumes a nonfinancial and multi-dimensional performance-based measurement, companies tend to
operate through financial statements.
One of the most common associations made to the concept of management
control is that it is about two things: planning and control. They are so closely
related that they can be described as two sides of the same coin (Emmanuel, Otley
& Merchant, 1990). The English term that usually translates into performance
management is management control, which has to do with control. Control is
difficult to clearly identify within companies; it is there, but not described as control
in a direct way. It can be about resource allocation in relation to the volume and
tuning of the amount expended in relation to what was planned for. Businesses
usually also have a clear structure and division which is a part of the control process
in general. There is a good understanding of how the procedures in the organisation
work and what is required by management and staff in the business. Although
control as a concept entails negative connotations, it is still a feature that
management exercises, especially as a clear part of monitoring and follow-up.
A variant of control is feedback, also a natural part of the follow-up. It is then
extensively used to both evaluate and correct business performance. This can be
done both through formal systems but also through informal channels. Feedback is
25
largely about communication. It is up to each organisation to choose the

transparency and the ambitions they have for communication. The concept of
control in an operational context is really about the business being seen as a selfregulating system, in that it reproduces, develops and learns (Pask, 1961). This
functioning, as a self-regulating entity, has been named cybernetics and can be
applied in many different contexts as a concept, or a scientific theory, for example,
in medicine, social theory and technology. An early researcher in the field is Wiener
(1948) who had a multidisciplinary approach and applied his cybernetic theory in
several scientific fields. In business economics and management research, it is
particularly Beer (1959 and 1966) who relates advanced cybernetic ideas to
organisations. The concept of control is closely related to functions such as
management and performance management, but it is also a concept that has
received new significance in recent years.
When control as a phenomenon is to be studied, a primary observation is that it is a
human act performed by a person (Vickers, 1967). That to review something is to
compare how it is to what it should be. The deviation is then the basis for action to
rectify any discrepancy. This idea can be developed to include a more comprehensive
process. A model of how this control function can be applied in an operational context
is presented by Otley and Berry (1980) who assume that there is a goal or a purpose in
the process, as the results need to be measured against objectives and they are thereby
defined. The most interesting part is actually the predictive model concept. It includes
some type of understanding of the process which, in one way or another, can be
expressed in causal relationships. The last premise of the model is that there must be an
opportunity to correct anomalies. If these conditions apply, the process and activities are
described as controllable according to the model (Emmanuel, Otley & Merchant,
1990).
The control function has also been the basis for a professional role, the controller.
The increased use of computerised systems has led to a larger amount of information
covered whereby the profession, or the function of controller, has changed and
evolved (Lindvall, 2009). One of the challenges is to control the function, i.e. the
controllers work, to a greater extent. This should be a critical part of how the
business is managed by training staff, and making information and systems available
at the lower hierarchical levels of the organisation (Cooper, 1996). A modern
feature is where the controllers work more on formulating and implementing
business strategy and managing mission-critical information, rather than pursuing
pure control that largely involves documenting and merely posting the results
(Kaplan, 1995). The function fits, to a large extent, to this particular task, namely
to participate in the formulation and evaluation of performance that connects a
business with its strategic ambition (Chenhall & Langfield-Smith, 1998). In many
respects, the modern controller has become more of a coach than the old-fashioned
definition allows (Broadbent, 1999). The function has switched today to a large
extent to a person, rather than a function which has made working with more
control come into focus.
When a management team is working with the control, this expresses itself in
various ways. One of the first things to happen is that clear information need is
identified and associated with a particular person or group (Taylor, 1911). The task
can then be optimised based on a productivity and efficiency perspective. Another
common way to create conditions for the control is by using the structures of the
organisation, for example, by defined hierarchies (Fayol, 1949). Top management
is separated from business operations, where the management function is
strengthened. Consequently, the clearly defined units, with responsibilities such as
performance accountability or responsibility for costs, again help the organisations
structure to create the conditions for control (Anthony & Govindarajan, 1995). The
prospects for governance are also affected by the extent to which ambient behaviour
is stable and production processes are well established (Burns, 1961), as well as how
work-flows and processes are organised (Woodward, 1965). The organisations
structure and how the work is carried out are clear ways for management to create
conditions for control.
The control itself can be performed in different ways with focus on different
areas. Merchant (1985) describes three different types of control: action control,
results control and personnel control. Performance is monitored and controlled so
staff can be checked. A similar approach proposes that there are really three
different areas that can be controlled: a) to check the person who added to the
process; b) to monitor the input via the actual process; or c) to check the output
(Simons, 2000). In many cases, it does not make sense to review the performance
during the process, but often the focus is on the management to control those
performance processes as they are generated. The more self-regulating the system is,
and in various ways, similar to market demand and supply, natural mechanisms in
the form of ideal market surveillance occur (Coase, 1937). One way to check the
internal market in an organisation, where supply and demand are indirectly
controlled, is by using transfer prices (Emmanuel, Otley & Merchant, 1990).
Efforts to create control can take different forms. Management can focus on
checking results, or control might happen through market-like mechanisms.
When the preconditions of a business (whereby its environment is stable and
decisions may be considered predictable) are met this means that the result to a
relatively large extent can be calculated, dependent upon certain conditions. But,
the surroundings are more open to changing terms and conditions. Macintosh
(1994) has discussed the control dilemma in these different conditions. In one of his
models, one axis analyses how goals are perceived, whether they are clear and
unambiguous, meaning that they are rational in any sense, or alternatively
contradictory and not perceived as rational. The second axis analyses whether the
process underlying the activity can be described and understood well, and be
perceived as rational, or alternatively cannot be well understood.
In the field or matrix that these two axes form, Macintosh states that two types
of systems can be recognised. If both the task to be done and the goals are perceived
as rational, the system is also rational, simple, classic, and productivity tests can be
performed. However, if any part is not perceived as rational, more of an open
27
control system is applied. Here, it is more about conducting tests of selected parts,
or working with those that are more socially orientated (Thompson, 1967).
Similarly, different types of control are developed and applied, depending on how
the goals are understood, as well as the recognition of business performance (Ouchi,
1979, Ouchi, 1980). When there is a rational view of the business presented, terms
can be controlled by bureaucratic means, such as rules and procedures. However, if
the business instead has conflicting views about a goal, or a lack of clarity about
what is to be implemented, control can instead build on a market idea, namely,
supply and demand. Control of operations can also be performed by a strong,
charismatic leader with a dynamic stance and a clear vision for what should be
corrected. Furthermore, an organisation with a strong tradition can also apply this
tradition; in itself a way to control personnel and results.
Reports, communication and stakeholders

An area and a concept that has not existed as long as monitoring and control is that
of an accountable organisation, based on relationships with its stakeholders, and
how stakeholders choose to communicate and report. Work on the follow-up in
terms of performance, control, feedback and stakeholders is a crucial and very
important function of management. It is a classic area which in recent years has
undergone changes.
An important part of communication between the organisation and its
stakeholders is published reports. The reports contain measures divisible by the
area-dimensions. A useful distinction may be financial metrics, operational metrics
and social dimensions (Epstein & Birchard, 2000). After the relevance lost debate,
the balanced scorecard offers another way to look at performance, through the four
perspectives of: finance, customers, internal processes and innovation (Kaplan &
Norton, 1992). Common to many contemporary reports and summaries of the
measures, is that as the financial perspective is insufficient, another perspective
largely based on non-financial thinking is added. But even within formal financial
reporting, focusing on the annual accounts and report, there are additional
dimensions that can be added, to cater primarily for external stakeholders
information needs. This may, for example, involve the executive managements view
of the past period and what the future holds, whereby the core values of the
business are emphasised by clarifying the dimensions and surfaces, but also through
ongoing illumination in the form of notes and comments (Epstein & Birchard,
2000). An important basis of communication between the various stakeholders and
a business are the reports and measurements presented.
Adapting the business to critical stakeholders is a task requiring great
commitment from management. Proposed by Epstein and Birchard (2000), this
undertaking is treated in several stages and in several areas. The result is that
strategic ideas about accountability translate, for example, by means of measurements
and reports, to acts within the business. One of the most obvious tools for Epstein
and Birchard is the work to formulate and implement a balanced summary measure,
which both demonstrates the results required by the owners but also clarifies the
results that stakeholders expect. These metrics and reports are based on the
strategies prioritised by individual stakeholders, where a hierarchy based on the
stakeholders importance is made. Common to the long-term work is to connect
stakeholders contribution to the business, and report what they then expect. In this
imaginary matrix, where various stakeholders represent a dimension and different
measures, reports are made visible as the relationship between the expectations of
the business and its long-term ambitions. Efforts to create an accountable
organisation are based largely on the ability to identify and prioritise stakeholders
and then provide them with the information (reports and metrics) pointing to the
companys capacity for just accountability.
The debate surrounding the companys efforts to be an accountable organisation
is not unproblematic. In fact it is considered directly harmful by some scholars
(Sternberg, 2004). Producing reports and disseminating them among stakeholders
is in itself no issue. It is a requirement that the interested party is in a context and
position that will allow it to be used and put into action, to the advantage or
otherwise of the business (Williamson, 1997). However, there is a consensus that it
is not enough only to satisfy the owners interests, but that modern management
requires a more pluralistic approach where stakeholder visibility is necessary
(Phillips, Freeman & Wicks, 2003). The challenge seems to be about having great
commitment and energy, both to working towards the owners requirements, for
example, profitability, as well as for the other stakeholders, such as environmentalist
and human concerns (Bakan, 2004, Collison, 2003). Efforts to create a responsible
organisation are not always obvious, and have only just begun, but future business
leaders will increasingly need to deal with the subject.
Although the ultimate responsibility for the organisation lies with management,
it can also be seen as an agent acting on behalf of the organisation (Phillips,
Freeman & Wicks, 2003). With this approach, the overall picture of the company
is also questioned by its owners, where the principal-agent relationship is found
between owners and management, but describes this relationship effect between the
organisation and management (Kay, 1997). The firm is seen as an independent
entity in a different, meaningful, way and distinguishes itself from its surroundings.
The owners have a property right, legally speaking, but the expectations and
requirements the owners impose on an organisation can be equated with other
stakeholders, which in many cases also have a legal presence. In working with an
accountable organisation, the entity in itself is a clear party and its owners and other
stakeholders therefore representing other parties. The accountable organisation
becomes significant as it is responding to the other parties expectations.
Part II The essence of

sense-making
The man in the street does not ordinarily trouble himself about what is real
to him and about what he knows unless he is stopped short by some sort of
problem. He takes his reality and his knowledge for granted.
(Berger & Luckmann, 1991, p. 14)
Two key concepts that authors Peter Berger and Thomas Luckmann wrote about in
the late 1960s are reality and knowledge. The reasoning was based on the
assumption that human beings perceive their environment as real and that it has
certain characteristics. Knowledge of the world and its characteristics vary
depending on the individual, but each person perceives it as real in their own way.
One can also see knowledge as part of a social context, a context in which the
knowledge of the group defines the groups perception of their own reality. From a
sociological perspective, according to Berger and Luckmann (1966), it is therefore
interesting to analyse and study the social knowledge that constructs the reality of
a group. This social knowledge can be further described in various ways as:
thoughts related to an individual, an awareness of certain values, an idea of a social
status, ideologies, or ideas based in action. One of the major challenges for Berger
and Luckmann (1966) was that they were trying, through systematic theoretical
reasoning, to theorise thoughts about the world, a world that very few actually tried
to interpret but in which everyone nevertheless lived.
In other words, common-sense knowledge rather than ideas must be the
central focus for the sociology of knowledge. It is precisely this knowledge
that constitutes the fabric of meanings without which no society could exist.
From their work, based on ideas about sociological knowledge, theories were
formed about how reality was constructed through the subjective creation of
meaning. A central question was how the knowledge was distributed, and the
mechanisms that governed the distribution. In an everyday situation, the environment
was interpreted according to the subjective meaning, where thoughts and actions in
various ways become an expression of what is perceived as real and meaningful.
The subjective can then contribute to a common-sense idea of everyday life,
constructed within intersubjective encounters. These meetings can be described as a
huge network that is perceived as fair for an individual, based partly on larger
networks such as countries, as well as smaller network associations.
To participate in a network requires an awareness of time and space, that is, the
here and now which creates awareness about what will be perceived as fair. The
perceptions of time and space also form the basis for interpretations of closeness and
distance. An individuals location and understanding of reality are made possible by
the language that coordinates the intersubjective meetings and fills the surroundings
with meaningful objects. The meetings and objects can be seen as temporal patterns
or structures that create the reality within which I, as an individual, orientate myself.
For example, by looking at the clock and thinking about what day it is, I orientate
myself in a temporal structure that is a way for me to perceive my reality. The
structure becomes the objective part of an objectification, which means that other
people that I interact with can perceive and interpret an object in a similar way,
seen as a production of signals. Language, for example, is one of the most
important signal systems, but can also be seen as a prerequisite for intersubjective
communication. When an idea is communicated it leaves a subjective classification
and becomes the form of an objective stance, to which others and I can relate.
Language allows a disconnection of an idea from one individual, causing the
perception to become an objective part of reality, which can be reused at a later
time.
despite the maximal detachment from everyday experience that the
construction of these systems require, they can be of very great importance
indeed for the reality of everyday life. Language is capable not only of
constructing symbols that are highly abstracted from everyday experience, but
also of bringing back these symbols and presenting them as objectively real
elements in everyday life. In this manner, symbolism and symbolic language
become essential constituents of the reality of everyday life and of the commonsense apprehension of this reality. I live in a world of signs and symbols every
day.
Language can also make individuals part of daily life and may contribute to, and
retrieve knowledge from the social stock of knowledge, which is spread in social
networks:
I live in the common-sense world of everyday life equipped with specific bodies
of knowledge. What is more, I know that others share at least part of this
knowledge, and they know that I know this. My interaction with others in
31
everyday life is, therefore, constantly affected by our common participation in

the available social stock of knowledge. The social stock of knowledge includes
knowledge of my situation and its limits.
A common explanation used to understand meaning is that it is about interpretation
or translation. The way to look at the significance of this is that it opposes and says
that there are clear differences between the terms, particularly if one tries to
understand the meaning on a deeper level (Weick, 1995). Creating meaning is an
act, which in part can be compared with interpretation, but not necessarily.
Meaning is seen as a process, an activity where the emphasis lies in the activity,
while the interpretations in and of it, can be seen as a process where the focus is
instead on the product, the interpretation, Weick notes. One way to concatenate the
concepts is to simply look at the interpretation of the product that comes out of the
process of sense-making. One of the conclusions will then be to create meaning
regarding authoring as well as interpretation, creation as well as discovery.
For this you can then add two time horizons. The first approach is based on the
idea that meaning is attributed by a problematic situation, which is transformed
into a problem. To better understand and manage the problem, the situation can be
described as insecure and a meaning must be given to it in order to create safety or
order. In the process, the user selects the creation of the meaning out of portions of
the situation bounded to focus attention. The parts are then placed in a context that
makes the sense-creator see and judge what is wrong, and the direction in which
actions need to be taken. The second approach is based on the creation of meaning
as something that is always going on and that cannot be chopped into pieces or
separated. The process that creates meaning is always ongoing and never stops.
For an individual to understand, an event is broken out of a larger flow, but the
larger flow or the current process continues nevertheless. On the one hand, the
meaning is described as a process of creating interpretations, but on the other, it can
also be seen as a continual process. Common to both approaches is that there is a
meaning-maker per se, that is, an individual noting discrepancies in a situation or
ongoing flow. The discrepancy may be noted, therefore, that comparisons are made
with previous experience, and formulated as an example through words or text to
form an object that can be analysed; the meaning of the creator themselves, and the
social context. The object becomes meaningful in relation to the context in which it
was created, and a hint based on the item being developed, which makes the
interpretation become part of a cultural and social context.
The shared understanding of phenomena and anomalies in a group means that
the group and its members perceive and communicate an object in a similar way.
This is very important for the sense-making process.
Sense is generated by words that are combined into the sentences of
conversation to convey something about our ongoing experience. The goal
of organizations viewed as sense-making systems, is to create and identify

events that recur to stabilize their environments and make them more
predictable. A sensible event is one that resembles something that has happened
before.
(Weick, 1995, p. 106, 170)
Sir Geoffrey Vickers (1995) wrote down observations he made during the 40 years
he had gained experience of human behaviour. He turned against the simplistic
ideas regarding people as goal oriented. The social process is seen as a system, not
from a cybernetic perspective, but rather a system where the choice of different
combinations is settled.
For Vickers, in contrast to Simon, managers set standards or norms rather than
goals, and the focus on goals is replaced by one on managing relationships
according to standards generated by previous history This places Vickers
work firmly in the interpretive tradition which sees social action as based upon
personal and collective sense making.
(Checkland & Holwell, 1998, p. 47)
Vickers looked at organisations as social entities where the ability to manage and
coordinate relationships were important. Managers acted rather to manage, and
administer, relationships than to make rational decisions that would allow the
organisation to reach its goals. Language became an important medium to form an
opinion about the world, and different social networks of conversations shaped
relationships (Winograd & Flores, 1986). Using information could enhance these
relationships. Through conversations, various filters were created that were
continuously replicated as part of the interpretation given by the world. A central
concept for Vickers was an appreciative system or appreciative setting, which can
be interpreted as a system of beliefs or a comprehensive understanding. Perceptions
and understanding were processed by the group, and then used to interpret the
world around it (Vickers, 1987). Past experience leads to new contexts being
assessed using these encounters and consequently, new experiences will change the
understanding of the next and so on. This process is constantly changing perceptions
and understanding in the same way that reality is continuously forming.
the act of attributing meaning and making judgements implies the existence
of standards against which comparisons can be made, standards of good/bad,
important/ unimportant, etc. Finally, the source of the standards, for which
there is normally no ultimate authority, can only be the previous history of the
very process we are describing, and the standards will themselves change over
time as new experience accumulates.
33
This system can also be seen as a learning process in which old experiences help
individuals and groups to create standards that are then used to interpret and act in
a new context, in a meaningful way.
Organisational sense-making
Peter Checkland and Sue Holwell in their book Information, Systems and
Information Systems (1998) attempted to chart the development of informationsystem theories while summarising their own research in the area. Peter Checkland
had for 25 years been in charge of a research programme that was based on actionresearch as a method, and had used organisations and information systems as
empirical phenomena. What the authors came up with had been previously
published in the books Systems Thinking, Systems Practice (Checkland, 1981) and
Soft Systems Methodology in Action (Checkland & Scholes, 1990). The idea is that
a business basically consists of people who want to act in a meaningful way. The
research team added an interpretive perspective on the organisational problems that
could occur, and which could be related to information management.
They also wanted to try to deal with the unstructured conditions that could
apply to managements problem solving in a structured manner, which among other
things, is made by dividing the problem into sub-problems. One could then
modulate the parts and thereby better understand how the problems might be
solved. Another assumption is that the social reality created in groups is constantly
recreated in endless social processes, which lead to both the groups consisting of
perceptions of what changes needed to be explained. Their research was aimed
more at creating interpretations and learning, rather than at producing optimal
solutions. Several of the conclusions of the research group have appeared clearly in
the new positions they give, which can be illustrated by the following quote:
Our aim in this book is to try to make sense of a broad field, and to do so by
working from both practice-based theory and theory-based practice. The field
is that which focuses on the organized provision of information in support of
people taking purposeful, or intentional, action, this action being usually but
not exclusively initiated within organizations.
The members participating in the organisation include a form of contract that can
be seen both in the formal employment contract, and within a psychological
agreement between the firm and its members. Together, it affiliates a relationship
based on norms, values, roles and the organisational agenda, that is, the issues,
criteria, resources, structures, processes and the goals defined. The agenda along
with members participation are the bases for decisions and considerations in order
to achieve goals, which in turn lead to meaningful action. Both individuals and the
group or organisation as a whole perceive the world around them as data-rich. Data
refers to any form of raw materials or facts that can be used as single elements. This
can be presented in different ways, through text, calls, images or impressions. Data
are selected according to a predefined pattern of behaviour, which is a result of past
experiences and the values with which the distinct group identify. The beliefs
guiding data selection are challenged and continuously revised in an intersubjective
context, where new ideas are created. These form the basis of intersubjective sensemaking.
Checkland & Holwell based their argument on a concept Vickers (1987) calls
appreciative settings, which could be translated as a system of beliefs that creates
understanding. This is created individually, but can also apply to an entire
organisation, partly because perceptions are adapted to, and somewhat overlap with
the ideas of those we associate with them. Different meanings are added to the data
that have been selected so that it can be used to make judgments about the world and
different standards. This can be seen as a process that begins with the initial data and
receives some attention, something the authors call Capta, and is described as
follows:
Having selected, paid attention to, or created some data, thereby turning it into
Capta, we enrich it. We relate it to other things, we put it in context, we see it
as a part of a larger whole which causes it to gain in significance. The phrase
which best captures this is probably meaning attribution. The attribution of
meaning in context converts Capta into something different, for which another
word is appropriate: the word information will serve here, this definition
being close to the way the word is often used in everyday language. This
process, which can be both individual and/or collective, by which data is
selected and converted into meaningful information, can itself lead to larger
structures of related information for which another word is needed; we may
use the word knowledge.
(Checkland & Holwell, 1998, p. 89,90)
The concept of information can be derived from other concepts and conceptual
sources. One of the most common is that the information comes from any kind of
data. When the data is structured it becomes information and when it is used,
knowledge is obtained (Alter, 1999). In a data-rich environment the data is available
in a certain context, such as an organisation. In that context data becomes
meaningful to a person acting within and understanding the context, it then
becomes information. When the actions are decided upon and implemented,
information then creates knowledge for the individual. The interesting process, in
order to understand the concept of information better, is when data are transitioning
to become information.
While Peter Checkland and his team were working on a research project
that dealt with soft system methodologies, the concept they called Capta was
35
born. They compared the Latin meaning of the word data, as the leader in Latin
meaning to give, with Capta, from the word capere with the meaning to take
(Checkland & Holwell, 1998). The difference that they tried to clarify with the
choice of words was that in data-rich contexts, such as within an organisation, the
opportunity to gain access to data is given, while what happens when data become
information is that the user of the information selects and embraces those specific
data to become Capta.
The word Capta as an expression of data is not only about an empirical
observation but rather becomes a phenomenon or experience when the data are
selected (Russo, 1957). Another finding is that data become Capta, which in turn
becomes information, in a process performed by a human, and it is not something
within the power of a machine (Checkland & Holwell, 1998). When decision
makers in an organisation need to act, it is therefore required that a database is
presented (Simon, 1960). This material is actually data when selected from the datarich environment, such as the one presented in a report, or via an informationchannel, and created as Capta when it is interpreted information that the decisionmaker can then act upon. If, or when, a decision maker wants to act in a meaningful
way and as accurately as possible, it is based on the interpretation and the meaning
put in the information, as well as the options then given (Daft & Weick, 1984).
Information is not just information; it is created in the human process in which data
are selected and interpreted.
The process will be one in which the data-rich world outside is perceived
selectively by individuals and by groups of individuals Perceptions will be
exchanged, shared, challenged, argued over, in a discourse which will consist
of the intersubjective creation of Capta and meanings. Those meanings will
create information and knowledge which will lead to accommodations being
made, intentions being formed and purposeful action undertaken. Both the
thinking and the action will change the perceived world, and may change the
appreciative settings which filter our perceptions. Thus the process will be
cyclic and never ending: it is a process of continuous learning, and will be
richer if more people take part in it.
(Checkland & Holwell, 1998, p. 104, 105)
Organisations as a set of social relations

Informal social relations offer one way to describe an organisation. Similarly, these
relations constitute a hierarchical structure of responsibility as a clear power base
for how to look at the work of an employee, and how contact with other hierarchal
parts of the organisation should be managed. This is manifested, for example, in the
language used by both an employee with more responsibility, that is, a higher
hierarchical position, and an employee with a lower one, when talking to each
other. While the division makes the difference between units and levels clear, it also
creates a sense of security in that the members may seek support from others. In
several cases, this duality is described as both limiting and promoting.
Vast amounts of data form the basis of the perceived world. The reports
presented from the formal information systems are part of the data on which
different users create different types of meaning. The reports in themselves constitute
a selection of data, meaning that they generally contain Capta. However, in practice,
the user subjectively selects and absorbs additional samples of data from parts of
the report; meaning that there is a wide range of formal data that is then followed
by further selection from the user. Selections may be due to the understanding that
some users have for the terms used in the report, but may also depend on the
situation in which selection takes place. In addition to the more formal systems,
there is also the presentation of the comprehensive data-management from informal
arenas. The main forms are talk and observation selected based on individual
preferences, whereby the individuals intellect filters the data. The availability of
data and the conscious selection of data vary relatively little, and the conversations
occurring in principle provide no comments to suggest that an employee has access
to too little data, rather the contrary.
The group develops certain members perceptions, ultimately associated with the
varying selection of data and interpretations, something that could be described as
intersubjective sense-making. This can be described as different identities that can
be linked to a specific employees duties, but also to a specific organisational units
identity. The intersubjective sense-making is also part of the commitment, or the
involvement, of different peoples expressions. Talks take place within a group, but
also between different hierarchical levels, particularly as part of the transformation
of an interpretation to action. These influences are, unconsciously, the ideas which
then form the basis for the interpretation of new data. One obvious feature of the
talks is how reactions and activities from the outside world in general, and among
customers specifically, are mixed with the perceptions and experiences regarding
internal operations. While the intersubjective context is usually very real, it is at the
same time something that could be hard to understand from a single employee
perspective. Meetings are clear but what is going on between a manager and an
employee, and what will be the lasting effect, which can be described as new ideas,
is something subconscious and partly implied. The organisation takes an
intersubjective communication form, which not only takes place in the context of
physical meetings, but also occurs through other communication such as letters and
e-mails. All of which continuously affect thoughts, perceptions and actions in
organisations.
In the various human processes there is a meaning and a purpose for the data
selected. Various employees sense of responsibility and accountability identity can
be the basis for the initial attribution of a meaning to a particular data set. This is
partly based on an employee identifying with the actions and choices made in a
particular department, thereby adding a specific meaning to the data that are
selected. The sense of responsibility could largely relate to a particular individual,
37
but might also be described as something you agree upon and share in an
organisational unit, or between two hierarchical levels. Another way to describe
how data are put into a context and receive meaning is through the success of
models that different people carry with them. This can be described as the experience
of how to act in an organisation for it to be successful. This can include the
experience of how the customer reacts to a certain type of action, but also about the
types of signals and variables you should keep track of in order to know how the
business develops. The common denominator is that a willingness to engage and be
involved means that clearer explanations are developed, attributable to a meaning
and an interpretation added to the data. This can be seen as the expression of the
different interpretations related to acts occurring in the organisation, where
previous positions can be evaluated and revised. This, in turn, adds to the experience
that can be used in such successful models, allowing more long-lasting structures of
meaningful understanding to be obtained.
When various employees perceptions and interpretations are coordinated in a
group, these are passed on to become intentions. Different analytical models scale
shared resources in a relatively objective manner, in which the margin of
interpretation is limited although present. Then, when you get down to it and
approach the actual business, the interpretations have a slightly larger space even
though many parts of the business may change slightly. One can see in the
organisations that there are really two types of plan. The first based on the business
continuing as it has done in previous periods, and with awareness and experience
of how the activities will be planned and coordinated by relatively limited
interpretations and understandings. The second type is based on something that
must change, for example, because there have been significant discrepancies
between planned and actual outcomes. What then happens in organisations is that
different opinions and ideas are more clearly joined to the new intentions and plans.
The first type will then be focused on maintaining a stable business, and a common
understanding is used to accomplish this. In the second case, the common
understanding is used to develop new ideas and intentions. Another common
denominator for many intentions and plans of the organisation is that resources will
be managed in one way or another.
In organisations, there are different types of situations that must be handled by
actions carried out in a meaningful way. When an activity is generating acceptable
performance, compared to planned intentions, actions are evaluated along with
what has been achieved. In cases where the deviations are remarkable, a dialogue
with various representatives is begun, based on previous experience and the
appropriate data selected. The processing of the options then generates various
alternative decisions whereby an agreement on a decision is made, then executed. In
cases where the deviation between the planned and actual performance is so
extensive that it is assumed to affect the long-term outcome, the objectives may be
revised. The organisations themselves are also composed of many actions that could
be described as ongoing. If an action follows the intended path it does not need to
be significantly revised or changed.
Information systems and management control

An understanding of the nature of accounting reports gives one additional
knowledge of the nature of accounting. For these reports are the direct outcome
of operating an accounting system. That is not the same as saying that
the objective of accounting is the production of financial statements;
fundamentally the objective is to make enterprise activities understandable.
(Littleton, 1953, p. 77)
An information system could partially be understood as organised information
management, partially as a technical solution and partially as a function that
supports professional knowledge. Overall, it should lead to different types of
information being used in the organisation. Organisations have associated
information systems primarily with the technical solutions that have made it
possible for a certain kind of data compilation from various databases. The informal
information management is just as important, even though it is not formalised and
organised in the same way. This can be traced to the evaluation of information
systems that often involves assessing the shape and structure of the data presented,
rather than understanding the context or the situation that the information system
should support.
Checkland and Holwell (1998) identify three key elements that can describe how
meaning is created, and purposeful actions are taken, with the help of an information
system. The first part consists of sense-making that takes place in organisations and
that leads to part two, meaningful action. These two are supported by part three,
information systems. In organisations, this can be seen and recognized when linked
to a specific employees work. As this is done regularly, various kinds of meaning
developed are ongoing processes where data is successively selected and given
interpretation, not only in some specific situations, but also continuously in
everyday life. These ongoing processes will result in different types of actions, some
borne from the analysis of the situation where the creation of meaning has been
given an important role. The various information systems developed in organisations,
both formal and informal, help the continuous sense-making process by providing
data that form the cornerstone of meaning-creation. In this way, a more
comprehensive picture of the three functions forms the basis for understanding
what is going on in the management of a business.
One could also look at decisions as an extension or summary of the methods that
the leader applies in business management, acting as an extension of the management
team. The methods are seen more as tools in efforts to lead the firm, and decisions
require actions to be taken, to which methods contribute. Similarly, actions are
partly based on decisions, but also on the preferences and aspirations conveyed by
management that can be seen as an expression of management, dealing with the
conceptual dichotomy of responsibility and risk, with learning and change.
Moreover, the individual at the centre, which in this case is the leader, continually
strives to act in a successful and meaningful way (Checkland & Holwell, 1998).
39
Decision and action thus have an important role in ongoing efforts at organisational
leadership; enacted by using the performance methods of management and its
expression.
In leading an operation, continuous kinds of values and judgments are
commonplace. These are analysed based upon past experience, as well as the overall
understanding and knowledge-bank that the leader possesses. For decisions and
actions to feel meaningful, an interpretation and decoding is required, which then
forms the basis of assessment. The construction of meaning that revolves around the
leaders experiences and interpretations thus becomes crucial for the opportunity
and ability to make decisions and act.
Understanding the context in which a leader operates is one of the most
important tasks in forming and leading a successful operation. Consequently,
planning and monitoring, decision and action are based on that interpretation. The
interpretation is also about making information and signals meaningful and taking
action, even though it almost always takes place unconsciously. Hence, a skilled
leader needs to practice such information de-coding, interpretation and analysis.
The meaning of our actions and of those around us is something we make: it
is an interpretation and not something that is simply given to us. The making
of meaning through interpretation is a skilled personal accomplishment
(Boland, 1993, p. 125)
The organisation itself is shaped by our social reality. We collect signals and events,
including in the form of the information contained in and around an organisation,
and create pictures for ourselves of the entity based on that information. This
information by itself is not meaningful until it is interpreted and given meaning. Our
perception of our social reality, such as the organisation and its activities, guides us
in our actions, in the decisions we make and the tasks we perform. While it may be
the leaders work of decision, action, planning and monitoring, a very central role
in the plan is the picture of the effect of the decision, which constitutes the idea
around the activities needed to achieve objectives. The image or the model becomes
a proverbial drawing to aim for, and then the outcome assessed. Our social life and
the structure of our social reality is based on formed opinion, and maintained by
the information processed whereby the interpretation of information becomes
effective in an entity such as an organisation:
This process of informing and being informed is central to our perceptions of
social reality. Arrangements for giving and receiving information form an
important part of the fabric of social life.
When interpreted, then communicated in meetings with other employees, stakeholders,
or in different documents, a story is told, shaped by the senders interpretation of the
social context and what is occurring there. It then creates a form of meaning about
what is going on regarding the activities performed in an organisation. The
interpretation and meaning is, in turn, the basis for actions, and re-interpreted in the
new conditions; our world changing bit-by-bit, constantly created and recreated. The
reality is produced by our interpretations and our experience, which then affects our
actions. In our stories, the images of ourselves are formed.
I accept that the production of lived reality is a hermeneutic or interpretive
process. The stories we tell give meaning to our experience of reality, and hence
shape and constrain what we take reality to be. What we take reality to be in
turn influences our actions, and in this way further shapes what reality will be.
The combined implication of these presuppositions is that we cannot disentangle
our experience of ourselves and the world we inhabit from the stories we tell
and the metaphors we embrace. Indeed, as Lakoff and Johnson (1980) remind
us, the essence of metaphor is understanding and experiencing one thing in
terms of another (p. 5). Hence, when the economist claims that the subject of
economic theory is but a convenient fiction, or that people merely act as if they
are intentional utility maximizers, the distinction is moot. We are the stories we
tell; what we would be if we told different stories is precisely the point.
(Shearer, 2002, p. 545)
The organisation and its employees then become a context where different
impressions and reflections come together, allowing several alternative meanings
and interpretations to be possible. It may also be that a leader or manager at a
higher level seeks interpretations in order to create a meaningful perception. This
process is a form of learning, both individually and for the group, where the
organisation itself becomes a system of interpretation. Various members of the
organisation, with discourses, meanings of information and impressions they have
accumulated, are, in this effect, the basis for action.
Daft and Weick (1984) argue that we should take organisations to be
interpretation systems in which members scan their world, collecting data
about it which is given meaning so that action can be taken and learning
achieved.
(Checkland & Holwell, 1998, p. 96, 97)
The leader of the group and the group, together create a meaningful basis for the
organisation to act, based on decisions and action. The created reality can be described
as socially constructed and is the reality from which different actors operate.
Reality is what we take to be true. What we take to be true is what we believe.
What we believe is based upon our perceptions. What we perceive depends
upon what we look for. What we look for depends upon what we think.
41
What we think depends upon what we perceive. What we perceive determines

what we believe. What we believe determines what we take to be true. What
we take to be true is our reality.
(Zukav, 1979, p. 310)
Employees and executives in various businesses want to act in a meaningful way
(Checkland & Holwell, 1998). This is done by operating the steering methods created
and recreated by different intentions in the business (Ahrens & Chapman, 2007).
Operational management hence moulds the organisation in that it creates the
conditions for common norms and values, and the procedures and systems for the
pooled resources are shared between evolving operational devices. Service line
management has been just that feature, to create conditions for joint intentions, as
well as for the purpose of spreading and using resources in an efficient and productive
manner. This means that the theories and approaches that apply derive a deeper
meaning, an approach in line with the reflective practitioner (Schn, 2003). The work
and the development of management control is not primarily an abstract theory, but
rather a practical application.
It is not just a theoretical aloofness that can be a concern when there is a
development of the working method alongside decision, action, planning and
monitoring. One who practices the ideas and theories that operational control is
based upon can also be affected by the creation of a distance between the leader and
the business he/she is set to lead. Modern business management is largely about
processing information where the information itself can become a substitute for
reality. The picture becomes more important and more real than the actual reality.
The more information we have about the world, the more we distance ourselves
from what is going on and the less able we become in comprehending its full
complexity. Information becomes a surrogate for the world what is actually
going on tends to be equated with what the relevant indicators (or images) say
is going on.
(Tsoukas, 1997, p. 833)
A successful business is, in many ways, synonymous with successful business
management. Success can involve both growth and profitability, as well as efficiency
and productivity, but making the right decisions and acting appropriately are
equally important. Management is therefore more and more about creating a
relevant and accurate understanding of what is going on in a business. The basic
accounting assumption, of a true and fair view, may very well be used as an example
of how various stakeholders in general, but perhaps most of all management in
particular, try to understand how their business is running. Activity steering
justification and relevance are, in turn, based largely on the extent to which they
can help the manager not only to understand how a method or technique should be
used, but also to explain why.
The strategic work of an organisation is based on several components, where one

of the most important is employee engagement. Nordstrom and Ridderstrle (1999)
emphasise:
Workers control the principal means of production In a modern company
70 to 80 percent of what people do is now done by way of their intellect. The
critical means of production is small, grey and weighs around 1.3 kilograms. It
is the human brain While the human brain is celebrated as the most
wonderfully designed, incredibly intricate mechanism, the matter of who
actually owns it is blissfully simple. It is not controlled by shareholder,
investment funds, or any other body. George Soros may be able to destabilize
currencies and markets, but he has no control over your brain. Governments
can issue all the propaganda in the world, but your brain is your own. It is
controlled for better or worse, by the individual.
(Nordstrm & Ridderstrle, 1999, p. 17,18)
One way to keep an activity vital is to provide staff at lower levels in an organisation
access to accounting information that they subsequently use in efforts to shape the
firm (Johnson, 1992). The staff will then be involved and engaged, because they
have information, know the business, and thus what is expected therein. In the longterm, staff need access to problem solving information, which is then translated to
competitive action. The challenge in many organisations is not to pretend that the
staff are involved and then continue to exercise the real power from a higher level
(Macintosh, 1994). The balance of power between the higher decision-making
levels in an organisation and staff at lower levels must be in balance in order to
achieve greater competitiveness. Swifter access to information and increased
participation in terms of strategic decisions mean that the business can respond
more rapidly to customer requests, thus increasing flexibility.
Notwithstanding, two-way interaction between the organisational levels also
means that discussion is opened for freer, more spontaneous, problem solving in the
group, where participation in its purest form means that the group has decisionmaking power (Argyris, 1954). Participation and commitment among staff start
when the people who work in the business are invited to participate and information
is made available, leading to an increasing genuine long-term competitiveness. This

way of looking at information management in strategic matters is different from
traditional information management. The flow from the lower levels of the
organisation, information on what has been achieved, and also information on
emerging threats and opportunities (Simons, 1995) is also explored. The way an
organisation chooses to work with the dissemination of information is a way to
signal the extent to which one is interested in involved and committed staff.
Efforts to engage the staff are essentially based on the staff wanting to get
involved. By extension of this argument staff are an autonomous entity, where they
effectively become their own managers. If employees, for example, who have
divided into autonomous teams, are not interested in managing themselves or
becoming managers, it is a problem (Ezzamel & Willmott, 1998). Despite being a
new kind of scrutiny, largely based on non-financial information with great
openness and more frequent reporting intervals, the staff are seen more as
individuals than team members in Ezzamel and Willmotts (1998) study. There is,
thus, a risk that individuals look more to self-interest than to the organisation as a
whole, and groups at best (Emmanuel, Otley & Merchant, 1990). Efforts to create
a strong commitment therefore begin with management making conscious choices
about what staff should be given additional powers (Lind, 2001). The enlarged
powers and the increased availability of information make stronger positions in
relation to the lead built up by the staff, which for example may show up in
financial information. Lind (2001) carries the view, however, that the work of
empowerment leads to dramatic improvements in productivity and quality of
production. A prerequisite for a successful effort to engage staff is based on
management finding and encouraging those who want to be involved.
Organisational structure
In order for an operation to be conducted in an efficient manner different entities
or units are usually required. A manager chooses, for example, to divide the
operations according to the duties of a production unit, or according to location.
To coordinate the activities, you select one, or a number of people, where the basis
of your decision is upon who may be more forceful and have access to more
information than others, in order to lead the work. The structures that develop
through different types of subdivision and the allocation of competences can be seen
as a way to manage and lead an organisation. The structures become an important
part of efforts to make the organisation or company clear, both to those who work
there, as well as those from outside.
It is interesting to see how such a structure has evolved and how organisations
adopt it in different ways. It can be about how the employees perceive and relate to
it. Their ability to perform their duties may be affected by the structure that
management has chosen to develop. This in turn, leads to production largely
45
dependent on the structure, supporting the type of value that will be created, which
will be the end product.
Another area of interest is how the levels created in the structures are able to
handle the business. Different powers and potential for decisions enable the
operation to be divided into what are called hierarchical levels. It then becomes
important to find ways to deal with these differences when it comes to influencing
the business. The contact to be made between the levels becomes an important part
of the companys overall ability to get the business to work well. It is also essential
to develop a language between levels that becomes part of contact with one another.
How power is expressed becomes part of the language in which employees at
various levels can interpret a higher hierarchical levels perception of this form of
communication. In most cases, the structure and different levels are relatively
pronounced and obvious, but there is also a less well-defined dimension: namely,
how responsibilities have been allocated and how they are perceived. Communication
is necessary when you want to highlight the underlying commitment to make
participation evident among staff. An important part of the responsibility is how it
becomes clear to a co-worker, as well as how the employee can perceive the
boundary between adjacent areas of responsibility. In some cases, the division is less
important, but what matters is the common responsibility for a part of the
business.
One of the earliest texts describing organisations and how different structures are
used to control and coordinate a comprehensive business is the Bible. The Old
Testament describes large movements of populations, legal regimes, as well as
different types of plagues and war. Ever since then, and especially in the last century,
the organisational form has been studied more specifically, and has led to a vast
amount of knowledge and text being produced about the organisation as a
phenomenon.
An activity can be managed and developed in different ways, whichever
leadership philosophy a leader adopts (Armstrong, 1985). When activities are
organised along a specific leadership style, groupings, dependencies and
independences arise, which must be managed by the leader (Mintzberg, 1983). This
can lead to problems, for example in the flows between the groups or in the contact
between specialists. Different types of control systems, or formalised behaviours
and routines, can limit the extent of the problem even though it still remains.
A way to deal with such network problems yet also have an independent
grouping, is by working out clear organisational structures. Such structures can be
built on a line and staff function, where production takes place in a line, and
processes and operations are supported by a staff member. Another structure is
based on a matrix where different groups contact each other in different dimensions.
Furthermore, an example of a structure is hierarchical, based on the different levels
of authority created in a business. The organisational structure will then work out
a formal normative arrangement (Egeberg, 1984). This type of structure creates an
expectation of control and behaviour (Simon, 1960), or creates the most stable
possible patterns of behaviour (Mintzberg, 1979). This can be seen in three types of
functions in organisations (Jacobsen & Thorsvik, 1998): stability in behaviour so

that it becomes to some extent predictable; secondly, a limiting function where an
employee will work on certain tasks; and thirdly, a coordinating function which
allows different behaviours to be synchronised.
Highly structured organisations develop into different types of bureaucracies, a
concept discussed by Max Weber (1947). In structured organisations, employees are
part of a rational activity and their actions are governed by written rules and
procedures. These routines and rules are managed and archived by a particular
function, an agency, according to Weber. In addition, a distinction is also made
between their private affairs and the interests of the organisation. The roles become
impersonal and how an employee carries out his/her work is supervised by others.
This way of looking at a controlled organisation has been called a mechanistic
structure (Burns & Stalker, 1961), or a mechanical bureaucracy (Mintzberg, 1983).
Characteristically there is a high level of specialisation in the firm whereby
different employees have different tasks. This is supported by strong formalisation
where these duties are standardised in a precise manner. Employees can then be
grouped according to their specialist skills. Because of a high degree of formalisation,
orders are given down the organisation from a higher level. The higher level also
making sure to get the information needed from lower down. Another important
function is to evaluate lower level performance and thereby, the emphasis of the
firm is located in vertical structures. This way of looking at levels and dividing them
by the authority to make decisions is called a hierarchical structure, where
organisational position becomes very important. This type of coordination shaped
hierarchy has, among other things, been defined by Weber (1947) as: A firm
organized system of authorities superiors and subordinates the lower rates
controlled by the higher...
For this type of organisation to work, akin to deciding the number of children
(employees) to a parent (leader), the received designation control span is paramount.
Early writers in organisational theory tried to put a figure on that number. Fayol
(1949) said that six to eight people were appropriate, but at most twelve people,
while writers such as Urwick (1944), who had a background in the military, said
that the ideal was five or six subordinates per parent. With the help of this division,
the organisation could then be built up, where each parent in turn had a parent who
had the same number of subordinates within the various levels. This theoretical
school came to be called the administrative school, and is the basis for many of the
relevant leadership theories today. The implication is that an organisation divided
into small groups requires extensive administration. The ambition in business today,
however, is to reduce administration, making the question of the subordinate
number rather about how many a manager can in fact manage, rather than the most
appropriate number (Kreitner, 1995). Increased decentralisation may be linked to
the increased use of computers, which in turn, can be connected to a more
comprehensive knowledge-related workplace (Hitt & Brynjolfsson, 1997). Although
the hierarchical concept has been questioned for many years, it is still a form of
organisation creating efficiency. There are writers such as Jacques (1990) who holds
47
that in large organisations the hierarchical models release energy, creativity,

rationalise production and boost morale, if the firm is properly structured.
In a hierarchical organisational structure, an idea developed which later became
central to modern forms of corporation namely, how to look at authority. A simple
and basic definition is that authority is the right to control the actions of others.
This is then inserted into a context of the hierarchical organisation through various
order channels, where a certain hierarchical level has the power to say to a lower
hierarchical level what should be done. Fayol (1949) contended that there were
certain conditions linked to the way a social organisation would head. First, various
functions and operations are handled by specialists one could also distinguish
between the act and authority where orders or instructions would come from one
source and the individual interests would be subordinated to the common objectives
and ambitions of the firm (Hoskin, 1991). There was a desire to distinguish between
the act performed by a subordinate and the decision or instruction made by a
parent, something that many writers have since come back to. Taylor (1911) said
that the work would be planned in detail by supervisors, i.e. the higher hierarchical
level, and communicated in writing to the employee.
When a clear division between decision and action was able to generate greater
efficiency, it became one of the main arguments for the hierarchical organisational
model. The right or authority to make important decisions could then be controlled by
a central body or person who, with the other parts, obliged the subordinates to act upon
decisions, exerting a very great power. Decisions then broken down into the organisation
as a chain of partial decisions, will also be clearly power-related to a particular goal. In
addition to coordinating the subject, there are not many sound arguments, except
perhaps to a higher hierarchical level enjoying power (Mintzberg, 1983a).
When the power to make certain decisions lies with a person or a feature found
high up in the hierarchical structure, this is called a centralised organisation. With
this, many writers point to the problem of the important decisions taken at the
central level, as Mintzberg expresses:
Why, then, should an organization decentralize? Simply because not all its
decisions can be understood at one center, in one brain. Perhaps the most
common error committed in organizational design is the centralization of
decision making in the face of such limitations. The top managers, empowered
to design the structure, see errors committed below and believe that they can
do better, either because they believe themselves smarter or because they think
they can more easily coordinate decisions. Unfortunately, in complex conditions,
this inevitably leads to a state known as information overload: The more
information the brain tries to receive, the less the total amount that actually
gets through. People at the bottom of the hierarchy with the necessary
knowledge end up having to defer to managers at the top who are out of touch
with the reality of the situation.
(Mintzberg, 1983a, p. 96)
The opposite of the centralised organisation is the decentralised one, where

employees at lower levels have power to make important decisions. This allows
power to move down the organisational hierarchy with several different effects.
Among other things, stimulated motivation in the organisation means that it is able
to respond more quickly to change. Although the centralised and decentralised
entities are often seen as opposites, they can also be seen as two poles where
different organisations exist along a spectrum (Kreitner, 1995, Mintzberg, 1983a).
In the hierarchical organisation, whether it is centralised or decentralised, decisionmaking is based in the office or position you have. The power to make a particular
decision is linked to a particular function in the organisation, which becomes the
starting point of a power source (Bolman & Deal, 1991).
There are in addition to this, several other power bases; starting points for
power or authority. For example, it can be about control over resources or goods,
Etzioni (1966) calls this utility power. Another power base is the control of
knowledge or information critical to the organisation; whereby knowledge is power
and it is called information power by Pfeffer (1992). This has also been studied by
Pettigrew (1973) who concluded that strong specialists in an organisation can
control the flow of information, such as the basis for decisions by non-specialists.
Although power and authority can be seen as synonymous, there are differences
between the concepts. The power, or powers, can be obtained from a higher
hierarchical level. Authority, however, is obtained by the employee (the child),
which allows one to see the child as the source of authority (Barnard, 1938).
When different structures and patterns emerge in an organisation, a certain
authority is linked to positions in the structure. The authority applies to a particular
function in the organisation that not only has the power to decide, but also the
responsibility to do so. The actions and choices made by the manager in the unit
will be held responsible for something becoming evident through the various
operational processes and performance reports. An example of this is the budget
work that takes place in organisations, where authority and responsibility have
been switched to the business units (Emmanuel, Otley & Merchant, 1990). The
business unit can also be described as a responsibility centre. The responsibility
centre (Higgins, 1952) should be responsible for a certain cost, an investment, or a
certain profit or turnover (Anthony, 1965). This description can be compared with
the one developed by the Alfred P. Sloan (1964) which called for profit centres, a
common term used today.
Robert Anthony (Macintosh, 1994) has developed the perception of responsibility
associated with a particular unit. The emphasis of Anthonys vision of responsible
entities is that they build up the organisational hierarchy and create parts, each of
which has its own goals. Each unit receives a certain input to generate an output
(Anthony, 1995) and consequently organisations develop responsibilities customised
to the overall structure. However, it should be recognised there are also examples
of structures adapted to the responsibilities previously found in an organisation
(Emmanuel, Otley & Merchant, 1990). Part of the development of responsibility in
an organisation is the view of the devices performance, and the performance of the
responsible person (Parker, Ferris & Otley, 1989).
49
What the unit produces is seen as a result of the work by the person responsible,
while there may be several other dimensions that control performance. It is difficult
to report on the accomplishment (Amey & Egginton, 1973) which is really about
the degree of control by the responsible person (Solomons, 1965). One of the
earliest quotations with regard to the reporting of responsibility is clearly linked to
a specific persons actions. These writings are from accounts which existed in
Athens several hundred years before the birth of Christ. The aim was not to report
to third parties or to create a basis for taxation, nor for the purpose of determining
income, but rather to deduce losses from theft and fraud (Chatfield, 1977). This
differs, to a large extent, from the approach Anthony developed, as he assumes you
want to control and increase the effectiveness of a particular device or manager via
reporting responsibility.
While employees shape the organisation, they are also formed by it. This
situation may manifest itself in that it shows involvement and commitment to the
task, or the responsibility that has become a side-effect. In this process, where
organisations are constituted, individual identities are also shaped that become part
of the way you then choose to work. These are partly based on the values and
norms which then form the basis of organisational roles. The group also becomes
an important part of the whole, in which different people find support for their
identity.
The interesting thing is then to see how different factors influence and motivate
individual performance in various ways, something that can be done more or less
concretely. The relationships that develop between the individual and the
organisation become a channel for the different factors that motivate employees.
The social conditions that exist in the organisation develop the idea a co-worker has
about him/herself, and the context he/she is in. It is also interesting to study how
the behaviour of different groups in an organisation is influenced by the individuals
and conditions that are given; leading to the development of a group identity.
A social perspective
Organisations can be described in a formal way in which words like structure and
hierarchy are important. But, there is also a more informal side to companies that
has to do with the individuals who work there. Employees are affected and involved
in various ways; they have different roles and develop an identity, which in turn
helps them work together in a group. In an organisation there is a common goal or
objective that the group of individuals pursue together. Each individual also has
his/her own ambition or desire to belong to the group and be part of the business.
In order to work in the best way possible, it is required that the group forms a
shared ambition, a goal that stands above that of the individual. Within the
framework of managements work, it involves finding opportunities where the
organisations goals are discussed and clarified; it may also involve evaluating and
perhaps revising an objective. In its simplest form, it is about deciding where and
when a goal is determined, and the ambition defined. Managements work is also
about ensuring that, as far as possible, employees embrace the organisations goals
as their own.
To understand what it is that makes people act can be the starting point of
discussion; what it is that motivates them, seen as a psychological phenomenon. In
a context where it is expected that an employee should be involved and engaged, an
internal motivation and a willingness to develop is required. This can be seen as an
internal psychological process creating a force to make us act, which is then
maintained and amplified (Weiner, 1992). In an organisational context, this
becomes clear when it comes to improving the performance required by some
employees for the firm as a whole to succeed (Landy & Becker, 1990). A synonym
for motivation is commitment, a concept that is also assumed to lead to improved
employees performance. One interpretation of commitment is that it is about the
extent to which employees identify with the organisations goals and values (Lincoln
& Kallenberg, 1990). The organisation may then have different properties and
methods, resulting in increased motivation and higher performance.
One way to raise motivation is to work with goals, which among other things,
Latham and Locke (1979) highlight. These authors argue that there are three factors
influencing the extent to which work goals can motivate employees. Firstly,
objectives must be specific and clear; secondly, a greater motivation must be created
if, for example, there is a deadline linked to the objectives; and thirdly, it is the goal
itself that is perceived as a challenge and thus motivates staff. Other organisational
factors influencing motivation include: the organisational structure, organisational
culture, job design and the different types of reward systems (Jacobsen & Thorsvik,
1998). Studies have shown that various employees feel motivated in different ways;
partly linked to the task and partly linked to the circumstances surrounding the task
(Herzberg, Mausner & Snyderman, 1993). Factors linked to duty, so-called
motivators, can be recognition, responsibility, performance and promotion, while
factors linked to conditions on the job, so-called hygiene factors, may be pay, work
management, corporate politics and interpersonal relationships between the upperlevels and subordinates. Another way to explain motivation is the creation of a
psychological contract between an employee and the organisation (Schein, 1980).
This contract or agreement contains specific components, such as pay and working
time, but also indirect components such as a certain autonomy and opportunity to
develop. Motivation is then more about achieving a certain level of job satisfaction,
which in itself can lead to better performance but also include an inherent value
(Argyris, 1982b).
Various organisations develop their members different perceptions about
themselves whereby different types of categorisations are made, described as social
identity (Ashforth & Mael, 1989). occurs through different social categories, where
one classifies oneself according to various properties. These are then used to locate
the employee socially, but also for systematically defining other affinities. In
addition to pure social affiliation, personal identity is also shaped, that is, certain
51
ideological characteristics which are then perceived as identity. The perception of

ones own identity is not always clear, but may consist of multiple social identities,
more or less related, where importance varies with circumstance (Alvesson &
Bjrkman, 1992). The question of self-identity is therefore important to know who
you are, as well what one can and should do; something that continually shapes and
affects ones life (Polesie, 1990). This subsequently relates to how roles are
defined.
The term role is used to refer to (1) a set of expectations concerning what a
person in a given position must, must not, or may do, and (2) the actual
behaviour of the person who occupies the position. A central idea is that any
person occupying a position and filling a role behaves similarly to anyone else
who could be in that position.
(Harrison, 1976, p. 16)
Roles are governed by the social conditions that apply to a particular service or
position. These are then amplified by the norms and values that apply in a particular
context. Norms govern, among other things, what is considered acceptable and
unacceptable (Harrison, 1976). They can be defined as general standards for those
things deemed good or bad in a specific social context, which may differ between
organisations and cultures. The standards will then be a part of the principles,
guidelines and limitations of behaviour that pertain in an organisation (Jacobsen &
Thorsvik, 1998). These can be seen as formal and can, for example, be prepared in
different rule sets, but might also be informal. Standards differ to some extent from
the values within an organisation.
The valuations are based on what is believed to be good. These may come from a
conscious choice about what should be considered good (Schein, 1985), but can also
be expressed as a tendency to prefer certain states over others (Bang, 1988). The
underlying assumption is that different norms and values govern actions, and this
assumption has been questioned (Argyris & Schon, 1978). Instead, we mean that
values are something that you talk about, and consider to be fine, while in fact the
reality is that others opinions control actions.
Norms and values become especially clear in groups where different types of
expectation allow members to choose to act in a certain way. The norms of a group
can develop in different ways: by direct statements or directives and by early
positions, but also through the experiences of previous group events, composed of
different team members, which are brought into a new one (Feldman, 1984). The
group itself becomes an important part of an organisation, and much work is done
within its constellation. A group could be formed to accomplish a task, but it is also
about coordinating various members abilities and actions, which can be described
as a process (Martin, 1991). A definition of a group can be two or more individuals
who perceive themselves as a group and interact on the basis of relationships and
stable patterns of behaviour in order to achieve common goals (Barron, 1986).
There are various factors that influence group behaviour and performance. It may
depend on group size, composition, roles, norms, goals, cohesion, leadership and
surroundings (Parker, Ferris & Otley, 1989).
Another important factor is the extent to which different members of a group see
themselves as part of it, thereby increasing their own, as well as the groups, identity.
This is, for example, affected by the social conditions that facilitate the group, the
distinctness of the groups values, the status associated with the particular group, as
well as how the group relates to and identifies with other groups, the so-called
reference objects (Ashforth & Mael, 1989). When a member of a group feels that
he/she belongs, he/she consequently feels involved, and different feelings of loyalty
and commitment to the group develop. This can be achieved with groups that have
a direct social relationship, but also where there is a direct interpersonal interaction,
for example, by knowledge affiliation with a particular profession, without
belonging to it (Turner, 1971). The faction can also create an identity, seen as
organisational, which deals primarily with how members classify themselves
(Alvesson & Bjrkman, 1992).
Different organisational leaders strive after definition of the organisations key
features and character, to help and guide members conduct. The identity can then
be divided into one which is public, about the attitudes of the corporation, and one
which is private, about how the organisation sees itself (Albert & Whetten, 1985).
The groups organisational identity and its strong community via a developed team
culture, render coordination of the group and its work easier (Hofstede, 1991). This
can also affect how the group chooses what information is important and what
should be excluded (Janis, 1982, Schein, 1980), partly based on the information
that fits with the fundamental values and norms of the organisation. The information
deselected becomes a blind spot for the organisation (Kotter & Heskett, 1992). In
a group, different types of social influence or control develop that allow the group
to perceive certain issues in the same way, and therefore act more effectively. This
is done by members being influenced by others, but is also due to the influence of
others (Martin, 1991). Basically, it is about values and attitudes changed or
controlled, which in turn lead to individual members accepting and sharing those of
the group. Social control may occur through different types of power exercised by,
for example, reward or punishment, and partly by obedience to authority. The
groups also establish different kinds of roles that constitute how the various
members relate to each other, where the leaders role should be seen as one of the
clearest.
A decisions context
One of the most fundamental questions that early authors in the 1960s busied
themselves with was related to how policymakers reacted to uncertainty. Herbert A.
Simons (1960) research about decision-making, according to him one of
53
managements main tasks, was a process that could be performed in a relatively

rational way. The first step was the decision-maker looking for different types of
events in need of decisions. When such events were discovered, they were then
analysed and developed, and various types of actions that would satisfy the needs
relating to a decision were created. In a third and final step, a choice between the
various actions that had been developed was made. What differentiates Simons
model from earlier decision models is that the election was not made solely on the
basis of maximum economic benefit. The model also involved an alternative which
achieved sufficient satisfaction. This was partly based on the idea that the decisionmaker could not grasp all the variables that had to be processed in order to make
an optimal decision, and was therefore contented with a satisfactory option, based
on a range of variables. Simon also said that a decision could be seen as programmed
or non-programmed, which in turn, derived from the extent to which they might be
structured and routine.
This thought has influenced theories in other areas, such as management control
(Emmanuel, Otley & Merchant, 1990). Another way to look at decision-making is
that the confusion and change around a decision is too large to be able to be seen
as rational. This is based on the idea that a decision is much more complex than the
simple models suggest (Cyert & March, 1963). This approach to decision-making
is based on the existence of different types of cognitive limitations and political
power games, where negotiation and bargaining are distinct features. March and
Olsen (1976) also believe that a decision can be seen as a rational, intelligent option
based on a specific object or so the organisation can move away from a purpose.
This can be realised by various objectives viewed as hypotheses to work with, and
one sees the intuition as something real and permitted in a decision situation.
Different experiences can then be seen as memories that limit, but also as wisdom
achieved through continuous learning. Rational negotiation can also be noted as a
mental process within the structures of complex sequences of social action, thereby
giving them meaning (Klein & Hirschheim, 1991).
A decision situation is characterised by different traits (Vickers, 1995). Each
situation is, out of a deviation, generated in a unique manner at every opportunity,
allowing different mental skills necessary to handle the conditions surrounding the
divergence. The uniqueness and complexity within a certain situation relate to, and
are interpreted, based on the understanding and beliefs that the decision-maker
holds. Those who create the decision itself are affected by the situation in an
interplay between innovation and learning, which can be seen as a mental process.
The expectations various stakeholders have of each other, and the conviction that a
certain operator will act in a certain way, are also important for the decision
situation.
The perceived mechanism of a decision transforms the thoughts and ideas of an
organisation (Brunsson, 1989). In some cases, however, the decision has an inverse
function, where there are interpretations of what actually happened, becoming a
symbolic decision (Peters, 1978). A direct consequence of this may be different types
of actions that should theoretically implement the decision in concrete activities,
whereby those actions become an important part of organisational success.

Furthermore, the monitoring of these can then be developed by the entity, in a form
such as action controls.
Action controls are the most direct form of control because control involves
taking steps to make certain that employees act in the organizations best
interest. With action controls, the actions themselves are the focus of the
controls. Although they are commonly used in business organizations, action
controls are not effective in every situation. They are usable and effective only
when managers know what actions are desirable (or undesirable) and have the
ability to make sure that the desirable actions occur (or that the undesirable
actions do not occur).
(Merchant, 1998, p. 27)
One way to check actions is through the various types of restriction and regulation
that govern individual behaviour in the organisation. These may be purely physical
barriers but can also involve different types of administrative procedures that allow
a certain pattern of behaviour to be controlled, for example, by dividing a task into
several stages with different employees responsible for different parts, thereby
controlling each other. Another is when a certain action or plan must be approved
before implementation. Yet another way is based on the demand of some
responsibility for the acts to be performed. For this to work there must be a clear
definition of what is acceptable, and this must be communicated to employees
(Merchant, 1998).
Individual actions can also be seen in relation to those taking place throughout
the organisation (March & Olsen, 1976). The starting points are the individual
action models that different employees follow, which then lead to an act. These are
then inserted into the overall conduct of an organisation, which in turn creates
reactions that stimulate and influence the individual action models. Hence, a
learning process, or a complete learning cycle (Hedberg, 1981), is established.
Action models are based on the idea that some activity inside peoples heads can be
related to their actions, which may be partly conscious and partly unconscious
(Argyris, 1982). Various anomalies assure the actions take corrective measures,
which can be described as learning.
The ability to change and influence these models, that is, values and norms, in
turn affects the conduct underlying the learning model and is called double-loop
learning (Argyris, 1990). This model is different from a simple idea where various
errors and mistakes do not affect values, but only direct actions: single-loop learning
(Argyris & Schon, 1978). Actions may also be related to different time periods
where they have different effects on the organisation. The most common divisions
are based on a strategic long-term perspective, a tactical perspective and an
operational short-term perspective (Anthony, 1965).
55
In some cases, it may be difficult to achieve the organisations intentions with a

certain decision and subsequent actions. This may be due to different types of
executive problems, for example, access to resources or political disagreement
about a decision (Jacobsen & Thorsvik, 1998). It may also be that the decision is
of a symbolic character and should show that you have to act rather than enforce
action (Edelman, 1967). These differ from the instrumental decisions that are
intended to solve problems whereby the symbolic decisions will lead to a consensus
(Pfeffer, 1990). When the demands of such external actors become too extensive
and interfere with the decoupling of internal process decisions, this can be seen as
an explanation for the weak causal link between thought and action in some
organisations. The decision may have marginal impact on the actions of the
organisation, and a kind of hypocrisy develop in the organisation (Brunsson, 1985,
Brunsson, 1989).
The traditional codes and ways of acting may take a long time for a new
employee to learn, but at the same time they are a prerequisite for becoming a part
of the organisation. Norms, values and a desire to be a part of the organisation
create the conditions of control. A variation on this form of control is the collegial
control that may apply to a group of employees, defined as a group because of the
skills and accomplishments they have. The desire to belong to the group, relating
perhaps to activities based on skills, means that control is directly or indirectly
maintained (Macintosh, 1994)
The process of monitoring (Otley & Berry, 1980) requires the cybernetic model
of feedback control (Luckett & Eggleton, 1991). This occurs primarily in various
forms of feedback in which information about a business and its outcomes are
brought back to management. A typical model is based on a mechanical, cybernetic,
feedback where the information is received into the organisation via the control
system and then compared with the planning system as the basis for various rewards
(Flamholtz, 1996). In this model, a formal performance measurement system plays
an important role in the process of feedback. Feedback itself takes place in two
dimensions, to evaluate and to provide a basis for correction. Information about the
accomplishments is retrieved, mainly from accounting systems but also from more
general information, where other formal quantitative information is stored. The
model is an example of a mechanical calculating feedback that influences three
functions: the evaluation of reward, planning and actual operations.
The way to work with feedback is greatly influenced by how it is seen in
organisational culture (Levy & Williams, 2004, London & Smither, 2002). Culture
influences how people search, understand, accept, use, and respond to formal and
informal information. If there is a positive culture, it is characterised by both
management and employees comfortable in the role in which they both receive and
give feedback. If, however, the culture and the attitude of management is that
employees are driven by a strong vested interest, they do not seek occasions for
feedback (Morrison & Milliken, 2000). Effort to receive feedback is, in many cases,
a positive action where, for example, a manager may ask for more comments other
than those presented in reports (Briers, Chow, Hwang & Luckett, 1999). Often, it
is feedback from superiors, and not from managers at the same level, or from
employees at lower levels, that is requested, or given (Ashford & Tsui, 1991).
Organisations with frequent communication between different levels of management
often have a greater openness to re-engage in an informal plane (Gupta,
Govindarajan & Malhotra, 1999). To get the opinion that a function is required in
many organisations, analysis and pondering regarding culture enable and create the
conditions for the functioning of feedback, both formally and informally.
A synonym for feedback is communication. This is especially evident when
analysing communication from a higher to a lower hierarchical level (Katz & Kahn,
1978). Although communication upward in an organisation can be characterised as
feedback, it is, to a greater extent, management wanting to know that instructions
have been properly understood, described as two-way communication (Williams,
1991). Well-functioning communication between different parts of an organisation
leads to motivation being created and increased. This can be described in models
relating expectation and satisfaction (Wright, 1991).
An employee who has received a greater responsibility in an organisation needs to

use different channels to collect information and form an opinion about what is
going on. In many cases, the unique traditions specific to each company are the
basis for information collection, but there are also some comprehensive and general
techniques, models and ideas. Thus, organisational leadership is affected by the
traditions of reporting available. Planning activities and then following up on what
has been achieved, both financially and non-financially, are important parts of the
leadership work in an organisation. Models that are applied to pricing and cost
management, i.e. calculation, also affect the material used to conduct a business. In
order to manage a business effectively, procedures and structures are required to
facilitate its management.
Every organisation has resources in need of management in one way or another.
In organisations that have a beneficial interest, resources shall generate more in the
form of profit, in which the owners have vested interest. Internally, there are various
ways to look at how resources should be allocated, and to whom, or which
department, and who requires access to these. Different choices can be traced to the
visions or goals set out in the organisation. Ambitions realised through resource
allocation and priority should be assigned a specific interest. Resource allocation is
a way to examine the perceptions about how a business works, and what you need
to do to make it work better. This idea can be seen as an attempt to manage
different variables or key areas that could affect the business.
Goals and ambitions are evaluated by using different types of monitoring. The
activities and documented actions are based on measures using various compilations
such as reports, which in the simplest form are centred on financial statements. In
planning, ambitions form the basis for quantified planning, such as profitability
requirements, which can then be compared with the outcome for a planned period.
An integral part of the work on leading an activity is that after a plan has been
established, it must be followed up by an evaluation. This has been described as
operational control, and is composed of two sides of the same coin: planning and
control.
Thinking and acting strategically

Plans are not a blueprint to future success but rather an interpretation of the past
extended into the future.
(Weick, 1969, p. 69)
One area, since concepts such as management control have begun to be used, a
central and natural starting point, is the work of strategy. Early authors such as
Anthony (1965) emphasised that management control is a function used to
implement strategic decisions. In recent years, efforts to establish strategic ambition
have become increasingly important and ideas like the balanced scorecard have the
primary task or function to translate strategy into action (Kaplan & Norton, 2001).
Leading complex organisation begins in many cases with a strategic ambition,
which is then channelled into decisions and actions. Management is also based
largely on the employees and staff involved in the strategic direction, and in
comparison to the external environment. However, the strategic and long-term
planning remains in many respects, the ambition and the direction with which top
management works.
A central part of the process of business and management control is the act of
management itself. One way to describe this supervision is that it requires proximity
to the business and the activities occurring there (Mintzberg, 1973). The action is
preceded by a decision which in turn is preceded by some form of long-term
ambition; a strategic goal (Checkland & Holwell, 1998). There is really no
contradiction between the long-term, strategic reflective ambition, and the daily
details that manifest themselves in action. Mintzberg believes that it is precisely the
reflection and act that characterise strategic planning:
Conventional planners may believe that managers are too involved in the
details to reflect. But effective managers may know that only by being so
involved can they reflect. To think strategically, in other words, they must be
active, involved, connected, committed, alert, stimulated. It is the calculated
chaos of their work that drives their thinking, enabling them to build reflection
on action in an interactive process.
(Mintzberg, 1994, p. 291)
Within any decision there is a dimension of the future, and therefore not the
strategic ambition; in other words it is just a future ambition without an aspiration
to reflect todays decision (Drucker, 1959). The decision itself makes the things
arising from it become part of the future, whether it is in the direct future or the
longer term. The concern with the plan is that it becomes an abstraction of a future
state. The strategy is a hypothesis that represents the organisations ambition to
meet perceived goals (Olve, Roy & Wetter, 1999). Then, when the hypothesis is
tested, the result is the basis for new assumptions that are subsequently tested, and
59
a learning process occurs. This is likened to firing a weapon; see where it hits and
then repeat fire and check again (Peters & Waterman, 1982). Even though the
decisions themselves can be viewed individually and decoupled from the person
making them, as well as from context. Decisions become more meaningful and
interesting when the ambition behind them, and the actions that result, are
considered.
Many scholars and writers especially in the American tradition have seen
strategic work as something objective and almost mechanical, occurring outside
subjective perception. One writer, who has firmly turned away from this view of
strategy, is Macintosh (1994). The starting point for his argument is that the work
of management and staff performance can be better understood if one also looks at
how the individuals subjective understanding has built up. This research tradition
is called the interpretive approach, the interpretivist paradigm, and it is also
usefully studied within Financial Management and Accounting Research (Chua,
1988, Covaleski & Dirsmith, 1990). The strategic ambition is then no objective
absolute, but better understood in relation to the individuals who work with it.
Fundamentally, it is a strategy of the major problems and challenges related to how
an organisation sees and defines itself in relation to its environment, as well as how
various phenomena and events in the environment are understood, to create
meaningful perceptions to be acted upon (Macintosh, 1994). Decisions and actions
shape and reshape the organisations environment, new parts are broken out to
create meaningfulness and ultimately action. Individual perception accounts for
why certain decisions are made and the derived actions, and therefore helps us to
understand strategy and the ambition behind decision-making.
A common way of looking at the strategic work is as a process, in its simplest
form consisting of two steps: first formulated as a strategy and then implemented
(Andrews, 1971). This logical and rational picture of how management teams work
is questioned by scholars who argue that it is instead about dealing with vague and
sometimes conflicting opinions and points, where policies and decisions cannot be
taken without the emerging guiding hands (Whittington, 1993). A common way to
describe this unstructured process is by using the metaphor of garbage cans, where
four different phenomena come together namely, problems, solutions, actors and
options (Cohen, March & Olsen, 1972). When these four elements meet, they are
mulled against each other regarding decisions and actions, which for example may
occur at a board meeting, or in a corridor, where two colleagues encounter one
another. A similar approach means that decisions do not actually lead to action, but
rather may stand in the way of the actions required (Mintzberg, 1990). Decisions
are not necessarily based on policies and strategies, and actions are independent of
them. The ambition may even lead to other actions becoming relevant. One way to
look at decision-making and action in relation to the strategies is that they are not
fully rational, logical, or take place in a well thought-out process. More or less, they
live a life of their own.
Work on the strategic ambition of a firm, and the decisions and actions arising
from it, can largely be described as a chore, rather than a strategic decision taken at
a specific moment. Reactions to changes in the environment then become a way to

act on strategic routines, which are both based on the decision, and routine as an
experience repeating itself, of which the decision is part (Nelson & Winter, 1982).
An expert in one area has so much experience in that field that the decision becomes
part of a routine, taken more or less unconsciously. With this approach, there is also
the thought that a strategic ambition is not definitive, but a work in progress, where
it must continuously change, in contrast to those decided upon at a single time, with
a clear choice for a well thought out decision-making process (Pettigrew, 1990).
With the experience of acting strategically, the individual decisions become less
important; seen instead as decisions in a historical context where they become part
of the strategic ambitions routine.
Strategic work and long-term planning is of paramount importance to modern
organisations. More and more work is now about planning for an activity, which
in many cases takes place in a constantly changing context. Just as the Soviet Union
in its time had big troubles with its five-year plans, organisations not actively
working with their strategic positioning worry when expectations from the
environment change. The concept of strategy comes from military language and
refers to the ability to win a war with the help of a battle (Macintosh, 1994). Here,
the emphasis is really on the battle technique used, which ultimately leads to the war
being won. The metaphor of the battle from a business perspective is very interesting
and has occasionally been used to describe what is primarily happening in the
market (Bengtsson & Skrvad, 2001). Although much of the strategic work is
anchored in the organisation, it is still the top management who have the overall,
long-term gaze.
One way to try to understand how goals work in an organisation is by seeing
how objectives are developed; the process that precedes a certain goal. Various
actors and stakeholders in the organisation are involved with different aspirations
that together create a whole, the objective. However, the goal can also be seen as
both economic objective related to the financial resources available within the
organisation, as well as a wider objective of a vision that will lead employees to act.
How different resources should be managed is another important area. Different
resource types may need to be prioritised in different ways, where certain resources
are consumed and others managed from a long-term perspective. A third interesting
area is how the organisation perceives various relationships that create profitability
and contribute to the success of the business. Different variables are linked together
in a whole, or in a relationship, creating an understanding of the activities. This
successful understanding is then transferred to action in the various kinds of
operations. Common to these parts objectives, resource management and success
models is that they partially control how business should be conducted. An idea
or vision is translated into resource allocation where different metrics or key areas
receive their award by the priority given to the area and vision. The assignment
takes an indirect position in terms of how you look at the business and how it
should evolve. Individual values of the decision maker become part of the resource
handling and priority given.
61
To be able to direct and control an activity, goals are needed that can serve as a
reference point (Emmanuel, Otley & Merchant, 1990). However, the concept
targets are perceived and interpreted differently depending on the context used. If
we use a football metaphor, every part of the team can be seen as a small cog
functioning in order to achieve the goal that the opponents are defending. The goal
and the way to reach it are clear to the team. However, what is needed to get the
ball rolling across the line varies depending on the actions and conditions that
appear on the pitch. In its simplest form, it is the objective description of a desired
future state (Etzioni, 1966), or something you desire to reach (Hall, 1975). Goals
can be seen as symbolic targets or operational objectives, i.e. either as official policy
objectives that the organisation is expected to pursue, or goals that can be related
to the actual deeds of operations (Perrow, 1961). The targets may apply to an entire
organisation (Thompson, 1967), but will be meaningful when converted into the
individual goals of employees (Cyert & March, 1963). The important thing is that
the overall organisational objectives are integrated with the individual goals of
employees (Drucker, 1954). One way to do this is to divide the overall goal into
sub-goals, prerequisites for further work. Thus, a goal must first be met before the
next begins. The first objective then becomes a means to reach the next, and it is
this chain of objectives that is referred to as a goal-means hierarchy (March &
Simon, 1992).
Various authors have since tried to describe the motive for working with goals.
One view is that the goals are motivating for staff and that they contribute more to
overall firm efforts (Latham & Locke, 1979, Luthans, 1995). Another view is that
they should be used to guide the organisation (Cyert & March, 1963). A goaloriented organisation was discussed early on by Drucker (1954) and goes in the
Anglo-Saxon literature under the name management by objectives. One of the basic
ideas is that its members should know, and thus try to reach, various goals and
targets. This can be seen as a simple solution to common management problems
(Mayer, 1978). A third reason for objective use is the evaluation criterion for the
work of the organisation (Scott, 1992, Simon, 1971). This allows one to assess the
effectiveness of an organisation by comparing inputs and outcomes with the goal
they have set. Another reason may be that with the help of objectives, certain
legitimacy is reached which becomes something to communicate to the outside
world (Meyer & Rowan, 1991, DiMaggio & Powell, 1991). A common starting
point for many of the writers who have dealt with and tried to define goals and goal
orientation, are the following three dimensions: targets should be formulated,
employees should be involved in the goal-setting process and everyone will work to
achieve the goals (Kirchhoff, 1974). These dimensions can then have additional
aspects, for example, that goals should be measurable and specific, individual and
organisational goals should be integrated, as well as effectiveness to be assessed and
follow-up regularly conducted (McConkie, 1979).
Another interesting aspect in terms of objectives is time, i.e. how much time longterm objectives should have. In some contexts it is considered difficult to set goals
over a long period of time because they are vague and unclear. An example of this
is Wallander (1995) reasoning about the budget. This leads to long-term goals that
are not well suited as a management tool, motivator or evaluation criterion (Simon,
1964). A positive effect, in terms of long-term goals, is that they can contribute to
innovation and flexibility if they are not too clear, but more visionary (Holbek,
1984). The targets can then be seen in the different contexts in which they relate to
overall business ideas and visions. Booth (1998) sets up three questions where the
answers will clarify the business idea: where are we going, how do we get there and
what do we do? The answers lead to goal formulation that is then translated into a
strategy, or strategies. These strategies form the basis of action plans. According to
this view, the objectives are not the only targets that are important, but also the
context in which they develop and from which they derive. Booth also believes that
there should be a difference between goals and objectives, where an objective is a
qualitative intent that can be measured quantitatively in a goal. The goal can be seen
as the intent that governs decisions and actions (Mintzberg, 1983a).
One of the most common planning processes in an organisation is the budget,
which focuses on long-term financial objectives (Bruns & Waterhouse, 1975,
Merchant, 1981). The processes leading up to the budget can be seen as an
interaction between different hierarchical levels that respond to different resource
assignments and objectives. The interaction is based on participatory budgets that,
in many studies, have been motivated in different ways (Shields & Shields, 1998).
The most common reasons reported in the studies were to create motivation or to
disseminate it. The process for giving initial conditions can be described as either
top-down or bottom-up, i.e. from either higher management, or from the production
level (Bergstrand & Olve, 1988). Central to both perspectives is that the process will
lead to behaviour allowing you to reach a certain result. This can occur through the
plan being processed at different levels, or a decision maker providing certain
conditions (Emery, 1969). The continuous reworking makes the plan dynamic,
without ever being completed, and without new conditions, old statements must be
audited (Ackoff, 1970). As described by Ackoff: planning is not an act but a
process.
Plans and actions are based on assumptions and assessments made at a certain
time on specific future conditions. What is achieved by the plan is that opportunities
can be identified and developed while dangers can be avoided or at least minimised
(Euske, 1983). The plan itself is an uncertainty factor that needs to be addressed.
The most favourable situation is when the plan covers the controllable elements
where you are relatively sure of what can be expected. If the conditions are
uncertain, however, the plan can instead be based on different types of reactions to
certain events (Euske, 1983). The plan can also be seen as a process consisting of
several parts, or steps. Emery (1969) points to the five steps that should be included
in the planning process. The first step is to determine what data or values are to be
used. In the second, data is processed in such a way that various alternatives and
the effects of various choices can be calculated and assessed. In the third, a choice
of the option generating most benefit to the organisation, or the greatest
achievement, is realised. In the fourth, Emery notes that the plan must then be
63
translated into one that is operational, and that may mean that the comprehensive
plan is divided into smaller parts. The fifth and final step is about controlling the
outcome, and comparing the results with the intended plan.
Another way to look at the plan is as a process as suggested by Ackoff (1970)
where the work plan has five parts. The first is about identifying goals and objectives
that the plan must meet. The second deals with the funds to be used, concerning the
organisational policy or the different programmes or routines that form the basis of
work. The third is about identifying what resources are needed to achieve these
objectives through available funds. The fourth is based on the creation of the
processes and actions that lead to the plan being realised. Finally, as a fifth part, the
control functions to supervise any errors and create conditions able to correct them
are developed. Basically, both processes build upon three simple questions that are
the basis of a decision, namely: what is the issue or problem, what are the
alternatives and finally, which option should be chosen (Dewey, 1910)?
Another way to look at the plan is to relate it to the various hierarchical levels,
the starting point for Robert Anthony (1965) in his models. This focus shifted from
the budget and monetary perspectives, to the management of resources. Each
hierarchical level in turn, has a special focus that becomes the basis of planning.
Strategic planning will determine the long-term goals and how to comprehensively
get there. It is also about trying to assess the context of an operation, as well as where
we want to be in in the future, and the opportunities offered there (Bracker, 1980).
The next hierarchical level, management control, is described as the process by which
a manager makes sure he gets the resources needed to achieve the set objectives.
An important part of this work is to create comparability and dissemination of
information between different organisational elements, something that can be
achieved by accounting information. Operations at the lowest hierarchical level are
called operational controls and are based on doing the different activities and tasks
in an efficient manner. The various activities that take place on the levels affect,
among other things: focus, who is involved, what type of information is needed and
the current time horizon.
A similar division Ackoff (1970) makes is with the comparison made between
strategic and tactical planning with respect to time, scope, resources and goals.
Strategic planning is then seen as long-term with a focus on the bigger issues, and
the aim is to reach different objectives. However, tactical planning is about shortterm plans, with more detail, and aims to translate strategic objectives into
operational ones. Strategically, it is about determining what should be achieved,
while the tactical point is to determine how it will be achieved. Common to all
approaches is that different types of resources are made available to the organisation
to achieve its goals; not only financial resources, but also those that do not fit in
such a budget (Euske, 1983).
When different types of resources have been allocated, an organisation must have
some kind of connection for clarification, i.e. a link between the resources you have
and the goals to achieve (Cohen, March & Olsen, 1972). The value or the results
will be influenced by other variables and factors about which opinions will be
formed. This can, for example, be recognised in the conditions (Hardin, 1968),
which represent plan success. Hardin points out, among other things, that the most
important factors affecting the business must be investigated along with the link
between them and their interdependence. The key variables can then be analysed to
see how different types of changes affect them, such as in the outside world. If there
are clear relationships between those which are inserted into a process, inputs, and
what you get out, outputs, i.e. the various steps and elements which process
comprises, it is called a programmed activity (Emmanuel, Otley & Merchant,
1990). This assumes that there is knowledge and understanding of the parts
included, and that there are good conditions to measure the different influences and
contributions. This knowledge is not a known process for a non-programmed
activity. This reasoning is based on the ideas Otley and Berry (1980) developed in
the early 1980s. The process has been created to evaluate what deliverables are
required to target. If, the result deviates from the target, assessments are made based
on the perception and knowledge that you have about the process elements,
something Otley and Berry call a predictive model. Based on the assessment,
various alternatives are measured up in order to ensure that targets are achieved.
Accounting tools
Accounting information is relevant when it makes a difference in the decisionmaking of the user. (Kam, 1990)
Organisations are living in complex and uncertain contexts. This creates the need
for some form of joint function that can handle uncertainty and create stability
(Emmanuel, Otley & Merchant, 1990). Accounting systems are largely based
precisely on the function to achieve this stability:
management accounting systems are of major importance because they
represent one of the few integrative mechanisms capable of summarizing the
effect of an organisations actions in quantitative terms.
Performance is presented in various types of reports and in practice it is the report that
allows an understanding of what has happened in the business to be built upon.
An understanding of the nature of accounting reports gives one additional
knowledge of the nature of accounting. For these reports are the direct outcome
of operating an accounting system. That is not the same as saying that the objective
of accounting is the production of financial statements; fundamentally the
objective is to make enterprise activities understandable
(Littleton, 1953, s. 77).
65
One of the most common uses of accounting information is when making

organisational decisions (Zimmerman, 2009). This approach can be traced back to
the 16th century when the theories of economically rational decisions were shaped
(Simon, 1960). A basic and in many cases continuing practice means that economic
decisions involve quantitative data from accounting information.
Quantitative data are helpful in making rational economic decisions, i.e., in
making choices among alternatives so that actions are correctly related to
consequences.
(Moonitz, 1961, s. 21)
The rational decisions in this case are based to a large extent on the context in
which decisions are taken, which for example, can be about the options the decision
maker must choose from. Decisions themselves are based on the decision makers
assumption about the effects and results they may have (Kam, 1990). If the decision
maker has extensive experience in a particular type of decision, that is, he/she
knows what information is required, how it should be interpreted and in what the
decision will result, the decision can be classified as programmed or structured
(Alter, 1999, Emmanuel, Otley & Merchant, 1990). If conditions are opposing, the
decision can be classified as non-programmed. The factors for the decision are
influenced by the extent to which changes in the environment create uncertainty
about the business, and how these in turn, affect the success of the model that the
decision maker directly or indirectly assumes (Earl & Hopwood, 1981). The use of
accounting information, based on the user, can be based on trusting the information,
together with a certain level of quality. In order to understand how the information
about the financial results will be used, the context in which the decision-maker
operates is required; the context influencing the decision and affecting the use of
financial reporting.
A natural starting point for users who want to assess an organisations
performance is the financial result as it is presented in a performance report. Ever
since the early 1900s, when advanced financial systems (including DuPont) were
developed (Macintosh, 1994), a built in measurement of return, and different types
of measures defined as supplements, or as a replacement to the endpoint, have
appeared. The dimensions and report should not only serve as an evaluation of
what has happened, but also as a function motivating managers willingness and
ambition to work for the companys interest (Solomons, 1965). The measurements
can be divided. For example, in terms of whether they measure profitability, return
on an investment (ORegan, 2001), or if there are ratios: financial, staffing, activity
or market (Catass, Grjer, Hgberg & Johrn, 2008). One of the simplest and
most widely used indicators to assess the result is the profit margin, where the profit
(gross or net) is divided by sales. The remuneration is usually measured in an
earnings ratio where the return, i.e. profit (after certain adjustments) is divided by
invested capital. The return can be measured in different ways and here there are
discussions between representatives of different approaches (Emmanuel, Otley &

Merchant, 1990). When a business performance is to be judged, the first natural
step is to look at the result that can then be related to any grandeur, such as turnover
or invested capital, giving the ratio.
The business does not cease when, for example, it has made a statement, it
continues; the report is a milestone in a larger process. The report as a compilation
of a large dataset will convey a message about the activities that have occurred
within the organisation. These will then be a part of the complex function of
leadership, where the strength of the report is that it summarises a large amount of
material in a way that makes it useful. Littleton (1953) highlights the importance of
a balance between overly detailed reports, enabling the most important overall ideas
to disappear, with those where transparency and clarity are centred along with the
important information. Too great a summation of values may create the opposite
effect, as it does not provide the information needed by the user. Similarly, the
report does not draw conclusions, and possible factors surrounding the business are
not included which are perhaps essential, and which the user must take into
account. One of Littletons most basic ideas about the reports is that they will give
the user an understanding of what has happened in the business.
Another important idea in connection with informative reports is that they
serve their communication function best when they organize accounting data
most understandably The sub-grouping of statement figures and the careful
placement of the groups add a great deal to understandability. But the reader
must know what significance to attach to the placement itself.
(Littleton, 1953, p.78)
This ambition regarding reporting can also be seen in the regulations relating to
financial reporting which previously had a focus on purely economic values,
whereas connection to company information has become more comprehensively
detailed, with more informative reporting and an overall informative perspective
(Beaver, 1989). In addition to the content of the report, the effectiveness of
communication is influenced by the way the reports are handled and transferred
(Huber, 1982). Including how they are regulated by the summation degree as a
report, as well as the procedures that are related to reporting for a given firm (Davis
& Olson, 1984).
Bodnar and Hopwood (1995) have developed a classification of reports based on
seven key characteristics. The first division is made for the purpose of the report
that may involve planning, controlling or monitoring an ongoing business. It can
also concern reporting to external stakeholders, agencies, tax authorities and
owners. The second division relates to the timing of the report, for example, the
history or future, and whether it is short or long-term. Furthermore, reports may
then be timed after initial production, recurring at regular intervals, as well as
produced as a reaction to a request or an event. A third division is dependent upon
67
the extent of the report, distinguishing organisational boundaries such as

departments and divisions. The fourth division concerns the essence of the report,
i.e. what it is that the report is produced for? The report can then be connected to
the internal functions of the organisation, such as sales, finance or production units;
this represents the fifth division. The sixth division relates to the form of the report
with regards to its presentation, e.g. the graphics, colours, whether it is printed or
presented. A final classification concerns the extent to which the report is detailed,
for example, whether it is a summary, or contains extensive comparison. The
authors also distinguish between vertical and horizontal reporting. The vertical
focus is on reporting top-down from a hierarchical perspective, while the horizontal
emphasis is on comparisons between departments within the same function in an
organisational unit.
With computerisation of accounting systems, the ability to customise reports
according to individual users needs has developed. Different types of information
and presentation format transform the raw data into more useful information for
the intended user. A general model based on the data in the databases, is managed
by a software program and then presented in a computing environment, on paper
or on screen, for a particular user (OBrien, 1993). These systems were called,
among other things, management information systems, executive information
systems and decision support systems, and the various types of divisions and
subdivisions tried by various writers are referred in many textbooks (Alter, 1999,
Avison & Fitzgerald, 1988, Bodnar & Hopwood, 1995, Boockholdt, 1993, Davis
& Olson, 1984, Gray, 1994, Lucas Jr., 1994, OBrien, 1993, Sprague & Watson,
1993). Common to all systems is that they compile data into a form that allows the
user to better understand the meaning of information.
Financial reporting may have a different character (Bodnar & Hopwood, 1995).
On the one hand, it may have an external character, which, among other things,
forms the basis for taxation, but it can also have an internal character as the basis
of cost estimates. Reports can also be associated with different responsibilities that
may include a particular investment, or the responsibility for a particular outcome,
or a certain level of profitability, to be achieved. These types of report can be used
by those working in the organisation but also by stakeholders outside the unit. This
is described by Littleton (1953) as a form of management focused on monitoring
and evaluation, but also regarding responsibility and duty. The English term used is
financial stewardship or stewardship reports (Bodnar & Hopwood, 1995), meaning
that they monitor and control a financial resource.
This comes from a form of the agent owner relationship, where the owner
confides to an agent a certain fortune. The agent sends a list of the entrusted to
him/her and takes of that which he/she is no longer responsible for, which enable
seeing what he/she at a certain time had responsibility for. This list is represented as
a statement of how a resource is managed over a period of time. The next form of
accounting is based on double-entry bookkeeping, and can be seen as more
shareholder-orientated accounting, according to Littleton. This had the advantage
that one can see both a particular instant, and the course between two points in
time. With todays computerised information, the user is given a good opportunity
to monitor progress over a specific time period and largely self-define what should
be included in the reports (Boockholdt, 1993). This was considered a difficult, and
an ideal state, 30 years ago (Evans, 1969).
The rapid developments surrounding information systems make the pure
information typologies disappear and various hybrid systems develop, containing
characteristic features from several different systems (Alter, 1999). The restrictions
previously in the technical solutions have now been centred on the users ability to
understand and give instructions about information needs (Friedman & Cornford,
1989). Although the benefits of advanced information systems are sometimes
questioned (Drucker, 1995), studies show that different employees in organisations
use and defend systems, among other things, because they deliver official results
(Schiller, 1990).
Davis and Olson (1984) indicate that there are three different ways that
presentation format may affect the user in a decision situation. Firstly, the order or
information grouping, with respect to what is important and less important, affects
different comparisons being made. Secondly, the format can focus on exemptions or
derogations, making various comparisons misleading. Thirdly, various types of
graphical presentation affect the user to make certain indirect interpretations that
have to do with personal associations. The interpretation of graphical presentations
of such charts is affected by which scales are in use, what kind of graphical forms,
size and colour, among other things (Andersson, 1982). Various reports can then
have different characters and thereby meet different user needs. OBrien (1993)
highlights three types of reports which affect the users questions in different ways.
First, one of the most common forms of report, simple periodic reports that provide
the user with information on a regular basis. Second, reports based on any deviation
or exception creating. Third, where the user him/herself requests a specific type of
report and it then becomes a response to an explicit desire for a particular type of
information.
Various summaries and reports managed in an organisation constitute the
document that forms the basis for actors in and around the organisation. The
amount of data compiled in the report should help the reader to understand what
has happened during a particular period in a particular context, for example,
around a particular activity. When raw data are presented in a form that allows
some understanding by the reader, this is regarded as information (Langefors, 1995,
Alter, 1999). The report can be viewed as an interface between information systems,
and the user of the information within an organisation (Bodnar & Hopwood,
1995). The report becomes the tool that distributes information in the entity,
making the context in which the report will be used interesting to study.
Understanding the users handling of various types of reports, and the effects and
reactions they have, will also be important. Moreover, once the data have been
presented in the report, and thus compiled, they should be interpreted based on the
understanding that the user has of the terms used in the report.
69
Data become information, either when presented in a certain form meaningful to

the user (Alter, 1999), or when a user interprets the dataset (Langefors, 1995). This
means that it is not only the compilation as such, but also the understanding that
the user has of the concepts presented in a report, whereby its usefulness increases.
If the user does not have expertise enabling him/her to understand the terms used
in a compilation (increasing his/her understanding of the concepts that can be
characterised as non-technical use (Littleton, 1953), and deemed essential) this can
be detrimental to understanding. Increasing the users ability to understand and
capture the message in a report is essential. In some cases, concepts difficult to
define and which translate in an ambiguous way can be a problem. However, it is
important not to translate and redefine concepts in a way that ultimately leads to
the purpose of the initial message disappearing (Littleton, 1953). There is a large
group of stakeholders, both within and outside organisations, who do not have the
skills to interpret technical accounting terms, proposing that the reports should not
only meet the needs of those familiar with the terminology, but also to those with
other primary tasks in need of accounting-related information. Littleton suggests
that accounting information must convey a clear message to the receiver, affected
by both the form and the recipients understanding:
The weakness of the usual income statement as a form of message is more in
human nature than in arrangement of subtracted groups Perhaps the report
form could be modified so it would tell its story better A fresh point of view
about the function of financial statements would quickly make it clear that
most reader-interest centers in activities. Reports therefore should reveal the
ebb and flow of activities around the productive cycle of the enterprise.
(Littleton, 1953, p. 93, 94, 98)
The problem of catering to different recipients information needs is something that
stman (1973) has highlighted. He says, among other things, that the various
recipients of knowledge, and the ability to use different accounting methods,
represent problems when it comes to understanding the contents of various reports.
This can also be described as a lack of awareness of the effects and consequences of
certain actions related to the information presented in the reports. stman uses the
concept of mind to describe the factors that influence a recipients exchange of
financial reports. User situation consists of tasks and working methods, but also
more personal characteristics such as interests and knowledge.
Recipients exchange of reports is also affected by the extent to which the
conditions reported on might be affected. If the work situation is complex and
difficult, structured reports play a minor role in the overall information flow. The
geographic or organisational distance between the receiver and what is reported also
affects what reports yield. If a great distance, the receiver has a greater yield mean.
The greatest benefit attaches to reporting to clarify the organisations true nature
and the economic effects of management (Littleton, 1953). The report then serves
as a means for communicating to various stakeholders (Arrington & Puxty, 1991).
Todays economic systems can be attributed to Luca Pacioli (1494) and the
commercial traditions he wrote about in the late 1400s, where the concepts of debit
and credit, and double bookkeeping were described (Thompson, 1994). The
modern form of reporting, conceptually most similar to these origins, is at issue
today, including the origin of industrialisation, particularly in the US. When the
larger organisations, often geographically dispersed, began to emerge, they recruited
cadets from West Point who brought a tradition of dividing operations into smaller
units, appointing managers in hierarchical structures and using different types of
reports and documentation to lead operations (Hoskin & Macve, 1994). The
method of using reports to lead an activity is thus one of the oldest forms of
performance management, a method still timely and relevant today.
Textbooks in the financial subjects often begin with a discussion of the financial
information disclosed to external and internal stakeholders. The following three
excerpts are examples of this:
Accounting is a language that communicates financial and non-financial
information to people who have an interest in an organization
(Drury, 2001, p. 4)
Management accounting systems provide information, both financial and
nonfinancial, to managers and employees inside an organization. Management
accounting information is tailored to the specific needs of each decision maker
(Atkinson, Kaplan, Matsumura & Young, 2007, s. 3)
Both internal parties (managers) and external parties use accounting information,
but they often demand different types of information and use it in different
ways. Management accounting produces information for managers within an
organization. It is the process of identifying, measuring, accumulating,
analyzing preparing, interpreting, and communicating information that helps
managers fulfil organizational objectives.
(Horngren, Sundem, Stratton & Burgstahler, 2008, p. 5)
Reports communicating financial information to decision makers, both internally
and externally, help them to make decisions that aid business goals. Information
management is therefore central to an organisations ability to succeed in its
ambitions. Research in a Swedish context shows that the use of reports, such as
monthly reports, is commonplace (Thoren, 1993, Thoren, 1995). These are used by
middle managers in large firms to measure performance, decision-making, learning
and negotiation, as well as symbolically. In connection with the new management
control practices that the balanced scorecard has introduced, information
management and IT support have also been discussed (Olve, Petri, Roy & Roy,
2003). These studies show that the methods and tools needed for success are based
71
on the right information presented to the right people at the right level in the
organisation; in other words, that the reporting functions. This in itself is nothing
new; previously stmans (1973) study showed that computerised systems for
financial reporting created reports that were received in different ways, mainly
based on the hierarchical level of the organisation at which the receiver was
working. Within computerised reporting was a need to adapt reporting to the
recipients preferences and needs.
Report content needs to be aligned with the receiver using the information, but
also so that different areas of a business contribute information about their
activities. This may include information from production, logistics, marketing or
strategic planning (McKinnon & Bruns Jr., 1992). The information in the reports
can then be characterised as operating or status information, used for comparisons
or as information that will later become a reference point. Reports usefulness is
partly based on whether the information can be linked to actions and decisions,
whether it reflects the area a manager is responsible for, how it is presented and
when the report is available; even if the recipient feels safe in his/her interpretation
of the report. However, writers such as Simon (1960, p. 125) also emphasise that
the reports will serve as and contribute to the scorecard of corporate wellbeing...(and) call attention to problems...understand the structure of the company...(in
order) to plan for the future. The report therefore fulfils many functions and is
central to the work of management.
Managers are hungry for information to support their work. They seek
information from every source available to them. Informal sources of
information face-to-face meetings, observation, telephone calls, and informal
reports dominate other sources of information for day-to-day needs and
remain important for longer term needs.
(Bruns Jr. & McKinnon, 1993, p. 94)
Ever since the medieval publication of texts dealing with double-entry bookkeeping,
there has been considerable interest around which results an activity produces
(Geijsbeek, 1914, Pacioli, 1494). Companies such as Du Pont, which began
operations in 1903, were early to allocate capital based on the profitability a given
activity could generate (Johnson & Kaplan, 1987). Return models, where a business
profit related to the capital that had been invested yielding a return ratio, were
developed. Return on equity, after the English term Return on Investment (ROI),
primarily developed in the 1920s, remains one of the most common profitability
measures. In conjunction, traditional financial control mechanisms were challenged
mainly by Harvard researchers Johnson and Kaplan (1987), where an interest in
using other measures for assessing an organisations performance and profitability
grew. It was suggested that short-term financial dimensions did not capture longterm developments in a satisfactory manner and that, in fact, they could even be
misleading for management.
We should acknowledge the difficulties associated with attempting to measure

economic profits in periods as short as a year Other measures, such as product
innovation, product leadership, employee skills and morale, or customer loyalty,
may be much better indicators of future profitability than annual profits. It is
unlikely (I would say impossible) that any single measure can both summarize the
economic events affecting a firm or division during a period and serve as a basis
for motivating and evaluating managers. Therefore, multiple performance
indicators may improve the motivation and evaluation of divisional performance.
(Kaplan, 1984, p. 413)
To achieve a successful business was all about working with multidimensional
performance measurements, where more than the financial dimension was in focus
(Kaplan & Norton, 1996). One multi-dimensional performance measurement
presented as a model is the balanced scorecard (Kaplan & Norton, 1992, Kaplan &
Norton, 1996). The use of a multi-dimensional system would lead to management
having the opportunity to receive signals around and stimulate innovative
improvements to critical business operations (Hoque, Mia, & Alam, 2001). The
balanced scorecard includes four dimensions, or perspectives, where three of them do
not deal with financial performance measurement (Kaplan & Cooper, 1998, Kaplan
& Norton, 1992, Kaplan & Norton, 1996). The three perspectives include: customer,
internal process, and learning and growth perspectives (Olve, Roy & Wetter, 1999).
The customer perspective identifies customers and market segments which are then
associated with measures such as market share and customer satisfaction. The most
important internal processes are monitored with measures such as lead-time,
productivity and waste. The third perspective, innovation and learning, is based on
the way the business works with relation to long-term development and change. The
measurements can then act on dimensions such as the number of new products, or
the time between the final product and launch. The balanced scorecard and its four
perspectives as presented today, is one of the most common and widespread tools for
working with multi-dimensional performance measurement.
Even though recent developments surrounding non-financial performance have
largely emerged from research on financial management in general, and research on
the balanced scorecard in particular, there have also been major developments of the
measures in other areas. Current advances have largely contributed to tying together
multiple disciplines of businesses, thereby creating an overall picture of modern
performance measurement. Thoughts and ideas about non-financial metrics are
nothing new, as Robert Anthony says:
Performance measurement systems have been discussed in this and other texts
for many years. The balanced scorecard is an example of old wine in a new
bottle. The ideas are essentially the same as performance measurement systems
but are repacked under a new label.
(Anthony & Govindarajan, 2001, p. 445)
73
Other texts have dealt with areas such as quality, waste, maintenance and delivery
precision (Howell & Soucy, 1987). Similarly, for instance in Bromwich and Bhimani
(1989), the importance of replacing measure productivity, utilisation and standard
costs against quality, delivery and inventory reduction, has been highlighted. France
has for decades been working on something that could possibly be called the
balanced scorecards predecessor the tableau de bord in which three dimensions
of business performance are analysed: strategy, management and operations (Lebas,
1994). Kaplan and Norton have received much attention for their scorecard model,
but it is neither fundamentally new nor revolutionary. The work of non-financial
performance has consequently occurred elsewhere.
When specific arrangements of dimensions need to be selected, other business
area ideas are used to create an original performance picture of operations. The
development of manufacturing has, for example, led to a greater focus on a holistic
approach regarding quality, especially summarised in the concept of Total Quality
Management (TQM) (Dale, Lascelles & Plunkett, 1990), as well as the more
extensive work on warehousing, for example in the form of Just In Time (JIT)
(Tanaka, Yoshikawa, Innes & Mitchell, 1993). Both TQM and JIT can be widely
supported by well-developed performance management and performance
measurement systems (Young & Selto, 1991). Even within the marketing field, there
have been extensive studies on the link to performance management (Foster &
Gupta, 1994). Focussing, for example, on how the quality of a service is perceived
(Parasuraman, Zeithaml & Berry, 1988), or on the link between profit and growth
on the one hand, and customer loyalty and satisfaction on the other, designated as
the Service Profit Chain (Heskett, Jones, Loveman & Sasser Jr., 1994). In some
areas such as production and marketing, different performance metrics are
presented, not based solely on financial information, but continuously developed
and able to be used in a more integrated performance measurement.
The work of non-financial performance measurements has in many ways not only
been in complying with cost, but also increasingly in trying to understand what is
causing the cost or performance (Schonberger, & Knod Jr., 1994). This understanding
has been expanded to include how a particular activity reaches its strategic objectives
which, for example, could be described in the form of causal relationships, or
strategic maps (Kaplan & Norton, 1996, Kaplan & Norton, 2004, McNair, Lynch,
& Cross, 1990). Both market considerations and costs may be taken into account,
derived from the higher strategic level down to the operational activities in the form
of various performance hierarchies (Lynch & Cross, 1995). The many dimensions
of performance can also be described, metaphorically, as a prism with five facets:
stakeholder contribution, stakeholder satisfaction, strategy, process and capacity
(Neely & Adams, 2001, Neely, Adams & Kennerley, 2002). Regardless of which
model is used, non-financial performance measurements have consequently had a
major impact on business and public administration. Financial reporting is still
important, but has been increasingly supplemented by that of a non-financial nature.
Criticism of non-financial reporting has, in many ways, been that it is not sufficiently
developed and therefore less reliable (Epstein & Birchard, 2000).
Information and knowledge

Modern organisations extensively collect information in computerised systems. The
computerised information can be termed as formal, being collected and stored in a
standardised way. There is also a large amount of informal information within the
firm, held by one person or by a small group. However, both are disseminated in
various ways within the organisation, and become natural parts of daily evaluation.
In many organisations, computerisation has increased the amount of available
information, although its usefulness has diminished. More and more of the decision
makers ability is taken up in interpreting and giving meaning to a report and
consequently, the ability to decide and act is affected. Computerised systems
represent great potential in modern organisations, and also great danger.
Ever since the breakthrough in financial reporting, particularly during
industrialisation, it has been a natural part of the internal report flow within
organisations. Now that computers have, more and more, come to collect a mix of
information, policymakers have begun to demand more varied information types,
such as non-financial information, increasing interest in this area. Critical to an
organisations success is that it can no longer simply be measured in dollars and
cents, but also other necessary dimensions such as quality, customer satisfaction and
employee well-being. Nowadays, these parameters are more clearly associated with
what creates success. Financial reporting is still the most important, especially if one
is to follow profitability, but often the causes of financial results are traced to nonfinancial elements.
Different types of resources are allocated to organisations to enable them to solve
the tasks and commitments assigned to them. Resources related to organisational
goals, as well as to management and responsibilities, are a precursor to operational
effectiveness and success. When the activity is carried out, it can be monitored in
different types of compilations where such ratios and various financial results are
compiled. In cases where activities have not generated the desired planned results,
decisions are made and actions taken to rectify deviations. This is related, among
other things, to the power of those with responsibility in the organisation.
When an organisation grows both directly and indirectly, and becomes more
complex, there is a greater distance between the executive management and core
business. One way to try to bridge this gap is by means of efficient and well-adapted
information. The authors Emmanuel, Otley and Merchant (1990) emphasise its
importance in the following statement:
management accounting systems are of major importance because they
represent one of the few integrative mechanisms capable of summarizing the
effect of an organizations actions in quantitative terms. many of the
mechanisms are, in part, based upon the transmission of information. Integration,
coordination and control could not be achieved without information.
(Emmanuel, Otley & Merchant, 1990, p. 4, 6)
75
Two concepts closely associated to information are: information systems (IS) and
Information Technology (IT). IT refers to the technical side, and can be described
as a prerequisite for communication, whereby IT receives the implications of
computer technology and communications (Kempner, 1987). In a later phase of
development, IT came to focus on the link between information technology and
leadership, with a greater focus on meaning than is usually connected to IS
(Checkland & Holwell, 1998). The significance then is on adapting technologies to
the needs of the organisation, determining systems operation and development.
Checkland and Scholes (1990) also stress the importance of information systems for
actions in the organisation: ...Information systems exist to serve, help or support
people taking action in the real world. Although IS can be seen as a technical
subject, it has strong links to how organisations work and the conditions under
which they work.
The development has also increasingly become a matter of whom the systems are
there to serve, which needs to be determined before development occurs (Checkland,
1981). The information user can be seen as a customer who consumes as the system
produces. The system consists of technology and information, but also in part of
human or personal effects (Alter, 1999). The concept of information systems has
been present since the 1960s, and processed and evolved as of today. Now it largely
deals with the organisations information needs, its information management.
The way an organisation chooses to use information can be categorised in
different ways (Macintosh, 1985). These categories may be traced to how decisions
are taken in an organisation and consequently executed. One dimension or category
is based on the amount of information available, a second dimension on
contradictory and ambiguous information, and the last reflecting how information
use happens. These decisions in turn can be described as programmed or nonprogrammed, where programmed decisions are based on extensive experience and
are closest to the character of well-known routines, while non-programmed are the
opposite, characterised by decisions that were previously unknown (Emmanuel,
Otley & Merchant, 1990). If a decision-maker has great experience in taking a
certain decision, data are analysed on a routine basis where the impact of the
decision can be assessed. In contrast, for a decision-maker facing the unknown, it is
more difficult to foresee the consequences and interpretations of the available
information (Alter, 1999). The use of information greatly affects the development
of the information system, and the management of information.
It is interesting to study how performance measurement occurs and how different
kinds of measurements are used to create a clearer picture of what has happened.
Different concentrations may occur where financial values can be combined with
non-financial metrics. It is also interesting to see the extent to which various
abnormalities really initiate a decision, which then generates a change of direction
for the business. The question then becomes whether the deviation is linked to past
actions of the organisation, and if it will cause corrective activities. The
understanding of the different types of powers and procedures may provide a basis
for how the organisation has managed to effectively link conduct in the correction
of deviations. Another area of interest concerns the experience gathered over a

longer period of time as the basis for activity improvement, whereby the goals set
up are based on experience as a form of learning.
In a business, various types of action are viewed as a consequence of a decision
that, in turn, derives from a situation by choice, or as a reaction to an event. In both
cases, there is some form of documentation on which decisions can be based, as
evidence comes from the different perceptions of the desired or actual performance.
This has been described by Simon (1960) in the following manner:
Problem solving proceeds by erecting goals, detecting differences between
present situation and goal, finding in memory or by search tools or processes
that are relevant to reducing differences of these particular kinds, and applying
these tools or processes. Each problem generates sub-problems until we find a
sub-problem we can solve We proceed until, by successive solution of such
sub-problems, we eventually achieve our overall goal or give up.
(Simon, 1960, p. 27)
One of the most common ways to measure results is by using various types of
financial metric such as return on equity and return measurements (Bernstein, 1993,
Broadbent, 1999, Foster, 1986). These are common on a certain hierarchical level,
but must then be translated into different types of operational objectives and
metrics to be useful at lower levels (Merchant, 1998). In addition to the financial
dimensions, there are different types of non-financial metrics. These may include a
measurement that captures the companys position with regard to environmental
considerations, market position, the competitive situation, management skills and
human capital (Broadbent, 1999). Some models have attempted to weave together
performance measurement based both on financial perspectives, and different
internal processes such as performance, customer perceptions and employee
considerations (Kaplan & Norton, 1996, Kaplan & Norton, 1992). Yet another
way to expand performance measurement is to link it to some critical success
factors (Rockart, 1979), or Key Performance Indicators (Binnersley, 1996). The idea
is that different employees should use performance measurement to focus attention
on the right things at the right time. For performance measurement to work well,
an acceptable precision, a certain objectivity, a specific timeliness (i.e. not presented
to the user too late) and an understandable presentation are also required (Merchant,
1998). Basically, performance-related management is really about three basic
questions (Otley, 1987). These are: Which performance dimensions to focus on?
Which level is suitable to put on each dimension? How are different rewards linked
to the performance that achieves the right level?
One of the problems with performance measurements relates to satisfying shortterm or long-term goals (Otley, 1992). This can arise for example, when a decision
maker must choose between a long-term investment and short-term operational
decision, something that has been named investment myopia (Merchant, 1998).
77
The problem is based, among other things, on accounting informations inability to

manage profits and benefits of values that are intangible, and that therefore cannot
be measured with conventional methods.
As described earlier, modern organisations often handle large amounts of
information. This is done in computerised systems where storage and processing of
the simple transactions have been enhanced in various ways. Partly, information
from the meetings that take place between different stakeholders, both internally,
but also externally, and especially with customers, requires management. A possible
classification for information management is that it occurs either formally or
informally. It also has various forms, and its availability can be described in multiple
ways, which can therefore be further criteria for classification. It is then interesting
to see how the internal management and coordination of information is formed, as
well as to what extent it supports different users in their tasks. This can be illustrated
partly by the extent to which the information is presented to the user, and also in
the manner in which the user acquires what is needed. It is also interesting to see
how information usage differs between different users, for example, depending on
their organisational level. Another aspect worthy of highlight is how the user
perceives the provision of information, and how information is introduced. This
may be done by trying to describe different types of benefits that a certain amount
of information can have for a user.
When various types of information must be identified and evaluated, this can be
described as different systems for information dissemination. These can be seen as
formal and clear to every employee in an organisation, but also as informal and
only visible to those affected by them, part of information management. In both
cases, the information systems are affected by context, as well as the idea present in
the systems when development occurs. The systems are then processed, classified
and assessed in different ways, for example by the type of information involved.
Another way to evaluate information systems is by describing their detail and scope,
or by relating the information to a time horizon, evaluating and assessing its
availability.
One of the first researchers to use the concept of information system was Brje
Langefors (1995). He introduced the concept as a combination of the terms
data processing system and information retrieval system, when he was chair of a
scientific conference in the early 1960s. Central to the new concept was to manage
information, or to inform. This meant that the systems would not only gather
information but could also be developed in a way that allowed the user to receive
answers to their questions. To this, further clarifications have been made, as the
systems must have a purpose where the different parts work together to achieve a
goal. A system also has borders, separating it from the surrounding environment,
where you can see the connection between internal activities and that environment
(Davis & Olson, 1984). This can be exemplified by describing an organisation as
an open system, dependent on the surroundings and environment in which it
operates.
Another way to describe an information system is to explain what it can do,

namely to collect, store, process and distribute data or information (Andersen,
1994). Information systems are theoretically inter-disciplinary and actually reside in
several disciplines. Ahituv and Neumann (1990) indicate that there are nineteen
different types of theoretical linkage that can be made into different subjects, but
three general theoretical areas. The three areas are: positivist theory, technology,
and behaviour-orientated theory. Other authors, such Boland and Hirsch Heim
(1985), believe that information in the first place belongs in two theoretical areas,
namely informatics and leadership.
Davis and Olson (1984) chose to assume Anthonys (1965) model that
distinguishes between strategic planning, administrative management and operational
control, to describe how information is handled differently in various organisational
contexts. The comparison can be made based on what information is needed at
different levels and what is the characteristic information for those, as well as the
type of decisions that typify the varying management levels. Making the right
decisions and managing information about the options to be decided upon are also
central aspects of information systems. Gorry and Morton (1971) focus on models
based on two previous theories, Anthonys (1965) hierarchical levels and Simons
(1960) three types of decision. These levels and categories of decision create a
matrix in which the three levels of strategy, administrative and operational
leadership form one axis, and the second consists of structured, semi-structured and
unstructured decisions. This creates nine fields that represent the different
information needs of managers to make different kinds of decision.
Information systems can also be seen as producers of information used or
consumed in a certain context. This approach has, among others, been developed
by Alter (1999) in a model he calls Work Centred Analysis (WCA). The WCA is
based on the idea that the information system, consisting of a number of business
processes, people, information and technology, produces an information product
that is then consumed internally or externally. The idea can be recognised from the
idea Langefors had in the 1960s, that information systems would satisfy a specific
need or have a specific purpose. Alter focuses the description of an information
systems context on how different managers and employees need information to
make decisions. An author who wrote early regarding this was Ackoff (1967), who
said that the need for information among business leaders was an idea that many
system developers had. This assumption led to some system developers having
problems when looking at the system as something that only supplied the
information, but rather as part of a larger Management Control System. Another
problem facing the development of management information systems is that a single
system should be able to accommodate all the different aspects of information
management required (Dearden, 1972).
In organisations, information systems have either a more formal nature or an
informal character. The difference is that formal systems are created in a clearer way
and can provide a user with information on a regular basis and in a predetermined
shape (Avison & Fitzgerald, 1988). Informal systems on the other hand, may have
79
a more temporal nature without the same regularity and form, and are often
described as black boxes or gossip (Emmanuel, Otley & Merchant, 1990), but
may also deal with ideas, opinions, attitudes and feelings (Jacobsen & Thorsvik,
1998). Formal systems are often documented and regulated by rules and procedures
and information managed in some cases is stored in a permanent way. The informal
systems are not under the same pressure when it comes to documentation and
regulatory control (Davis & Olson, 1984). Davis and Olson (1984) add two
dimensions, public and private information systems. Public in that they are known
to those entitled to use them, while the individuals responsible manage private
schemes themselves. This classification allows a matrix to be created with a public
information system that is both formal and partly informal, and similarly, private
schemes that are also formal and informal. The information handled in the
accounting systems is seen as formal public information except that it requires
certain privileges to access it. This information is collected in a standardised routine
manner by the entire organisation, making it formal (Emmanuel, Otley & Merchant,
1990).
Mintzberg (1975), in a study of how managers in organisations used formal
information systems, concluded that there were weaknesses in the formal systems
that led to managers preferring to choose the informal. One reason was that the
formal systems were limited in their ability to report why a particular result had
been achieved, or to consider non-quantitative values. Formal systems summarised
information, which created a generalised nature to what was presented. Another
reason given was that the formal systems were reporting late, meaning that they
could not be used. Taken together, this meant that firms could not rely on systems
that created uncertainty. Mintzbergs conclusions were supported in a study Preston
(1986) conducted. He resolved that in order to achieve control purposes, the
information had to be managed by timely conditions. Formal systems delivered
incomplete information per se as they delivered only a certain type of regulated
information. He also concluded that the information itself became a power
processed and exchanged as a resource in organisations. The shortcomings of
formal systems lead to managers developing their own methods of collecting,
interpreting, and disseminating information relevant to their duties. Preston noted
that managers create their own information system that allows them to maintain
control and influence over certain activities.
An important part of the informal information systems is informal communication.
The casual dissemination of information is often much faster than the formal, partly
because it is made orally instead of in the written form (Stohl & Redding, 1987).
Employees in organisations place more trust generally on information disseminated
through informal channels than on that from formal channels (Robbins, 1983).
Formal information systems, especially those delivering reports, in many cases
need to be supplemented by informal channels. Mintzberg (1975) observed that
when the formal and informal information systems were evaluated against each
other, preferences often favoured the informal, partly due to weaknesses within the
formal, which can also be seen in informal systems. Formal systems reports only
contain the data and information from the systems, which of course is obvious,
while a manager in practice may actually need a combination of internal and
external information along with non-quantifiable and non-financial categories.
Another obvious observation regarding formal reporting is that it largely summarises
data to provide a comprehensive picture that may be contrary to managements
need for detailed information. Another problem has to do with the fact that formal
reporting often becomes available too late, and therefore, may be perceived as
unreliable. To compensate for formal system deficiencies, Mintzberg (1975)
recommended that the inclusion of communication channels, better suited to
managements way of working, should be developed. The informal information
system is thus a necessary complement to the formal.
Informal information systems can be described as networks around people
involved in management (Preston, 1986). Daily organisational work provides a
manager with a faster and more customised decision support system through direct
observations and conversations with other managers and employees. The information
will also be much more multidimensional and not merely routine. In organisations,
there is also a power dimension in having access to information and being able to
engage in the exchange (Emmanuel, Otley & Merchant, 1990, Macintosh, 1994).
The management of informal information is largely about collecting, interpreting
and disseminating information in networks, which in itself can be described as
exercising control. The networks where informal information is handled are
important parts of managements efforts to shape decisions and interpret their
environment, something Preston (1986) describes as follows:
These processes (of interaction, observation and keeping personal records) are
intrinsic to the construction of reality and of making sense of the social and
physical world. Despite attempts to design more timely, detailed and accurate
information systems, I believe managers will continue to talk to each other,
observe events, and keep personal records of those events they regard as
important. Furthermore, these processes are important to the operation of an
organization.
Informal information management concerns, among other things, how managers
choose to seek information. It may in a sense be described as an aimless search for
pieces of information, or to be curious by asking questions, exploring new tracks or
changing focus, collectively making meetings and conversations play a large role,
for example in the form of speculation, gossip, rumours and corridor talk
(Macintosh, 1994). The personal meeting is often important, such as during lunch
or coffee breaks, or more formally through meetings and phone calls. A significant
portion of the time a person in managerial work uses is to talk, so that information
exchange is kept current and updated. Macintosh (1994) describes this way of
working with information, where the manager is a nerve centre that collects,
processes and disseminates information.
81
In McKinnon and Bruns Jr.s (1992) study of seventy-three business leaders working
in different fields, it turned out that the managers used oral sources as their primary
internal source of information. This way of working with information processing in
turn has led to the freer movement of managers within organisations, whereby power
and authority are sought from personal contacts as the conduit for information
assimilation. The oral contacts are a channel that aligns better to the work of
management (Daft & Lengel, 1986). Richer information also allows management to
have more opportunities to change the interpretation of a situation. The words in a
conversation are powerful, but words disappear once they are told. Sometimes as
discussion needs to be documented in order for a group to be able to act upon it and
not interpret it in their own favour (Ong, 1982). Another dimension of the spoken
word is about managers using talks as an exercise of authority, making the oral culture
among managers live on (Zuboff, 1988). The oral tradition among managers, both in
terms of gathering information and talking to others, helps maintain their natural
position and authority, meaning that informal information has an important function.
the need for information arises from uncertainty and choice, and the role of
information is to reduce uncertainty.
(Davis & Olson, 1984, p. 227)
One way to describe the particular value of information is to relate it to the extent
that it reduces uncertainty (Alter, 1999). There are different ways to evaluate
information. Andrus (1971) suggests that information should be evaluated for its
utility, which can be related to how it will be used. Second, it may be about the form
that the information is presented in on one hand, and the shape it is adapted to by
the needs of the decision-maker to increase benefit on the other. This relates,
fundamentally, to time, where information advantage increases if it is available
when needed. The third benefit concerns availability, that is, when a user may
receive or access the information. The last benefit is about ownership or control of
information, providing a greater benefit to the user. Based on these four areas, the
increase of benefits for the user by changing the management of information must
in turn be related to the cost, according to Andrus (1971).
Another way to evaluate the information is by trying to assess the extent to
which it satisfies a user (Seward, 1975, Cyert & March, 1963). This situation may
be traced by at first following what the manager is looking for within information.
If the formal information systems contain the sought information, this creates user
satisfaction, but if they do not, it means that the user needs to look further.
Information may also have other values in an organisation among users, in addition
to the value related to a particular decision situation (Davis & Olson, 1984). This
information affects the motivation of employees if, for example, they see in a report
that the firm has been successful for a time. The information is also valuable if a
user needs it to build different models or assumptions, or to create an image of a
context. Steven Alter (1999) has compiled a number of criteria that can be used as
a starting point to evaluate its benefit. These are grouped into four categories:
information quality, availability, presentation and security.
In terms of criteria that can be categorised under information quality, data

accuracy and precision can be evaluated. The accuracy is assessed based on the
information showing what it is supposed to, while precision is evaluated in relation
to how accurate and detailed the information needed is. There may be systematic
errors in the information that recur regularly, or random errors. Another criterion
is whether the information is complete for a particular task, or if you need to
supplement it with additional facets. In addition, time is another criterion that may
be used to evaluate information, regarding how long ago it was compiled, and
consequently if it is the correct perspective from which decisions should be made.
Another criterion is the source, i.e. if the person or the organisation that manages
the information is reliable. The source can be internal or external, as well as partly
formal or informal, which in turn, affects how the information received is
interpreted. The second category contains criteria that evaluate information access.
The first criterion concerns the extent to which the information is available and if
so, if it is available for a particular user. The next criterion concerns whether it is
permissible to use the information, from a legal or cultural moral perspective. The
third category is about the way the information is presented. First, the summation
degree is evaluated, for example by assessing the scope and detail of the material
from the beginning, and also the extent to which it had been summarised when it
was presented. Another criterion is whether the information is presented in a userfriendly format suitable for a particular work situation. The last category deals with
the security centred on certain information. It can be evaluated by assessing who
has access to information and under what conditions. It may, for example, include
that sensitive information is encrypted for protection.
Alter (1999) also indicates that an organisation may have different ambitions in
terms of transparency and clarity around different types of information. It may be
that certain information is of a high or a low degree of openness, while around
others, there is no transparency; information is secret. In terms of clarity, this is seen
on the scale of a clean data set, from the data that needs to be interpreted, to gossip
and assumptions; the information needs to be convincing, and in the most obscure
or distorted cases, it is about lying. These differences are then linked together in a
matrix where such reports to management characterised by low transparency can
be classified as data needing interpretation, while the stories of former leaders can
be seen as transparent information that has a gossip-like character. In addition,
information can also be viewed as either hard or soft (Hckner, 1988). The soft
information consists, for example, of images and ideas, while alternatively
accounting information can be an example of hard information (Jnsson, 1981).
Depending on the strategic conditions that apply, offensive or defensive, the soft and
hard data are of different importance levels. Then, when a user needs to process a
large amount of information it may lose its value if the important information is
hidden within the information overload (Snowball, 1979). This in turn, can create
a stressful situation that comes to a question of information availability, whereby
an increased speed of response is required.
83
One way to look at the amount of information available is to relate it to how

much attention is required.
What information consumes is rather obvious: it consumes the attention of its
recipients. Hence, a wealth of information creates a poverty of attention and a
need to allocate that attention efficiently among the overabundance of
information sources that might consume it.
(Varian, 1995, p. 200)
The information systems, reports and summaries can partly be seen as components
of a process in which a particular user forms different perceptions of operational
contexts through the reports provided. Not only can they be described as catalysts
whereby different employees respond to the anomalies reported, the reports
function is also influenced to some extent by its shape and structure, and its
usefulness by the ability a particular user has to absorb its implications. The terms
used then become central to report understanding. It is interesting to study how
different users can benefit from the information compiled and how different
structures of reports increase a users ability to use the report for contextual
understanding. This situation may be described based on the extent to which the
report manages to summarise and sum up what is relevant to a particular user. To
describe different reports characteristics can also be a way to understand what
contributes to perceived usefulness. Another area of interest is the meaning and
understanding a user can gain from a report, and how the employees unique
situation influences interpretation.
The fact that the available amount of information has become very extensive,
largely because of computerised information systems, has made it increasingly
important for decision-makers to select relevant information (Rockart, 1979). This
can be described as a human process in which common data are selected and given
meaning, for the decision-maker to act upon (Checkland & Holwell, 1998). The
process of selecting and giving meaning to data can be termed Capta, as described
earlier. The work of an active information management group has in many cases
become an increasingly important function necessary to conduct effective
performance management. Much of the development surrounding modern business
management has therefore come to focus on how to measure performances in
activities.
A key starting point when a manager works with feedback information in a more
mechanical and cybernetic way is that objectives must be clear and set in advance.
Given this, it should be possible to measure performance, usually at the end of a
process, and deviations in relation to the objectives to be calculated (Simons, 2000).
This is often described as a form of diagnostic check (Simons, 1995). One of the
major challenges for a manager is that within the vast amount of information
produced by an organisations needs, critical information selection is essential
(Rockart, 1979). With the help of the diagnostic checks, attention is focussed on the
parts of the business where clear objectives have been formulated and performance
can be measured. Classic business management is largely based on a feedback that,
in many cases, is mechanical and relies on formal information (Emmanuel, Otley &
Merchant, 1990). Then, when the actual feedback process occurs, perceived
information and actions come from it in various ways.
A negative feedback has a stabilising effect in one sense, whereby the business
needs to deal with an unwanted development, while positive feedback allows
progress in some form of forward motion (Littlejohn, 1995). Positive feedback
creates, in many cases, pleasure and pride, while negative feedback can cause a sense
of shame and unhappiness. These allow the psychological effect of feedback to be
analysed. On an individual level, this can be done by reviewing how performance is
affected when different types of feedback are used. There are three types of
feedback: feedback linked to performance; feedback on tasks being carried out; and
feedback on a cognitive dimension (Leung & Trotman, 2005). Feedback creates
conditions for individual performance and affects commitment and motivation.
Although much emphasis is placed on formal feedback, there is also extensive
informal feedback. The formal feedback is usually clearer and therefore perceived
as more objective and easier to study (Langfield-Smith, 1997). However, just
because the informal is more difficult to codify and study in a structured way, it is
nevertheless interesting to follow (Hall, 1977). Organisations self perception is
shaped by several different sources of feedback loop, allowing the informal handling
networks to be considered important when the conduct of an organisation needs to
be understood:
Nor should the less formal uses of information be neglected; organisational
cultures form and are reproduced, at least in part, by the use of approving and
disapproving feedback signals of many types.
(Otley, 1999, p. 369)
In modern business management informal information management often has a
minor role. This view continues, despite studies in the wake of the relevance lost
debate (Burns & Vaivio, 2001, Johnson & Kaplan, 1987), as well as studies
(Mintzberg, 1975, Preston, 1986), emphasising that formal systems are concerned
with supplying specific information in a timely and reliable manner. The distinction
between informal and formal feedback can be made in different ways. Formal
feedback consists of formalised reports and/or meetings (Ashford & Cummings,
1983), generated with the help of information systems and focused on the financials
(Luckett & Eggleton, 1991). Throughout formal feedback, planned, scheduled
patterns are established and act as a mechanical function (Katz & Kahn, 1978,
London & Smither, 2002). Informal feedback on the other hand is done on a daily
basis (Ashford & Cummings, 1983) and is largely based on social sources, often in
encounters between people (Luckett & Eggleton, 1991). An additional feature of
informal feedback is that the change was not planned and communicated
85
independently of the formal systems (Katz & Kahn, 1978, London & Smither,
2002). Other divisions may also be made, for example, based on the sources from
which feedback derives, what time period it covers, and whether it is regulated
through procedures or rules (Karlsson & Lukka, 2009). Although a distinction
between what is formal and informal feedback can be useful, they are not necessarily
two opposites or mutually exclusive, but more seen as two pools on a scale. They
can actually be understood as two forms of feedback that are in many respects
complementary.
In the work of leading an activity, the management of information has become
an increasingly vital and important function of managerial success. To a large
extent, the system of economic governance, based on the work of management in
general and management control in particular (Emmanuel, Otley & Merchant,
1990), is suited. Information systems can be partly understood as tools that collect,
process and present user information, such as that from an accounting perspective,
but they can also be understood as a system to handle informal information flows.
Different types of reports are often the simplest and oldest form of information
processing. It is then extensively based on financial reporting and financial
statements, for example to follow a result or short-term receivables and liabilities.
The reports are a well-known and established form of information management,
which in many cases serves as the nervous system of organisations (Macintosh,
1994). However, even informal information management plays a central role, for
example when it comes to the dissemination of information between people in the
organisation, such as conversations in a coffee break, or in a hallway. Although the
informal information has not been equally formal and explicit, it is very important
and necessary for the various management functions work.
The performance paradox

Efforts to lead a business cover, in most cases, several different methods and
techniques. The premise is that the director uses long-term planning, information
management and monitoring to manage their operations in an efficient manner.
This is a type of diagnostic check, which may be likened to a physicians way of
diagnosing a patient, or an engineers supervision of a machine (Simons, 1995). In
its simplest form, performance is compared to pre-set targets and any deviations are
analysed and corrected. One of the most compelling and commonly used systems
for diagnostic control is profit and profitability reporting (Simons, 1995).
Additionally, the work of leading and acting within an operation similar to a
bottom-up feature, is that information is used that leads to action, which in turn is
related to the goals and measured performance, such as profitability (Johnson,
1992). Performance may in itself be measured in several dimensions, for example,
based on the operational dimension, the social dimension and the financial
dimension, but the crowning achievement of a performance pyramid is profitability
(Epstein & Birchard, 2000). Profitability and the results-orientated approach are
the classical types of performance measurement where such a business manager uses
these to evaluate its own entity and decisions (Emmanuel, Otley & Merchant,
1990). In more modern models, such as the strategic maps and the balanced
scorecard (Kaplan & Norton, 2004), the underlying process of learning and
development, internal processes and customer perspectives lead to long-term
shareholder value creation and productivity growth being achieved.
With the help of statements, economic performance of an activity is clearly made,
and profits can be presented. This is something that, ever since double-entry
bookkeeping began to be used, has been one of the main accounting data (Thompson,
1994). Early writers in the subject of accounting theory, such as Littleton (1953),
emphasised the significance of the result, saying even that to establish an accrual
accounting result was the most important task. Therefore, the profit and loss
solution for managers with an extensive need for a reliable measure of performance
was born. In addition to managers and management functions, are stakeholders such
as creditors and tax authorities, or employees and analysts, interested in the results
generated over a given period (ORegan, 2001). This presentation is so central to
international corporate activities that it has a very important function as an internal
language, even more important than a corporate language such as English
(Macintosh, 1994). The accounts and financial results are so essential to the
organisation, that without them, several functions around a business would not
work. This is so natural today that it is almost taken for granted.
Accounting has been described as the language of business. While this may
sound a rather extravagant claim, it does express something of the importance
of accounting in todays world. For example, without accounting data much
that is taken for granted in our society, from simple calculations of profit to the
operation of international stock markets, would be impossible. The way in
which accounting is practised today is a consequence of mankinds attempts to
control the environment. Indeed, since earliest times mankind has felt the need
to record events, and the emergence of some form of written record coincided
with the development of basic recording skills.
(ORegan, 2001, p. xxiixxiii)
Although profitability is a long-term measure of a successful organisation, i.e. its
ability to generate profits, there are more dimensions in the understanding of what
a profitable and successful business means. Kay (1993) believes that success is
traditionally measured according to several criteria, in most cases related to some
kind of volume. A common measure, for example, is the size of the business, which
can be measured by the number of employees or turnover. Another yardstick can be
the companys value on a stock exchange, if the business is listed, or the percentage
of the companys market share. If the owners focus on the financial resources
invested in an activity for many years, it is interesting to follow the return, which in
practice involves comparing various investment returns with each other. Another
87
dimension when it comes to success may be the rate at which a business grows.
Success can be measured in many different ways in which profitability, usually
measured in terms of financial results, is one of the most widely used.
Success can also be about growth in its industry to a level which means that the
company dominates its part of the market, and then remains at that level for a long
time (Flamholtz & Randle, 1998). A key indicator of success is development,
usually measured in some form of growth such as stock market evaluation, which
takes place over a longer time (Collins, 2001). But success can also be about
maximizing profit over a long period, and having the ability to implement the
strategies decided on (Flamholtz & Randle, 2000). Another way to describe success
is to define it as the ability to create value (Kay, 1993). Therefore, we need to assess
the difference between the measured value of the operations output or performance,
as well as the measured value or cost of the resources supplied to an activity or
process. Traditionally, the creation of value has centred on what the owners get back
on their investment, while value in another form also involves other stakeholders,
employees and customers (Donovan, Tully & Wortman, 1998, Nilsson & Rapp,
2005). Although the most commonly used definition of success is all about financial
return, there are more dimensions that can be a starting point in a discussion.
The ability to judge whether a company or an organisation is successful is largely
affected by the goals that have been set for the business. These constitute in
themselves a criterion for success (Gray, 1995). In the same way that success is
perceived differently in different international cultures and contexts (Hofstede,
1991), the term success may also have different meanings in different organisations.
What is certain is that success in turn affects the motivations of employees and
managers at various levels, something that becomes clearer if studied in an
international and multicultural context (McClelland 1961). Although international
disparities between countries to a greater extent are affected by the organisations
way of working, its culture, there are interesting parallels that provide an adequate
basis even in comparisons between different organisations within a country. Gray
(1995) expresses differences between countries and their impact on performance
metrics that illustrate success and how it is perceived, in the following way:
perceptions and measures of corporate success in an international context
are culturally influenced and drivers; thus moves towards making global
comparisons should be matched by the selection of a set of success indicators
which reflect that diversity and also communicate in areas of common concern.
It is not possible nor is it desirable to focus primarily on measures related to
profits as international indicators of corporate success.
(Gray, 1995, p. 275)
Gray (1995) concluded in the study that from an international perspective, it is not
traditional financial measures, but other measures that need to be developed, largely
because of the different cultural influence and interpretation linked to non-financial
arenas and value creation.
The organisational context more generally also affects how accounts are designed
and thereby what is reported. OReagan (2001) describes four contexts that
everyone in different ways influences what the accounts present. The first context
includes the legislative and regulatory norms. Assembly through political processes
affects how the settlement of accounts should look. Different stakeholders are
trying to influence regulation so that it will satisfy their more specific interests. In
the second context, the use of accounting information as a function that
communicates in different ways with different stakeholders. The third context is
about how accounting information is a commodity with such a significant impact
on how investors in the stock market assess companies valuation. In a fourth
context, internal business developments over the years, and how they have affected
accounting development, are described.
One of the most obvious driving forces behind an organisations behaviour is that it
will create the conditions to continue if it is to survive. In accounting theory, using for
example the concept of a going concern, one of the fundamental postulations to describe
a business based on a long-term view (Sandin, 1996). The conditions for a long-term
investment are based on how it will be used over a longer period of time and thus, form
the basis of depreciation. As a result of the internal quest to survive, promoting
continuous change that enables operations is required in most cases, adapting to
customer needs and the ability to generate earnings. Burns and Stalker (1961) liken this
to the behaviour of species in the animal kingdom adapting to their environment. A
rough division is made between species living in a stable environment and those that live
in one that is changing. In the stable environment business is recreated, whereas
operations in the changed environment need adaptation. This occurs, for example, by
constantly adjusting and changing internal procedures and ways of working whereby
the key concepts become customisation, development and survival.
This approach can be compared to Darwins ideas about survival of the fittest at
the expense of the weakest. The philosopher Herbert Spencer used these theories in
an economic context, pointing out, among other things, that individuals adapt to
their environment in order to survive (Macintosh, 1994). Self-interest was a strong
driving force that led society through individual developments, whereby it existed
for the individuals benefit. In larger organisational dimensions, the owners interest
also exists. Their interests and desires came to be channelled through the managerial
level developed during industrialisation. The manager or management transferred
the owners ambitions for the organisation and operations (Ackoff, 1986). The
survival came largely to be by finding a balance between internal and external
forces, which constantly threatened to ruin the business, Barnard (1938) stressed in
an early and important study.
Failure to cooperate, failure of cooperation, failure of organization,
disorganization, disintegration, destruction of organization and reorganization
are characteristic facts of human history.
(Barnard, 1938, p. 5)
89
Human aspirations and forces thus represent some of the most important factors
for an organisations survival. One of the solutions to the problem of balancing
these forces is considered best done with the help of management, as well as
supervision and control by administrative systems. An important prerequisite is that
employees are willing to submit their own ambition and interest, in order to
promote the organisational goal and task. The ability to survive is thus both
dependent on financial resources, and also creating a shared commitment to the
tasks and ambitions that the organisation is trying to reach.
Working with profitability as a concept has been part of management tasks since
Luca Pacioli began writing about double-entry bookkeeping and medieval trading
traditions (Pacioli, 1494). Even today in modern models such as strategic maps, there
is a clear link for the business to generate profit. The interesting part is then to try to
understand what profitability means. A simple definition is that profitability is success.
This means that profitability can be measured in any kind of volume or quantity. This
may involve market or valuation of an exchange, but success can also be described as
something else, such as energy and humility, or passion and joy to go to work. It can
also be about the pride of success for example, with one change. When profitability is
to be assessed, it is thus the meaning of concepts such as success, partly about the
economic dimension and partly about softer and more qualitative concepts. Ever since
the first compilation of results and the first measurements were used, profitability has
been synonymous with financial results. The dimensions have largely been about
comparing the results with an underlying greatness, such as return on equity.
Another dimension of profitability reasoning involves creating the conditions for
long-term survival. This idea is not discussed as much but is still very topical,
especially when it comes to the work of developing the organisation. Profits and
financial results are part of the resources needed for the business to continue and
survive, but it is equally important for organisations to transform the business to
compete more effectively and create stronger and larger market positions. In a
business, it is clear that work to find a balance between both internal and external
forces is needed. This balance is achieved through operational control and
management, a balance that is about internal ambition and external conditions.
Profitability means long-term work for a successful organisation and generating
sufficient economic results, providing resources for future survival and adaptation.
Performance measurement is actually an example of a sense-making process that
can be seen as parts, but also as a whole. Performance in an activity could both be
understood in a specific shorter time period, and over a longer time period. In a
similar way, one can see a given organisational unit, while at the higher hierarchical
level, they are trying to get a handle on the whole entity. In both cases, informal
information systems are important to be able to form an opinion on what was
achieved. Later, these perceptions are confirmed through formal systems. There are
several examples from organisations on how short and long timeframes are analysed
continuously, and how informal and formal systems are used in parallel, on a very
decentralised level. The reality is formed continuously by the employees of the small
business unit, which among other things, will lead to gradual improvement in
performance.
Part V and beyond
The operations carried out in an organisation can be described as a collection of

actions performed by the specific organisations employees. These actions will
contribute to the business and allow it to become competitive and appreciated, for
example, by a customer.
The power that some employees hold will represent an opportunity for them to
act and move within the organisation towards new opportunities and resources.
When actions are evaluated, this is done by appraising the performance achieved by
an employee or a group. If the performance achieved deviates from the planned,
various measures are taken to prevent it from further departure. In cases where it is
difficult to determine what good performance is, or what was expected, perhaps
instead of correcting the actions, new alternatives should be tried in order to see
what results these can achieve. The actions you then choose depend on what
previous experience you have with them, and to what extent they are applicable to
the new situation.
Understanding processes of organisational sense-making

Acts performed in organisations generate various kinds of tracks documented in
the information systems. This creates conditions for performance measurement
allowing one to evaluate whether the goals set have been achieved. The management
of information and its dissemination then become important parts of the assessments
made by the individual employee, or organisational unit. To the formal information
systems, further observations and impressions are then collected in the informal,
personal, information systems. These do not handle information in a systematic
manner but, to a greater extent, depend on the contacts, experiences and knowledge
of employees. If the formal information systems provide a relatively poor substrate,
this can be supplemented with information from the informal, allowing employees
to obtain a better picture of what has happened in the business.
Generated from the information systems are various types of reports and
impressions. Formal systems produce reports that can be static, i.e. they look the
same from month to month, creating comparability, or dynamic, meaning that
different values can often be analysed in real time. These allow the user greater
opportunity to observe a deviation by trying to derive it in different ways. Common
to the formal statements is that they summarise a comprehensive material in simple,

transparent compilations, making a larger material tangible. Informal systems do
not generate reports in the same way but rather impressions and observations
forming an integral part of the decision support system that an employee needs. The
interaction between the formal and informal information systems can be variously
described. They can complement each other, which is the case if the formal system
does not contain the information needed, and they can confirm each other, as is the
case if formal reports show something that an employee already knew or had
suspected. Information systems can be evaluated in different ways. This is easier to
do with formal systems that can be analysed and measured, which is not the case
with individual, informal systems.
What then happens to the report, or its impressions, is that they are subject to
interpretation by an employee. This is based on the perception that employees have
about their competence, responsibilities or affiliation. If an employee has received a
clear task to do and powers to perform actions related to the task, it will be
interesting to evaluate what the actions made have meant to him/her, and what is
achieved. This is the basis for assessments of new actions and new options. When
an employee or a group have been assigned responsibility for an area that task has
then been assigned to them. This allows actions within that area to be affected,
leading to an outcome that will be interesting to interpret. If instead, it is the case
that an employee does not have the necessary authority to carry out a task, or lacks
clear information, the formal reports will not be of too much interest. This can be
explained by the motivation that employees feel about their tasks.
The affiliation an employee feels or with which he/she identifies, can well be
described as formal, structural, or delimited, and understood as identity-dependent.
The interpretation of reports for a larger content and a more extensive meaning is
related to the employees organisational context. An employee may, for example,
seek support for his/her interpretation from a senior manager or by trying to
understand what has happened by discussing this with his/her team. But the reports
also reflect a group affinity; whether good or bad, the perception of the group and
what needs to be done are affected. The formal structures and informal roles give
reports and impressions a deeper meaning whereby further understanding can be
obtained. This in turn, can form the basis of judgments about the new options that
will consequently be anchored in the group.
The alternative actions discussed in group or employee thinking can be described
as the ambitions or goals set up. The desire for a future state to be achieved through
action. The targets can be both individual for certain employees, but also come from
a more extensive process where the organisations common goals are developed.
This is often a hierarchical affair where, for example, a higher hierarchical level
gives some conditions for a lower level. When a lower level receives them, they are
converted into actions leading the entire organisation to achieve common objectives.
The organisational context then gives certain circumstances for a group or
employees to work from. What kind of action that then arises is partly due to prior
experience, as well as the ability to analyse opportunities and obstacles around an
Part V ... and beyond
93
alternative option, borne from the employees understanding. These can be seen as
different success models that form the filter of interpretation, or are associated to
mental cause and effect relationships. The ambitions or goals that an employee or
group accept, give some conditions for the activities and meaningful actions to be
conducted in the business. In the longer term, they can also be seen as corrections
or ambition changes generated by the previous interpretation and evaluation of a
performance measurement.
The different elements can thus be described and understood as an ongoing, not
static, process. The parts go together and there is interplay between the obvious and
clear on one hand, and the implicit and hidden on the other. The process clarifies
the conditions and options given to an employee, meaning that he/she can
understand what actions are possible and desirable. A consistent view is that the
individual has a central position. This is particularly evident in Weick (1995) when
he says that all meaning is dependent on the individual. It then becomes interesting
to note if the individual attributes meaning passively or actively. Another important
dimension is the social unit of which the individual is a part and the relationship to
be managed and controlled for the unit to work well (Vickers, 1995). Relationships
can then partly be characterised as unclear and difficult to manage, as well as clear
and easier to work with.
To communicate effectively in a social context a developed language is required,
which, for example, Berger and Luckmann (1966) emphasise. The signals
communicated through the use of language may be unclear and difficult to
understand and use, but they can also be clear and assume a common language, as
well as a shared understanding. Another dimension of communication is how a
comprehensive understanding can be used to filter and interpret what is being
communicated within the organisation (Vickers, 1995). This can be done either by
the filter used in a static way or conversely in a dynamic way. Where organisations
are static, and sometimes unclear, is at the work of the long-term goals. These are
in some cases almost unlimited in time and are often focused on economic objectives.
There are also objectives in the work with the customer, whereby customer contact
and quality can be compared to these long-term goals. The organisations are aware
of the goals but cannot really work in a tangible way with them if they are not
translated into a shorter period of time, and more precisely communicated. What
then happens is that the goals are realised in various actions that have an impact,
for example, on critical resources.
It is common for organisations that different kinds of rules and procedures have
been developed and have important functions. Different types of documentation
that allow rules to be perceived and used in the same way throughout the
organisation often support these. Similarly, work in the organisations is, more or
less consciously, to identify which factors are central and critical to business success.
These attempts to then clarify key factors and, for example, summarise them in
control models, are made. They form a single filter used to communicate common
signals from the organisation. The firm also works with routines. Formal
dissemination of information, which may be based on the awareness of what is
needed, i.e., what information may be considered critical. Information management

in formal systems leads to a similar filter being used repeatedly to interpret the
data.
With awareness of what the information will be used for, e.g. by the increasing
clarity and awareness of the languages meaning, comes a gradual change. This
leads to a more dynamic interpretation of the information and it also becomes
larger. The roles that have been developed and identified in the organisations can
sometimes acquire almost metaphorical names. The meaning of names can then be
difficult to interpret and may also be adapted to the changes taking place in and
around organisations. This means there may be a lack of clarity in the organisation
of what a coach is really going to work with, and the interpretation may vary
depending on the situation being faced.
The concept of responsibility is perceived differently by different people, but
common to it, is that it gives a clear signal about something expected of an
individual or group. The interpretation of what is expected and what responsibilities
are, the set of requirements may vary depending on an employees situation and the
duties. This can, for example, depend on the skills that an employee possesses,
where the professional role itself creates clear signals, for example in the technical
terms used. Professional skills also mean the knowledge possessed can be used in a
creative and dynamic way, especially when it comes to interpreting events, and
when using collective understanding. Understanding can then be enhanced or
altered by the conversations that take place in organisations, for example, between
different hierarchical levels. The talks are based on a specific context and a common
language. In this way, we try to make certain phenomena clear and interpretation
comes from a dynamic use of the earlier understanding as a filter. An example of
this are the different economic concepts linked to a certain type of action, leading
to an understanding of the actions impact on the cost of development. A certain
meaning is related to the figures presented, which is the next step in the basis for
new interpretation. This may also apply to an evaluation of a previously determined
goal, leading to new objectives being laid down: the result has been evaluated
leading to new goals.
The process of meaning creation can build on someone breaking out parts,
whereby certain clues from a broader context create the meaning of these results.
The process may also focus on the big picture and see the creation of meaning as
something always going on, and not only affecting a small organisational part.
Weick (1995) points to these two interpretations of meaning. A further dimension
can be added, namely how knowledge of reality is distributed, as Berger and
Luckmann (1966) find interesting. The availability of knowledge or information
may both be provided locally and partly characterised as decentralised, unlike the
central control of information.
This structure is formal, but at the same time it facilitates an easier distribution
of knowledge in reality, in which the members of a small group affect each others
understanding of a situation. In some cases, the group, through informal information
dissemination, forms an opinion on what has been achieved during a period,
95
confirmed by the formal systems of performance reporting. The concepts, which

can be influenced, then achieve a greater significance for the group as evidence, for
example, in dealing with the image of reality. This allows group identity to become
an important part in the process, as something that is part of work within
organisations.
In some instances, information surrounding a smaller unit has a more central
role. A senior coordinating level gives certain conditions to which the lower units
then adapt their activities. The process that allocates resources is one of the clearest
examples of how reality is defined by a higher hierarchical level, where the lower
unit is part of the big picture, and the starting point for the creation of meaning.
This leads to centrally controlled knowledge, focused on the whole, to develop that
should then be passed down the organisation through a decomposition of lower
organisational units. Still, the decisions taken are based on the approach applied to
the entire organisation, which for example, can be recognised in the identification
of critical success factors. These are then coupled to various types of performance
measurement, again highlighting the whole organisational understanding, defined
from a higher level. The understanding of reality is then amplified, for example, by
various formal meetings that are held where the common understanding of the
bigger picture develops. In conjunction with an increasing level of computerisation
and automation of simple procedures that have emerged among companies, a
discussion about detail becomes more and more necessary. In its simplest form,
information is described as a processed data set. But, somewhere a deeper
understanding is required, based on the fact that one must not only understand the
information, but also describe and understand the context in which it is used.
Businesses must find ways to accommodate different employees with the information
they need, thereby abandoning mass distribution, which over long periods has
characterised information management within enterprises. One could say that what
is presented in reports and taken out of the information is not information unless it
is precisely tailored to the designated user.
The modern business or middle manager has come increasingly into focus in
recent years. The context in which the manager works with the new expectations
he/she has, have allowed a number of newly developed methods and ideas to help
the manager steer the business. It has, since the beginning of industrialisation in the
1850s, always been of interest to analyse how companies and businesses will be led,
albeit, in recent years this interest has increased. The ability to be able to make
decisions and ensure that transactions are actually implemented, have become
critical skills in modern organisations. The person who takes on the role as the
leader of an operation has high expectations of him/herself, and is able to use
various methods to implement his/her mandate. The result of the work of running
a business over the years has largely focused on delivering results, ensuring
profitability. Today, there is a discussion by managers and researchers of other areas
as to what constitutes profitability for the business. The senior management should
manage risks, learn from their successes as well as their mistakes, and be able to
work with change. The methods are mainly intended for the director to be able to:
control the activities involved in planning; design and maintain an appropriate

information management system; follow up on plans that worked well or not; and,
supervise the delivery of good profitability. With the help of the different methods
of management control, operations managers accomplish something beyond
profitability, expressed in terms such as responsibility, learning, risk management
and working with change.
In order to succeed in delivering a result that, for example, can be expressed in
financial terms, a managers ability to create meaning is required. For the manager
and the team leader, working with others requires that an idea is formed about
achievements and their causes. In the social context, a meaning is constructed about
how to perceive the business, both individually and as a group; a meaning which
then forms the basis of decision and action. The leaders ability to precisely make
decisions and act is based on an idea formed in the operational context; the context
has therefore become meaningful. This ongoing process of sense-making helps the
leader to make significant decisions leading to action, and involves expressions of
concepts such as responsibility and risk management.
The broader sense-making process can then be broken down into parallel,
underlying processes. There are three interrelated and ongoing processes assumed to
exist. In the first process a manager is thinking of how to lead the work in a business
through uses of different management control techniques or models. In order to be
able to do this he/she needs to manage the information flow and by doing so form a
knowledge base for decisions. Information and knowledge in this phase are both
feedback oriented in that they show what has happened in the past, but also forwardlooking since they are used for planning. In the second process the consequence of
managing appears, usually described with concepts that are somewhat vaguer, such as
responsibility, risk and learning. In connection, responsibility is a given and the various
decisions should be made, directly or indirectly, as a part of the assessment of existing
risks. Once the decisions have been made and the actions implemented, the new
experiences act as the basis for learning, changing the skills. New insights lead to new
decisions on more fundamental changes, and new actions are implemented as an
expression of given responsibilities. The third process is happening in and around the
manager. In its simplest form, it is about making decisions and implementing acts, but
both the decisions and actions take place in an ongoing effort to create meaning.
Understanding accountability
Responsibility is in many cases a word associated with conflicting emotions. On the
one hand, it may be obvious and natural to take responsibility in a situation where
you feel comfortable, and think you have the experience and expertise that enables
the responsibility to sit right. However, on the other hand, responsibility is also
perceived as onerous and something of a plague, especially if the responsibility is
not linked to power and competence. Responsibility is then extensively about how
97
an individual in an organisation perceives the area and the work for which he/she
is supposed to be accountable. However, one can also understand the concept as
based on how a group, or a part of an organisation, takes responsibility for a
particular type of job. It is then to a greater extent based on a broader responsibility,
which in many cases has its counterpart in the English concept of accountability.
Here, it is a group, such as an organisation or company, which will be held
accountable for the choices and decisions taken. The interesting question then
becomes to whom they are accountable and what will be the response, described as
follows:
Accountability refers to a real or perceived likelihood that the actions,
decisions, or behaviours of an individual, group, or organization will be
evaluated by some salient audience, and that there exists the potential for the
individual, group, or organization to receive either rewards or sanctions based
on this expected evaluation.
(Hall, Frink, Ferris, Hochwarter, Kacmar & Bowen, 2003, p. 33)
Taking responsibility becomes an expression of what one is prepared to be evaluated
on as based on actions, which in turn may imply either a reward or a form of
punishment. The evaluation is based in most cases on any type of performance
compared to a set goal. This approach was developed in the middle ages where the
merchant families in Italy, who mainly dealt with the Far East, had to be able to
monitor and document how their agents had prosecuted their interests (Dahl,
1998). During that time and, in Italian society, there was a deep influence from the
Catholic faith. In order not to sin an agent needed to show that he had not acted
wrongfully and through the double-entry bookkeeping he could prove that the right
decision had been made (Pacioli, 1494, Puxty, 1993). They wanted to document
their actions, as an expression of responsibility and accountability.
In this way an agent could justify his behaviour through the accounts when
challenged by an owner. If there were no deviations between the amount received
and used then there was no problem with the responsibilities given to him from the
owner. In a way double-entry bookkeeping became a way to avoid the stigma of an
accusation of deviance.
In other words, there is a strong connection between what you choose to do, the
actions that are decided upon, and what is later reported, or reported on in different
ways. The person creates an image of the ability to act and ultimately to take
responsibility seriously:
the duty to provide an account (by no means necessarily a financial account)
or reckoning of those actions for which one is held responsible.
(Gray, Owen & Adams, 1996, p. 38)
An organisation can be defined as a social system of people who are deliberately

constructed and where the people act together to achieve certain goals (Etzioni,
1966). The organisation develops mechanisms to plan and monitor how individuals
and groups act in the areas of interest for the organisation (see for example
Anthony and Govindarajan (1995), Berry, Broadbent and Otley (1995), Merchant
(1998) and Wilson Chua (1993)). The concern is that individuals go from being
only individuals to becoming impersonal rule followers, where the objective should
be in line with rational rules as defined by the organisation (Lindkvist & Llewellyn,
2003). Individual responsibility, which becomes clear in the accounting reports, will
increasingly focus on how an individual has perceived it, rather than what values
and beliefs control the individuals conduct (Roberts, 1991). Accountability at the
personal level is about following the established rules of the organisation, rather
than the development and monitoring of individual ethical and moral values.
Responsibility in this form emerged when different tasks and roles were
specialised, for example, in a manufacturing process, where the ability to evaluate
individual tasks and responsibilities became of interest (MacIntyre, 1967). As the
desirable outcome formerly planned for and the evaluation were largely based on
assessing whether the desired results had been achieved, more instrumental
responsibilities were deemed necessary. This requires taking responsibility for an
event or assessing if an action was positive or negative (Gray, Owen & Maunders,
1988). Responsibility becomes liquid and consequently the larger consequences of
an action less interesting for the individual (Bauman, 1994). In the English language,
two different terms are used to describe responsibilities, namely accountability and
responsibility (Roberts, 1991). A division between them can build the organisations
expectations, which are increasingly about accountability on the one hand, and
individual morality, ethics and responsibility, on the other. The distinction is not
entirely easy to understand and comes from the fact that there are unambiguous
translations of the two English terms where the difference in meaning becomes clear.
Liability may therefore partly be attributed to a responsibility for individual tasks,
and to the larger moral/ethical perspective.
In organisations working with various responsibilities, the image of their own
performance is reflected in information such as that presented in accounting systems
(Roberts, 1991). Information systems will then have a role, largely about showing
something has been achieved by the various individuals of the organisation.
Knowledge and understanding of their own performance at the individual level,
means talking about the extent to which he/she has followed the established
organisational routines and structures; the perception of the individual is based
more upon initiative and creativity (Asplund, 1983). The perception of oneself is
formed in a process where the images and perceptions are affected by independence,
external forces and internal impulses (Joas, 1998). Even though formal structures
and systems create opportunities for individuals behaviour in an organisation, at
the same time, every human being is an independent individual with the ability to
act in a conscious and reflective way in many different contexts (Lindkvist &
Llewellyn, 2003). This approach is based on the individuals ability to have
99
contextual awareness (Giddens, 1984). Accountability and responsibility are things

that do not occur by themselves, but as functions that are interpreted by individuals
in an organisation (Boland, 1993):
The meaning of our actions and of those around us is something we make: it
is an interpretation and not something that is simply given to us. The making
of meaning through interpretation is a skilled personal accomplishment
(Boland, 1993, p. 125)
The ground and starting point for the interpretation of responsibility can come from
formal and informal mechanisms (Hall, Bowen, Ferris, Royle & Fitzgibbons, 2007).
Formal mechanisms may include accounting systems, while informal ones may be
related to the culture, that is, norms and values (Frink & Klimoski, 1998). The
context that creates the conditions for the individuals sense of responsibility can
also be divided into four aspects or dimensions (Hall, Bowen, Ferris, Royle &
Fitzgibbons, 2007). The first dimension is derived from the source of an individuals
sense of responsibility. The next switches decisions to the individuals perception of
responsibility, and the third describes the way in which individual responsibility is
linked to unique accomplishments. Finally, the different types of responsibility are
described against several parties and in several areas for which a single individual
can be held accountable.
Accountability in an organisation is largely about the individual perception of
what responsibility means, and this view can be traced to various areas and
interpretations.
if the potential for conflict did not exist that is, if the firm and all its
stakeholders were largely in agreement managers would have no need to
concern themselves with stakeholders or stakeholder theory.
(Frooman, 1999, p. 193)
Handling responsibility and being accountable to a stakeholder are largely managed
through communication, such as the reports of various kinds discussed previously.
Accountability is largely about seeing the business as a unit or identity to be held
accountable for the activities in progress and the impact things have (Gray, Owen
& Adams, 1996). One of the challenges is a matter of understanding how to
distinguish between individual actors and the business itself (Cooper & Owen,
2007). The business can stand to order a variety of stakeholders, whereby a
traditional subdivision, for example, can involve internal and external stakeholders,
as well as interested parties with a direct and active interest, or an indirect, passive
monitoring interest. Among internal stakeholders are employees, while the clear
external stakeholders are owners or customers (Epstein & Birchard, 2000). More
indirect stakeholders are usually non-profit organisations such as those who
monitor environmental interests. One of the first and most central aims is therefore
to try to identify which stakeholders are the most critical to the organisation and
find ways to work with them.
The challenges of working with a responsible organisation or responsible
employees are based largely on the relationship between a principal and an agent.
The following definition is a simplified description of the principal-agent theory
(PAT):
An agency relationship exists whenever one party (the principal) hires another
party (the agent) to perform some service.
(Kaplan & Atkinson, 1998)
The theorys most central part is between the two parties relationship that can be
described as a contract or agreement that directly or indirectly controls the relation.
When the theory is used in operations management, the topic is most often described
as the owner of the principal delegating authority-making decisions over certain
resources to the CEO. The risk is that management makes decisions that are
beneficial to them but not for the business owner(s). Therefore, the owner(s) must
follow managements movements and decisions, for example, by using accounting
and auditing methods (Jensen & Meckling, 1976, Macintosh, 1994). Complex
relationships are characterised by different actors acting in their own interests and
for their own gain. Therefore, it becomes important for business management, in
various ways, to signal that it is acting in a responsible way. This is an idea and
ambition that can be traced all the way back to the early users of double-entry
bookkeeping (Thompson, 1994). Relationship and communication between
management and shareholders, or the company and stakeholders, control how
accountability will be perceived.
There are two important views on how the most important should be understood;
either the owner or other external stakeholders are of primary importance. This
classification is not entirely unproblematic because the owners interest may not in
many cases be a priority, while the broader stakeholder expectations are
consequently prioritised and met (Vilanova, 2007). The advocates of corporate
governance, with a greater focus on the owners interest in terms of economic
performance and profits for example, believe that management needs to be tightly
controlled and prevented from acting in its own interest (Tirole, 2001). A challenge
to the ownership perspective however, is that even though the owner, in many
respects has great power, it is management who in most cases has real power
(Tirole, 2006). On the other hand, the theorists who advocate a broader stakeholder
perspective say that being able to be dedicated exclusively to their own benefit is a
simplified description (Jones & Wicks, 1999), despite the fact that PAT is based on
the economically rational theory (Macintosh, 1994). Those who advocate the
stakeholder perspective argue that a person in a management function does not
have to be someone who sees only his own gain, which is one of the positions in
PAT, but instead can be seen as an agent or trustee, after the English term steward,
who can meet many peoples needs.
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Stewards in loosely coupled, heterogeneous organizations with competing

stakeholders and competing shareholder objectives are motivated to make
decisions that they perceive are in the best interests of the group. A steward
who successfully improves the performance of the organization generally
satisfies most groups because most stakeholder groups have interests that are
well served by increasing organizational wealth.
(Davis, Schoorman & Donaldson, 1997, p. 25)
Even though the two theoretical positions, shareholder or stakeholder focus, are
described as contradictory and mutually exclusive, there are models and theories
based on common approaches. Such a model assumes that individuals and business
critical stakeholders are identified and ranked. This is based on three different
dimensions or characteristics of the stakeholder (Mitchell, Agle & Wood, 1997).
The first characteristic (power) is about the power the stakeholder has over the firm
and the opportunity to influence activity, the next (legitimacy) is based on the
stakeholders legitimacy, as a legal right, and the last dimension (urgency) concerns
whether the managements priorities can be accepted by the stakeholder. Based on
this classification stakeholders are prioritised (Vilanova, 2007). The prioritisation
can then be compiled via the various reports and information as the basis of
assumptions regarding communication with these important stakeholders (Epstein
& Birchard, 2000). Models to identify and work with stakeholders do not
necessarily mean that the owners perspective is removed; rather, additional
stakeholders and issues are added to the task of management.
A current debate about responsibility, very much about businesses and
organisations, concerns environmental issues. The discussion is ongoing in two
levels where global, often politically orientated organisations, run a more general
discussion of environmental issues, while more business-related and local-levels
include others. One of the challenges is about how to go on from merely talking
about environmental issues, to acting upon them. Hopwood (2009) adds a timely
contribution to the debate:
Of course much could already be done to alleviate some of the major
environmental difficulties if there was a will to act. But that will is only very
weakly developed in most countries of the world and in most spheres of life. It
certainly has been largely absent at the political and the corporate levels, both
arenas where rhetoric has often been a long way ahead of action and were, as
a result, remarkably little has been done in the majority of cases. All too often
the desire to act has only found a verbal expression, action itself being more
influenced by political infighting and corporate lobbying and influence.
(Hopwood, 2009, p. 433)
Work on environmental issues has its origin in the concept of sustainable
development in particular, which began to be discussed during the 1980s, at a
largely international level. This resulted, among other things, in a report entitled
Our Common Future where early ideas on sustainable development were presented.
An early starting point assumed that todays demands should be sustainably met,
without infringing the needs of future generations. The challenge is to both support
development while ensuring the preservation of a resource or asset (Zovanyi, 2001).
This occurs both directly and indirectly, where a business with maximum
productivity must be weighed together with the continuous renewal of the resources
consumed (Tivy & OHare, 1982). What is demanded is a management that can
manage critical resources, resources that in many cases are finite, such as soil, water,
air and timber, and use them wisely; to this end, the term intelligent management
was coined (Zovanyi, 2001). While the ambition of a local, enterprise-level largely
involves providing continuous development, responsible business management
relating to environmental aspects and impacts have to be taken into account. One
way to legitimise and demonstrate that a business keeps its dimensions, for example
in terms of environmental impact, is to declare the environmental impact of
operations. An open account allows stakeholders monitoring the company to view
this impact, and may then constitute a pressure group to which management is
accountable (Epstein & Birchard, 2000).
Moreover curiosity alone could and most likely should result in an investment
in greater transparency, particularly if social and environmental values are to
function alongside economic ones. A case can therefore be made that
calculation, including that of new forms of accounting, is likely to be a
significant feature of a world not only conscious of environmental issues and
constraints but also committed to achieving a more harmonious relationship
between the human and natural worlds.
(Hopwood, 2009, p. 434)
Although openness is seen as important, the logical connection between sustainable
development and report content is nevertheless questioned (Gray, 2009). The
question becomes even more complex when an individual entitys acts are assessed
by its effects on the planet as a whole. The environmental debate that has emerged
over the concept of sustainability is largely based on flows and processes
throughout the ecosystem, allowing Non-government Organisations (NGOs)
actions to not be evaluated just as individual acts.
It is increasingly well-established in the literature that most business reporting
on sustainability and much business representative activity around sustainability
actually have little, if anything to do with sustainability. (Beder, 1997, Gray,
2006, Gray & Milne, 2002, Milne, Tregigda & Walton, 2003, Milne, Kearins
& Walton, 2006). Indeed these accounts might most easily be interpreted as
how organisations would like to understand sustainability and how, in turn, it
would convenience them if the body politic would accede to such a view. In
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doing so, business is in the process of constructing the dominant discourse

around sustainability but in a way which at best ignores discourse in both
the development literature and the development community as well as the
growing body of scientific consensus.
(Gray, 2009, p. 2)
Thus, there is a problem when the management is expected to explain, justify and
take responsibility for (Cooper & Owen, 2007) the environmental impacts an
activity may have, many of which have been defined and elaborated on another
conceptual level. Gray (2009) questions what opportunities are actually there to
report on sustainable development and environmental impacts at an organisational
level, but perhaps even more apparent is what type of environmental impact an
organisation needs to report on. The conclusion is that organisations need to
develop stories, narratives about their work with the environment and sustainable
development, despite the challenge of the task (Lamberton, 1998). The ambition
that there should be an appropriate environmental statement is to be replaced by a
more pluralist approach where even reports that lack environmental impact can be
included in the narrative (Spence & Gray, 2008). Although the accounting and
reporting of environmental impacts are not developed or normalised, they still
require that the management of a business be responsible, especially when it comes
to the desire to be an accountable, or profitable, organisation.
Working with responsibilities in different forms is based on ethical and moral
values and reflections (Schweiker, 1993). The moral and ethical positions that are
primarily made by individuals are an expression of ones identity and values. When
management communicates accomplishments in reports or through accounts, it
becomes a means to present an image of themselves, as well as a story about identity
(Shearer, 2002). The ethical dimension in itself affects what is perceived as right and
good in some respects, and the image presented is of the operator of a moral agent
in context.
Giving an account is one activity in which we come to be as selves and
particular kinds of communities through forms of discourse that shape, guide
and judge life regarding concern for the common good, human solidarity and
basic respect.
(Schweiker, 1993, p. 235)
The concept of accountability is also a dimension for the reasoning of company
actions before a group of stakeholders, external or internal (Arrington & Francis,
1993). The economic self-image as presented is an expression of moral reflection
and evaluation. The challenge is to present an image that not only shows the
positions gained in self-interest, but also to point out that for society, common
interests have been met. Responsibility is not just about reporting things that are in
the organisation and managements own interest, but also things in the public
interest. Regarding the economic logic, with maximum self-benefit, the focus will
then be to worry (Shearer, 2002). From a philosophical ethical perspective, which
for example was presented by the French philosopher Emmanuel Levinas, the
relationship to others arises especially when the entity comes to be held accountable
for its actions (Levinas, 1986). An interesting approach, Levinas argues, is that even
though others do not react to what one does, one is still accountable to them, a
relationship described as asymmetric (Levinas, 1985). Accountability is thus about
both recognising achievements lying in self-interest, but also presenting and
communicating information not necessarily directly reflecting the image the
organisation itself wants to project.
The development of accountability increases the transparency of
organisations. That is it increases the number of things that are made visible,
increases that number of ways in which things are made visible, and in doing
so encourages a greater openness. The inside of the organisation becomes more
visible, that is transparent.
(Gray, 1992, p. 415)
A responsible organisation should work with an open, transparent, reporting and
communication system, to see as broad and multifaceted a picture of its activities as
possible. This assertion is both challenging and exciting, yet at the same time,
daunting (Roberts, 2009). A fully transparent organisation is screened in all its
parts, and the all-seeing insight resulting is similar to Foucaults all-knowing
apparatus.
The perfect disciplinary apparatus would make it possible for a single gaze to
see everything constantly. A central point would be both a source of light
illuminating everything that must be known, a perfect eye that nothing
would escape and a centre towards which all gazes would be turned.
(Foucault, 1979, p. 173)
Accounting systems today offer, to a large extent, an opportunity to create full
transparency (Roberts, 2009). Macintosh (1994) uses the model of a prison, the
Panopticon, based on Foucault, as a metaphor to describe how individual employees
can be monitored through accounts. The prison was built as a ring surrounding a
central watchtower. Each cell had windows both on the outside and facing the
tower. The watchtower window was made of mirrored glass meaning that the
prisoner did not know whether or not he/she was being observed. The design
created an uncertainty that, in itself, contributed to the monitoring.
A transparent organisation, with constant monitoring, no longer works towards
important achievements, its real responsibility, but spends more time defending
105
perceptions (Strathern, 2000). The criticism is then raised against the organisations
actions that do not help improve the accountability action, but instead become an
expression of criticism against the management itself (Power, 2007). Even though
there is the debate on accountability arguing for transparency and openness, there
are also voices raised against openness, arguing that openness allows the
organisation and management to focus on the wrong data. A possible middle
ground between not being completely closed nor fully opened and transparent is
work with intelligent accountability (ONeill, 2002).
Accountability, in its intelligent form, is in a particular context. It is not a mere
showing or making visible of the self against a pre-determined set of categories,
but rather involves active enquiry listening, asking questions, and talking
through which the relevance or accuracy of indicators can be understood in
context.
(Roberts, 2009, p. 966)
Intelligent accountability is largely based on face-to-face meetings where complex
accomplishments and relationships between areas can be evaluated over time. That
being said, compared with the performance, the pure rhetoric is revealed by actual
deeds. Currently, this is not presented in snapshots, for example, in a report, but
becomes a dialogue full of questions and answers. The responsible organisations
ethical and moral points of departure then build extensively on the picture of the
operation and the image of oneself, where discussion and ethical values becomes
less rhetoric and more concerned with actual action.
Responsibilities, and work with responsibility, begin in the daily operations and
internal workings of an organisation. The organisation consists of individuals who
act together to achieve a common goal. The roles and functions assigned to the
various players in the organisation are the basis for different types of evaluation in
which performance is compared with the set objectives for the field in which they
are responsible. The reporting and information compiled, such as accounting
systems, is the material that forms the basis for performance evaluation. The
dilemma for many organisations is largely a matter of interpreting whether the
performance is adequate, whether a unit has taken on its responsibilities and
fulfilled expectations.
Understanding the context

Traditionally, research and development in the management control field focused on
developing new techniques and models. Today there is greater interest in the study
of how employees and managers use techniques. The technology itself is interesting,
as the procedures and practices constitute an important basis for action, but it is
also interesting to try to understand how the models are used, and the effects
achieved within them. For several years, research has been ongoing in subjects and
areas that are difficult to operationalize and thereby to clarify in simple, pedagogical
models. The manager, i.e. the user of management control ideas, the attitudes and
work with models is just as interesting, if not more so, than the models themselves.
However, it is clear that the idea with the greatest impact during the past few years
is the balanced scorecard. It is a clear example of a model that can be described as
both a technique and a simple model. The work practices and traditions that have
existed in the company have been documented and packaged to be transferred and
used in other contexts. Luca Pacioli, the medieval monk, was an early example of
this when he wrote down the basics for double-entry bookkeeping. The Du Pont
model developed in a similar manner from one of the largest US companies efforts
to derive profitability. The techniques and models are simplifications that come
from a practical business context.
One of the major concerns with the generalisation of simple models is that they
assume that all companies and organisations can operate and use them in a
comparable or similar manner. One of the points of the models is that they are
simplifications to facilitate understanding, but at the same time the organisations
that will use the models are complex. This means that it is not really the model that
is interesting, but how organisations choose to utilise and work with the model. The
CEO or the management function that uses a model becomes a very interesting
empirical context for understanding what happens when models are used in
companies.
The context in which we live and act is largely constructed by us as actors,
whereby the context is a social construct (Berger & Luckmann, 1966). This means,
for instance, that in order to make a decision, a manager first forms an opinion
about what has happened and what options are available. The conclusion of this
review is an interpretation of the environment, the context in which different parts,
such as reports and group perceptions, are given a meaning. Decisions and actions
may, to some extent, be understood from the image of a context in which the
director forms the meaning. An actor in the context acts on the socially constructed
image as the operator of the applicable conditions, and how they should be valued.
The actor, or manager, wants to perform in a meaningful way, something that is
consciously or subconsciously defined by the operator and/or other agents in this
context. In order to be able to act meaningfully, an understanding of the conditions
that apply in this context is required. Perceptions are an interpretation of what is
going on, which in turn, build on what has happened in the past and what is
supposed to happen in the future. As the actor identifies with a context and wants
to be a part of it, it becomes important to the contextual perspective to act
meaningfully. This can also be seen as an expression of an agent who has taken
responsibility for an area in which he/she has power, whereby the operator has
assessed but not yet handled the associated risks. Consequently, the actor has
corrected past outcomes and the expression of learning for the manager to initiate
107
change if necessary. Decisions and actions, based on a social construction of

meaning, lead to accountability, learning, risk awareness and change according to
this view.
As humans, we identify ourselves with the context we are situated within. It
could be the profession we have selected, or where we have chosen to live. Some
areas we have not chosen, for example, the country of our birth, or our family, but
whether we have chosen or not chosen it, we nevertheless identify ourselves with
our context. Our hobbies also show who we are as a person, if we exercise regularly
or collect objects. Our dress and habitual behaviours define who we are as people,
Consciously or subconsciously we seek like-minded people with similar values and
outlook. Throughout, we make choices, where we want to signal that we belong to
a group in a given context. When making career choices, we choose simultaneously
the context in which we want to be, and in what context with which we want to be
identified. Occupational choice becomes a part of who you are. Job title and
company name represent important descriptors of a person.
Career choices are not static but can be changed when new tasks are triggered.
This can apply as well to a changed role in the same company as in a change of
business. The person, in most cases, chosen to work there becomes of the
environment and the organisation they are in, identified by a context and a
professional role. For a given profession, different powers and expectations are
connected. In many cases, it is about being expected to make decisions, whereby
concepts of responsibility and resource management become clear. It could be a
liability, or a power, which is not pronounced and thus, will not be as obvious but
nevertheless is present. An employee has the authority to make a decision he/she is
responsible for in certain areas of work. Responsibility can also be clearly
pronounced. It may for example, be reinforced with a title or the authority to decide
for others. Concepts such as power and authority can then be connected to a clear
professional identity. It is then no longer only a professional skill that is important
but also how, for example, a group of employees can be led, making decisions that
in the long-term will be good for the group. Professional identity then consists in
several dimensions.
Many organisations choose to promote employees who have demonstrated
commitment. This means then that you receive other tasks that often involve
planning for others, such as being responsible for a group of colleagues, or having
a greater responsibility for contact with external parties, where customers are one
such example. The new expectations for employees based on where he/she has
proved adept at in the profession, mean that the person initially recruited is given
more responsibility and is expected to make other types of decisions. Often,
decisions are about things that have to do with the profession, but other areas may
also be relevant. The clearest examples are with personnel and financial responsibility
whereby traditional tasks with a relatively short perspective have changed, to some
extent, to longer ones.
In many organisations today, employees are expected to continually develop
existing, as well as learn new, skills (Cho & Egan, 2009). A common assumption is
that the organisations ability to survive depends on employees learning at the same
rate, or even better at a higher rate, than the changes the environment manifests
(Boshyk, 2002). When different companies and business leaders discuss their
learning situations, it is often difficult to define what is meant. This certainly has to
do with certain terms and concepts that do not belong to their usual vocabulary.
However, when they talk about how they work, there is a clear pattern that
resembles, and can be interpreted as, learning in different forms. Organisations are
made up of people, and a common way of looking at learning organisations is that
there are people in the organisation who learn (Pedler, Burgoyne & Boydell, 1991,
Popper & Lipshitz, 2000). Learning builds on, to a large extent, the question to
change the standards, practices and objectives of a given firm, not only as a facility
for solving problems (Argyris & Schn, 1996). Learning can also be seen as a form
of self-evaluation in which the critical review of ones own performance creates
opportunities for improvement (Ron, Lipshitz & Popper, 2006). This is an ongoing
process occurring in several dimensions simultaneously, such as the detection and
correction of errors, social adjustment and control, and various types of meaning.
The experience is then collected in a form of collective, organisational memory,
developing the groups ability to handle new situations.
[organizational learning] an experience-based process through which
knowledge about action-outcome relationships develops, is encoded in
routines, is embedded in organizational memory, and changes collective
behaviour.
(Ron, Lipshitz & Popper, 2006, p. 10841085)
The concept of organisational learning is complex in itself and also includes a purely
rhetorical function (Clegg, Kornberger & Rhodes, 2005). Learning is assumed to be
made for the benefit of the entire organisation, but stored in practice throughout
the systems that manage the business, described as organisational learning systems,
with effects varying depending on the unit (Edmondson, 2002). A common
aspiration is that learning should create value to business performance improvement
(Lipshitz, Popper & Friedman, 2002). When learning is staged, managed by and
useful for a group rather than an individual, this is an expression of the organisations
learning process (Hutchins, 1995). An alternative view is that it is the individual
member of the group, the learning agent, that starts and takes on board the learning
process, but then the change happens in practice in the organisation (Ron, Lipshitz
& Popper, 2006). The group or organisation thus represents both the context and
beneficiaries when learning is lifted from an individual to a higher organisational
level.
There is an inherent tension between the concepts of learning and organising
(Clegg, Kornberger & Rhodes, 2005). Organisation aims to bring order and
structure in contexts that in some cases might be perceived as complex and chaotic.
By means of organising there is a reduced variability as it is focused on key concepts.
109
Learning in contrast, is based on habitual patterns of change and that new

approaches are added, creating space for creative voices and a larger pursued
disorder per se (Rhodes, 1997, Wenger, 2000).
Organizing and learning are essentially anti-thetical processes, which means the
phrase organizational learning qualifies as an oxymoron. To learn is to
disorganize and increase variety. To organize is to forget and reduce variety.
(Weick & Westley, 1996, p. 440)
This finding leads to the need for creating spaces of both order and disorder, both
to construct and deconstruct a context, a condition where there is a continuum
between such order and disorder. In this state, created and recreated concepts and
perceptions (moving concepts) about their organisation and what goes into it, as
well as the reality, are not frozen images recorded on one occasion, but the reality
is dynamically created and re-created (Steyaert & Janssens, 1999). These concepts
are the building blocks of the thinking that form our view of our surroundings,
making learning in many cases mean just the changing of perception within the
organisation, with the help of concepts.
Concepts organize our thinking and thus our imagined ways of world-making.
They allow us to perceive certain things It is difficult to change dominating
concepts and images of thought, to de-frame and think the unthinkable. Yet
one important aspect of radical learning will include the effort to question the
taken-for-granted in order to gain yet unknown perspectives and insights.
(Clegg, Kornberger & Rhodes, 2005, p. 156)
An organisations knowledge and skills are by definition part of its discourse; its
context and representations are in themselves a form of power (Foucault, 1972).
Knowledge is a natural part of the order and the way the organisation acts, meaning
that learning is effectively changing the regime, which in turn alters power
structures. An important part of the learning process is thus changing the rules and
standards that constitute the discourse that forms our perception of the world
around us (Clegg, Kornberger & Rhodes, 2005). Ultimately, the interplays between
order and disorder, organising and learning, move a new image of the organisation
forward. The private foundation that business rests on, the knowledge context that
limits ones own perception, has been questioned and, therefore, new approaches
and knowledge discourses can be inserted (Calas & Smircich, 1991). An organisation
or group of people create their own reality using knowledge and understanding, an
understanding that is gradually changing as new lessons are appended to the
existing perceptions and a learning organisation comes into operation.
No learning is without action and no action is without learning.

(Revans, 1998, p. 83)
A pedagogical starting point for learning in action is that the most effective learning
takes place in real situations in an everyday context (Reynolds & Vince, 2004). This
occurs via a workgroup or team, centred on the decision-maker, as the natural unit
where learning occurs (Senge, 1990). As the reflection and ultimately learning
happens, the team or group must produce documents to formalist and store
organisational learning (Edmondson, 2002). When actors or participants in a
learning environment reflect in conjunction with each other on everyday problems
and situations, learning also takes place, with the help of each others observations
and insights (Raelin, 2008).
A manager faced with trouble assembles a few [comrades in adversity] for
all to learn with and from each other how better to define what everyone is
trying to do, what are the separate obstructions to getting it done, and what
particular courses of action may be helpful in doing it.
(Revans, 1982, p. 720)
The best conditions for learning are thus created when colleagues reflect together on
real, everyday problems and situations that arise in the organisation (Raelin & Raelin,
2006). One common definition of learning in action emphasises areas of the
environment and the real situation, but also in many cases it is regarded as a process.
[Action learning is] a process of reflecting on ones work and beliefs in the
supportive/confrontational environment of ones peers for the purpose of
gaining new insights and resolving real business and community problems in
real time.
(Dilworth & Willis, 2003, p. 11)
There are two main parts highlighted in the process of translating learning into
action. It is partly the act in itself that can be seen and understood as a path to
(Raelin, 2008), or a base of (Pedler, 2005), learning. However, in order to achieve
this, the action becomes the means of transportation (Raelin, 1999). It is partly
learning that can be developed at the individual, team and organisational level
(Marquardt, 2004). The challenge for a business that wants to work with translating
learning into action is to find the right balance between action and learning (ONeil
& Marsick, 2007). When documented in procedures and routines action and
learning becomes understandable to an individual or an organisation, even though
this is not learning itself (Cho & Egan, 2009). The process of learning in action, the
process where the action can both be viewed as the product but also the input,
therefore needs both the act and the learning to be identified and understood.
111
A very important part of the effort to learn in action is all about finding a way
to reflect that in the act itself (Schn, 2003). For example, when a team reflects on
what happens in everyday life, what you take for granted is that new insights are
formed, which in turn, may lead to new solutions for known problems. In order to
create the best effect of reflection, regular occasions can be staged where
opportunities are provided for learning through reflection (Conger & Toegel,
2003). To further enhance this possibility, different types of methods or tools may
be used. A natural approach is to use a dialogue to try to explore the problem
(Smith, 2001), which can be done in the form of open public reflections and
conversations (Raelin, 2008). Another common approach is that a different type of
feedback, both individually and in groups, is carried out (Conger & Toegel, 2003),
which may also take the form of an interview or assessment (Waddill, 2006). Such
individual and collective reflections create the conditions for learning in action
leading to organisational learning.
The models of economic governance are also based on, in many respects, an
educational dimension in that they simplify complex processes and make them
manageable, leading to deeper understanding as well as reflection and learning.
Of equal importance is the service that AIS [accounting information systems]
can provide in assessing how actual events matched the assumptions that were
made when the plan was developed. The evaluation process is much richer
when the actual events and assumptions are compared. This is because the
assumptions are not limited to events that can be measured in financial terms,
but also include opinions gathered from external market intelligence, informed
communications within and outside the company and management hunches.
The aim of this design of AIS is quite simply to improve learning. At both top
and lower management levels, awareness of the many sources of uncertainty
that effect decision making is improved. The AIS has the role of scanning the
environment to determine whether key assumptions remain valid.
(Emmanuel, Otley & Merchant, 1990, p. 370, 371)
In their daily work, for example when it comes to making decisions, the assumptions
that formed the basis of previous plans and objectives are used. These can be
formed in different models and in a logical cause and effect relationship, helping to
perceive the world and how we then act (Senge, 1990). The mental models represent
a form of theory-in-action that is the basis for the behaviour itself (Argyris, 1982).
The models are characterised as active in that they form actions, but are also
perceived and seen.
Albert Einstein once said, our theories determine what we measure (Senge,
1990, p. 175). The problem of mental models is that we are sometimes unaware of
them and those who act on a particular model, a set of assumptions, defend their
actions without knowing that conduct was actually built on hidden models (Argyris,
1985, Argyris, Putnam & Smith, 1985). At the same time, a manager needs to
develop their own ability to act on the models, meaning that reflective learning
takes place when the models change (Senge, 1990). When the common models that
shape both individual behaviour and group perception, or attitudes and ultimately
behaviour, change, the process of organisational learning occurs.
A common assumption is that the manager has a cybernetic task, where the
managers function can be described as a guiding mechanic (Beer, 1959). The
concept of cybernetics comes from Greek and means to steer. The meaning can be
illustrated by the rudder function on a boat or that of a thermostat to regulate the
heat in a room, for example. The rudder has the ability to control a large vessel and
regulate the power of the sails. Similarly, the thermostat regulates the power of the
heating source so that the right level of warmth is spread throughout the room.
Cybernetic theory has been used to explain behaviour in society, medicine and
technology (Wiener, 1948). To look at management as a regulatory function as a
mental model may explain why many of the methods and ideas about it have
emerged as they have done.
The mental models are, in many ways, clear examples of learning, where new
experiences are added to old understanding, and the mental models adapted to new
conditions where learning has taken place. When a new experience has been formed
and this experience should be put into action, this often manifests in some kind of
changed behaviour. It has been learned, and thus takes the form of action, which is
a first step in the change process. In a way, the learning, the individual and the
organisation, act as expressions of a mental work, while the changes are expressions
of its physical consistency. For example, organisational learning as mental work
and organisational change as physical process (Clegg, Kornberg & Rhodes, 2005,
p. 150).
The change is, in many respects, a natural part of learning and actions without
learning are the same as learning without change, something that does not create
the desired results, further reiterated in the following statement:
action without learning is unlikely to return fruitful results and learning
without action does not facilitate change.
(Cho & Egan, 2009, p. 435)
Many theories assume that change and working with change take place in some
kind of process. Change can thus be understood partly as something that happens
by more or less consciously pronounced processes, and as something that happens
unconsciously in daily work. However, change is always linked to individuals
within different levels of an organisation. The change is also seen as a natural part
of learning and there are strong links between learning something and action.
The work of changing businesses or organisations means in most cases that some
kind of process is staged. This can in many cases resemble classical strategy where
an initial step is formulated and then in the next implemented (Andrews, 1971).
Flamholtz and Randle (1998) state that the structure transformation process occurs
113
in four steps; a notion comparable with several other writers on the subject (Raineri,
2009). Their model is based on four steps leading to a plan for change being
defined. In the first step the environment in which the organisation operates, for
example in terms of market conditions, competition and trends, is evaluated.
Parallel to that step its internal operations are assessed, with a focus on the business
plan, organisation and size. This then leads to the third step where a number of
questions are answered, questions which largely involve simple business conditions,
such as what type of business is to be conducted, where it will be conducted, the
competitive advantages held, desired future accomplishments and the promotion of
organisational success. The conclusions are summarised in a fourth stage in which
environmental analysis is included as the current mission weighed with future
ambitions, resulting in strategic initiatives and goals.
Similarly, a work with organisational development has also been described as
something that takes place in five phases (Lyngdal, 1992). After the first phase has
been identified and diagnosed by the organisation, an analysis followed by problem
solving takes place. This is then affected and the results evaluated. A metaphorical
way of describing what happens in such phases is to assume thawing, change and
freezing (Schein, 1985). The thawing phase creates a form of insight into the illness
where the consequence of not changing operations is made clear. In this phase,
which parts should not be changed are diagnosed, as well as the ambition to create
a safe atmosphere where anxiety and reluctance to change are counteracted (Nadler,
1987). In the next phase, work is focused on changing the business, for example
through training, communication initiatives and changes in structures and/or
management styles. In the last, freezing phase, the measures are evaluated and
stabilisations in the form of the change becoming routine. Here, it is also important
to ensure that the general attitude, and the attitude to change in particular, often
described as culture, corresponds with what is actually happening in the
organisation: its structural behaviour (Jacobsen & Thorsvik, 1998). In the work of
a change process there is often the ambition for rational processes of transformation,
where different phases characterise the procedure.
Even though a process of change, just as a strategy process, traditionally takes
place in three main parts, the purpose and what is achieved may vary. In a change
process, three different functions or purposes are sought, the starting point for
Flamholtz and Randles (1998) model. The first type of change that the organisation
can work with is about changing the management function so that it goes from
being focused on an entrepreneurial management team to more of a professional
management. Key components of this type are the different systems for operations,
such as planning and performance measurement systems. A second type of
transformation is about the revitalisation of an activity so as to better fit into the
companys environment and market. Revitalising is largely aimed at assessing and
evaluating the opportunities and threats that exist, and how the business can be
altered to better manage ambient conditions. A third type of change involves
transformation and finding new visions and roles for the company. It can both
involve identifying those in the existing market, but also in trying to work with new
market options. The purpose of the change and its causes may vary depending on
the size of the business and the intentions that lie behind the change process.
Another way to look at the development process is that it takes place in the form
of a historical-dialectical development in which two forces clash. In this case, it is
dialectical in that a form of metaphorical argument is occurring in an organisation
undergoing change, where the substance of the discussion is the weighing of
argument and counterargument against each other. This approach can be traced
back to the ancient Greeks:
Dialectics come from the Greek term for dialogue, whereby a residue of giveand-take and of relentless questioning continues to inform the context. At the
core of all dialectics, we find a continuation of incessant querying and an active
engagement with the resistant stuff of knowledge. Dialectical inquiry is
epitomized by Plato in the person and style of Socrates.
(Heilbroner, 1980, p. 31)
In a development, change occurs in the organisation and its leadership to some
extent based upon the size of the business and market expansion. Each step is
followed by a backlash, according to the historical-dialectical model, which Greiner
(1972) describes as a crisis phase. The different phases based on this position is that
the organisation has previously won, or past a crisis phase. All organisations start
small and are characterised as informal communication hubs where the owner is the
one who developed the business and in many cases also leads it. When
the organisation continues to grow into the next phase, it must first overcome the
leadership crisis that may occur when the business becomes too large for a single
owner. From a leadership crisis perspective, stable administrative procedures such
as models for financial control can be of help. When the business then continues to
grow, the organisation can end up in an independence crisis where the managers
who are at lower levels require greater autonomy in order to develop the business.
A natural solution is to delegate responsibility and authority. In order to develop,
an effective business needs, in the next phase, to coordinate resources and ambitions
as something that come out of a need for control. This is also the crisis phase that
the organisation needs to go through. At this stage of development, business has
become so extensive and complicated that a common view of it, both in senior
management and in the actual business, is difficult to achieve. The organisation can
no longer be developed as a unit, something known as the red-tape crises. A
division into independent units, which can cooperate, is then required. The tension
that arises between the continued development and the crisis that development
needs to overcome is described by Greiner (1972) as a historical-dialectical model
in five phases. Development and growth requires an ability to handle resistance and
crisis.
115
A natural ambition in most organisations is to change work in order for it to be

done under some kind of consistent structure or method, in a rational way.
However, early research into how organisations work points to the contrary
(Barnard, 1938). Under this approach, the organisation and its structure is a mirror
of how the employees in the organisation have grouped themselves and how they
choose to work. It is argued that the structure comes after behaviour and that
employees act in certain patterns, which then form the basis for the entitys
structures (Scott, 1992).
Every employee also brings a set of experiences and specific expertise, which for
example, allow newly recruited employees to want to interpret data in a new way,
thereby altering the activity (Miner, 1987). Similarly, one can reflect changes in an
organisation in light of broader changes taking place in general society (Miner,
1990). Changes in organisations are not only based on rational models and
methods, rather, a significant percentage of changes are made unconsciously. One
way to describe an organisations ability and willingness to transform itself is based
on environmental uncertainty. If the conditions are stable, functioning management
repeats what has previously been done, while the changing approach depends on
the conditions of environmental change. This can be likened to two species or types
of companies (Burns & Stalker, 1961). This type of continuous change is largely an
evolutionary adaptation like its biological role-model; change in order to survive.
In many cases, organisations are changing, but considerably slower than society
in general (Hannan & Freeman, 1989). This can be attributed to several factors. For
example, significant investment in working methods and equipment, or shifting
internal and external power relations, creating a natural resistance. There is also a
more general delay in the new discoveries that can be detected by the organisation.
Uncertainty about an organisation affects its ambition and ability to change.
Changes can also be characterised as random where, for example, those affected
by a problem, or active in a particular context, carry out the change, and not
primarily those who are most suitable according to some management criteria
(March, 1976). In a business, there is an ongoing stream of threats and opportunities,
and those who work there and act on them, might make the change in a way more
based on the coincidences offered and not on well thought-out strategies. This
behaviour is concentrated on the idea that change is a form of incomplete process
(March, 1989). Participants do not always see the context in which changes are
decided, but the situation itself invites change in the moment. Those involved are
not fully aware of what they are involved in and what participation means. This
means that change is to some extent anarchist, without rules and structures, and of
course is therefore irrational. Currently, the conditions for change and the process
itself are not rational, i.e. not based on thoughtful planning and a balanced
analysis.
Overall, there are several things going on for a more unplanned change in
organisations to occur. For example, whether the activities of a business can be
programmed, and are thus largely predictable, or non-programmed, and thus very
difficult to determine (Emmanuel, Otley & Merchant, 1990). There are also many
events, occurring both internally and externally, which are difficult to understand
and can be interpreted in several different ways (Smircich & Stubbart, 1985). In
many cases, the causal link between the different actions and outcomes make it
difficult to determine which results to plan for, and thus rational actions cannot be
effectively defined (Orton & Weick, 1990). An undesirable consequence is that it is
difficult to interpret events and predict the effect of the actions for change or
learning as they are based on wrong information and a degree of overconfidence
(March, 1991). Change takes many forms; the two main divisions bring rational
planned change and gradual adaptive change (Czarniawska & Joerges, 1996). The
planned change process is better suited, in many cases, to a stable environment,
whereas the adaptive approach is suitable to a rapidly changing context.
All change will ultimately be about the people working in a business. This applies
to employees at lower hierarchical levels as much as to the higher levels of
management. A common starting point then is to explain change as something that
happens in the political game, in an organisation, or in its culture (Pettigrew, 1985,
Johnson, 1987, Dawson, 1994). The possibility that the actual cause of a change is
active is questioned (Balogun & Jenkins, 2003). The change is not something
supplied or made by an individual in an organisation, but it is part of the individuals
own behaviour and current context (Balogun & Johnson, 1998). This means that
culture cannot be changed by the leader in a conscious way (Willmott, 1993).
Cultures and organisations alter after all, but it happens in a more emergent way,
and in the form of a more natural development, rather than with concrete plans and
models (Ogbanna & Harris, 1998). Change is something that needs to be
understood meaningfully for it to be implemented (Isabella, 1990). Change and
work is tied in this way to the employees and the management who are the agents
in an organisation.
Change can be seen as a process, described earlier, in which different actors are
active during different phases. Common to this work, is that management becomes
clear and visible (Buchanan, Fitzgerald, Ketley, Gollop, Jones & Lamont, 2005,
Kotter, 1996). Employees need to feel that management is active and involved in the
change and the process (Raineri, 2009). However, it can also mean that management
ensures that employees are trained and coached to handle the new data, so that they
have the right skills (Nadler, 1998). The smallest and simplest components of a
change process can be described as change strategists and change recipients (Jick,
1992). Change strategists are those who have the power to decide what changes to
make, and the recipients those affected by the decisions taken. This simple grouping
means that a natural division can be identified between management as change
strategists, and employees as change recipients. This division can also be described
as hierarchical, where the initiative for change and the power to decide come from
a higher, or lower, hierarchical level.
When the responsibility for change comes from higher management this is
known to be the traditional top-down command, and when the change is
controlled by the lower hierarchical levels, such as a production line, it is a bottomup control (Janger & Edmondson, 1990). When the approaches are combined, it is
117
a simultaneous approach, where both management and employees at lower levels

are involved in controlling change. The choice of governance perspective, in many
cases, is to first understand the purpose of the change and then choose which part
of the business will lead it (Beer, 1988). Although employee-driven change is often
advocated, it is based not on a general positive attitude toward the employees
ability, but about creating competitiveness.
The idea of liberation and empowerment for our workforce is not
enlightenment its a competitive necessity.
(Ray, 1991, p. 38)
Efforts to enforce a change can be attributed to, and associated with, either senior
management or employees at lower levels. Another way of looking at strategic
change over time is that it is something that grows in an organisation and not
something shaped by a particular group therein (Ericson, 2001). Whether the
change is described as something intentionally emerging that can be realised
(Mintzberg & Waters, 1985), the common minimum denominator is that change is
itself a process, carried out by individuals in an organisation. The change can thus
be described in terms of the then and now by anyone who has insight into what is
going on in the organisation, past, present and future.
Although the ambition and plan in many cases is that the change process must
comply with thought-structures, it often occurs in a more conscious and continuous
manner. This is partly a reflection of the uncertainty surrounding a business
requiring continuous change at a more unconscious level. Changes can also be part
of the more random design to try out different ways of working, and thereby
discover ways to transform the business for the better. The change then takes place
largely in a natural and unconscious way, becoming itself part of everyday working
life. Change is the same as learning, both largely linked to individuals in an
organisation. Different employees at various levels of an organisation are involved
in various periods and phases of the change process, where the top management is
more accountable if the change is substantial, and daily changes to improve an
ongoing activity to a greater extent are managed at the more operational level. It is
also common for larger projects to be initiated and driven by management, partly
because the authority to make decisions exists there. There are examples of
organisations where change is initiated and operated both from the lower level as
well as top management. This is controlled mostly by the discovery of the problem,
and on which level has the skills to handle it. The thing to change is linked to a
person in receipt of certain powers to give suggestions and decide on a solution to
deal with the problem.
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Understanding Management Control

and Organisational Sense-making

Chartridge Books Oxford

Dedicated to my wife and my children

The accounting heritage

Part I The Essence of Management Control

The control concept in management control

Reports, communication and stakeholders

Part II The essence of sense-making

Organisations as a set of social relations

Information systems and management control

Part III Individuals and organisations

viii Understanding Management Control and Organisational Sense-making

Part IV Techniques and functions

Thinking and acting strategically

Information and knowledge

The performance paradox

Part V and beyond.

Understanding processes of organisational sense-making

Understanding the context

Management control techniques in general and management accounting methods in

Employees of an organisation want to act in a meaningful way regardless of the area