Management Accounting Practices and Assemblages

Peter Miller
London School of Economics and Political Science
Paper to be presented at
Eighth Biennial Management Accounting Research Conference
21/22 February 2!!" #ydney Australia
14 February 2003; 20:42
-2-
Management Accounting Practices and Assemblages
Peter Miller
London School of Economics and Political Science
Abstract
The roles of accounting in shaping the economy are currently being rediscovered by
sociologists !allon" 1##$; Fligstein" 1##0; %ranovetter" 1#$&'( This recent revival of
interest in accounting mar)s a further stage in a curious pattern of alternate attention and
neglect on the part of sociologists to*ards the practices that ma)e the economy visible and
measurable qua economy( This paper revie*s the different *ays in *hich accounting has
been given a *ider sociological significance across the t*entieth century( +t argues for a
focus on ho* ne* calculative practices emerge *ithin historically specific assemblages" and
ho* they alter the capacities of agents and organisations" and the interrelations among
them( +nvestment appraisal practices are used to illustrate(
The paper is in five sections( ,ection one introduces the paper( ,ection t*o
considers briefly the *or) of -a. /eber in the early 20
th
century" and the lin) established in
his *ritings bet*een accounting and rationalisation( ,ection three considers a subse0uent
stage" *ith a mar)edly different focus" namely the emergence in the 1#&0s and 1#10s of a
substantial literature on budgeting( 2eavily influenced by theories of group dynamics" this
literature focussed primarily on management accounting in an intra-organisational setting(
,ection four e.amines a further stage" characterised by the elaboration of a range of
methodologies from appro.imately 1#$0 on*ards that had as their concern to analyse the
social and organisational aspects of accounting( The methodologies developed and applied
here included those that focus on the institutional environments of accounting" the political
economy of accounting" ethnographic approaches" and a concern *ith the net*or)s *ithin
*hich accounting is embedded( ,ection five considers one particular strand of the recent
economic sociology literature" that *hich concerns the calculative capacities of agents and
their embeddedness in social net*or)s( /hile endorsing the revival of interest in economic
sociology" this paper argues that rather than focus on the enduring and transhistorical
attributes of agents and net*or)s" emphasis be placed on the roles of accounting *ithin
historically localised and temporarily stabilised assemblages of practices( 3lso" in place of
an emphasis on the role of economics and economic theory in formatting the real economy"
attention is directed to the more prosaic practices of management accounting *hich ma)e it
possible to act upon persons and processes *ithin and bet*een organisations(
These arguments in favour of focussing on the calculative practices of accounting
are illustrated briefly through consideration of a relatively neglected topic in management
accounting - investment appraisal( The practice of 4investment bundling5 as elaborated at
!aterpillar +nc in the early 1##0s is considered( 3n investment bundle *as defined there as
a multi-period capital spending program based on the diverse yet mutually reinforcing assets
needed to manufacture a core product module in a specified area on the factory floor( +t is
argued that the practice of investment bundling as developed at !aterpillar helped
operationalise a *orld-*ide transformation of production regimes *ithin a particular
corporate setting" and in a manner compatible *ith the broader problematising of the
competitiveness of 6orth 3merican industry *hich can be termed a 4politics of the product5(
+nvestment bundling provided a device for intervening *ithin the firm" and in consonance
*ith a broader transformation of concepts of competitiveness and economic citi7enship(
-3-
1$ %ntroduction
-ost e.perts are indifferent to" or discomforted by their o*n past( /hether this is
due to bad conscience" *hich can ma)e commentary appear as criti0ue" or a belief in
progress" *hich can ma)e earlier states of )no*ledge seem irrelevant" is less important than
the end result( +n the case of accounting" the result is that even today a sociology of
economic calculation e.ists only in embryonic form( +t *ould be *rong" ho*ever" to pin the
blame for this oversight *holly" or even primarily" on a group of e.perts *ho may see little
benefit in an enhanced self-understanding of their practice( The real fault lies else*here"
*ith a discipline that so far has failed to address ade0uately one of the most important
phenomena of the t*entieth century - the gro*th of those forms of economic calculation to
*hich the name accounting is currently given( +t is as if sociology has been too accepting of
the economy and its component parts as a given and ob8ective reality sui generis" too
daunted by a territory populated by apparently comple. techni0ues" too entranced by
professions such as medicine and la*" and correspondingly disdainful of accounting" to give
it the attention it merits( 9r perhaps it is simply because social scientists and social
authorities prefer to meddle *ith the lives of the poor" the insane" the e.cluded or the plain
*retched" rather than to see) to understand and e.plain the calculating practices that ma)e
up and represent contemporary capitalism(
This neglect is all the more curious in so far as accounting *as accorded a pivotal
role at the outset of the sociological enterprise( The *ritings of /eber placed accounting at
the heart of 4rational5 capitalistic economic activity" *hile those of -ar. accorded accounting
a central role in the development and reproduction of capitalist social relations( :et the
initial and bold pronouncements concerning accounting that played an important role in
shaping the sociological imagination at the end of the nineteenth and the beginning of the
t*entieth century *ere follo*ed by virtual silence on the part of sociologists for
-4-
appro.imately half a century( This silence is all the more surprising in light of the translation
into ;nglish during this period of /eber<s )ey *ritings on the sub8ect by Talcott =arsons" the
so-called founder of 3merican structural-functionalist sociology(
1
+t *as not until the 1#&0s
that the interest of social scientists in accounting resurfaced"
2
to be follo*ed in the 1#10s by
the burgeoning of 4behavioural accounting5( 3nd it *as only in 1#>1 that accounting at last
had a 8ournal - Accounting, Organizations and Society" dedicated to e.ploring its
organi7ational and sociological dimensions(
The roles of accounting in shaping the economy are currently being rediscovered by
sociologists !allon" 1##$; Fligstein" 1##0; %ranovetter" 1#$&'( /hile endorsing this revival
of interest in the calculative practices of accounting" this paper argues for a focus on ho*
ne* calculative practices emerge *ithin historically specific assemblages( ?ather than
begin *ith the calculative capacities of agents" and their embeddedness in social net*or)s"
attention is directed to the roles of accounting *ithin historically localised and temporarily
stabilised assemblages of practices" and ho* accounting practices can alter the capacities
of agents and organisations" and the interrelations among them( 3lso" in place of a concern
*ith the role of economics and economic theory in formatting the real economy" attention is
directed to the more prosaic practices of management accounting that ma)e it possible to
act upon persons and processes *ithin and bet*een organisations( +nvestment appraisal
practices are used to illustrate(
The paper is in five sections( ,ection one introduces the paper( ,ection t*o
considers briefly the *or) of -a. /eber in the early 20
th
century" and the lin) established in
his *ritings bet*een accounting and rationalisation( ,ection three considers a subse0uent
1
The Protestant Ethic and the Spirit of Capitalism" first published in %erman as a t*o-part article in
1#04-&" *as translated into ;nglish and published in 1#30( The Theory of Social and Economic Organization" a
translation of =art + of Wirtschaft und Gesellschaft" *as published in 1#4>( +t is also interesting to note that @arl
=olanyi<s The Great Transformation" a boo) *hich hints strongly at the need for a sociology of the mar)et and of
finance" *as published in 1#44(
2
,ee" for instance" 3rgyris 1#&2'" Aalton 1#&#'" /hyte 1#&&'(
-&-
stage" *ith a mar)edly different focus" namely the emergence in the 1#&0s and 1#10s of a
substantial literature on budgeting( 2eavily influenced by theories of group dynamics" this
literature focussed primarily on management accounting in an intra-organisational setting(
,ection four e.amines a further stage" characterised by the elaboration of a range of
methodologies from appro.imately 1#$0 on*ards that had as their concern to analyse the
social and organisational aspects of accounting( The methodologies developed and applied
here included those that focus on the institutional environments of accounting" the political
economy of accounting" ethnographic approaches" and a concern *ith the net*or)s *ithin
*hich accounting is embedded(
,ection five considers one particular strand of the recent economic sociology
literature" that *hich concerns the calculative capacities of agents and their embeddedness
*ithin social net*or)s( +t is argued that" rather than the attributes of agents and net*or)s"
*e should focus on calculative practices and the assemblages of persons and organi7ations
they help form( These arguments are illustrated briefly through consideration of a relatively
neglected topic in management accounting - investment appraisal( The practice of
4investment bundling5 as elaborated at !aterpillar +nc in the early 1##0s is considered( 3n
investment bundle *as defined there as a multi-period capital spending program based on
the diverse yet mutually reinforcing assets needed to manufacture a core product module in
a specified area on the factory floor( +t is argued that the practice of investment bundling as
developed at !aterpillar helped operationalise a *orld-*ide transformation of production
regimes *ithin a particular corporate setting" and in a manner compatible *ith the broader
problematising of the competitiveness of 6orth 3merican industry *hich can be termed a
4politics of the product5( +nvestment bundling provided a device for intervening *ithin the
firm" and in consonance *ith a broader transformation of concepts of competitiveness and
economic citi7enship(
-1-
2$ Accounting and Rationalisation
-a. /eber" *riting in the first t*o decades of the t*entieth century"considered
accounting to be at the heart of the rationalisation of society under capitalism( /eber
re8ected the idea that capitalism *as a matter of greed or ac0uisitiveness( +nstead" he
argued" capitalism should be understood as the continuous pursuit of profit by means of
4rational" capitalistic enterprise5 /eber" 1#30" p( 1>'( ;conomic action" according to /eber"
is capitalistic in so far as it depends on an e.pectation of profit through the utili7ation of
opportunities for e.change( 3nd this 4rational5 pursuit of profit re0uired as its counterpart
calculations in terms of capital( The modern" rational organi7ation of capitalistic enterprise
*ould not have been possible" /eber argued" *ithout the calculative practice of
boo))eeping(
?ationalisation provided the overall theme for /eber<s sociological pro8ect( This
multidimensional rationalisation of the conduct of life *as termed e!ensfuhrung( /eber
*as concerned *ith the conditions *hich gave rise to and enabled the spread of the
Bspecifically modern calculating attitudeB /eber" 1#>$" p( $1'( 3ccounting" in the sense of
both budgetary management and capital accounting" *as central to his analysis of the
sociological conditions of economic activity( 2e argued that money is Bthe most CperfectC
means of economic calculationB /eber" 1#>$" p( $1'" that is" Bformally the most rational
means of orienting economic activityB /eber" 1#>$" p( $1'( !alculation in terms of money"
rather than its actual use" *as the mechanism by *hich rational economic provision could be
conducted" and capital accounting *as the form of monetary accounting peculiar to rational
economic profit-ma)ing:
/eber defined an economic enterprise as Bautonomous action capable of orientation
to capital accountingB /eber" 1#>$" p( #1'" and stated that Bthis orientation ta)es place by
means of CcalculationCB /eber" 1#>$" p( #1'( To this e.tent" he placed a concern *ith
->-
calculation at the heart of a sociological analysis of economic activity( !alculation *as the
crucial mediating machine" located mid-*ay bet*een rational profit-ma)ing enterprises and
the opportunities available to them( Aouble entry boo))eeping" according to /eber" *as
Bthe most highly developedB /eber" 1#>$" p( #2' form of boo))eeping" in so far as it permits
4a chec) in the technically most perfect manner on the profitability of each individual step or
measure5 /eber" 1#>$" p( #3'(
/eber<s arguments *ere complemented by those of ,ombart *ho put for*ard a
similar albeit stronger argument concerning the relationship bet*een double-entry
boo))eeping and capitalism( ,ombart argued not only that rational calculation *as
important to the capitalist enterprise" but *ent so far as to speculate *hether it *as double
entry boo))eeping that had given rise to capitalism( The plausibility of this proposition is
less important than the pivotal role and sociological significance it gave to economic
calculation( +t accorded economic calculation a central and formative role in economic
activity" rather than a subsidiary role( Together *ith the arguments of /eber" ,ombart
helped establish a lin) bet*een accounting and sociology that has continued to the current
day( 3ccounting *as identified as a proper ob8ect of sociological analysis(
=rior to /eber" -ar. had also signalled the importance of the relationship bet*een
accounting or boo))eeping and capitalism( +n an obli0ue reference to the imaginary *orld of
political economy" -ar. remar)ed in Dolume + of Capital that one of the fist tas)s of
?obinson !rusoe on his desert island is to )eep a set of boo)s -ar." 1#>4a" p( $1'( +n
Dolume ++ of Capital" *here -ar. deals *ith the costs of circulation" namely those associated
*ith the transformations of the forms of capital from commodities into money" and from
money into commodities" he addresses the issue of the labour-time e.pended in boo)-
)eeping( 3 part of the variable capital has to be used" he argued" to ensure that the process
of circulation can continue( Eoo))eeping is depicted as a deduction from the productive
process" albeit an essential part of the circulation process( The machinery of the office"
*hich includes labour po*er" thus mirrors the movement of value through the productive
-$-
process -ar." 1#>4b" p(131'( +n so far as capital see)s its o*n reproduction" this deduction
from *hat -ar. regarded as the real process of production is an essential part of the
capitalistic process( 3nd as the production process becomes ever more social in character"
and loses its individual character" boo))eeping becomes ever more necessary(
-ar. did not accord accounting as central a role as did /eber( 6one the less" *hen
placed in the conte.t of a theory of value and the concept of mode of production" -ar. gave
accounting an important place alongside other political interventions in the relations of
production( +n -ar.<s *ritings" accounting is accorded a macro-structural role" both shaping
and reproducing the nature of capitalist relations of production( To this e.tent" -ar. and
/eber occupy a similar terrain( For both" accounting helps define the social and economic
relations that define a society( Thus did the interrelation bet*een accounting and sociology
commence( 2o*ever" little *as to be made of these beginnings until the 1#&0s and 1#10s
*hen 4behavioural accounting5 began to emerge(
"$ Accounting #ociology and the Analysis of &roups
Follo*ing the *ritings of /eber and ,ombart" there *as little or no interaction
bet*een the disciplines of accounting and sociology until the 1#&0s( /hen a sociological
concern *ith accounting did resurface in the 1#&0s" the focus had shifted from a macro-level
concern *ith processes of rationalisation and accumulation to a more micro-level concern
*ith groups" group dynamics" and the role of accounting in them( 9ne can mar) the shift by
reference to !hris 3rgyris< 1#&2' seminal paper on the impact of budgets on people(
3rgyris e.amined *hat 4budget people5 thin) of budgets" and ho* factory supervisors thin)
differently about budgets( 2e combined a study of accounting practices *ith a sociological
concern *ith groups( ?ather than ta)ing groups as given and self-evident" he described the
interaction bet*een people and budgets as one of the creation of groups( +f management
-#-
puts increased pressure on individuals" he argued" groups are li)ely to form( These groups
can in turn help absorb the increased pressures placed by management on individuals(
9nce formed" such groups can persist even after the initial pressure to produce them has
disappeared(
+n proposing that the interaction of people and accounting practices be understood in
this *ay" 3rgyris *as dra*ing on t*o decades of research in sociology *hich had
substantially re-focussed the discipline since the late nineteenth and early t*entieth century(
From 1#30 on*ards" groups and their dynamics became a ma8or preoccupation for social
scientists( The boundaries bet*een social psychology and sociology became blurred" and
social scientists found groups every*here( The character of ;lton -ayo is central to this
change in *ays of analysing the relational life of the enterprise( The studies conducted
under his supervision at the /estern ;lectric !ompany<s 2a*thorne /or)s in !hicago
bet*een 1#2> and 1#32 illustrate the transformation( These studies had a clear conclusion:
the dynamics of groups e.plain changes in industrial output more successfully than changes
in the physical environment( Further" the relations among individuals" and bet*een an
individual and his or her *or)" should no longer be considered e.plicable in terms of a
bundle of physiological attributes( The enterprise can be vie*ed as a social system" and
interpersonal relations and group dynamics are at the heart of this social system(
3 number of other influential administrative theorists endorsed and e.tended this
sociological analysis of groups and their importance *ithin the firm( 3s early as 1#1$" -ary
=ar)er Follett had sought to s)etch out a role for the modern corporation *ithin a democratic
polity" arguing that the modern corporation should be the principal arena *ithin *hich a
group ideal of democracy could be realised Follett" 1#1$'( 2er position *as simple: there is
neither individual nor society" but 4only the group and the group-unit - the social individual5
Follett" 1#1$" p( 21'( T*o decades later" !hester Earnard remar)ed that 4the most usual
conception of an organi7ation is that of a group of persons((5 Earnard" 1#3$" p( 1$'( 2e
argued that the 4system of interactions5 is the basis of the group" and that formal
-10-
organi7ation should be regarded as 4a system of consciously coordinated activities or forces
of t*o or more persons(5 Earnard" 1#3$" p( >3'( /orld /ar ++ and its immediate aftermath
provided a 4laboratory5 in *hich group relations could be studied in their depths and details
-iller" 1#$1'(
+n the 1#&0s and 1#10s" the concept of the group became a central preoccupation
for the rapidly e.panding discipline of sociology( The sociologist %eorge 2omans 1#&1'
*as the first to attempt a theoretical synthesis based on the concept of the group( 3 range
of influences as diverse as Freudian theory" @urt Fe*in<s social psychology and the
sociometry of -oreno fuelled the gro*ing interest in the study of the small group( The
contribution of 2omans *as to attempt to dra* these diverse strands together" and to *or)
to*ards a general sociological theory *hich *ould ma)e the group the starting point for the
study of social relations(
3longside the theoretical synthesis being attempted by 2omans" sociologists *ere
busy e.amining issues such as absenteeism" staff turnover" morale" productivity and
industrial conflict as problems of group relations( 3 4*ildcat stri)e5 *as analysed by
%ouldner 1#&4' in terms of a 4general theory of group tensions5( The interrelations bet*een
individuals" or 4inter-relatedness5 as he described it" *as the focus for %ouldner<s concerns(
The painting of toys in an assembly line situation could 8ust as readily be understood in
terms of group dynamics and intergroup relations" as ,trauss 1#&&' demonstrated( ,trauss
depicted the factory as a social system made up of mutually dependent parts( 3nd Aalton
1#&#' proposed that cli0ues" small groups of persons *ith a common interest" could be the
indispensable mechanisms for promoting" stabili7ing and resisting change(
This line of reasoning *as reinforced by a number of *riters on the other side of the
3tlantic( Eion 1#41' coined the idea of the 4leaderless group5 as a *ay of analysing the
location of the individual *ithin a comple. of interpersonal relations( Ga0ues 1#&1' depicted
industrial conflicts bet*een managers and *or)ers as manifestations of underlying problems
of group relations( +n place of an industrial relations model of bargaining" he proposed a
-11-
psychotherapeutic one that he termed 4*or)ing through5( 3nd even accidents at *or) came
to be defined as matters of group relations( ?ather than vie* accidents in terms of a
dangerous physical environment to *hich individuals *ere e.posed" they *ere understood
in terms of legitimate forms of *ithdra*al from the *or) situation(
4Eehavioural accounting5 is the label used to describe the *ave of studies *hich
appeared from the late 1#&0s on*ards" and *hich built on these developments in the
sociological analysis of groups( Focated at the point of intersection of sociology and
accounting" behavioural accounting e.amined in differing *ays the interrelations bet*een
accounting and group relations( +n an early paper directed more to*ards sociologists than
accountants" Aalton 1#&#' sho*ed ho* pressure to meet cost targets" *hen combined *ith
re*ard schemes based on success in meeting such targets" can result in the distortion of
records( Ara*ing on theories of decision-ma)ing -arch H ,imon" 1#&$' and the ideas of
4human relations5 *riters such as -c%regor 1#10'" Fi)ert 1#11' and 2er7berg 1#1$'"
behavioural accounting consolidated the focus on group relations *ithin organi7ations(
The organi7ational and behavioural aspects of budgeting became a central
preoccupation of researchers across the 1#10s and early 1#>0s( Eec)er and %reen 1#12'
e.tended the concerns of 3rgyris *ith the group dynamics of budgeting processes( They
e.amined the interrelations bet*een the cohesiveness of *or) groups and the acceptance
of budget goals" and the impact of this interrelation on outcomes( 3 highly cohesive *or)
group *ith a positive attitude to*ards the budget goal *ould be li)ely to yield ma.imum
output" *hile a similarly cohesive *or) group *ith a negative attitude to*ards the budget
goal *ould result in a slo*do*n of production( 3s *ith 3rgyris< study" group process and
dynamics appears to be the )ey factor in e.plaining the budget process( 2ofstede *ent one
step further by depicting the budgetary process as a game *hich people play for its o*n
sa)e( 3lthough 2ofstede found some evidence that participation in the budgetary process
*as positively associated *ith motivation to meet budget targets" the results *ere mi.ed(
=articipation appeared to be a necessary but not sufficient condition for high budget
-12-
motivation( Target levels needed to be realistic" and the attitudes of senior managers *as
also important( The )ey ingredient" ho*ever" *as identified by 2ofstede as the 4game spirit5
*ith *hich managers entered the 4budget game5(
This line of reasoning *as e.tended significantly by 2op*ood 1#>4'" *ho dre*
e.plicitly on sociological and administrative theories of groups and organisations( 2e
problemati7ed the lin) bet*een participation and budgeting" arguing that participation can
mean almost anything to anyone and adding that much of the debate had turned in0uiry into
dogma( 2op*ood re-focussed the debate by identifying three distinct *ays of using
budgetary information in the evaluation of managerial performance( 2e identified a 4budget
constrained5 style" a 4profit conscious5 style and a 4non-accounting5 style( ;mpirical
evidence indicated that both the 4budget constrained5 and 4profit conscious5 styles of
evaluation resulted in a higher degree of involvement *ith costs than the 4non-accounting5
style( 9nly the 4profit conscious5 style" ho*ever" succeeded in achieving this involvement
*ithout defensive behaviour or undue tension and *orry on the part of the managers in
charge of the cost centres( The 4budget constrained5 style often resulted in manipulation of
accounting reports" incorrect charging to budgets" delays in carrying out repairs until the
money *as available in the budget" and a general deterioration in the relationships bet*een
managers and those to *hom they reported(
T*o decades of research into the behavioural aspects of budgeting and related
evaluation mechanisms transformed the discipline of accounting( +n the process" the
interrelation bet*een accounting and sociology *as altered permanently( 3ccounting *as
no longer to be perceived as a purely technical process" but *as to be vie*ed as
organisational and behavioural( /hat this meant" ho*ever" *as soon to change in line *ith
developments in sociology and the *ider social science environment(
-13-
'$ Accounting as an (rgani)ational and #ocial Practice
+f behavioural accounting *as firmly established by the mid-1#>0s as a *ay of posing
sociological 0uestions about accounting practices" its focus *as almost e.clusively focused
on processes that occurred *ithin organisations( The agenda outlined by those such as
/eber" ,ombart and -ar." and that sought to analyse the interrelations bet*een large-scale
social change and accounting change" had been almost entirely supplanted by a concern
*ith groups and group dynamics(
The need to remedy this by reinstating the macro-level analysis of accounting *as
set out clearly by 2op*ood 1#>4'( 2e argued that the processes by *hich groups influence
and control the accounting function *ithin organisations is matched by pressures arising in
the *ider social and economic environment( To the e.tent that much contemporary
accounting reflects the ethos of capitalism" so too *ould one e.pect the forms and
philosophies of accounting to change in line *ith changes in the social and political
environment( 2e reinforced this point in 1#>1 in an editorial in the first edition of Accounting,
Organizations and Society( 2e spo)e there of an 4urgent need for research *hich can
provide a basis for seeing accounting as both a social and organi7ational phenomenon5
2op*ood" 1#>1" p( 3'" arguing that studies of po*er" influence and control should
complement studies of the behavioural aspects of accounting *ithin organi7ations(
+t *as to be a fe* more years" ho*ever" before things began to change( +n 1#>$"
2op*ood could still comment that there had been little research *hich addressed the *ider
social and political influences on accounting( The more micro-level focus characteristic of
the north 3merican research tradition continued to dominate" in contrast to the more macro
;uropean approaches focusing on 0uestions of organi7ational sociology and the broader
structural and environmental influences(
;ven as late as 1#$0" a sociological analysis of accounting that could blend
successfully micro-level and macro-level concerns remained largely an aspiration( +ndeed" it
-14-
*as not even clear *hat concepts and issues *ould guide such a research agenda( ,ome
suggestions" ho*ever" *ere put for*ard in 1#$0 in an influential paper *hich sought to
identify the roles of accounting in organi7ations and society Eurchell et al" 1#$0'( 3 *ide
range of hitherto neglected issues should" it *as argued" be brought *ithin the purvie* of
accounting researchers" and the basic premise on *hich accounting *as analysed should
change( ?ather than seeing the technical dimensions of accounting as independent of the
social dynamics" they should be seen as interrelated( Gust as 3rgyris had argued that
accounting practices can create groups" so too it *as argued can accounting create other
social forms( The role of accounting in creating organi7ational visibility" in creating particular
patterns of organi7ational and social management" and in creating structures of po*er
needed to be addressed( The analysis of accounting *ithin organi7ations should be
connected e.plicitly *ith the analysis of more general forms of economic and social
management( 3ccounting should" that is to say" no longer be conceived as a purely
organi7ational phenomenon( The earlier tradition of sociological en0uiry concerning
accounting" as embodied in the *ritings of -ar. and /eber" *as appealed to as having
identified issues *orthy of systematic study( =rocesses of rationalisation should be
addressed" as should the mythical" symbolic and ritualistic roles of accounting( ,tudies of
the organi7ational roles of accounting should be complemented by studies of the societal
roles of accounting(
From 1#$0 on*ards" things began to change( The range of methodologies dra*n
upon by researchers broadened" as did the focus( +nstitutional structures and processes"
and their interrelations *ith accounting practices" *ere given increasing attention( 3cross
the follo*ing t*o decades" the interactions bet*een sociology and accounting altered( The
sociological analysis of accounting came to be located more *ithin the discipline of
accounting" and in the process the concepts used and the definition of the ob8ect of attention
itself altered( 6o longer *as it simply a matter of applying pre-given sociological concepts to
accounting( ?ather" the concepts themselves *ere developed in close connection to the
-1&-
calculative practices of accounting( The discipline of accounting became more reflective"
and itself contributed to the *ider development of the social sciences(
Four strands of research contributed to this e.pansion of the domain of accounting
research; first" a concern *ith the institutional en"ironments of accounting; second" a
political economy of accounting; third" an ethnography of accounting; and fourth" the study of
the net#or$s *ithin *hich accounting is embedded(
The ground *as already laid *ithin sociology and organi7ation theory for the analysis
of the institutional environments of accounting( +n the late 1#>0s" the study of the
institutionalised 4myth structure5 -eyer and ?o*an" 1#>>' of rationali7ed societies had
emerged( -eyer and ?o*an argued that prevailing theories neglected a concern *ith the
legitimacy of rationali7ed formal structures" as distinct from day-to-day *or) activities( +n so
far as rationali7ed and impersonal prescriptions attribute a social purpose to technical
activity" and specify the appropriate manner in *hich to pursue this activity" these
rationali7ed prescriptions *ere *orthy of study in their o*n right( Terming such prescriptions
4myths5" their importance stems from the e.tent to *hich they become institutionali7ed" that
is to say ta)en-for-granted *ays of achieving organi7ational ends( ,uch myths" -eyer and
?o*an argued" become binding on particular organi7ations" and shape the development of
organi7ations and societies(
The myths of the accountant thus too) their place alongside those of doctors"
la*yers and others( /hether it *as a matter of a particular category of cost" or the broader
ceremonial role attributed to financial values in a rationali7ed society" myths" organi7ations
and rationali7ation *ere to be lin)ed( ;choing some of -a. /eber<s formulations" formal
organi7ations *ere depicted as being driven to adopt practices and procedures defined as
rational( The conventions of modern accounting" the vocabularies of personnel e.perts" and
the labels of the organi7ation chart are mechanisms by *hich organi7ations come to be
lin)ed to their institutional environments( To the e.tent that organi7ations incorporate
practices defined as rational *ithin their institutional environment" it *as argued that they
-11-
increase their legitimacy and survival prospects( The rules embodied in such practices then
become binding on the organi7ation( The formal structures of organi7ations thus come to
reflect the myths of the institutional environment" rather than the demands of the *or)
activities of the organi7ation(
Die*ed in institutional terms" accounting is understood as one of the mechanisms
through *hich organi7ations come to incorporate rational conceptions of *ays of organi7ing(
3ccounting is 8ust one of many such practices in contemporary societies" albeit a highly
significant one in a number of contemporary *estern societies ( +t provides a set of
techni0ues for organi7ing and monitoring activities" and a language *ith *hich to define and
delineate organi7ational goals" procedures and policies( 3ccounting performs a ceremonial
function that helps legitimate an organi7ation among its 4users5" *hether these be
participants *ithin the organi7ations" stoc)holders" the public" or regulatory bodies such as
the ,ecurities ;.change !ommission( +nstead of presuming only efficiency effects" the
adoption and diffusion of particular accounting practices can be studied *ith regard to their
roles as rational institutional myths( 3t a societal level" one can study ho* the amount of
accounting done in a particular society or organi7ation is determined by its environment"
rather than by the intrinsically necessary technical *or) processes(
3 ma8or ne* research agenda *as opened up by this focus on the institutional
environments of accounting( The lin)s bet*een an organi7ation and its environment *ere
accorded a central place in the analysis of accounting( ?esearchers *ithin accounting *ere
encouraged to loo) beyond the organi7ation" and to see changes *ithin the organi7ation as
dynamically lin)ed *ith changes in the *ider environment( 3ccounting lost some of its
apparent uni0ueness in this vie*" and became part of the cultural apparatus of a society(
Eudgetary practices *ithin an organi7ation *ere no longer vie*ed as a matter only of group
dynamics and games among the participants( They could be vie*ed in terms of the
articulation" enforcement and modification of societal e.pectations of acceptable budgetary
practices during a period of organi7ational decline !ovales)i and Airsmith" 1#$$'(
-1>-
Iuestions such as ho* this occurred" to *hat purpose" and from *hom and *here such
e.pectations arose" could be directed to a range of actors beyond the organi7ation( The
increasing dominance of finance personnel in the control of large corporations could be
e.plained by pointing to changes in the strategy and structure of organi7ations" changes in
anti-trust la*s" and the mimic)ing of firms in similar environments Fligstein" 1##0'( 3 shift in
intra-organi7ational po*er relations is vie*ed as a result of events *ithin the organi7ational
environment" and as a result of the *ay in *hich )ey actors *ithin organi7ations define their
problems( 3 range of further studies dre* more loosely on the institutional perspective
Eerry et al" 1#$&; ;speland and 2irsch" 1##0; 3nsari and ;us)e" 1#$>'" and demonstrated
the importance of lin)ing changes in accounting practices *ithin an organi7ation to the
demands and e.pectations of the institutional environment(
3 political economy of accounting also dre* attention to the importance of
addressing the macro-environment *ithin *hich organi7ations e.ist" and did so in *ays that
dre* upon and e.tended the *ritings of -ar. and later *riters( =olitical economy *riters
emphasised the conflicting political and economic interests at sta)e in accounting" and the
importance of addressing such interests both *ithin and beyond the organi7ation( They
placed particular emphasis on the *ays in *hich po*er relations" *hich are historically
specific" are shaped by and in turn shape accounting practices( The image of accounting as
a technically neutral and ob8ective practice *as rebutted sharply by political economy
*riters( 3ccounting *as vie*ed instead as a partial and interested language and practice"
one that represents and reinforces the interests of particular occupational groups and
classes(
The scene had been set for a rene*al of interest in political economy issues by the
publication of a!or and %onopoly Capital Eraverman" 1#>4'( This *as an intellectual call
to arms to those interested in understanding changes in the productive process and in the
occupational structure of the *or)force *hich had occurred across the past century( For" as
Eraverman stated" little had been added by political economy *riters to the analysis of such
-1$-
issues since -ar.<s death( Eraverman pointed particularly to the emergence of a ne*
stratum of clerical *or)ers in monopoly capitalism" and emphasised that although clerical
*or)ers had e.isted in the nineteenth century" this ne* stratum *as fundamentally different
both in terms of social status and their role *ithin the productive process( 2e vividly charted
the gro*th of a ne* class of *or)er *hose sole tas)" he argued" *as the increasingly
comple. one of representing value in monopoly capitalism( 2e argued that entire ne*
industries had emerged" such as ban)ing and insurance" in *hich 4the productive processes
of society disappear into a stream of paper5 Eraverman" 1#>4" p( 301'( -onopoly
capitalism" according to Eraverman" devotes ever more resources to accounting for value" to
the point at *hich the labour e.pended on such processes begins to approach or even
e.ceed the labour used in producing the underlying commodity or service( The gro*th in the
amount of accounting carried out in monopoly capitalism" according to Eraverman" is not 8ust
a function of increasing comple.ity( +t is a matter also of trust" or the lac) of it( 3
presumption of dishonesty" 4the first principle of modern accounting5 Eraverman" 1#>4" p(
303'" gives rise to the immense duplication *hich is at the heart of double-entry
boo))eeping( 3nd if distrust is the norm" then auditing" cast by Eraverman *ith deliberate
irony as a 4profession of honesty5" is called forth to certify to outside parties the truth of the
financial records( 9ut of all these differing demands" Eraverman argued" emerges a vast
paper empire *hich appears as real as the physical *orld" and *hich comes increasingly to
dominate it(
/ithin accounting" a number of *riters developed and e.tended the political
economy approach" albeit *ith differing emphases( The changing form and content of
Annual &eports *ere lin)ed to changing strategies of capital accumulation 6eimar)" 1##2;
6eimar) and Tin)er" 1#$1'( 3 4social criti0ue of accounting5 *as proposed" coupled *ith a
proposal for an 4emancipatory accounting5Tin)er" 1#$&" p( 201'( 9ther *riters in the same
tradition dre* less directly from the *ritings of -ar." and more from recent political
economy approaches( Dariations in modes of regulation of accounting practices *ere lin)ed
-1#-
to variation in the institutional and political structures bet*een countries =u.ty et al" 1#$>'(
The roles of accounting in industrial relations and *age determination negotiations *ere
addressed Eougen" 1#$#; Eougen" 9gden and 9utram" 1##0'( The dominance of
accounting controls over the labour process in the J@ *ere e.plained by reference to the
4collective mobility pro8ect5 of the accounting profession in the J@" and the dominant position
it has achieved *ithin the 4economic functions5 of the global function of capital 3rmstrong"
1#$&" 1#$>'( 3nd the differential spread in the J, and the J@ of practices such as standard
costing" budgeting" and performance reports *ere e.amined using an historical-comparative
method( 3 number of further studies *ere conducted dra*ing broadly on the principles and
concepts of political economy( The interaction bet*een state actions and the distributional
conse0uences of accounting policies *ere e.amined 3rnold" 1##1'" as *ere the lin)s
bet*een cost accounting techni0ues and attempts to control the labour process( -ore
recently" the importance of using concepts of class" ideology and social structure in
analysing labour relations" and a factory reorgani7ation programme in particular" has been
reaffirmed 3rnold" 1##$; Froud et al" 1##$'(
3 different agenda" one that can be labelled an ethnography of accounting" also
emerged in the early 1#$0s( The concern here *as *ith the meanings and perceptions of
the actors *ho develop and use accounting practices in localised settings( The conditions
and conse0uences of accounting in specific organisations provided the focus here( The
4lived e.perience5 of individual actors *as addressed through case analyses that
emphasised the symbolic use of accounting for individuals Eoland and =ondy" 1#$3'( 3n
understanding of ho* accounting practices contribute to the production and reproduction of
organisational life *as the aim of such research ?oberts and ,capens" 1#$&'(
3n ethnography of accounting see)s to understand *hat *as said" done and
understood in a particular situation( 3 focus on the changing relations bet*een volumes and
costs in advanced manufacturing Gonsson and %ronlund" 1#$$' allo*s one to understand
ho* practices and procedures are *or)ed out in local settings( +n so far as ne* *ays of
-20-
accounting have to be understood and made sense of" an understanding of accounting
change in a particular organisation can similarly be facilitated by referring to the meanings
people attach to the social *orld 6ahapiet" 1#$$'( The emergence of a ne* accounting
based organisational culture can be analysed using an interpretive or ethnographic frame
Aent" 1##1'( The fabricating of budgets =reston et al" 1##2'" and the influence of the
inspection and revie* processes of the Eritish +nland ?evenue on internal accounting
processes =reston" 1#$#'" can highlight the chains of reasoning involved( 3n ethnography
of three hospitals can help us understand ho* and *hy ne* accounting numbers are
produced" and ho* the social lin)ages among a relatively small group of people enables this
to occur !hua" 1##&'( -ean*hile" the process of 4becoming5 a professional accountant
=o*er" 1##1' can be vie*ed as analogous to that of the 4moral career5 of the mental patient
%offman" 1#11'( -ore generally" one might say that most behaviour" even *ithin the
sphere of the mar)et-driven economy" is deeply embedded in net*or)s of interpersonal
relations %ranovetter" 1#$&'(
3 fourth agenda focussed on the net*or)s *ithin *hich accounting is embedded( 3s
*ith all three of the previous themes identified" this gre* out of developments *ithin the
*ider social sciences as *ell as from attempts to address intellectual challenges identified
by accounting researchers( +n so far as previous research *ithin accounting had sought to
analyse and e.plain the lin)s bet*een accounting and the environment" a dualism had
formed: on the one hand there *as the environment" on the other the organi7ation( +n place
of such a dualism" a number of *riters began to e.plore more dynamic and process-based
*ays of e.plaining the interrelations bet*een organisations and their environments( Eurchell
et al 1#$&' called for researchers to analyse the interpenetration bet*een accounting and
society( +nstead of t*o mutually e.clusive domains - 4accounting5 and 4society5 - attention
*as focussed on the specific practices and institutions in *hich the accounting category
4value added5 appeared( +n this interpretation" the environment is not e.ternal to accounting
but 4passes through5 it" and accounting in turn shapes and modifies the social( Eurchell et al
-21-
e.amined three 4arenas5: accounting standard setting" the management of the national
economy" and the industrial relations system( The 4accounting constellation5 *as the
particular social space *here these three arenas intersected and intert*ined" a net*or) or
assemblage of intersecting practices" processes and institutions( The 4value added event5 is
a field comprised of a very particular set of relations established bet*een institutions"
economic and administrative processes" bodies of )no*ledge" systems of norms and
measurement" and classification techni0ues( +n a related manner" although dra*ing on
different reference points *ithin sociology" ?obson 1##1' set out e.plicitly to apply and
e.tend this approach in a study of accounting standard setting in the J@( Ara*ing upon the
*ritings of Fatour 1#$>" 1#$$'" he focussed on discursive processes of accounting change"
and the concept of translation in particular( 3ccounting change occurs" ?obson argued"
*hen a particular group or institution is able successfully to enrol other actors in their
proposals by incorporating and translating the interests of others into the solutions proposed(
+n this process" problems are defined as shared" alliances formed" arguments mobilised" and
the interests of other groups" parties and institutions enrolled to*ards a common interest(
These four research agendas clearly do not e.haust the sociological analysis of
accounting across the past t*o decades or so( They serve" ho*ever" to indicate the e.tent
to *hich accounting researchers have redefined the domain of accounting research by
dra*ing on and contributing to sociological research( +n the follo*ing section" the revival of
interest in economic calculation among sociologists in the past decade is considered in
greater detail(
*$ Agents +et,or-s and Assemblages of Practices
-22-
The recent rediscovery of the economy by sociologists has ta)en a particular form(
The focus has been on the *ays in *hich calculating agents embed economic processes in
social net*or)s( 3n early contribution by =olanyi 1#&>'" *hich argued that the economy
should be vie*ed as an 4instituted process5" provides an important reference point for this
literature( =olanyi spo)e of 4the transcending importance of the institutional aspect of the
economy5 =olanyi" 1#&>; cited in %ranovetter and ,*edberg" p( 34'" and argued that it is
the instituting of economic processes that integrates them and gives them unity and stability(
=olanyi identified three forms of integration - reciprocity" redistribution and e.change - and
argued that their integrating effect is conditioned by definite institutional arrangements(
+ntegration" according to =olanyi" means something more than the aggregation of individual
behaviours and interactions(
Three decades later" and in a similar vein" %ranovetter 1#$&' argued that economic
behaviour is 4embedded5 in a net*or) or system of social relations( ,ociologists since
/eber had" he argued" cut themselves off from a large and important part of the ;uropean
tradition" as represented particularly by -a. /eber( For that tradition" economic action is
vie*ed as only one category" albeit an important one" of social action( +nterloc)ing
directorates among firms" industrial purchasing" subcontracting relationships" intrafirm audits
and transfer pricing" are identified by %ranovetter as e.amples of the important role played
by *ebs of social relations in shaping economic behaviour( -ost economic behaviour"
according to %ranovetter" is closely embedded in net*or)s of personal relations( ?ather
than vie* these relations as merely causing friction *ithin an other*ise rational mar)et
process" such relations *ere seen by %ranovetter to be central and amenable to sociological
analysis( !areful and systematic attention is re0uired" he argued" to the actual patterns of
personal relations through *hich economic transactions are carried out(
-ore recently" !allon 1##$' has addressed the issue of embeddedness" *ith
particular respect to the interrelation bet*een the economy as a thing and economics as a
-23-
discipline( 3rguing that economics as a discipline shapes rather than observes the
economy" !allon<s arguments are broadly consistent *ith those of many accounting
researchers across the past t*o decades(
3
+f accounting practices and concepts shape
*ays of organising economic processes *ithin and among organisations" it is consistent to
e.pect a similar interrelation bet*een the discipline of economics and the formation of actual
mar)ets( /hereas accounting researchers have tended to focus on particular calculative
practices or ideas" !allon<s focus is on the more general issue of the calculative capacities
of agents( 3ccording to !allon" calculating is a comple. calculative practice that involves
tools and inscriptions( 3lso" calculating is vie*ed as intrinsically lin)ed to the net*or)s
*ithin *hich agents are entangled( 3ppealing e.plicitly to %ranovetter<s notion of
embeddedness" !allon argues that the calculative capacities of agents are inseparable from
the net*or) of social relations in *hich they are situated( The agent is not immersed in a
net*or) vie*ed as a conte.t or an institutional environment( ?ather" agents and net*or)s
are considered to be t*o sides of the same coin( The ability of agents to calculate is *holly
dependent on the net*or) of relations *ithin *hich the agent is immersed(
This attempt to avoid the distinction bet*een macro- and micro-" as *ell as the
notion of conte.t" is consistent *ith earlier *ritings in the accounting literature discussed
above( ;0ually consistent is a focus on the intrinsic lin)s bet*een calculative agents and
net*or)s( Eut the primacy attributed to the concept of net*or)" the notion that net*or)s are
*ebs of interconnected agents" and the emphasis on the role of economics in shaping the
economy" raises a number of issues for accounting researchers( To address these issues"
consider the follo*ing propositions(
First" if a history of the construction of mar)ets and mar)et organisations is yet to be
invented" this should commence *ith an analysis of the concepts and practices through
*hich such a domain is formed( ?ather than presume and begin *ith the role of net*or)s in
3
For a summary of these debates" see -iller 1##4'(
-24-
connecting agents" *e should focus on the historically and geographically variable practices
that ma)e calculation possible( For it is these practices that ma)e it possible to intervene" to
act upon and alter the capacities of individuals" entities and processes" to transform them
and achieve specific ends( +t is through calculative practices that *e can affect the type of
*orld *e live in" the *ay in *hich *e understand the choices open to organisations and
individuals" the *ay in *hich *e manage and organi7e the activities of others and ourselves(
3ccounting researchers should attend to the comple. interplay bet*een *ays of calculating
and *ays of managing social and organi7ational life( 3 history of the formation of mar)ets
and of the economy should commence *ith the heterogenous practices and ideas that have
made organi7ational life calculable(
,econd" rather than presuming that the discipline of economics shapes the actual
economy" *e should e.amine empirically the comple. of )no*ledges and practices that
reflect on and intervene in economic life( To study the economy 4as a thing5" *e should not
necessarily ta)e economics as a starting point( /e should consider instead the relations
among the disparate disciplines and practices that have helped shape the economy in its
modern form( 3ccounting" actuarial science" applied psychology" engineering" finance" and
operations research are 8ust some of the disciplines *e should be considering( !learly" a
number of these disciplines have important interrelations *ith economics" and in some
cases have borro*ed e.tensively from economics -iller" 1##$'( +t is the assemblages that
form among a variety of concepts and practices" the variable boundaries bet*een them"
and the interventions that they ma)e possible" that *e should attend to(
Third" *e should pay attention to the lin)s bet*een calculative practices and the
programmes they see) to operationalise( +nstead of presuming that the triptych of agents"
net*or)s and calculation set out by !allon e.hausts the relevant domains" *e should
consider the *ays in *hich calculation is endo*ed *ith a significance that e.tends beyond
the immediate tas)s to *hich it is put( /ithin individual organi7ations" the calculation of
costs can be lin)ed to much *ider concerns" such as national competitiveness and the
-2&-
perceived need for benchmar)ing( ?ationales such as decision-ma)ing" responsibility" and
efficiency can give meaning to apparently mundane tas)s such as budgeting and variance
analysis( 3nd" on a much broader scale" the language of mar)ets can help transform the
boundaries bet*een the private and the public sector" and call forth an avalanche of
numbers produced by a variety of calculating machines( Fiberalism and neo-liberalism are
not 8ust models for the conduct of economic activity" but for the *hole of social life( The
concept of the mar)et provides a rationale not only for the e.change of goods and services"
but an idea and an ob8ective for transforming citi7ens and institutions that had previously
operated according to very different logics( /hether it is a matter of the delivery of health
and social care" and the boundaries bet*een them" or the monitoring and evaluation of the
police and probation services" *ays of calculating are intrinsically lin)ed to *ider political
concerns(
+n the follo*ing section" these arguments concerning the importance of focussing on
calculative practices" and the assemblages they help form" are illustrated by considering the
issue of investment appraisal practices at !aterpillar +nc in the late 1#$0s(
'() &e*thin$ing and re*appraising the factory+ in"estment !undling practices at Caterpillar
,nc
The process of 4re-thin)ing the factory5 in the J,3 across the last t*o decades of the
t*entieth century" and the specific form this too) at !aterpillar +nc" illustrates the *ay in
*hich the calculative practices of accounting help form an assemblage of persons"
processes and things(
4
?ethin)ing the factory refers to a physical reconstruction of the
4
+nterestingly" *hile previously published *or) on this issue by the author has received considerable
critical attention" the accounting practices that *ere central to the transformation of the factory at !aterpillar +nc
have been largely ignored( 9n these issues" see 3rnold 1##$'" Froud et(al( 1##$' and -iller and 9<Feary
1##4a" 1##4b" 1##$" 2002'(
-21-
factory" as *ell as a reconstruction of practices and ideas about ho* to govern the
4customer-driven5 factory( +t entailed a transformation of managerial beliefs about ho*
international competitiveness should be maintained( 6e* accounting practices *ere central
to the re-organising of factory architectures" shop floor layouts and principles for organi7ing
the flo* of material and products(
?ethin)ing the factory can be understood as comprising t*o aspects( First" the
construction of ne* programmes for the design and administration of the factory" in
accordance *ith emergent cultural norms( ,econd" the elaboration of technologies for
ma)ing such programmes operable( For programmes do not operate on their o*n( They
re0uire technologies" devices for intervening" instruments for acting upon people" ob8ects
and processes so as to shape or influence them( Technologies include various forms of
calculating" *riting" recording" e.amining" assessing and visuali7ing that have the capacity to
act upon and transform the person" ob8ect or process in 0uestion( 3dministrative systems"
accounting practices" training systems" organi7ational forms" systems architectures" filing
and information systems" and spatial arrangements of people and machines all share the
ability to shape the conduct of individuals indirectly" rather than by force or direct control(
3t !aterpillar +nc" rethin)ing the factory began in the late 1#$0s by a problemati7ing
of the issue of competitiveness vis-a-vis Gapan" and @omatsu in particular( 3 particular
calculative technology - competitor cost analysis - gave visibiilty *ithin the firm to the general
notion of competitiveness that preoccupied so many commentators" consultants" academics
and policy-ma)ers( !ompetitiveness *as to be given a number as *ell as a name( 6ot only
*as @omatsu of Gapan identified as posing a ma8or threat to !aterpillar" the nature of that
threat *as distilled into a single financial number( !ompetitor cost analysis provided a
calculative practice that made it possible to establish *hether" and to *hat e.tent" the firm
had a structural cost disadvantage relative to )ey international competitors( !ompetitor cost
analysis offered a *ay of ma)ing possible a detailed comparison bet*een @omatsu<s costs
and those of !aterpillar" and at the level of every !aterpillar facility rather than 8ust in
-2>-
aggregate(
!ompetitor cost analysis allo*ed the establishment of company-*ide structural cost
reduction targets" and individual product-by-product targets( 3 ne* tool" the 4!ost
?eduction =rogress ?eport5 made it possible to monitor progress in cost reduction( 6e*
4rolling5 budgetary mechanisms gave operating units detailed spending and employment
plans" and gave plant managers and %eneral 9ffice an enhanced visibility of the factors and
decisions that *ere held to affect progress along the cost reduction curve( Eut competitor
cost analysis *as more than a technical accounting change( +t helped transform the field of
accountability for !aterpillar<s personnel( Factories" plants and administrative units *ere
given *ays of addressing 4the ne* reality of global competition5( +n place of internally
engineered performance standards" accountability *as to be e.ternally focussed( 3t all
levels *ithin plants" employees *ere called upon to engage directly *ith Gapanese
competition" to address its pervasive effects upon the company as a *hole and in every
facet of their daily *or)( Ey providing a single cost reduction number for the firm as a *hole"
and for individual product groups" competitor cost analysis targets gave substance to
general invocations to consider the Gapanese challenge(
Eut the cost reduction programme put in place in the early 1#$0s" and the target of
22 per cent cost reduction by 1#$1" came to be considered insufficient for dealing *ith the
competitive threat from @omatsu of Gapan( ,omething much more far-reaching *as held to
be re0uired to address a perceived fundamental cost disadvantage vis-a-vis @omatsu(
4?evolutionary change5" or a more fundamental rethin)ing of the factory" *as held to be
needed( 3 ne* factory architecture" one that abandoned functional in favour of cellular
organi7ation" came to be vie*ed as essential to corporate success(
3 novel calculative technology - termed 4investment bundling5 - *as central to this
ne* *ay of framing the issue of competitiveness( The transition to a ne* manufacturing
environment depended on the creation of ne* physical and calculable spaces( +nvestment
bundling provided a *ay of ma)ing calculable the distinctive architecture of production
-2$-
based on system principles that *as seen as necessary to meet the competitive threat
posed by @omatsu of Gapan( 9ne particular investment bundle" termed the 3ssembly
2igh*ay" sought to embed ne* ideas of *or)" and ne* identities for *or)ers" in the physical
layout of an actual shop floor(
4+nvestment bundling5 entailed dividing manufacturing facilities up into 4bundles5"
physical areas of a factory floor that encompassed the net*or) of cells needed to
manufacture a core product module( 3 bundle *as defined as a:
((( grouping of investments *hich are made for the purpose of manufacturing"
assembling" testing" and painting a ma8or component Kor core product moduleL( +t
occupies a section of the building( +t is an entity *hich can be managed separately(
3ccounting can identify the costs" inventory and resources needed to run the
minifactory(
5
3 calculative practice thus made visible a defined physical area on the shop floor"
and in accordance *ith the notion of a core product module as defined by systems
e.pertise( +nvestment appraisal thus lin)ed the concept of competitiveness *ith the actual
design of factory layouts( +nvestment in the ne* architecture of production *as not to be
evaluated on a machine by machine basis( 6either *as it to be evaluated for each individual
cell( ?ather" investment *as to be made in a series of Bmini-factoriesB" each one a physical
area on the factory floor that contained a Bgate-to-gate processB" and that could be managed
on its o*n( 3s an amalgam or net*or) of cells" a bundle *ould comprise diverse )inds of
assets: the s)ills of *or)ers" soft*ares" hard*ares" manufacturing machines" and logistics
technologies" among others( Financial flo*s *ere to mirror the physical flo*s of the ne*
systems-based model of production" and the in8unction to focus e.ternally on
5
-emo of =( !( %uerindon" !apital +nvestment for the #0s" 6ovember 10" 1#$$(
-2#-
competitiveness vis-a-vis @omatsu of Gapan( +t *as through such a calculative practice that
the =lant /ith 3 Future =/3F' program" the most ambitious in !aterpillarCs history" *as to
be managed(
6
;ighty-t*o investment bundles" or mini-factories" *ere identified *ithin the
=/3F program( ;ach of these bundles became a unit of investment analysis" decision" and
management(
3t the centre of this ne* approach to investment appraisal *as the idea that one
invested to achieve synergies among diverse assets" synergies that ought to be reflected in
the concept of velocity of material flo*( This referred to the speed at *hich material flo*ed
through the area described by a bundle" thus providing a measure of the e.tent to *hich
core product modules *ere being manufactured according to globally competitive cost and
0uality targets" as *ell as in response to shifting volumes and patterns of demand( The
0uestion that *ould be as)ed of every decision pertaining to investment in fle.ibly
specialised manufacture *ould be: Bho* competitive am + getting e-ternally *ith this
investment Kin each BbundleB of technologiesLMB
7
+n this *ay" the practice of investment
bundling *as to provide a direct and visible lin) bet*een the shop floor and the competitive
environment(
+nvestment bundling *as also to provide a direct and visible lin) bet*een the
financial e.pertise called for *hen investing in capital assets" and the 0uality and
performance of the 3merican product( +n particular" satisfactory returns on investment or
net present values' at !aterpillar *ere to be the demonstrable conse0uences of improving
the cost" 0uality" and competitive capability of core product modules and manufacturing
processes( The *or)ings of financial e.pertise *ere to be made accountable to the product(
The idea *as that one invested in systems of manufacture" ne* architectures of production"
6
The =/3F program *as eventually to re0uire a commitment of N1($bn for the purchase of capital
assets" plus N0(#bn for start-up costs(
7
+ntervie* *ith a former director of manufacturing" Gune 1#" 1##0" p( 3" emphasis added(
-30-
as a *ay of acting upon the more general issue of competitiveness( 3 calculative practice
*ould ma)e visible financial returns" as *ell as other ne*ly visible competitive issues such
as floorspace" inventory and throughput( 3s physical spaces on the factory floor" and
responsibility centers for *hich net present values could be calculated" investment bundles
made operable and manageable the competitiveness of 3merican products on the *orld
mar)ets( +nvestment bundling provided a technology for acting upon people and processes"
and in accordance *ith a particular corporate program for governing economic life *ithin the
enterprise(
?ethin)ing the factory at !aterpillar +nc in the late 1#$0s *as a densely theoretical
and political pro8ect( The calculative practices of competitor benchmar)ing and investment
bundling operationalised concerns regarding the competitive threat posed by @omatsu of
Gapan( !ompetitor benchmar)ing gave a financial number and a name to a rather diffuse
notion of Gapanese competition( Eut it suggested a rather constrained and in*ard-loo)ing
future( +n contrast" the assemblage made calculable through investment bundling practices
*as a programme for modernisation and reform(
8
6e* machines and layouts on the shop
floor" ne* material flo*s" and ne* *or)ing relationships *ere to be made calculable through
novel investment appraisal practices( 3n ambitious and corporate-*ide programme of
investment" rather than retrenchment and cost-cutting" *ould address issues of
competitiveness( +nvestment bundling lin)ed together abstract notions of competition
articulated at a national level" *ith the manufacturing of a core product module in a particular
factory( 3nd it distilled these into a single financial number that could be presented at the
level of individual factories" the corporation as a *hole" and the capital mar)ets(
.$ Conclusions
8
9n the notion of programmes" see -iller and ?ose 1##2'(
-31-
This paper has e.amined the recent rediscovery of the economy and economic
calculation by sociologists( +t has outlined briefly the curiously punctuated history of a
sociological concern *ith accounting across the t*entieth century( +nitially central to
sociology at the beginning of the t*entieth century" accounting disappeared from vie* for
appro.imately half a century( /hen accounting *as initially 4rediscovered5 by social
scientists in the 1#&0s and 1#10s" the concern had shifted from a macro-level concern *ith
rationalisation processes to a micro-level concern *ith groups and group processes( From
1#$0 on*ards" and *ithin the accounting literature" a further shift occurred( 3ccounting
researchers sought to understand and analyse the lin)s bet*een accounting practices *ithin
organi7ations and broader institutional and social pressures( -ost recently" there has
emerged a concern *ith the *ays in *hich economic processes are shaped by agents *ho
embed them in social net*or)s( /hile noting the merits of this rene*ed interest in
accounting by sociologists" this paper has argued instead for a focus on the calculative
practices of accounting" and the assemblages they help form( +t has illustrated these
arguments by considering the roles played by a particular set of investment appraisal
practices at !aterpillar +nc in the early 1##0s( The practice of investment bundling helped
evaluate and operationalise a *orld*ide corporate transformation of production regimes at
!aterpillar +nc" and in a manner consistent *ith broader concerns *ith corporate and
national competitiveness(
+t *ould be interesting to e.plore other e.amples of the *ays in *hich accounting
practices" and investment appraisal practices in particular" help form assemblages of
different types( 3t !aterpillar" investment bundling helped articulate a 4competitive5 model of
the firm( +n a very different industry - microprocessors - a particular set of investment
appraisal practices have helped shape a 4cooperative5 model of the relations among the firm
and its complementors( The devices that *ere central to achieving this are termed
4roadmapping5 practices -iller and 9<Feary" 2003'( ?oadmapping practices as used at
-32-
+ntel !orp are *ays of ensuring that large-scale capital investments made by sub-units of the
firm in assets such as ne* processes" microprocessor products and manufacturing
capacity' are coordinated *ith one another internally" and that they are aligned also *ith
complementary investments on the part of a *ide range of other firms( 3s a )ey part of
+ntel<s capital budgeting process" roadmapping practices e.tend significantly the definition of
investment appraisal to include overall coordination mechanisms( +n so far as they e.tend
beyond the boundaries of the firm" roadmapping practices are argued to be important
devices for helping to operationalise the hybrid organisational assemblages that characterise
the modern economy( +t remains to be e.plored ho*" in this different situation" calculate
practices help lin) together persons" processes and ideas into a *or)ing assemblage(
-33-
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