Literature Review on the Controllability Principle
Today, the controllability principle appears throughout the management accounting literature (Merchant, 1985, p. 21). Historians trace the origin of the principle back to the founding of American railroads. Charles Perkins, who was president of the Chicago, Burlington, and Quincy Railroad in 1885, is quoted with the following statement: “It is obvious that to hold a manager responsible for results it is necessary to give him pretty full power over the property which he must use to produce those results” (Chandler, McCraw, & Tedlow, 1996, p. 26). At that time, companies were confronted for the first time with the problem of managing people who worked at considerable distance from central executive offices (Simons, 2007, p. 2). With companies being structured into decentralized and autonomous divisions, questions arose as to the best way to control such organizations (Sloan, 1963, p. 46). Results control instead of direct supervision of behaviors and the corresponding management by objectives (MbO) school of thought (Odiorne, 1965) gained in importance (Giraud et al., 2004, p. 3). It is Solomons (1965, p. 83) who closely relates the controllability principle to the decentralization of business operations.
KeywordsManagement Accounting Cost Allocation Management Control System Interactional Justice Uncontrollable Factor
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