management via accounting

Essay, Management
A review of how, in general, ‘management via accounting’ operates in modern managerially-run enterprises, drawing on the Introduction to Chandler, The Visible Hand (1977).
Project description
Describe three ways in which ‘management via accounting’ enables managers to deliver economic, efficient and effective outcomes within a line-and-staff structure. State which one of these is, in your view, the most important, and briefly explain why.


Referencing Requirements:
Alfred Chandler, in the ‘Introduction’ to The Visible Hand (1977), argues that the modern business enterprise is totally new. The new line-and-staff structure, once combined with the new continuous process of producing and analysing accounting and statistical information, enables plans and information to flow up and down the enterprise. This enables economic, efficient and effective ‘administrative coordination’ of activity in and across all business functions. This ‘management via accounting’ produces sustained advantage over all previous forms of business enterprise, so remains central to running organisations today. He specifies the following advantages (1977: p7) which apply to both manufacturing and service enterprises:

• Lowering internal transaction costs by ‘routinising the transactions between units’:
• Reducing costs for information on markets and supply sources by ‘linking the administration of producing units with buying and distributing units’
• Enabling the flow of goods or services, and of information, from one unit to another to be faster and cheaper
• More intensive use of facilities and personnel through more effective scheduling of flows (of goods or services)
• More certain cash flow and more rapid payment to and from customers and suppliers.

He concludes: ‘The savings resulting from such coordination were much greater than those resulting from lower information and transaction costs.’ (Chandler, 1977: 7)

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