The appropriateness of RAPM: toward the further development of theory

Description
One of the few areas in management accounting and control research that has attained critical mass concerns the
organizational and behavioral e€ects of budgeting. Many studies in this area focus on the use of budgets for manage-
rial performance evaluation, and revolve around the construct Reliance on Accounting Performance Measures (RAPM).
Despite the volume of the RAPM literature, concern has been expressed about its current state in terms of both theo-
retical progress and methodological practice.

The appropriateness of RAPM: toward the further
development of theory
Frank G.H. Hartmann
Faculty of Economics and Econometrics, University of Amsterdam, Roefersstraat 11, 1018 WB, Amsterdam, The Netherlands
Abstract
One of the few areas in management accounting and control research that has attained critical mass concerns the
organizational and behavioral e?ects of budgeting. Many studies in this area focus on the use of budgets for manage-
rial performance evaluation, and revolve around the construct Reliance on Accounting Performance Measures (RAPM).
Despite the volume of the RAPM literature, concern has been expressed about its current state in terms of both theo-
retical progress and methodological practice. This paper provides an overview of the RAPM literature, and explains
some important points of critique. In response to this critique, the last part of the paper explores the possibility for a
further development of RAPM theory that is based on the concept of uncertainty. # 2000 Elsevier Science Ltd. All
rights reserved.
1. Introduction
Within the management accounting and control
literature, considerable attention is paid to the
behavioral and organizational e?ects of using
accounting information for the performance evalu-
ation of subordinate managers. This attention is
for a large part directed at describing and under-
standing the behavioral and organizational e?ects
of a construct labeled Reliance on Accounting
Performance Measures (RAPM). This construct
signi®es:
... the extent to which superiors rely on, and
emphasize those performance criteria which
are quanti®ed in accounting and ®nancial
terms, and which are prespeci®ed as budget
targets. (Harrison 1993, p. 319).
The RAPM literature has earned a special
position in the management accounting literature,
not only because of its volume and thematic
constancy (Kren & Liao, 1988; Lau, Low, &
Eggleton, 1995), but also because of its impact
on other ``streams'' of management accounting
research (cf. Chapman, 1997, p. 192). Considering
the status of RAPM research, Brownell and
Dunk (1991, p. 703) even note (cf. Lau et al., 1995,
p. 360):
The continuing stream of research devoted to
this issue constitutes, in our view, the only
organized critical mass of empirical work in
management accounting at present.
Although these and other claims purport to
signal the importance and vitality of the RAPM
paradigm, the development of RAPM literature
has been accompanied by critical commentaries
as well (e.g. Otley, 1980; Briers & Hirst, 1990;
Chapman, 1997). In an overview of two decades of
RAPM research, Briers and Hirst (1990) point to
Accounting, Organizations and Society 25 (2000) 451±482
www.elsevier.com/locate/aos
0361-3682/00/$ - see front matter # 2000 Elsevier Science Ltd. All rights reserved.
PII: S0361-3682(98)00036-1
theoretical ¯aws in the RAPM paradigm. Their
particular claim is that RAPM research has come
to overemphasize statistical sophistication to the
detriment of theory development. Critique has
also been directed at the research models and
research methods typically used in RAPM stud-
ies. In this respect, questions have been raised
about the uncritical use of contingency theory in
RAPM research (Otley, 1980; Schoonhoven, 1981;
Chapman, 1997), and about its typical methods
for data collection and data analysis. Regarding
data collection, for example, Young (1996) points
to the often careless use of questionnaire survey
methodology, which is the typical data collection
method in RAPM studies. Regarding data analy-
sis, Lindsay (1995) has recently criticized the
dominance of tests for statistical signi®cance for
accepting or rejecting research hypotheses. There-
fore, while RAPM studies may form a critical
mass in terms of number of papers, the question is
left unanswered whether the claim for an orga-
nized critical mass is justi®ed. Indeed, the theo-
retical and empirical ¯aws mentioned impede the
development of the theoretically and empirically
well grounded body of knowledge, that, almost by
de®nition, an organized critical mass of studies
should display. The remainder of this paper
revolves around this question. It is structured as
follows. In the second section, an overview is pre-
sented of the origins, the development and the
®ndings of RAPM research. The third section then
provides an overview of the methodological and
theoretical problems of the RAPM paradigm that
challenge the idea of an organized critical mass
of RAPM studies. In the fourth section, a way is
presented for the further organization of the
RAPM paradigm, which involves theory develop-
ment about RAPM under uncertainty. The ®fth
section illustrates the implications of this theory
development for the RAPM paradigm, by provid-
ing some speci®c directions for further research.
The paper closes with some ®nal comments.
2. RAPM research: an overview
The starting point of RAPM research lies at the
point in time when the human involvement in
budgeting began to receive academic interest
(Birnberg, Turopolec, & Young, 1983, p. 116;
Briers & Hirst, 1990). A commissioned study by
Argyris (1952) suggested the importance of behav-
ioral factors for understanding the e?ectiveness of
budgeting. Argyris' ®eld-study of factory super-
visors in four production ®rms showed that bud-
gets induced behavioral and organizational e?ects
that should be regarded dysfunctional from a
management control perspective. The supervisors
in this study appeared to perceive budgets as
sources of pressure and tension, forcing them to
narrow their attention strictly to the problems of
their own department. Consequently, the super-
visors expressed negative attitudes toward their
superiors and toward budget procedures. Argyris'
study was important for at least two reasons.
First, it showed the need to complement technical
knowledge of budgeting with knowledge of human
behavior. Second, it suggested that dysfunc-
tional behavior is not just a natural human tend-
ency, causing a need to use controls, but that
dysfunctional behavior could indeed be provoked
by using (budgetary) controls. Subsequent empiri-
cal budgetary research aimed at explaining the
incidence of these behaviors rather than at merely
describing them. An important step was taken by
DeCoster and Fertakis (1968) who investigated
the relationship of budget pressure and leadership
style for a sample of departmental supervisors.
This study contributed to later RAPM research in
two respects as well. First, it studied whether budget-
pressure would result in an ``initiating structure''
leadership style (undesired), or a ``consideration''
leadership style (desired), and it thus formally
addressed the appropriateness of using budgets.
Second, their method involved the development of
a budget-pressure questionnaire (BPQ). The BPQ
was based on role theory (see, e.g., Kahn, Wolfe,
Quinn, & Snoek, 1964; Rizzo, House, & Lirtzman,
1970; House & Rizzo, 1972) which, as will be
further illustrated below, has become particularly
in¯uential in later RAPM studies. It was com-
posed of 97 behaviors regarded indicative of felt
budget pressure, about which the authors note:
The 97 questions were based upon the
hypothesis that the more the supervisor does
452 F.G.H. Hartmann / Accounting, Organizations and Society 25 (2000) 451±482
in response to perceived or actual sent role
expectations (i.e., budget requirements) (...),
the more pressure he will feel. (DeCoster &
Fertakis, 1968, p. 240).
Later, Swieringa and Moncur (1972, 1975)
used adapted versions of the BPQ to describe
and classify, so-called, budget-related behaviors.
In this latter and shorter format, the question-
naire has been used in many later RAPM
studies for measuring various budget-related
variables (e.g. Kenis, 1979; Merchant, 1981,
1984).
The early studies, which attempted to broadly
map budgetary processes and to explain (dys)-
functional e?ects of budgeting, were followed
by those that focused on discrete steps in the
budgeting process. Two steps, corresponding to
the beginning and ending of the typical budget-
ing cycle, started to receive explicit attention.
They were: (1) the way in which the budget is
prepared (e.g. Hofstede, 1967; Milani, 1975); and
(2) the use of budgets to control and evaluate
managerial performance (e.g. Hopwood, 1972;
Otley, 1978). Regarding budget preparation, stu-
dies by Hofstede and Milani suggested that the
e?ects of budgeting depended on the extent to
which subordinate managers were allowed to
participate in the budgeting process and the extent
to which they where capable of in¯uencing budget
target levels. This line of research was continued
by studies that focused on a construct formalized
as budget participation (e.g. Ronen & Livingstone,
1975; Brownell, 1981; Brownell & Hirst, 1986;
Dunk, 1989). An overview of the early budget
participation literature is found in Brownell
(1982a). A recent and more critical overview of
this literature is given by Shields and Shields
(1998).
Regarding the use of the budget as a tool for
performance evaluation, Hopwood (1972) and
later Otley (1978) focused on the use of budgetary
information by superiors to evaluate their sub-
ordinate's performance. As the latter two studies
are commonly regarded as the ``formal'' starting
point for RAPM research (e.g. Kren & Liao, 1988;
Briers & Hirst, 1990), separate attention is devoted
to them below.
2.1. Dysfunctional consequences of RAPM
In a study by Hopwood (1972) the budget-
pressure construct from Argyris (1952) and
DeCoster and Fertakis (1968) was replaced with the
more focused construct of supervisory style. Rather
than following these two studies in their reliance on
the budget-pressure construct (cf. Swieringa &
Moncur, 1972), Hopwood (p. 157) started from
the idea, supported by anecdotal evidence, that the
extent and manner in which budgets are used ref-
lect di?erent management styles. In particular,
Hopwood questioned whether dysfunctional reac-
tions to budgeting were the e?ect of the inherent
characteristics of accounting performance measures
that budgets contain, or the e?ect of the precise
manner in which and extent to which superiors used
these measures to evaluate the performance of their
subordinate managers.
1
Hopwood's supervisory
style construct was developed to express this ``man-
ner and extent''.
2
Hopwood (pp. 157±158) pointed
to four inherent limitations of accounting informa-
tion for managerial performance assessment:
First, not all the relevant dimensions of
managerial performance are included in
accounting reports since neither accountants
nor managers have developed comprehensive
measures and standards.
Second, even considering the economic
aspects of performance, an organization's
economic cost function is rarely known with
precision and an accounting system can only
attempt to approximately represent its com-
plexity (...).
Third, the accounting data are primarily
concerned with representing outcomes, while
1
Note that by focusing on the e?ects of performance eva-
luation, the budgeting theme became intertwined by a theme
concerning the dysfunctional e?ects of performance evaluation,
that had recently started to receive academic attention as well
(e.g. Ridgway, 1956).
2
In later RAPM studies, the supervisory style construct has
received alternative and synonymous labels like budget empha-
sis (e.g. Brownell & Dunk, 1991), supervisory evaluation style
(e.g. Harrison, 1992) and RAPM (e.g. Hirst, 1981).
F.G.H. Hartmann / Accounting, Organizations and Society 25 (2000) 451±482 453
managerial activity is concerned with the
detailed process giving rise to the ®nal out-
comes (...).
Fourth, the main emphasis of accounting
reports is on short-term performance indexes
while the evaluation of managerial perfor-
mance is often concerned with more long-
term considerations.
The type of reasoning Hopwood(1972) applied in
developing hypotheses was straightforward and
corresponded with the role-theoretic reasoning
underlying DeCoster and Fertakis' (1968) budget-
pressure construct. The general expectation was
that dysfunctional behavior associated with the use
of accounting performance information resulted
from superiors neglecting these defects and using
budgets in an absolute or Budget-Constrained way,
rather than in a more relaxed Pro®t-Conscious
way.
3
In particular, Hopwood (1972) expected
that the strict use of budget standards to evaluate
managerial performance would negatively a?ect
managers' job-related tension, job attitudes, and
social relations, and would indeed spur dysfunc-
tional decision making and data manipulation.
Such e?ects were argued to be the result of:
... disagreement and con¯ict between (the sub-
ordinate) and his supervisor over the dimen-
sions, and their values, on which the job is
described and evaluated. (Hopwood, 1972,
p. 161).
As the quotation illustrates, the particular
theoretical expectation was that strict emphasis on
budget attainment would cause role con¯ict, which
was identi®ed previously as a major source of
job-related tension (Kahn et al., 1964; Rizzo et al.,
1970). The relevance of the concept is displayed
in Kahn's et al. (p. 19) formal de®nition of role
con¯ict, as:
... the simultaneous occurrence of two (or
more) sets of pressures such that compliance
with one would make more dicult com-
pliance with the other.
4
Hopwood (1972, p. 161) furthermore argued
that too much budget emphasis would not only
cause disagreement and con¯ict, but would also be
ine?ective since:
... even if the cost-center manager tries to
improve his performance in terms of the
accounting indexes, the behavior which is
necessary to achieve this is not always clear if
some of the reported costs are not under his
control.
Hopwood's (1972) study focused on cost-center
managers, and was based on interviews and a
questionnaire survey. The analysis showed overall
support for the expected e?ect of the supervisory
styles outlined. The Hopwood study was repli-
cated by Otley (1978) who studied the e?ects of
RAPM in a pro®t-center environment. Otley's
®ndings essentially contradicted Hopwood's ®nd-
ings, as he found no signi®cant relations between
budget emphasis and either job-tension or nega-
tive social relations. Furthermore, Otley (1978)
found positive relations between budget emphasis
and managers' budgetary performance, which
falsi®ed Hopwood's suggestion that a strict reli-
ance on APM would be universally inappropriate.
2.2. Dysfunctional consequences of RAPM in
context
The contradictory ®ndings in the Hopwood
(1972) and Otley (1978) studies provided a strong
incentive for further empirical research.
5
Many
later studies explicitly refer to these two studies for
motivating their own e?orts (e.g. Brownell, 1982b;
Hirst, 1981, 1983b; Govindarajan, 1984). Several
factors have contributed to the ``pioneering''
3
Hopwood designed a measurement scale for this study,
using the relative importance of eight performance criteria
which received both a rank and a score. The measurement scale
was based on interviews, containing performance evaluation
related statements which were common language in the orga-
nization investigated (see, Hopwood, 1972, 1973).
4
The full argument concerning role con¯ict is presented in
the more elaborate Hopwood (1973).
5
Notably Hopwood and Otley have stayed out of the
``debate'' ever since starting it.
454 F.G.H. Hartmann / Accounting, Organizations and Society 25 (2000) 451±482
status of these two studies. First, both studies
contained a comprehensive analysis of the e?ects of
supervisory style, using a variety of budget-related
and work-related variables. Second, the studies
were largely similar concerning research questions
and research method, suggesting that the di?er-
ence in results was, somehow, ``genuine''. Third,
Otley (p. 123) himself triggered suspicion that the
di?erent results could be caused by systematic
di?erences between his and Hopwood's samples,
by noting:
The present study was designed to eliminate
technical failings in the accounting system, as
far as possible, by observing the operation of
a well designed system in a type of organiza-
tion that was well suited for the application of
budgetary control.
This notion of the suitability of RAPM laid the
track for an explicit inclusion of contextual vari-
ables in research models that could explain di?er-
ent ®ndings from situational di?erences between
the Hopwood and Otley samples (Kren & Liao,
1988, p. 282).
6
The common argument in these
studies is that accounting reports only potentially
have inherent defects, such as those outlined
by Hopwood. However, the extent to which they
are truly defective, and the extent to which their use
truly results in dysfunctional e?ects, depends on
the exact organizational context in which they are
used. Therefore, while Hopwood is responsible for
creating the distinction between budget system and
its use to explain dysfunctional e?ects of budget-
ing, now context was added as a third, and theo-
retically relevant, dimension.
Over the last two decades, several contextual
variables have been investigated in an attempt to
understand the conditions under which RAPM is
more (or less) e?ective. Together, the e?orts form
the area of the literature, called RAPM research,
which has received the positive and negative quali-
®cations mentioned at the outset of this paper.
Common elements of RAPM studies are the focus
on the use of accounting information for manage-
rial performance evaluation, the frequent use of
contingency frameworks in which the contextual
appropriateness of RAPM is analyzed, and the
heavy reliance on research methods from psycho-
logical and sociological research ®elds (cf.
Merchant &Simons, 1986; Brownell, 1995). Table 1
presents an outline of some key aspects of the
RAPM studies, organized by contingency variable
examined. Below, attention is devoted to each
category of studies, ranging from the ``broad''
national culture variable, to the more ``speci®c''
personality variables. A ®rst category deals with
universal studies, of which the early Hopwood and
Otley studies are also examples. Because many
studies have used multiple contingency factors,
and because many studies have tested multiple
hypotheses, both the table and the discussion
contain cross references.
2.3. Universal (non-contingency) studies
Several universal studies have been done as
well since the Hopwood (1972) and Otley (1978)
studies. Onsi (1973) found, in line with Hopwood,
that higher RAPM was associated with a greater
propensity to created budgetary slack, and to
engage in ``creative'' accounting, caused by a ten-
dency to enhance the attainability of budget tar-
gets. In several later studies this ®nding has been
(partially) replicated (Merchant, 1985c; Hughes &
Kwon, 1990; Lal, Dunk, & Smith, 1996). A study
by Kenis (1979) investigated the e?ects of RAPM
on an array of job-related variables, such as job
tension and job satisfaction. RAPM appeared to
have a negative e?ect on tension, but, contrary
to prediction, several positive e?ects of RAPM
were found as well. These e?ects included an
increase in managers' motivation to participate in
the budgeting process. Similarly, Hirst and Yetton
(1984) noted as a positive e?ect that RAPM
decreased managers' role ambiguity. Overall, the
results provide rather strong support for the
e?ects of RAPM on slack creation and data
manipulation. However, also positive e?ects of
RAPM have been reported.
6
The suitability of budgetary control for the sample studied
was based on earlier studies (e.g., Bruns & Waterhouse, 1975),
suggesting that decentralized and independent subunits (i.e.
pro®t-centers) had the ``pro®le of the optimum situation for
budgetary control'' (Otley, 1978, p. 126).
F.G.H. Hartmann / Accounting, Organizations and Society 25 (2000) 451±482 455
Table 1
Overview of RAPM studies
Contingency factor
Study (year)
Relevant hypothesis: RAPM
more appropriate for ...
Criterion (dependent)
variable(s)
Support for
hypothesis
(claimed)
Findings
signi®cant
Sample (No. of organizations)
1
Other hypotheses or variables in this study Statistical model
A. None (universalistic)
1. Hopwood (1972)
167 supervisors (1) (No contingency variable) Job-related tension Yes Partially
Relations with supervisor Yes Partially
Relations with peers Yes Partially
Data manipulation Yes Partially
Dysfunctional behavior Yes Partially
Pairwise t-test
2
2. Onsi (1973)
132 functional mgrs (7) (No contingency variable) exploratory Budgetary slack n.a. Yes
Data manipulation n.a. Yes
Correlation
3. Otley (1978)
39 pro®t center mgrs (1) (No contingency variable) Job-related tension No No
Trust in supervisor Yes Yes
Evaluation clarity Yes Yes
Job clarity Yes Yes
Evaluation fairness No No
Budgetary performance Yes Yes
Correlation
4. Kenis (1979)
169 department heads (16) (No contingency variables) Job-involvement No No
Job-satisfaction No No
Job tension Partially
3
Partially
Budget attitudes No Partially
Budget motivation No Yes
Budgetary performance Partially Yes
Cost efficiency Partially Partially
Job performance Partially Partially
Linear regression
5. Hirst and Yetton (1984)
= Hirst (1983b), see C1 (No contingency variable) Role ambiguity Yes Yes
See also E4 Linear regression
6. Merchant (1985c)
= Merchant (1981), see E1 (No contingency variable) Budgetary slack Partially
4
Partially
Correlation
4
5
6
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2
7. Merchant (1990)
= Merchant (1985b), see D2 (No contingency variable) Accrual manipulation (3) Partially Partially
See also C6, D6 and G3 Short-term thinking Yes Yes
Discouragement new ideas Yes Yes
Correlation
8. Hughes and Kwon (1990)
= Merchant (1981), see A5 (No contingency variable) exploratory Budgetary slack n.a. Yes
5
LISREL
9. Lal et al. (1996)
83 production mgrs (83) (No contingency variable) Budgetary slack Yes Yes
Correlation
B. National culture characteristics
1. Harrison (1992)
211 sales/purchase mgrs (28) Higher budgetary participation (regardless of nation) Job-related tension Yes No
See also F8 Job satisfaction Yes No
3-Way interaction
2. Harrison (1993)
= Harrison (1992), see B1 Cultures with higher power-distance and collectivism Job-related tension Yes Yes
(Singapore vs. Australia; nation = dummy) Job-satisfaction Yes Yes
2-Way interaction
Exploratory: nation  personality (authoritarianism) Job-related tension n.a. Yes
Job-satisfaction n.a. No
Exploratory: nation  personality (collectivism) Job-related tension Not tested ±
Job-satisfaction Not tested ±
3-Way interaction
See also H2
3. Lau et al. (1995)
114 functional mgrs (80) For hypotheses, see E11 No formal test Not tested ±
C. Environmental characteristics
1. Hirst (1983b)
111 functional mgrs (N.R.)
6
Medium (environmental and task) uncertainty Job-related tension No No
Relations w. supervisor No No
Quadratic regression
Lower (environmental and task) uncertainty Job-related tension Yes Yes
2-Way interaction
2. Merchant (1984)
= Merchant (1981), see E1 Products later in PLC Use of APM No No
Products with stronger market position Use of APM No No
Subgroup z-test
See also E3
3. Govindarajan (1984)
58 SBU mgrs (18) Lower environmental uncertainty Effectiveness Yes n.a.
7
2-Way interaction
(Table continued overleaf )
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Table 1Ðcontd from p. 456
Contingency factor
Study (year)
Relevant hypothesis: RAPM
more appropriate for ...
Criterion (dependent)
variable(s)
Support for
hypothesis
(claimed)
Findings
signi®cant
Sample (No. of organizations)
1
Other hypotheses or variables in this study Statistical model
4. Brownell (1987b)
50 functional mgrs (1) Lower environmental uncertainty Job performance Yes Yes
Job satisfaction Yes Yes
2-Way interaction
5. Ezzamel (1990)
81 mgrs (81) Higher environmental uncertainty Use of APM
Correlation
6. Merchant (1990)
= Merchant (1985b), see D2 Lower environmental uncertainty Accrual manipulation (3) Partially Partially
Correlation
See also A7, D6 and G3
7. Ross (1995)
= Ross (1994), see G6 Lower (environmental and task) uncertainty Job-related tension No No
ANOVA
D. Strategic characteristics
1. Govindarajan and Gupta (1985)
= Govindarajan (1984), see C3
8
Build strategies than harvest strategies Performance Partially Partially
2-Way interaction
2. Merchant (1985b)
54 pro®t center mgrs (1) Exploratory: harvest vs. growth strategies Use of accounting controls n.a. Yes
Pro®t-centers performing worse Use of accounting controls Partially Partially
Subgroup z-test
3. Gupta (1987)
= Govindarajan (1984), see C3 Build strategies than harvest strategies
9
Performance Yes Yes
2-Way interaction
4. Simons (1987b)
76 mgrs (76) Defender than prospector firms Use of tight budget goals No No
Use of cost control Yes Yes
Logit regression
5. Govindarajan (1988)
121 general SBU mgrs (24) Low cost than differentiation strategy Effectiveness Yes Yes
2-Way interaction
See also E8 and H2
6. Merchant (1990)
= Merchant (1985b), see D2 Growth than maintain/harvest strategies Long-range orientation No No
Discouragement new ideas No No
Subgroup z-test
See also A7, C6, and G3
4
5
8
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4
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2
E. Task and departmental characteristics
1. Merchant (1981)
170 manufacturing mgrs (19) Larger, decentralized firms Use of APM Partially Partially
performance Partially n.a.
10
Subgroup z-test
2. Hirst (1983b)
111 functional mgrs (N.R.) For hypotheses, see C1
3. Merchant (1984)
= Merchant (1981), see E1 Routine and repetitive production technology Use of APM Partially Partially
Correlation
Performance Partially Partially
Subgroup z-test
Larger, more diverse departments Use of APM Yes Yes
Correlation
Performance Yes Yes
Subgroup z-test
see also C2
4. Hirst and Yetton (1984)
= Hirst (1983b), see C1 Production than non-production jobs Role ambiguity Yes Yes
Exploratory: low vs. high job structure Role ambiguity n.a. Yes
Linear regression
5. Brownell (1985)
66 R&D and marketing mgrs (1) Marketing than R&D managers Performance No No
2-Way interaction
6. Brownell and Hirst (1986)
76 functional mgrs (1) Higher budget participation (low task uncertainty subgroup) Performance No No
Job-related tension Yes Yes
3-Way interaction
7. Macintosh and Daft (1987)
90 functional mgrs (20) Higher sequential interdependence Use of operating budgets Yes Partially
Correlation
8. Govindarajan (1988)
121 SBU mgrs (24) Match: decentralization, strategy and personality Performance Yes Yes
Correlation
11
See also D5 and H1
9. Imoisili (1989)
102 cost center mgrs (3) Lower task uncertainty Job stress No No
Performance No No
Budget attitudes No No
2-Way interaction
Lower task interdependence Job stress No No
Performance No No
Budget attitudes No No
2-Way interaction
(Table continued overleaf )
F
.
G
.
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2
5
(
2
0
0
0
)
4
5
1
±
4
8
2
4
5
9
Table 1Ðcontd from p. 458
Contingency factor
Study (year)
Relevant hypothesis: RAPM
more appropriate for ...
Criterion (dependent)
variable(s)
Support for
hypothesis
(claimed)
Findings
signi®cant
Sample (No. of organizations)
1
Other hypotheses or variables in this study Statistical model
10. Williams et al. (1990)
201 mgrs (22) Exploratory: pooled vs. reciprocal task interdependence Performance dimensions n.a. Partially
Canonical correlation
11. Brownell and Dunk (1991)
79 functional mgrs (46) Lower budget participation  task uncertainty Performance Yes Yes
3-Way interaction
Higher budget participation (low task difficulty subgroup) Performance Yes Yes
2-Way interaction
See also F6
12. Dunk (1992)
= Dunk (1989), see F3 Higher levels of manufacturing process automation Performance Yes Yes
2-Way interaction
13. Ross (1995)
= Ross (1994), see G6 For hypotheses, see C7
14. Lau et al. (1995)
114 functional mgrs (80) Lower task uncertainty  budgetary participation Job-related tension No No
3-Way interaction
Higher budget participation (low task uncertainty subgroup) Job-related tension Not tested Not tested
2-Way interaction
Lower task difficulty  budgetary participation Performance Yes Yes
3-way interaction
Higher budget participation (low task difficulty subgroup) Performance Yes Yes
2-Way interaction
See also B3 and F9
15. Abernethy and Brownell (1997)
127 senior R&D ocers (2) Tasks with lower analyzibility and fewer exceptions Performance Partially Partially
2-Way interaction
F. Budget participation
1. Brownell (1982a, 1982b)
38 cost-center mgrs (1) Higher budget participation Job satisfaction No No
Performance Yes Yes
2-Way interaction
2. Brownell and Hirst (1986)
76 functional mgrs (1) For hypotheses, see E5
3. Hirst (1987b)
44 managers (1) Higher budget participation Job performance No No
2-Way interaction
4. Dunk (1989)
26 production mgrs (26) Exploratory: lower vs. higher budget participation Performance Yes Yes
2-Way interaction
4
6
0
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S
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e
t
y
2
5
(
2
0
0
0
)
4
5
1
±
4
8
2
5. Aranya (1990)
97 store mgrs (97) Exploratory: lower vs. higher budget participation
12
Job satisfaction n.a. Yes
Budgetary performance n.a. Yes
2-Way interaction
6. Brownell and Dunk (1991)
79 functional mgrs (46) For hypotheses, see E11
7. Dunk (1993)
= Brownell and Dunk (1991), see E11
13
Lower budget participation  information asymmetry Budget slack No Yes
3-Way interaction
8. Harrison (1992)
211 sales/purchase mgrs (28) For hypotheses, see B1
9. Lau et al. (1995)
114 functional mgrs (80) For hypotheses, see E14
G. Superior-subordinate relation factors
1. Hopwood (1974)
= Hopwood (1972)
14
Lower consideration Use of APM Yes Partially
Higher initiating structure Use of APM Yes Partially
Pairwise t-test
See also I1
2. Merchant (1985b)
54 pro®t center mgrs (1) Exploratory: initiating structure leadership style Use of accounting controls No No
Exploratory: considerate leadership style Use of accounting controls No No
Correlation
3. Merchant (1990)
see A7 Considerate leadership style Accrual manipulation No No
Subgroup z-test
See also A7, C6, and D6
4. Macintosh and Williams (1992)
= Williams et al. (1990), see E9 Managerial roles Performance n.a. Partially
Canonical correlation
5. Dunk (1993)
= Brownell and Dunk (1991), see E11 For hypotheses, see F6
6. Ross (1994)
215 responsibility center mgrs (18) Higher trust in supervisor Job-related tension Yes Yes
ANOVA
H. Personality characteristics
1. Govindarajan (1988)
121 general SBU mgrs (24) For hypotheses, see E8
2. Harrison (1993)
= Harrison (1992), see B1 Higher individual's authoritarianism Job-related tension No Yes
Job satisfaction No No
2-Way interaction
Higher individual's collectivism (= lower individualism) Job-related tension Not tested
15
Not tested
Job satisfaction Not tested Not tested
2-Way interaction
See also B3
(Table continued overleaf )
F
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2
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(
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0
0
)
4
5
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±
4
8
2
4
6
1
Table 1Ðcontd from p. 460
Contingency factor
Study (year)
Relevant hypothesis: RAPM
more appropriate for ...
Criterion (dependent)
variable(s)
Support for
hypothesis
(claimed)
Findings
signi®cant
Sample (No. of organizations)
1
Other hypotheses or variables in this study Statistical model
I. Contagion e?ect
1. Hopwood (1974)
= Hopwood (1972), see A1 Exploratory: managers evaluated by APM themselves Use of APM Partially Not tested
Not statistically tested
See also G1
2. Barrett et al. (1992)
72 marketing mgrs (15) Managers evaluated by APM themselves Use of APM Yes Yes
Correlation
1
When the sample has been used in an earlier study, it is mentioned after the sign `='. When it is noted `see X', it means that the study is the same as study X.
2
The results reported here concern Hopwood's (1972) general hypothesis. This hypothesis was tested using pairwise t-tests for di?erent means between subgroups
based on the three evaluation styles (Budget Constrained, Pro®t Conscious and Non-Accounting). Note that these three subgroups were based on the relative impor-
tance of `Meeting the Budget' and `Concern with Cost' among eight performance criteria. Other and later `exploratory' analyses in this study concerned calculating
correlation coecients for scores on the two individual performance criteria mentioned and the dependent variables. Here many opposite results were reported, for
example indicating that `Meeting the Budget' and `Concern with Cost' were negatively related to job-related tension.
3
Kenis (1979) tested both the e?ects of a general use of APM and a punitive use of APM. The expected negative e?ects of RAPM on the dependent variables were
only partially found and, moreover, only for punitive use of APM. No negative e?ects, and even positive e?ects, were found for general use of APM. Overall, this is
denoted here as `partial' support for the hypothesis.
4
RAPM was measured with three variables. `Budgetary slack' was signi®cantly and positively related to `reactions to expected budget overruns' and signi®cantly and
negatively related to `required explanatioons of variance' and `link with extrinsic rewards'.
5
This study reports a reanalysis of Merchant's (1985c) data, which were used previously in Merchant (1981), using a LISREL-methodology. Now a positive
relationship between RAPM and budgetary slack was found.
6
The acronym `NR' indicates `Not reported'.
7
Govindarajan (1984) compares correlation statistics for the relationship between environmental uncertainty and RAPM for more and less e?ective business-units.
No formal test was reported. Furthermore, the relevant test should have concerned the e?ect of environmental uncertainty on the relationship between RAPM and
e?ectiveness (see also text).
8
From the Govindarajan (1984) sample now 46 observations were used. The number of organizations was not reported in this paper.
9
See also Govindarajan (1984), here reported as D1.
10
The test used here, comparison of correlation coecients per subgroup using z-tests, is not well suited to test hypotheses predicting interaction e?ects.
11
Govindarajan (1988) calculated distance scores as the actual scores minus the optimal score for each of the independent variables. These distance scores were
correlated with performance. This approach supports a systems concept of contingency ®t.
12
Aranya (1990) claims to have sampled in a high task uncertainty environment, and argues that for high task uncertainty, budgetary participation has a negative
e?ect on the appropriateness of RAPM.
13
Number of organizations not reported.
14
Number of subjects not reported.
15
No formal tests were done after the initial analysis revealed that `individualism-collectivism' scores were not reliable.
16
Only 26 observations used.
4
6
2
F
.
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.
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.
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t
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2
5
(
2
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0
0
)
4
5
1
±
4
8
2
2.4. National culture characteristics
RAPM studies paying attention to national
culture examine whether budget-based perfor-
mance evaluation is more appropriate in some
countries, than in others. The number of studies in
this category is limited. Harrison (1993) found,
in a setting of Australian and Singaporean man-
agers, a direct e?ect of national culture on the
relationship between RAPM and attitudinal vari-
ables. In Singapore, where power-distance is high
and individualism is low, RAPM had a less nega-
tive e?ect on job-related tension and a more
positive e?ect on job satisfaction. In the same set-
ting, Harrison (1992) had earlier found no e?ect of
national culture on the interaction between bud-
getary participation and RAPM. Also a study by
Lau et al. (1995) was motivated by the aspect of
national culture. They investigated, similarly to
Harrison (1992), whether previous ®ndings con-
cerning budgetary participation were transferrable
to Singapore (i.e. to a non-Anglo-Saxon country).
The e?ect of national culture was not formally
tested, but the results did not suggest a great
impact. Overall, these studies provide at best par-
tial support for the relevance of national culture.
2.5. Environmental characteristics
A large group of studies has tried to explain
di?erences in the appropriateness of RAPM from
the organization's external environment. Typi-
cally, these studies have focused on factors con-
tributing to the variability, unpredictability or
uncertainty of the environment. Hirst (1983b)
attempted to solve the Hopwood±Otley con-
troversy by pointing out that RAPM was the least
appropriate when uncertainty was either high or
low. With high uncertainty, APM are relatively
incomplete, causing superior±subordinate con-
¯icts, and job-related tension. Alternatively, low
uncertainty would cause APM to be ``too'' com-
plete, resulting in a loss of subordinates' discre-
tionary power, and in con¯ict and job-related
tension as well. Hirst's analysis revealed, contrary
to the expected curvilinear e?ect, that the appro-
priateness of RAPM, in terms of job-related ten-
sion, was low (high) when uncertainty was high
(low). Regarding superior±subordinate relation-
ships, no signi®cant e?ects were found. In a study
by Govindarajan (1984) similar hypotheses were
tested in a sample of business-unit managers.
Govindarajan predicted that APM were used less
when environmental uncertainty was high, and
that this uncertainty±RAPM relationship would be
more ``pronounced'' for more e?ective business-
units. The analysis showed a negative correlation
between uncertainty and use of APM, which was
more negative for more e?ective business units.
7
Later studies investigating the same or similar
hypotheses showed mixed results. In a direct
attempt to replicate Hirst's ®ndings, Ross (1995)
failed to ®nd a negative e?ect of uncertainty on the
appropriateness of APM. Furthermore, Ezzamel
(1990) found a positive correlation between
uncertainty and use of APM. In sum, it appears
that the overall evidence regarding environmental
uncertainty is mixed at best.
2.6. Strategic characteristics
A third set of contingency studies has investi-
gated the appropriateness of RAPM for di?erent
strategies. The literature on strategy-control sys-
tem relationships, of which these studies are a
subset, has recently been reviewed by Lang®eld-
Smith (1997). Overall, she ®nds that the number of
strategy-control studies is limited, and she con-
cludes that strong evidence is lacking. An impor-
tant cause may be that di?erent typologies
of strategy are used, leading to incomparability of
®ndings (Lang®eld-Smith, 1997, p. 209). Also for
RAPM studies investigating strategy, the results
are mixed. Govindarajan and Gupta (1985)
expected that RAPM would be less appropriate
for business-units following a build strategy
than for business-units following a harvest strat-
egy, but found no support. APM appeared to be
equally e?ective for build and harvest strategies,
7
Govindarajan (1984) did not test whether the di?erence in
correlations between high performers and low performers was
statistically signi®cant. Furthermore, the proper test for ®nding
whether RAPM should be matched with environmental uncer-
tainty would have meant that the relationship between RAPM
and performance would be di?erent for di?erent levels of
environmental uncertainty.
F.G.H. Hartmann / Accounting, Organizations and Society 25 (2000) 451±482 463
even if in ``build'' business units the use of sup-
plementary, long-term, performance criteria
positively a?ected performance. Govindarajan
(1988) found that RAPM is more appropriate
for business-units following a low-cost strategy
instead of a di?erentiation strategy, but other
studies show no or only partial support (Merchant,
1985b, 1990). Simons (1987b) found that the use
of ®nancial controls di?ered between defender
and prospector ®rms. The use of tight budget
controls appeared, however, to be associated
with higher performance for both categories of
®rms. These results and the di?erences in strat-
egic typologies used, give little room for strong
conclusions.
2.7. Task and departmental characteristics
The largest group of RAPM studies tries
to establish a link between characteristics of
the subordinate's task and department, and the
appropriateness of RAPM for his or her evalua-
tion.
The theoretical arguments underlying hypoth-
eses for the often studied task uncertainty variable
are largely similar to those related to environ-
mental uncertainty. The Hirst (1983b) paper has
already been mentioned. The instrument used to
measure uncertainty in that study also contained
elements related to task uncertainty. An unsuc-
cessful attempt to replicate Hirst's results was
made by Brownell and Hirst (1986). This study
combined an analysis of task uncertainty with
budget participation (see below). Later, Brownell
and Dunk (1991) found support for an e?ect of
task variability (and not task diculty) on the
e?ect of RAPM, a ®nding that was partially
replicated by Lau et al. (1995). Also in these latter
two studies, the task uncertainty variables and
budget participation variables were examined
simultaneously, hindering the interpretation of
®ndings for task uncertainty alone (cf. Southwood,
1978). Other studies focused on broader (organ-
izational) variables than managerial tasks alone,
suggesting that APM are more appropriate for
larger, formally controlled departments (e.g.
Merchant, 1981, 1984). In sum, the evidence for
this category of studies suggests that the appro-
priateness of RAPM tends to be higher for larger,
more interdependent departments, and less uncer-
tain tasks.
2.8. Budget participation
A large class of studies investigates the com-
bined e?ects of two budget-related factors,
RAPM and budgetary participation. Budgetary
participation research investigates the (dys)func-
tional consequences of subordinate participation
in setting budget levels. Functional consequences
may result from information sharing between
superior and subordinate, and from a positive
e?ect on subordinates' goal-acceptance and
motivation (e.g. Brownell & McInnes, 1986;
Dunk, 1993). Dysfunctional consequences may
result from subordinates' attempts to negotiate
slack into their budgets (e.g. Dunk). Brownell
(1982a) found that budget participation and
RAPM should be matched for optimal perfor-
mance in the sense that when participation is high
(low), RAPM should also be high (low). This
®nding has been combined with the ®ndings of
Hirst (1983b) in several subsequent studies. The
combined and more elaborate hypothesis was that
the match between budgetary participation and
RAPM only holds in low task uncertainty situ-
ations (e.g. Brownell & Hirst, 1986; Brownell &
Dunk, 1991; Lau et al., 1995). Overall, the ®nd-
ings of these studies are mixed. Furthermore, in
many studies the results are not easily inter-
pretable, because of the combined analysis of
budget participation and task uncertainty. In a
simpler research model Dunk (1989) and Aranya
(1990), moreover, found e?ects contradicting
Brownell's (1982b) original ®nding. In sum, it
appears that the combined e?ects of RAPM
and budgetary participation are not yet well
understood.
2.9. Superior±subordinate relation factors and the
contagion e?ects
A broad category of RAPM studies encom-
passes contingency variables that describe aspects
of the social relationship between superior and
subordinate. Both Hopwood (1974) and Merchant
464 F.G.H. Hartmann / Accounting, Organizations and Society 25 (2000) 451±482
(1985b, 1990) studied the relationship between
leadership style and RAPM. Hopwood found
some support for the expectation that RAPM is
matched with more considerate and less initiating
structure leaders, but these ®ndings could not
be replicated by Merchant (1985a, b, c, 1990).
Ross (1994) studied trust, arguing that this vari-
able reduces the potential e?ect of RAPM on role
con¯ict. He found that RAPM is more appro-
priate when managers trust their supervisors.
Based on the principal-agent framework, Dunk
(1993) investigated the e?ect of information asym-
metry between superior and subordinate. His
results, although opposite to expectations, sug-
gested that it may be a relevant variable. Finally,
Hopwood and Barrett, McDonagh, and Granleese
(1992) showed that superiors tend to match their
evaluation style with the style used in their own per-
formance evaluation (see section I in Table 1). This
phenomenon is known as the contagion e?ect (cf.
Ansari, 1977, p. 110). Overall, the evidence suggests
that factors concerning superior-subordinate rela-
tionships may be important, but so far only limited
evidence exists.
2.10. Personality factors
A ®nal and small category of contingency vari-
ables relates to the personality of the subordinate
manager. Govindarajan (1988) found that in the
optimal situation, strategy was matched with
the subordinate's locus of control and RAPM. In
particular, the expectation and ®nding was that
the optimal combination for a di?erentiation strat-
egy would be an external locus of control, and low
RAPM. Harrison (1993) found no support for the
expectation that RAPM was more appropriate, in
terms of job-related tension, for people with
higher authoritarianism. The expectation was that
based on the assumption that people with higher
authoritarianism, would more easily accept the use
of APM in hierarchical settings. In contrast, the
results supported an opposite relationship. None
of the relationships with job satisfaction were sta-
tistically signi®cant. Also for this last category of
RAPM studies, the overall results do not support
strong conclusions. In the next section reasons will
be presented for this state of a?airs.
3. RAPM research: an evaluation
The overview of RAPM papers above supports
the idea of a critical mass, at least in terms of
research volume. Furthermore, many RAPM
studies explicitly attempt to build on ®ndings of
previous studies, and attempt to integrate and
replicate previous ®ndings (cf. Lau et al., 1995,
p. 360). However, and despite the common elements
in RAPM studies outlined before, the idea of an
organized critical mass of RAPM studies seems to
be challenged by both methodological and theo-
retical problems. Important symptoms are not
only the relatively large number of hypotheses not
supported, but even more the low success rate of
studies aimed at explicit replication of previous
®ndings. Concerning the latter, recall that Brownell
and Hirst (1986) and Ross (1995) tried but failed
to replicate the Hirst (1983b) ®ndings. Hirst
(1987b), Dunk (1989) and Aranya (1990) tried but
failed to replicate Brownell (1982b). Other repli-
cation studies were only partially successful (e.g.
Brownell & Dunk, 1991). Consequently, Lindsay
and Ehrenberg (1993, p. 224) even mention the
RAPM paradigm as an example of an area of
unsuccessful replications, and note:
Taken as a whole, this body of research,
although typically `interesting' in seeking to
explain discrepancies, does not add up to a
coherent body of knowledge or understanding.
In a recent overview of survey studies in man-
agement accounting, which included also many
RAPM studies, Young (1996, p. 55) makes a
similar remark, as he notes that:
... 25 years of survey research has yet to yield
a cohesive body of knowledge about man-
agement accounting and control practices
within and across industries and nations.
These comments, in particular, provide a sharp
contrast with the idea of an ``organized critical
mass'' of RAPM studies. The following three
subsections discuss in more detail the problems of
RAPM research that may explain these expres-
sions of severe critique. The ®rst subsection below
F.G.H. Hartmann / Accounting, Organizations and Society 25 (2000) 451±482 465
discusses problems concerning the meaning and
measurement of the RAPM construct. The second
subsection addresses limitations in the basic for-
mulation of RAPM theory. The third subsection
discusses problems with contingency theory in
RAPM research.
3.1. Meaning and measurement of the RAPM
construct
Despite the central role of the RAPM construct,
RAPM studies show no unity in its empirical
measurement. Brownell and Dunk (1991, p. 702)
even note:
...the measurement of budget emphasis in
performance evaluation (RAPM) is far from
settled. That researchers have achieved as
much towards reconciling the Hopwood
(1972) and Otley (1978) results is quite
remarkable when one considers the variations
of measurement of budget emphasis.
Many studies use Hopwood's (1972) original
instrument, but formats di?er from the original in
the number and wording of the criteria (e.g. Otley,
1978; Brownell & Hirst, 1986), and in the way
of deriving scores for statistical analysis (e.g.
Brownell, 1982b; Harrison, 1992, 1993). A second
class of studies use the BPQ, deriving RAPM
scores through factor analysis (e.g. Kenis, 1979;
Merchant, 1981, 1984), which has resulted in dif-
ferent numbers of factors, and di?erent factor
contents across studies. A third class of studies use
ad-hoc ``RAPM'' instruments (e.g. Hirst, 1983b;
Govindarajan, 1984).
8
In none of these studies is
formal proof provided for the equality or validity
of the instruments used. Moreover, individual
studies do not seem to acknowledge the impor-
tance of consistent measurement across studies in
a developing paradigm (cf. Lindsay & Ehrenberg,
1993). Although variable measurement is typically
considered a methodological issue, the variety in
RAPM measurement also has important theore-
tical implications. First, the variety hinders the
de®nition of the boundaries of the RAPM para-
digm. For example, Govindarajan explicitly aims
to solve the Hopwood±Otley controversy. In later
studies, that use the same data and the same
``RAPM'' measures (e.g., Govindarajan & Gupta,
1985; Gupta & Govindarajan, 1984), this link is
less explicitly made. Therefore, it is not clear to
which exact phenomena ``RAPM knowledge'' per-
tains. Second, the diversity in RAPM measure-
ment raises the question about the essence of the
RAPM construct, and even if the RAPM con-
struct still means `the same' after several decades
of research (e.g., Ross, 1995). In most studies,
RAPM conveys a notion of targets expressed in
accounting numbers, which therefore are of a
quantitative and ®nancial nature (e.g. Hofstede,
1967, p. 26; Hirst, 1987a; Harrison, 1993, p. 319).
9
The emphasis on the accounting nature of APM
causes them to be associated with rigidity, formality
and objectivity (Lang®eld-Smith, 1997; Chapman,
1997), and their use is subsequently associated
with job-related tension and disagreement. In
other studies, RAPM re¯ects the use of budgets,
and APM are regarded as typical examples of
formal controls (cf. Fisher, 1995). While APM are
clearly related to both, the concepts of targets and
formal controls are not equivalent. Consequently,
predictions about the appropriateness of RAPM
will di?er between the concept chosen, and the
same applies for de®nitions of the ``opposite'' of
8
Hirst (1983b) developed and used an instrument that mea-
sures the reliance on quantitative performance information.
Govindarajan (1984) and Govindarajan and Gupta (1985)
measured RAPM as the extent to which managerial bonuses
depend on objective performance data (``formula-based
approach'') as opposed to superiors' subjective considerations
(``subjective approach''). Both studies explicitly point out that
the instrument they used was designed to be equivalent to the
Hopwood instrument. For example Govindarajan (p. 125)
states: ``It is worth noting that strictly `formula-based' and
strictly `subjective' approaches are analogous to Hopwood's
`budget-constrained' and `non-accounting' styles. In addition, a
combination of subjective and formula-based approaches is
similar to Hopwood's `pro®t-conscious' style.''
9
Ross (1995, p. 3) argues that the content of these measures
is di?erent: ``In each of the ®ve questions used by Hirst [1983a,
pp. 603±604] the emphasis is on the use of quantitative criteria
for performance evaluation. (...) Although ®nancial information
is part of the quantitative information that could be used for
performance evaluation it is also likely that non-®nancial quanti-
tative information would be included in a manager's de®nition of
`quantitative'.''
466 F.G.H. Hartmann / Accounting, Organizations and Society 25 (2000) 451±482
RAPM. If RAPM is presented as a formal con-
trol, its e?ects should be contrasted with the use of
informal controls (e.g. self-controls). If RAPM is
presented as the use of accounting targets, its
e?ects should be compared with those of ``other''
targets (non-®nancial, subjective, long-term, quali-
tative etc.). Interestingly, already Kahn (1972)
questioned the theoretical focus on ``the budget''
in the Hopwood (1972) study, and the under-
development of the (opposite) Non-Accounting
style, but so far no formal analysis has been
done.
10
Finally, the variety in RAPM measure-
ment and the underdevelopment of the RAPM
concept have probably also hindered its founda-
tion in the conceptual management control litera-
ture. Neither the RAPM construct itself, nor any
of the styles conceived by Hopwood have found
their direct theoretical counterpart in the manage-
ment control typologies outlined by Merchant
(1982, 1985a), Ouchi (1977, 1979), Anthony
(1981), Anthony and Govindarajan (1995) and
others. This may also have reinforced the vague
and imprecise equation of RAPM with ``formal'',
``hierarchical'' and ``static'' controls (cf. Chapman,
1997).
11
3.2. A theory of RAPM
A second set of problems relates to the basic
formulation of RAPM theory. In their overview of
early RAPM literature, Briers and Hirst (1990,
p. 385) sharply criticize the underdevelopment of
theory in many RAPM studies:
Of particular concern is the inclusion of vari-
ables in hypotheses with little supporting
explanation. For example, some studies use
box diagrams with arrows indicating causally
related variables. Although this is a parsimo-
nious way of communicating connections, the
supporting argument in some studies is only
suggestive (...).
Briers' and Hirst's (1990) remark is general,
without a precise speci®cation of ``good'' and
``bad'' studies. Furthermore, their remark seems
to apply more to the presentation of theory in the
papers than to the use of theory itself. In fact, and
in contrast with the diversity in measurement of
the RAPM construct, the paradigm shows great
consistency in its basic theoretical framework, that
is informed by role theory.
12
This relative unity
especially re¯ects in the criterion variables used to
test RAPM hypotheses. Role theory typically
points to such interpersonal and work-related fac-
tors as job-related tension and job satisfaction.
Moreover, the emphasis on role theory (with its
focal concept of role con¯ict) seems the cause of
the limited focus in RAPM studies on the poten-
tial negative e?ects of RAPM, which speci®cally
re¯ects in the frequent use of job-related tension.
However, many studies have used performance as
a criterion variable, rightly arguing that it is the
`ultimate' variable of interest. Unfortunately,
the use of performance-related variables is prob-
lematic for other reasons (cf. Smith, 1983; Briers &
Hirst; Lang®eld-Smith, 1997). First, RAPM
research is about ®nding the right performance
measures, and it seems illogical that a researcher
uses the right performance measures, when the
whole paradigm is about ®nding ``right'' perfor-
mance measures. Indeed, Young (1996) points out
that survey instruments for measuring perfor-
mance too easily presuppose ``relevant'' dimen-
sions of performance. Second, there is reason to
suggest that performance is an independent vari-
able (i.e. an antecedent of RAPM), rather than a
10
Notably, already Hopwood's original study exempli®es
the importance of strict RAPM-de®nition. In this study, the
RAPM styles in the statistical analysis were the result from
preceding interviews that were done to validate the styles. In
addition, Hopwood used more than one measure for RAPM.
While this study is known for the discrete supervisory styles
(and the negative e?ect of the Budget Constrained style), many
of the negative e?ects were not found in analyses using the
continuous accounting-related variables.
11
RAPM would typically be classi®ed as a `bureaucratic'
control in Ouchi's framework (1977, 1979). Its classi®cation in
Merchant's (1982, 1985a) framework would be ambiguous, as it
contains aspects of both `action control' and `results control'.
12
Notable exceptions to the role-theoretic framework are
the use of balance theory (Brownell, 1982b), and the of princi-
pal-agent models (Dunk, 1993). Yet, Brownell's alternative
theory is severely critiqued by Briers and Hirst (1990), and the
reference to principal-agent theory by Dunk merely results in
the adoption of new variables (i.e. information-asymmetry),
not a new theory.
F.G.H. Hartmann / Accounting, Organizations and Society 25 (2000) 451±482 467
dependent variable (e.g. Merchant, 1985b; Lang-
®eld-Smith, p. 226). Finally, studies often display
a gap between the theoretical hypothesis and the
empirical test, by developing predictions about,
for example, job-related tension and subsequently
testing performance. Yet, it has often been
demonstrated that the relationships between job
attitudes (e.g. tension, satisfaction) and perfor-
mance are complex and unclear (e.g. Schuler,
1980; Jamal, 1984; Tosi, Rizzo, & Carroll, 1994).
Furthermore, such gaps obscure whether a failure to
®nd support for a hypothesis is caused by insu-
cient theory or faulty method. Recently, Shields
and Shields (1998, p. 50) derive the same conclu-
sion regarding budgetary participation research. In
sum, RAPM studies appear to be limited in their
use of theory, and in their choice of criterion vari-
ables for testing the appropriateness of RAPM.
Although this apparent unity could, by itself,
positively a?ect the structure of the paradigm, the
disappointing ®ndings suggest that the paradigm
would bene®t from a more speci®c de®nition,
measurement and modeling of appropriateness.
3.3. A contingency theory of RAPM
Briers' and Hirst's (1990) comment on the
underdevelopment of RAPM theory is particu-
larly troublesome, since it echoes many of Otley's
comments made ten years before, in a review of
early contingency studies in management
accounting. Otley (1980, p. 414) noted:
The contingency approach is invoked, so it
seems, in order to cover up some of the
embarrassing ambiguities that exist in the
universalistic approach.
Contingency theory is often associated with the
adage ``it all depends'', but Otley's comment seems
to indicate that the adage signals the absence
rather than presence of theory. RAPM studies
show a great diversity in applying contingency
frameworks, which forms a third source of pro-
blems hindering the organization and integration
of the paradigm. A ®rst source of diversity is the
fact that RAPM studies vary widely in level of
analysis, with contingency variables ranging from
the broad concept of national culture to much
more focused personality variables. Consequently,
evidence is limited for each individual con-
tingency variable. A second source of diversity
is the di?erence between studies in the motivation
to include a certain contextual variable. In many
studies, the contextual variable chosen is argued to
account for a systematic situational di?erence
between the Hopwood and Otley samples (Kren &
Liao, 1988, p. 282). Such studies, for example,
explicitly investigate alleged di?erences between
cost-center (Hopwood) and pro®t-center (Otley)
managers (e.g. Hirst, 1983b). Other studies how-
ever, although also motivated by the contradictory
®ndings from these two early studies, use fewer
theoretical or systematical considerations in
choosing contextual factors. They focus on ad-hoc
factors expected to in¯uence relationships exam-
ined earlier. Examples of the latter type of studies
are those that combined the earlier mentioned
budget-participation construct, to explain situa-
tional di?erences in the appropriateness of RAPM
(e.g. Brownell, 1982b; Dunk, 1989). Third, a vari-
ety of motives exists to use contingency frame-
works. In most cases, the motive is pragmatic,
which is shown by using merely the outlines of
contingency theory to study ``any'' contextual
variable.
13
Far less important seems the aim to
contribute to develop a contingency theory of
accounting (cf. Chapman, 1997), or to extend
`the' contingency theory of organizations to
management accounting (cf. Schoonhoven, 1981).
A cause may be that RAPM studies seem typical
examples of management theory, which aims to
solve practical problems rather than explain
accounting phenomena from the context in which
they appear (cf. Puxty & Chua, 1989, p. 115).
14
A
13
In RAPM research, for example, personality quali®es as a
contingency variable, although it is not a ``contingency factor''
in a traditional sense (e.g., environment, strategy and organi-
zational structure).
14
Puxty and Chua (1989, p. 115) note a di?erence between
organization theory and management theory: ``Organisation
theorists (...) ask questions concerning the way organisations
operate. Management theorists take as a much closer focus the
question of what a manager should do to make his organisation
operate better''. This distinction also underlies the debate about
``normative'' versus ``positive'' accounting (e.g. Christenson,
1983). Lindsay (1995) notes that current RAPM studies have
little to o?er in terms of advice to management (p. 44, 47).
468 F.G.H. Hartmann / Accounting, Organizations and Society 25 (2000) 451±482
relevant fourth source of variance is that RAPM
studies carelessly mix predictions about the e?ects
of APM with predictions about the use of APM.
Some studies use a selection approach to con-
tingency ®t (cf. Drazin & Van de Ven, 1985;
Fisher, 1995; Selto, Renner, & Young, 1995). They
predict that, under certain circumstances, super-
iors will be reluctant to use APM and will use
other performance measures instead (e.g.,
Merchant, 1984; Govindarajan, 1984). Other
studies use an interaction approach to contingency
®t, predicting certain (dys)functional e?ects of the
interaction between RAPM and a contextual
variable (Imoisili, 1989; Govindarajan, 1988;
Brownell & Dunk, 1991). In many cases, no theo-
retical reason is given for the approach selected,
and sometimes, the two kinds of expectations are
even combined. For example, Merchant predicts
an e?ect of technology and department size on
both the use of APM (selection) and the e?ects of
RAPM (interaction).
15
Despite these di?erences,
RAPM studies show a remarkable limited set of
statistical models for testing contingency hypoth-
eses. The dominant format in testing RAPM con-
tingency hypotheses is the use of moderated
regression analysis using interaction terms, in which
the appropriateness of RAPM is the outcome of
a RAPM-contingency interaction. Although this
method is well documented in the methodological
literature (e.g. Southwood, 1978; Cohen &
Cohen, 1983; Champoux & Peters, 1987;
Jaccard, Turrisi, & Wan, 1990), its use in RAPM
research often does not seem the outcome of a
deliberate choice, but rather seems the result of
mere conservatism. Its unquestioned use limits the
extent to which the RAPM paradigm can pro®t
from developments in the wider organizational
behavior literature, which documents many alter-
native formats for the formulation and statistical
analysis of contingency hypotheses (see, e.g.
Venkatraman & Camillus, 1984; Venkatraman,
1989).
16
A ®nal and methodological point of cri-
tique is the typical use of small and non-random
samples (cf. Lindsay, 1995). Sample sizes below 50
are typical rather than exceptional. This itself does
not ``forbid'' the use of statistical analysis and
statistical signi®cance, but it seems that signi®-
cance is often but wrongly equated with materiality,
and chance of replication (cf. Lindsay). The parti-
cular reason for mentioning this problem in this
subsection on contingency theory, is that the
statistically demanding interaction models used to
test contingency hypotheses provide very unstable
results with these low sample sizes (Schmidt &
Hunter, 1978; Cohen & Cohen). This is a likely,
additional, cause for the lack of consistent and
replicated ®ndings across studies (cf. Lindsay &
Ehrenberg, 1993).
4. RAPM and uncertainty
The overview and analysis of RAPM research
above could easily lead to pessimistic opinions
about its current state, and its future. Many
reviews of management accounting (and RAPM)
research have indeed been quite successful in pre-
senting gloomy pictures (cf. Chapman, 1997).
However, to conclude the discussion in such a
negative spirit, would be both pointless and
shortsighted. An important reason for optimism is
that many of the methodological problems noted
can be resolved. For example, Young (1996) notes
that in itself, survey research is a respectable way
for data collection, and the notion of contingency
theory is never challenged. Lindsay (1995) argues
that a way to resolve current ¯aws in methodology
would be to use more random sampling, and to
focus more on simple and controlled replication
(cf. Lindsay & Ehrenberg, 1993). Indeed, these
and other aspects of the typical methodology of
RAPM research are well documented in the lit-
erature (e.g., Dillman, 1978; Kerlinger, 1986).
15
Indeed, the ``systems approach'', the third alternative to
express contingency ®t, was already propagated by Otley (1980)
but has been used sporadically. See Govindarajan (1988),
Abernathy and Brownell (1997) for exceptions. See Selto et al.
(1995) for a (non-RAPM) combination of the three forms of ®t
in one study.
16
A di?erent although related issue concerns the use and
interpretation of interaction statistics. Hartmann and Moers
(1998) have recently shown that the application and inter-
pretation of interaction statistics in RAPM research is subject
to frequent and serious errors.
F.G.H. Hartmann / Accounting, Organizations and Society 25 (2000) 451±482 469
A greater cause for concern, and a greater chal-
lenge for research, are the problems related to
RAPM theory. They will be the focus of the
remaining sections of this paper. While methodo-
logical ¯aws may a?ect individual studies, theo-
retical ¯aws a?ect a whole research paradigm.
Moreover, it is possible that the disappointing
results from RAPM studies so far may be
explained by a new theoretical perspective.
Recently such a new approach for studying the
role of accounting systems in organizations was
proposed by Chapman (1997). Chapman (p. 189)
points to the clarity and precision of seminal con-
tingency research in the sixties (e.g. Burns &
Stalker, 1961; Woodward, 1965; Lawrence &
Lorsch, 1967), and points to the sharp contrast
with the current state of contingency research in
management accounting. He speci®cally proposes
that contingency frameworks in management
accounting should focus on uncertainty as the
central concept, and he uses Galbraith's (1973,
1977) framework for ``organizational design'' to
support his arguments. Galbraith de®nes uncer-
tainty as an information de®cit, and his framework
provides a synthesis of early contingency frame-
works in which uncertainty also was the central
concept (Chapman, p. 199). In the remainder of
this paper, an attempt is made to transfer and
extend Chapman's proposal to the RAPM litera-
ture. In the subsections below, ®rst an overview is
given of the current `status' of uncertainty in the
RAPM literature. Based on this overview it will be
concluded that uncertainty provides the RAPM
paradigm with a paradox. The section closes by
discussing how the explicit recognition of the
paradox may prove bene®cial for the further
organization and development of the RAPM
paradigm.
4.1. The focus on uncertainty in RAPM studies
Apart from the opposite ®ndings of Hopwood
(1972) and Otley (1978), another important factor
spurring the in¯uence of contingency theory in
RAPM research was the prior development of
the contingency theory of organizations, and the
resulting availability of ``ready made'' contingency
frameworks to management accounting researchers
(Otley, 1980, p. 416; Kren & Liao, 1988, p. 283).
In the seventies, several contingency frameworks
for management accounting and control were
developed, which were either normative and
directed at prescribing accounting and control
system design (e.g. Lorange & Scott Morton,
1974; Gordon & Miller, 1976; Waterhouse &
Tiessen, 1978; Amigioni, 1978; Daft & Macintosh,
1978), or which served to test hypotheses predict-
ing ``®t'' between selected organizational char-
acteristics and the accounting system (e.g. Bruns &
Waterhouse, 1975; Hayes, 1977). These studies
had inconclusive ®ndings (Sathe, 1978, p. 91;
Hopwood, 1978, p. 8; Otley, 1980, p. 417), but
they served to illustrate how contextual factors
typical for contingency research in organizational
behavior could be used in management accounting
research, which are the uncertainty associated
with the organization's environment and with its
task technology (e.g. Burns & Stalker, 1961;
Woodward, 1965; Lawrence & Lorsch, 1967;
Thompson, 1967; Perrow, 1967, 1970; cf. Sathe,
1978, p. 183; Otley, p. 419). In these early studies,
the organizational environment was captured
in terms of its dynamism, heterogeneity (Gordon
& Miller, 1976), predictability (Waterhouse &
Tiessen, 1978), complexity and variability (Ami-
gioni). Task technology in turn was described as the
variety (Daft & Macintosh) and routineness
(Waterhouse & Tiessen) of tasks. The focus on
uncertainty re¯ected the prime importance of this
concept in the organizational behavior literature.
Regarding organizational design, Thompson (1967,
p. 159) argued that uncertainty is the ``fundamental
problem'' of complex organizations and that deal-
ing with uncertainty is the `essence' of adminis-
trative processes. Similarly, Galbraith (1977, p. 36)
had noted that:
Uncertainty is the core concept upon which
the organization design frameworks are based.
The importance is re¯ected in empirical research
as well, as evidenced by Downey and Slocum's
(1975, p. 562) argument that uncertainty had
become the ``central concept'' of organizational
contingency research. Similarly, Miles and Snow
(1978, p. 254) concluded that:
470 F.G.H. Hartmann / Accounting, Organizations and Society 25 (2000) 451±482
... the concept of uncertainty has emerged as
a primary variable linking a great number of
organizational characteristics to conditions in
the environment.
4.2. RAPM and uncertainty: theory
With this heritage, it is not surprising that
uncertainty was among the ®rst variables in
RAPM studies adopting a contingency perspective
(Hirst, 1983b; Govindarajan, 1984; cf. Brownell,
1987b; Chapman, 1997). It is often not recognized,
however, that in other and later RAPM studies,
uncertainty has remained an important factor,
often serving as the implicit or theoretical factor
behind the explicit and operational contingency
variable chosen for empirical analysis. For exam-
ple, Merchant (1984) investigated di?erences in
the appropriateness of RAPM for subordinate
managers of departments operating with di?erent
production technologies and in di?erent markets,
based on the expected di?erence in the uncertainty
that the two kinds of departments would face.
Brownell (1985) investigated di?erences in the
appropriateness of RAPM between R&D and
production departments, based on the assumption
that the two would face di?erent levels of envir-
onmental uncertainty. Both Imoisili (1989) and
Macintosh and Daft (1987) investigated depart-
mental interdependence and argued that this
latter variable was an important cause of uncer-
tainty in the manager's working environment.
Also the much studied budget participation vari-
able is uncertainty related, as it in¯uences infor-
mation asymmetry between subordinate and
superior (e.g. Dunk, 1993), and is often a response
to task uncertainty and environmental uncertainty
(cf. Shields &Shields, 1998). In RAPMhypotheses,
uncertainty is typically predicted to a?ect sub-
ordinates' perceptions of such factors as the con-
trollability, completeness and relevance of RAPM.
According to these arguments, uncertainty man-
ifests itself as changing conditions that a?ect the
controlled process. Uncertainty causes predictions
to be dicult and thus hinders budgetary target
setting. In addition, uncertainty makes it dicult
to judge ex-post whether good (poor) managerial
performance measured in accounting terms is the
result of good (poor) managerial e?ort or
(un)lucky circumstances (e.g. Govindarajan, 1984,
p. 128; Brownell, 1985; Williams, Macintosh, &
Moore, 1990; Imoisili, 1989). In short, dysfunc-
tional consequences of using RAPM under uncer-
tainty result from not applying or not being able
to apply the controllability principle, which forms a
central element of responsibility accounting fra-
meworks (see below). Stressing `uncontrollable'
APM can result in the incompleteness of perfor-
mance measurement (e.g., Hayes, 1977; Hirst,
1981, p. 771; cf. Govindarajan & Gupta, 1985;
Merchant, 1990; Ross, 1995), or even in the irrele-
vance of performance evaluations (Govindarajan,
p. 128; Govindarajan & Gupta, p. 54). The typical
(role-theoretic) hypothesis predicts that uncer-
tainty negatively a?ects the appropriateness of
RAPM.
4.3. RAPM and uncertainty: evidence
Although the role of uncertainty in extant
RAPM research is easily demonstrated, the cur-
rent state of RAPM research does not allow the
conclusion that the e?ects of uncertainty are well
understood. An important example is the Hirst
(1981, 1983b) study. Recall that Hirst originally
expected a curvilinear e?ect of uncertainty on the
appropriateness of RAPM. So far, no empirical
proof has supported this initial expectation, but
the linear relationship Hirst found instead has
been wrongly equated with his original theory ever
since (see, e.g. Brownell, 1987a). Yet, even this
®nding can, for several reasons, not be generalized
to an overall negative relationship between uncer-
tainty and the appropriateness of RAPM. First, in
later studies that attempted to replicate Hirst's
®ndings, no interaction e?ects of uncertainty and
RAPM on job-related tension were found
(Brownell & Hirst, 1986; Imoisili, 1989; Brownell
& Dunk, 1991; Lau et al., 1995; Ross, 1995). Sec-
ond, Hirst did not ®nd support for the expected
interaction e?ect of RAPM and uncertainty on
superior-subordinate relations, which he proposed
as an alternative measure for the appropriateness
of RAPM, following Hopwood (1972). This at
least suggests that conclusions about the con-
textual appropriateness of RAPM depend on the
F.G.H. Hartmann / Accounting, Organizations and Society 25 (2000) 451±482 471
speci®c criterion variable used. Third, Hirst's
®nding that RAPM is less appropriate under
higher levels of uncertainty have not generally
been con®rmed by studies focusing on the perfor-
mance e?ects of using RAPM under uncertainty.
Merchant (1984), Brownell (1985) and Lau et al.
did not ®nd evidence of uncertainty a?ecting the
relationship between the use of RAPM and man-
agerial performance, which they predicted. Since,
in contrast, studies by Brownell (1987a) and
Govindarajan (1988) con®rm a negative e?ect of
uncertainty on the relationship between RAPM
and managerial performance, the results are mixed
at best. Fourth, also studies predicting an e?ect of
uncertainty on the use of APM by superiors pro-
vided mixed results. Merchant only found partial
support for an e?ect of uncertainty on the use of
RAPM. Govindarajan (1984) found a negative
relationship between environmental uncertainty
and RAPM, but did not test whether the use of
APM was negatively related to performance under
high uncertainty (see before). Govindarajan and
Gupta (1985) found that non-accounting infor-
mation was used more in SBU's with high-uncer-
tainty strategies, but they also found that RAPM
was equally e?ective in both high and low-uncer-
tainty strategies. Finally, many studies suggest and
®nd that RAPM is especially useful in situations
of high uncertainty (cf. Simons, 1987a, p. 341).
Ezzamel (1990) found that APM were used more
frequently under conditions of high uncertainty,
the rationale of which was that larger, decen-
tralized ®rms would emphasize formal comm-
unication means when faced with uncertainty.
Ezzamel's study builds upon and con®rms earlier
®ndings (e.g., Khandwalla, 1972; Merchant, 1981;
Simons, 1987b) that a positive relationship exists
between the uncertainty originating in market
factors (e.g. competition) and the use of formal
controls such as budgets and accounting controls
(cf. Chapman, 1997). Similarly, Macintosh and
Daft (1987) found a positive relationship between
departmental interdependence, an important
source of uncertainty (e.g., Thompson, 1967) and
the emphasis placed on meeting budgetary targets.
In sum, therefore, the results concerning RAPM
and uncertainty do not display a large amount of
consistency. In fact, the support for hypotheses
predicting both a positive e?ect and a negative
e?ect provides us with an apparent paradox.
4.4. The uncertainty paradox
The overview presented above suggests that no
support exists for a universal negative e?ect of
uncertainty on the appropriateness of RAPM.
This clearly falsi®es claims that the results of
RAPM studies relying on uncertainty are con-
sistent (e.g., Brownell, 1987a; Chapman, 1997,
p. 193). In particular, such claims suggest that the
results of a positive e?ect of uncertainty on the
appropriateness of RAPM are neglected (cf. Briers
& Hirst, 1990).
17
Poole and Van de Ven (1989, pp.
562±563) explain this negligence by pointing to the
general aim of a researcher in a speci®c domain to
signal consistency (cf. Gresov, 1989; Mak, 1989).
They note:
Contemporary theory construction methods
are biased toward consistency. Relatively lit-
tle attention has been paid to the resolution
of tensions or oppositions.
and:
The presence of contrary of contradictory
assumptions, explanations, or conclusions is
often seen as an indicator of poor theory
building
In contrast, Poole and Van de Ven (1989, p. 563)
argue that explicit recognition of a paradox is a
fruitful exercise in the progress of theories, and
recommend that more attention is given to theo-
retical tensions and inconsistencies, to stimulate
the development of more comprehensive theories.
Claims for the consistency of ®ndings concerning
uncertainty in RAPM research indeed fail to
recognize that uncertainty provides us with a
paradox for the design of management control
systems. Recall, that in traditional RAPM think-
ing, and in the design of management control
17
Briers and Hirst (1990) note many examples of ``selective
referencing'' in RAPM research, although they do not explicitly
point out these results.
472 F.G.H. Hartmann / Accounting, Organizations and Society 25 (2000) 451±482
systems, the controllability principle is paramount.
This principle states that:
... the manager of a responsibility center
should be assigned responsibility only for the
revenues, costs, or investment that responsi-
bility center personnel control (Atkinson,
Banker, Kaplan, & Young, 1997, p. 564).
The principle seems particulary applicable to
uncertain situations, where the risk of being held
responsible for uncontrollable factors is high. On
the one hand, it seems widely accepted that
adherence to the principle is desirable, since it
represents that performance evaluations should
be `fair' (e.g. Merchant, 1987, p. 317). Choudhury
(1986, p. 189) thus notes:
... the notion of being answerable (only) for
what one is able to in¯uence, may be viewed as
conforming to a commonly held concept of
justice ...
On the other hand, it should be noted that a strict
application of the principle would imply that in
most cases the use of budgets for managerial per-
formance evaluation (and management control)
would not be feasible, since especially in uncertain
and complex organizations, with people working
in joint e?ort, the possibility to single out indivi-
dual responsibilities is severely limited (cf. Hirst,
1983a, p. 29; Merchant, 1987). The tension
between the apparent logic of the controllability
principle, and its apparent limited practical
applicability has lead to di?erent opinions about
its value. Hirst (p. 36) explicitly concludes that the
principle is paradoxical. On the one hand, decen-
tralization is an important means of enhancing the
controllability of organizational processes, and
budgets are important tools to formalize decen-
tralization, by means of creating responsibility
centers (cf. Bruns & Waterhouse, 1975; Merchant,
1981, 1984). On the other hand, a strict applica-
tion of the controllability principle would hinder
the subsequent use of the budget for managerial
performance evaluation. This and similar para-
doxes, which point to the apparent limited feasibil-
ity of formal organizational controls in cases where
they may be most needed, are mentioned through-
out the control literature (e.g. Ouchi & Maguire,
1975; Vancil, 1979). Ouchi and Maguire (1975,
p. 568) point to the paradox of using output perfor-
mance measures with decentralization, stating:
The use of output measures is largely a result
of the demand for quanti®able, simple mea-
sures. Paradoxically, output measures are
used most when they are least appropriate: in
the face of complexity (and) interdependence.
Baker, Jensen, & Murphy (1988, p. 598) note a
tension between decentralization as a way to pro®t
from ``speci®c knowledge'' of the subordinate on
the one hand, and the subsequent obligation for
the superior to choose the ``correct objective mea-
sure of subordinate performance'' on the other
hand. Vancil (1979) addresses as a general theme
the `ambiguity' associated with decentralization
and control, noting that control implies freedom
and restriction simultaneously. Thompson (1967,
p. 145) points to the ``paradox of administration'',
noting that organizations' administrations aim at
¯exibility, while being mainly occupied with the
reduction of uncertainty. Merchant (1984) points
out that planning and control systems cannot be
¯exible and in¯exible simultaneously. Finally,
Emmanuel, Otley and Merchant (1990, p. 183)
point out that budgets are most feasible, where
they are least needed and vice versa. In sum, the
discussion above suggests support for the rele-
vance and importance of uncertainty when
explaining and predicting the appropriateness of
RAPM. However, it is also likely that the lack of
consistent ®ndings in RAPM studies thus far is the
consequence of the tension between the opposite
e?ects of using APM under uncertainty. In the
®nal section some suggestions are given to deal
with this tension.
5. Implications for RAPM research
According to Poole and Van de Ven (1989), the
reasons to expose paradoxes lie in the alleged
bene®ts for theoretical progress. In this case, sev-
eral ways exist to address the uncertainty paradox
F.G.H. Hartmann / Accounting, Organizations and Society 25 (2000) 451±482 473
of RAPM research, and each of these ways may
prove to be fruitful for the further development of
the RAPM paradigm. In this ®nal section, atten-
tion will be given to ®ve speci®c directions for
further RAPM research that share the aim to
resolve the paradox, and to revive and further
organize the RAPM paradigm.
A ®rst such direction would involve an explicit
investigation of the di?erent roles that APM play
in evaluative situations, since it is not clear that
APM takes the same role in each organization or
division (cf. Kren & Liao, 1988, p. 300). Recently,
Chapman (1997, p. 201) suggested that the role of
accounting systems in general may depend on the
level of uncertainty. Typically, accounting systems
function as ``answer machines'' in low-uncertainty
situations, but they may become `learning
machines' when uncertainty increases. Simons'
(1995) recent control framework, may also support
such multiple roles for accounting information and
budgets. Whereas accounting budgets typically
serve as `diagnostic controls' (feedback systems)
under relative certainty, they also provide `bound-
aries' to management activity, and may function as
`interactive controls', when operational targets
should be aligned with strategy and (strategic)
uncertainty (Simons, p. 138; Horngren, Sundem, &
Stratton, 1996, p. 257). Notably, already Simon,
Kozometsky, Guetzkow and Tyndall's (1954)
study emphasized that management accounting
information is collected for various purposes;
problem-solving, attention directing and score-
card keeping activities. This understanding of
the multiple roles of accounting and of RAPM
may be enhanced if researchers explicitly consider
which essential aspect of RAPM they address.
An interesting illustration is provided by Govin-
darajan (1984, p. 128) who argued that APM are
not appropriate under high uncertainty, and
noted:
Performance evaluation presupposes targetsÐ
either explicit (e.g. budgets) or implicit. To
arrive at a priori targets that can serve as
valid standards for subsequent performance
evaluation, one must be able to predict the
conditions that will exist during the coming
year.
Further research should be able to explain why
uncertainty would only harm the controllability of
accounting targets, which Govindarajan (1984)
does not, and thus whether the essence of APM
under uncertainty lies in the target-nature or in the
accounting-nature of APM. Since it has been found
that (formal) strategic control systems can be rigid
as well (Ittner & Larcker, 1997, p. 294), another
relevant dimension of APM under uncertainty to
be examined may be its status of a formal control
system (e.g. Fisher, 1995).
Second, research should become more explicit
about the meaning of appropriateness. So far,
RAPM studies have generally argued that uncer-
tainty limits the feasibility of using RAPM, con-
cluding that RAPM will be more appropriate
under conditions of low uncertainty. Although
this bias toward dysfunctional side-e?ects can be
explained by looking at the history of the para-
digm (see, e.g. Argyris, 1952), and although
understanding dysfunctional e?ects should be
considered important, the resulting analyses are
often only partial. Instead, the appropriateness of
RAPM should be approached as a combination
of functional and dysfunctional consequences. In
other words, while the feasibility of controls (and
RAPM) is an important element in control system
design (e.g. Merchant, 1985a), so is the need for
control (e.g. Merchant, 1982, 1985a). This impor-
tance of the need for controls is currently often
forgotten, possibly by the dominant focus on role
con¯ict. A framework that may further sub-
stantiate the need for controls, and that may
explain the positive e?ects of RAPM under
uncertainty, could be based on goal theory (cf.
Kren & Liao, 1988, p. 289). Typical goal-theoretic
variables are ``goal clarity'' and `goal speci®city',
and the goal-theoretic literature advocates, and
®nds, that clear and speci®c goals and objectives
lead to higher performance (McConkie, 1979;
Locke, 1968; Locke & Latham, 1990; Tosi et al.,
1994). This may explain the positive e?ects of
RAPM, since APM are relatively clear and spe-
ci®c (cf. Tosi, 1975, p. 150; Schuler, Beutell, &
Youngblood, 1989, p. 240), as the results from
Hirst and Yetton (1984) seem to support. It would
be speci®cally important to study the e?ects of
goal-setting under uncertainty. Hirst (1987a) pro-
474 F.G.H. Hartmann / Accounting, Organizations and Society 25 (2000) 451±482
vides an initial theoretical analysis of the goal-
setting e?ects of budgets under uncertainty, but
so-far no empirical work has been done in this
®eld. Further RAPM research may, therefore,
build on studies in organizational behavior (e.g.,
Early, 1985; Wood, Mento, & Locke, 1987; Wood,
Bandura, & Bailey, 1990) that examine the e?ects
of goal-setting in various contexts. An alternative
framework for analyzing the e?ects of RAPM
could be based on `equity theory'. Equity theory is
concerned with peoples' perceptions of ``fairness''
and ``justice'' in social relationships (cf. Huseman,
Hat®eld, & Miles, 1987; Landy, 1989), and has
been used to predict and explain perceptions
about the fairness of performance evaluations and
rewards in organizational settings (Landy, Barnes,
& Murphy, 1978; Landy & Farr, 1980; Landy,
Barnes-Farrell, & Cleveland, 1980). Recall, that
``fairness'' has been mentioned often as an impor-
tant reason for subordinates resistance against
`uncontrollable' performance measures (see, e.g.
Hopwood, 1972, p. 161; Otley, 1978, p. 132; Lau
et al., 1995, p. 360). The relevance of this variable
for RAPM research is further demonstrated by
Ross (1994). He found that trust between sub-
ordinate and superior mitigated the job-related
tension e?ects of using APM. Trust is positively
a?ected by the perceived `fairness' of performance
evaluations (see, e.g. Fulk, Brief, & Barr, 1985).
18
Although some of these alternative frameworks
may be more fruitful than others, they at least
serve to demonstrate the possibilities for a more
explicit de®nition of the concept of appropriate-
ness, and to demonstrate possible alternatives to
role theory in developing predictions about the
contextual appropriateness of RAPM. In any
case, their use will often imply the use of other
criterion variables than those currently used in
RAPM studies, that are more explicitly chosen,
and that provide a better link between theory and
test (cf. Shields & Shields, 1998, p. 50).
Third, theory is needed about the appropri-
ateness of RAPM under uncertainty for the
performance evaluator. In RAPM studies `appro-
priateness' is examined in terms of subordinate's
attitudes and responses. An alternative level of
analysis would be the superior, and a related
question would be whether superiors' evaluative
behaviors can be explained in terms of contextual
`appropriateness'. Especially studies investigating
the contagion e?ect (e.g. Hopwood, 1974; Barrett
et al., 1992) could be extended to explain why
superiors have a tendency to pass performance
criteria on to lower-level managers, and whether
this especially happens with accounting perfor-
mance measures. At least part of the explanation
might lie in the uncertainty superiors face in
observing and evaluating subordinates' behaviors.
Keeley (1977) found that supervisors may reduce
their own uncertainty by emphasizing objective
performance measures, such as APM, which limit
supervisors' need for subjective judgment (cf.
Hartmann, 1995). Further studies in this direction
may easily connect to studies in which RAPM is
the dependent variable (e.g. Merchant, 1981,
1984). However, RAPM would now be modeled
as the explicit, theoretically predicted, outcome,
rather than as an indication of contextual ®t,
based on a ``loose'' application of contingency
thinking. Such more comprehensive contingency
frameworks may also lead to a better under-
standing of the diversity of roles that APM play in
the (control) relationship between superiors and
subordinates. In particular, they would allow an
explicit integration of attempts to explain the use
of APM better, and attempts to provide practical
recommendations for using APM, since they
would more broadly consider the options and
trade-o?s superiors face in choosing performance
measures (e.g. Argyris, 1988; Puxty & Chua,
1989). These attempts could eventually result in a
theory of superior choice, which is not available
now. Some APM studies suggest that other factors
than appropriateness in terms of subordinates'
reactions determine superiors' choice of perfor-
mance criteria. Otley (1978, p. 138) argues that
actual performance in¯uenced the reliance on
APM, suggesting that APM are emphasized more
in units with low pro®tability (cf. Merchant, 1985b;
18
Magner, Welker and Campbell (1995) found that the
trust-in-supervisor is, reversely, a?ected by the perceived fair-
ness of budgetary targets. Whatever the exact causal direction
of the relationship of ``fairness'' and ``trust'', they do support
the relevance of the concept of `fairness'. Lindquist (1995)
shows that `fairness' in¯uenced the acceptability of budgetary
goals.
F.G.H. Hartmann / Accounting, Organizations and Society 25 (2000) 451±482 475
Imoisili, 1989; Briers & Hirst, 1990; Lang®eld-
Smith, 1997), and the organizational behavior
literature points to the importance of socio-
logical and psychological variables that deter-
mine the choice of performance criteria (e.g.
Rahman & McGosh, 1976; Neu, 1992; Judge &
Ferris, 1993). Such a theory of superiors' choice
would be the behavioral ``counterpart'' of principal-
agent models that do explicitly consider the use of
performance evaluation criteria as the outcome of
a superior's choice under uncertainty (e.g.
Prendergast & Topel, 1993; Eisenhardt, 1985).
19
Fourth, RAPM research should be challenged
by ®nding out whether the appropriateness of
RAPM is di?erently a?ected by di?erent kinds
of uncertainty. Typically, the arguments support-
ing uncertainty-related expectations have not
discriminated between types and sources of
uncertainty. Potentially relevant di?erences in-
clude di?erences between complexity and uncer-
tainty (cf. Khandwalla, 1972; Govindarajan, 1984;
Ezzamel, 1990; Chapman, 1997) and between
objective ``uncertainty'' and perceived uncertainty
(Downey & Slocum, 1975; Downey, Hellriegel, &
Slocum, 1975). In RAPM research, these nuances
have generally not been recognized. In particular,
advances can be made by giving theoretical
meaning to di?erences between environmental
uncertainty and task uncertainty. Especially the
role of budgets as a bu?er against external
uncertainty (cf. Thompson, 1967; Hayes, 1977;
Merchant, 1984), and as a trigger to plan under
environmental uncertainty (cf. Merchant, 1989,
Chapter 5; Simons, 1987a, 1995) seem to deserve
further investigations. In particular, these ill-
understood functions of budgets under uncertainty
may also explain a more positive role for budgets
and RAPM under environmental uncertainty than
is now generally hypothesized in studies that `mix'
the e?ects of task uncertainty and environmental
uncertainty.
Finally, the impact of uncertainty on the
appropriateness of APM could be better under-
stood by including the personality of the subord-
inate manager. Current RAPM studies exclusively
focus on uncertainty as a factor external to the
manager, but there is reason to suggest that mana-
gers' personal and general attitudes toward uncer-
tainty a?ect the appropriateness of RAPM.
Personality factors have been mentioned before
as important determinants of managerial behav-
ioral and attitudinal reactions to budgeting (e.g.
Murray, 1990, p. 119). Likely candidates for
investigation are personality variables related to
individual preferences for risk and uncertainty (cf.
Duncan, 1972, p. 314; Chapman, 1997, p. 199).
Especially a construct called tolerance for ambi-
guity may prove useful for this purpose (e.g. Budner,
1962; Norton, 1975). Tolerance for ambiguity
expresses an individual's demand for information in
uncertain environments (Frenkel-Brunswik, 1949;
Martin & Westie, 1959; MacDonald, 1970) and
seems, therefore, closely related to the concept-
ualization of uncertainty as a `de®cit in informa-
tion' (cf. Galbraith, 1973, 1977). In related research
®elds (e.g. auditing, strategic management) this
construct has shown to explain personal attitudes,
behaviors and information preferences under un-
certainty (e.g., Downey & Slocum, 1975; Duncan,
1972; Dermer, 1973; Gupta & Govindarajan,
1984; Gul, 1986). This variable may also explain a
need for APM under uncertainty, since the clarity
and precision of ®nancial and quantitative
performance measures may reduce subordinates'
perceptions of ambiguity (e.g., Gupta & Govin-
darajan; Hirst & Yetton, 1984).
6. Concluding comments
The recommendations for further elaboration of
the RAPM paradigm given above are based on the
presumption that it is worthwhile to continue to
direct academic attention to the budgeting phe-
nomenon in organizations in general, and to the
extent and manner in which budgets are used for
controlling individual managerial behavior in par-
ticular. This presumption is based on the idea that
using ``some form'' of accounting target setting
will remain important, because, as Chapman
(1997, p. 202) notes:
19
Such a theory would also respond to the comment by
Flamholtz and Das (1985) that the management control litera-
ture should be more explicit about the organizational level it
addresses.
476 F.G.H. Hartmann / Accounting, Organizations and Society 25 (2000) 451±482
In a business setting (...) pro®t will still be the
primary goal to be attained and so account-
ing cannot simply be discarded.
Similarly, Parker and Lewis (1995, p. 212) note
that the emphasis in management control on
``traditional'' management accounting techniques
is persistent, and may even be ``topical'' because in
business and management:
... the dominant themes of the 1990s have
become ®nancial discipline, eciency meas-
urement, market solutions and the commer-
cial `bottom line' (...) This contemporary
environment and its attendant philosophies
have sponsored the persistence of the classical
management approach towards control in
both organizational management and man-
agement accounting.
Furthermore, claims for the continuing impor-
tance of accounting seem widely supported by the
empirical literature that evidences the important
and steady role of various forms of budgeting in
contemporary organizations (see, e.g. Umapathy,
1987; Skinner, 1990; Merchant & Riccaboni, 1990;
Otley, 1990). But even when acknowledging the
importance of management accounting traditions,
current theoretical and practical developments in
management control should be considered a
challenge rather than a threat for `traditional'
management accounting research. The RAPM lit-
erature may indeed provide an initial framework
for analyzing recent ideas about the use of, for
example, balanced scorecards and shareholder
value for managerial performance evaluation (e.g.
Otley; Kaplan & Norton, 1996). Based on RAPM
research speci®c hypotheses could be formulated
about the usefulness of having multiple perfor-
mance indicators (as in balanced scorecards),
about the e?ect of having non-®nancial or non-
quantitative performance targets, or about the
controllability problems associated with the use of
performance measures derived from capital mar-
kets (as in shareholder value). So far, both theory
development and empirical evidence concerning
the (contextual) appropriateness of these innova-
tive ideas in management control are limited.
Finally, it should be noted that the current status
and lack of organization of the RAPM research
paradigm should be no reason for discouragement
or abandonment. RAPM studies address impor-
tant and interesting phenomena, which are em-
bedded in a rich environmental, organizational,
departmental and individual context (cf.
Flamholtz & Das, 1985). Such ``richness''
obviously hinders quick answers to quick research
questions. This means, however, that not only
proposals for further theoretical development,
but also pleas for methodological improvements
deserve serious support. In particular, there seems
to be room for more, small, high-quality and the-
ory-driven replication studies (cf. Lindsay &
Ehrenberg, 1993). Recall that RAPM research is
well grounded in a well-documented research
methodology for data gathering and data analysis
(e.g. Dillman, 1978; Kerlinger, 1986; Lindsay,
1995; Young, 1996). Certainly, these relative
strengths should be considered when judging
claims for the need for more subjective and case-
based studies in management accounting.
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