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The development of a multi-dimensional concept of management information systems, with particular reference to the conceptual frameword of management accounting

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The development of a multi-dimensional concept of management information systems, with particular reference to the conceptual frameword of management accounting
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Multi-dimensional concept of management information systems
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Accountancy ( jstor )
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Information storage and retrieval systems ( jstor )
Management accounting ( jstor )
Management information systems ( jstor )
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Bibliography: leaves 225-247.
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The Development of a Multi-Dimensional Concept of

Management Information Systems, with Particular Reference to the Conceptual Framework of Management Accounting















By
WILLIAM THOMAS STEVENS













A DISSERTATION PRESENTED TO THE GRADUATE COUNCIL OF THE UNIVERSITY OF FLORIDA IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE
DEGREE OF DOCTOR OF PHILOSOPHY












UNIVERSITY OF FLORIDA 1970










ACKNOULEfGMENTS


While a Ph.D. dissertation renresonts a doctoral

candidate's original research, all dissertations in large part reflect the intellectual stimulation provided by his faculty advisors. This study is no exception. My greatest debt is to my committee chairman, Lawrence J. Benninger. Professor Benninger not only struggled through each of my many drafts but also constantly provided encouragement to continue. His unflagging commlritm-ent to the project of conceptualizin~g the Management Information System is deeply appreciated. The other mergers of my supervisory cominttee--Professors Ralph H. Blodgett, Charles W. Fristoe, and John H. James--each contributed a certain, nonaccountina perspective to the v:ork.

I would also like to acknowlcdge other contributions. Professor Williard E. Stone's support and willingness to let me use his classroom as a sounding board is most appreciated. Discussions with Professors William M. Fox and Walter Hill were most helpful. Dr. Leo Herbert cf the U. S. General Accouting Office and Professor Carl T. Devine of The Florida State University were always willing to take time from busy schedules to help to clarify difficulL areas. Finally, I am most grateful to Professor David Green, Jr., of the University of Chicargo who offered the first and lonc;cs a c otinutc sport of bcoth the subject of this sUidy and its author.











TABLE Of CONTNI'TS

ACKNOWLEDG OENSTS . . . . . . . . . . . . . . . . ii

LIST OF TABLES . . . . . . . . . . . . . . . . . V

LIST OFIIGURES . . . . . . . . . . . . . . . . . Vi

ABSTRACT . . . . . . . . . . . . . . . . . . . . vii

CHAPTER
I INTRODUCTION . . . . . . . . . . . . . .
The Nature of the Study . . . . . 1
The Sianif'icance of a aragerent
Information Systems Corncept. . 20
The Purpose of' the Dicsertation . 26
The Methodoiogy to be Employed
in the Dissertation . . . . . 27
The Organization of the Remainder of the Dissertation . . . 28
II THE DIMENSION OF PURPOSES--A DERIVED CONCEPT OF MANAGEMENT INFORMATION SYSTEMS . 30
Purpose and Organizaticn of t'e
Chap ter.. . . . . . . . .... 30
The Lack of a Consensmr; Viewpoint
on Management information
Systems . . . . . . . . . . . 32
Component Word Analyst.s . . . . . 42
A Derived Concept of Managetet
Information Sy. tems ..... 59
Reconci-ing the Derivation to Statements on Management InformaIion
Systems . . . . . . . . . . . 60
Summary and Concusions . . . . . 77
11I THIE DIMENSION OF PERIMETERS--THlE SERVED
CONCEPT CLARIFIED . . . . . . . . . . . 79
Purpose. and Organipat'ion of the
Chapter . . . . . . . . . . . 79
The Rationale of Accounting . . . 83
Reconc Ziin the Derived Concept
to Managerial Accounting Statements Relating to Management
_nf o a a n Sys-;erm . . . . . . 9
A Restatement of' the Derived ConCep of'In or atio
Stems :n Two 7iensions . . . 115


iii










TABLE OF CONTENTS (continued)


III Additional Elements Which Indicate the E.istence of a Third
Dimension to Management informiation Syostems . . . . . . 119
Sutmary and ConcuZ!sions . . . . 121
IV THE DIMENSION OF PROCESSES--THE DERIVED
CONCEPT EXPLAINED . . . . . . . . . ... 124
Purpcse and Organization of the
Chapter . . . . . . . . . . . 124
The Process of Managcment and Its
Relationsh-2p to Aanagement Informatfon Systems . . . . . . 125
The Information and Communication
Aspects of Zanagemen: Infor-mation Systems ....... 141
The BehaviCral Facets of Manacuement and Communica.tion .rocesse..s . . . . . . . . . . . 158
A Comparison of the Processos of
Management Infor'ma4tion 52.,stemE wi th the Implied Prccezcoe s of anement Acount-in Information Systems . . . . . . . 183
Surarmary and COne usicns . . . . 185
V A THREE-DIMENSIONAL CONCEPT OF MANAGEMENT
iNFORMAT1CN SYSTEMS AND S 0,1 OP ITS IMPLICATIONS FOR ACCOUNTING . . . . . . . . 190
Purpose and Onganizaticn of the
Chapter . . . . . . . . . . . .190
A Complete Concept of Manacement
Inforriation Systems ..... 190
Some Implications of the Concept 192 Sumnary and Conolusions . . . , 214
VI SUMMARY AND CONCLUSIONS . . . . . . . . 218 BIELIOGRAPHY . . . . . . . , . . . . . . . . . . 225


BIOGRAPHIjCAL SKETCH . . . . . . . . . , . .


248










LIST OF TABLES


TABLE PAGE

1 MANAGEMENT INFORMATION SYSTEMS (The
Common Ground) . . . . . . . . . . . . 40


V










LIST OF FIGURES


FIGURE PAGE

1 The Integration of a Management Information System with the George
Management Process ModaZ . . . . . . . 76

2 The Management Process . . . . . . . . . 133

3 The Hierarchies of the Management Procees . . . . . . . . . . . . . . . . . 1.35

4 The Relationship of the Organization to
the Hierarchies of the Management
Process . . . . . . . . . . . . . . . 138

5 Examples of Communications Networks . . . 151

6 Aanaoemenz and CommnLcation lietworks
in an Organi.ation . . . . . . . . . . 157

7 The Interrelationsoir of the leadershp
and Management Processes . . . . . . . NO

8 The Interrelationehip of the llanagement, Communication, Informatzon,
and Leadershiv Processes . . . . . . . 182

9 FinanciaZ Accounting Information Systems Compared with Management Information Systems . . . . . . . . . . 205


vi










Abstract of a Dissertation Presznted to the Graduate Council in Partial Fulfillment of the Requirements
for the Degree of Doctor of Philosophy



THE DEVELOPMENT OF A MULTI-DIMENSIONAL CONCEPT OF MANAGEMENT INFORMATION SYSTEMS, WITH PARTICULAR
REFERENCE TO THE CONCEPTUAL FRAMEWORK OF
MANAGEMENT ACCOUNTING

by

William Thomas Stevens

June, 1970



Chairman: Professor Lawrence J. Benninfer Major Department: Accounting

The term "Management Information Systems" has become popular in recent years; however, there does not appear to be any consensus regarding either its meaning or its proper area of usage. The expression is often employed one-dimensionally, that is, as a secondary support for other areas of interest such as data processing, management, systems, etc. This has led to a variety of meanings and contradictory assertions and suggests that 1%lanagement Information Systems per se warrant the development of a multi-dimensional concept.

The first steo in developing the concept was to

determine the present state of the art of Management Information Systems. Since there appeared to be no consensus on the subject, an indirect approach was indicated. Accordinglv, a first-opproximation concept was derived by


vii









analyzing the individual meanings of the words comprising the term "Management Information Systems." "Management" was found to be the act of making decisions to resolve a problem; "information" was whatever influences the mind, i.e., is used to settle the issue; "systems" conveyed the idea of wholeness and orderliness. Combining these analyses led to identifying one of the dimensions of a Management Information System as its purposee--the provision of information.

It was found that the purposes of a Management Information System have had a long and almost verbatim expression in the literature of accounting, especially in the branch of accounting known as "management accounting." In addition, existing accounting research provided a means for identifying a second dimension of Management Information Systems--the perimeters or attributes of the information output of such systems. The set of perimeters for distinguishing information from non-information contained four elements. In order to qualify as information the system's output must be: (1) relevant--logically connected with the problem under consideration and carrying some degree of influence to the user as well as stemming from sources perceived as being competent; (2) verifiable, which requires that independent parties using the same information come to essentially the same concluions; (3) quantif,'-aZ'r, i.e., capable of boing, measured; and (4)


viii










free fr&m Lias both statistically andi personally.

The two dimensions of purposes and perimeters were reconciled to statements in the literature concerning Management Information Systems and were found to be consistent with them. Since they share two identical dimensions, it was concluded that a Management Accounting Information System is at least a subset of a Management Information System.

Whether or not the systems are identical--different names for the same thing--depended upon their sharing a third dirension--the processes through which the static dimensions of purposes and perimeters are translated into action. Three processes were identified: (1) management; (2) communication; and (3) leadership. These were found to be interdependent as well as interrelated with the other dimensions. In addition, they were the same for both Management Accounting Tnformation Systems and Management Information Systems. it was concluded,

therefore, that these systems are conceptually identical and that the differences in design and output which exist are a function of the problem under study and not the systems.


ix












CHAPTER I

INTRODUCTION

The Nature of the Study

The current literature of business contains many references and allusions to Management Information Systems.' Often, these are indefinite, incomprehensible, incomplete, or inoperational.2 These shortcomings appear to be due to two primary difficulties. First, there are no well identified and generally accepted boundaries or attributes established for Management Information Systems. However, the word "boundary" implies a "limit" or enclosure which suggests an extension in only one direction. Since a Management Information System extends in several directions simultaneously, it seems best to substitute the word "dimensions" for boundaries. In this sense, it can be said

simply that while one or more boundaries have been proposed for Managcement Information Systems, the dimensions of such systems have not been determined. Second, the


'Since the subject of this study is Nanacgement (and
other) Information Systems, this term(s) will be capitalized consistently.

2There are literally thousands of such references or allusions and many of these are redundant. Therefore, for obvious reasons, not everv statement on the topic has been. examined or analyzed. Consequently, the comments to follow rc1er to only thos- stak:emernts pxmie in the course of this study.


1







2


literature on the subject contains many contradictions which indicate weaknesses in the language and/or dimensions employed.

These two subproblems, oaken together, represent a significant problem; specifically, that a complete multidimensional, and operational concept of Management Information Systems has yet to be formulated. In order to demonstrate both the existence and nature of this problem, examples will be drawn from current publications on the subject, and the matter of limits, taken both individually as boundaries and collectively as dimensions, will be considered first. Next, some examples of contradictions in the literature will follow, and finally the results of these analyses will be incorporated into an examination of the basic issue--the absence of a multi-dimensional concept of Management Information Systems. The Boundaries of a Management Information System

A review of the literature in which the expression Management Information Systems is employed reveals that the term is often used one-dimensionally, that is, Management Information Systems are treated as secondary matters supporting some other primary field of interest. In such instances, the attributes assigned to the Management

Information System are not those of the system but more properly long to the primary interest field and are ex-







3


panded or contracted as needed in order to make them coincide and harmonize with the primary interest. This may be highly useful in the study of such primary fields. It may even be representative of actual operations, but forcing essentially extraneous boundaries on to a subsidiary field does not depict a true integration of concepts. Moreover, these fluctuating boundaries add little to one's understanding of Management Information Systems per se and may leave seekers of knowledge in this area with feelings of uncertainity or confusion. There are four major fields in

which the term Management Informatiorn Systims appears commonly, but in a supportive roD. These will be examined in order to demonstrate the subproblem area of confusion created by the uncertain boundaries assigned to Management Information Systems. Clearly, if the collective of boundaries is uncertain, dimensions cannot be established. Data processing

The interests of a number of writers are centered on data processing, especially electronic data processing. In these instances, the Management Information System frequently finds its dimensions expressed. as an almost automatic conseqruence of fulfilling a specified set of objectives, of which the following are typical:

1. To provide nanacement with information
it must have in order to take action before status
becomes history;
2. to reduce over-all company costs by using
a mechanical system to provide timely man-hour and







4


scheduling information that can be obtained currently only through manual means;
3. To provide a means of more effective manhour control;
4. To provide a means of reducing the flow
time of schedule status and man-hour reports through
a mechanical system;
5. To record a transaction immediately in a
form directly usable by the computer program;
6. To reduce the manual transcription and
mechanical conversion of the data used as input to
the computer.)

The emphasis here seems to be on processing problems contained in a set of electromechanical components designed to manipulate data, and the existence or absence of a Management Information System is equated with the solution set to these problems. Nevertheless, these objectives do imply the existence of a set of boundaries for Management Information Systems. The first objective suggests that historical matters are not a proper part of a Management Information System--the relevant time frame embraces only the present and/or the future. The second goal implies that some decreasing "over-all" cost function must exist, and furthermore that it cannot be manually performed. The fifth purpose indicates that "information" must result from a "transaction," which suggests that data emerging from other bases are not "information."4


3Richard A. Johnson, Fremont E. Kast, and James E.
Rosenzwei7, The Theor;i and M2vanagemrant of Systems (New York: Mccra:-Hill Book Co., 1963), pp. 197-98.

4This notion seems important and has attracted a considerable amount of recenL attention whicn either sup-







5


This viewpoint is cuite specific and if it represented a consensus view there would be no problem, but unfortunately there is no expressed consensus on Management Information Systmos even within the field of data processing. To illustrate, Gregory and Van Horn, in a work de-scribed by one authority as "monumental" s and "an ambitious attempL to get the whole of . . . [electronic data processing] between two covers," state that "data processing . . . is an element of a much larger system-namely, the management information system."7

This turns the earlier viewpoint inside out and makes

the boundaries of Management Information Systems nebulous. Both reference frames, with some modifications, are commonly used. Each appears to possess merit with respect to certain asDects of data processing, but they tell one

very little about the character of management Information Systems.

Systems

The primary interest of another group of writers lies in the broader, generic area of "systems," and in this exports the states quo or proposes an expand e- fition of a "transaction." This matter will be taken up in some detail first in Ch. III, and later again in Ch. V.

5T. W. McRae, The Impact of Comiuz.ter.3 on Accounti'nn (New York: John Wiley & Sons, Inc. , 1964) , p. 283.

sbi d.

7Robert H. Gregory and Richard L. Van Horn, AutomatZc Data Processz'g Sus ter7s, 2nd Eh.. (Be mont, Calif.: Wadsworth Publishing Co., 19C3), p. 565,







6


panded frame of reference the boundaries of Management Information Systems expand accordingly. In his definitive work on systems analysis, Hare describes a system as a set of "elements, relationships, and procedures to achieve a specific purpose. ,8 This implies a completeness or wholeness, but how this is related to a Management Information System is not made clear when, in almost the same breath, Hare regards "information" as both a means and an end, depending on the goal sought. At the same time, however, he believes that "management" cannot be a proper objective since it does not exist for itself.9 At most management represents a subobjective which underlies a functionally attainable goal. In the past, systems analysis either concentrated on such specialized Subgoals as management, accounting, computer programming, etc., or it emphasized some basic philosophy, set of values, or other generalized rationale in support of some broadly expressed purpose. At present, the trend is moving away from both

the minutiae of specilization at one extreme and the sweeping generalization at the other. Current emphasis is placed upon gaining an understanding of the "patterns" of


8Van Court Hare, Jr., Systems Analysis: A Diagnostic Approach (New York: Harcourt, Brace and World, Inc., 1967), p. ix.

9Ibid. There is a substantial body of management
literature opposed to this viewpoint. This will be considered at length beginning in Ch. II.






7


existing or emerging relationships as these influence the achievement of goals.10

Although the broadness of the systems approach transcends data processing and approaches universality, as was the case of data processing, there is no consensus in the systems frame of reference. Karlin, for example, has an even broader outlook since he defines a system simply as "a set of transacting elements."l This, in effect, eliminates the restrictive boundary of purpose.

The scope of the "systems" approach is such that the Management Information System can embrace as much or as little as one desires, depending on how close to universality one wishes to come. This analytical frame of re-ference doubtlessly has a number of uses but it does not appear to offer much assistance to those seeking an understanding of the foundations of the term Management Information Systems,

Information

Some writers concentrate their primary interest on

what may be called "information." in such instances, the Management Information System has its meaning and boundaries expressed in terms of information. Theil, a pioneer


''Ibid.

11Arthur D. Karlin, "Thoughts on a Systems Concept," Paper read before the ScutheasLern Regional Meeting of the American Accounting Association, Chattanooga, Tenn., April. 30, 1966.







8


in the study of information, describes information as "a change in expectations about the outcome of an event."12 This notion is broader than Hare's concept of systems and more specific than Karlin's, and therefore lies between the two. It is, however, closer to Karlin's view since it implies that an objective need not be expressed. Moreover, the restrictive idea of "wholeness" is not required since knowledge of the relationship patterns is not specified as a necessary antecedent condition. However, as with the other reference frames discussed thus far, there is no consensus view on information. Deutsch, as an example, asserts that "information is what is transferred . . . it is not events as such, but a patterned relationship between events."13 This notion seems closer to Karlin's idea of "transacting elements" comprising a system than it is to any common conception of information. In any event, the matter is not made clear by these statements. Also, information-oriented theories tend to go far beyond the usual notions of what constitutes "management," and conse22Henri Theil, Economics and Information Theory
(Chicago: Rand McNally and North Holland Publishing Co., 1967), Ch. I, as cited in William H. Beaver, "The Information Content of Annual Earnings Announcements," EmriricaZ Research in Accounting: Selected Studies, 1968 (Supplement to Journat of Accounting Research, Vol. VI), p. 63.

13Karl W. DeuLsch, "Mechanism, Teleology, and Mind," Philosophy and PhenomemoZogical Research, Vol. XII (December, 1951), p. 196.







9


quently, they disclose little about the inherent nature of a Management Information System. The search for boundaries must continue.

Management

A number of theorists fix their attention on what is sometimes vaguely called "management." Interpretations of the meaning and functions of management vary and Management Information Systems, when examined in this context, are equally varied. Although the term information also possesses variety in its assigned definitions, these are generally variants of the same concept, and therefore are essentially compatible or supportive of each other. This, however, is not strictly the case for management for which there is a wide range of interpretations and theoretical constructs.

A currently prevalent view of management is the one

which can be called humanist. Mundel states that "management" implictly refers to "an integrated human group."14 The essential action components of management are limited to those occurring because of or between people, or which are related somehow to human beings, however tenuous the relationship might be. However, the emphasis on people is


4Marvin E. Mundel, A Conseptuat Framework for the .Management Sclences (New York: McGraw-ill Book Co.; 1967), p. 66.







10


mandatory, not permissive. People form the boundaries of management, 1 and apparently also establish the boundaries of the Management Information System. Does this confound or clarify the matter? Can events of significance occur in the absence of people? Is the real issue one of effects on rather than by people? When fully extended, is this people-oriented notion so global that, in effect, it can lead only to either paradoxical observations or to moot propositions? 16

Another of the reference frames for management finds this overriding human factor softened. This approach has its focus centered on the action of decision making, and in this respect, Simon notes that it is proper "to take liberties with the English language by using 'decision making' as though it were synonymous with 'managing.'"17 Decision making, when broadly interpreted, can be associated with human beings, but this shift in the meaning of "management" has the effect of narrowing the earlier con"sIbid., pp. 66-68.

16A well-known one can be paraphrased as follows: If a tree fell in the forest and nobody was there to hear it, would it make a noise? In the context of Management Information Systems under the humanist approach to managing, one could also ask, "Would it be information? Could it ever be management information?" Under this approach to management the only relevant question is, "Did someone cut it down, or did it just simply fall down?

17Herbert A. Simon, The Shape of Automation for Men and Management (New York: Harper and Row, Publishers, 1965), p. 53.






11


cept of management presented. The issue here seems to be one which focuses on event expectations and the potential actions which might be taken in order to influence, take advantage of, or outrightly control them. Thus, the emphasis becomes active rather than passive, and accordingly it becomes the function of a Management Information System to supply the inputs upon which such actions are to be based. This differs significantly from the pure humanist concept of management.

In yet another approach to management--the organizational view--the commitment to people as the agents of action is shifted to a concern about the philosophical and psychological nature of those who manage. For example, Ewing believes that while management involves people at different functional levels--the managers and the managed--the most significant aspect of managing is the commitment of

the managers "to the life and growth of the organization."'8 On initial inspection this may appear to clarify the idea of management and to narrow its boundaries, but it at once raises a new issue--what is an organization? Perhaps the simplest response comes from Litterer, who notes that an organization is essentially a purposeful entity. 1



18David W. Ewing, The Manage.ia. Mind (London: Collier-iacmillan, Ltd., 1964), pp. 2-3.

19Joseph A. Litterer, The Analysis of Organizations
(New York: John Wiley & Sons, Inc., 1965), pp. 5-6.







12


It would appear, therefore, that the search for the boundaries or attributes of a Management Information System has come full circle back to "systems" in which specific purposes were required. By a narrower interpretation, it could also return to data processing wherein the issue was one of decisions, costs, and so on. Dearden objects to over-emphasizing such corollary aspects of Management Information Systems, especially data processing. He suggests that the electronic processing of data, as a function, is not identical with the function of managing, and moreover that management is connected inextricably with its organization and its objectives without regard to whether or not people per se are active, passive, or even exist. Thus, the proper area of focus for a Management Information System is the organizational operations of management.20

Finally, although not exhaustively some students of management, especially those interested in Managreme'nt Science,21 simply employ the term Management Information Systems whenever they deem it desirable to do so and avoid


2 OJohn Dearden, "Can Management Information Be Automated?" Harvard Business Review, Vol. XLII (March-April, 1964), pp. 128-35.

21The orientation in this field is quantitative, and accordingly includes operations research and other mathematical tecIniques used for both conceptualizing and implementing managerial operations.







13


making any statements on the matters of boundaries, definition, or concept.22

It appears, therefore, that the boundaries of the

Management Information System have not been firmly established; no consensus exists; and often the term appears to be employed as a supportive notion for other, more immediate interests of the writers. In such instances, Management Information Systems per se are neither studied nor analyzed. This results in doubt, confusion, and possibly misdirected attempts at implementation. One cannot grasp an idea effectively nor apply it without understanding the inclusions and exclusions of the notion. Contradictory Statements on Management Information Systems

Not only are the boundaries of Management Information Systems unsettledbut often the language, terminology, and ideas expressed on the subject are contradictory, and this adds to the confusion. This will be demonstrated by reference to the totaZ systems approach to Management Information Systems.

Moravec regards the "total system" as the natural objective of many existing computer installations in which


22 For example, see Eugene D. Homer, "A Generalized
Model for Analyzing Manaqerment Information Systems," Management Science, Vol. VIII (July, 1962), pp. 500-15. The key termt c'f the title, Management Inforniation Systems, not only remains undefined but never even appears in the text. This is by no means the onl exmle of such outright avoidance in the literature.







14


all major operations, such as purchasing, inventory control, and so on, are regarded as distinct "subsystems" but treated as a whole by integrating them. All information, regardless of duplications, developed in the subsystems is fed into the overall system, hence the term "total." The computer merges these inputs, and by means of editing programs, eliminates the duplications. Thus, in the final analysis, alZ information appears, but only once. This, in effect, encourages the gathering of a wide range of data--regardless of their ultimate usefullness--and the proliferation of subsystems for handling the information

in order to ensure maximlum coverage.23

Others, however, use the term "total systems" quite

differently. Under this interpretation, which is the more common one, the edit operation is shifted from the output to the input stage. The totality is achieved by entering everything into the system, but only once. This is accomplished by fully integrating the subsystems into a whole and viewing operations in terms of this entity. As a result, the merging and editing operations are eliminated.2


23A. F. Moravec, "Advanced EDP Systems--The Total
Systems and the Single Information Flow Concepts," in Accounting and the Computer (New York: American Institute of Certified Public Accountants, 1966), pp. 273-86.

24E. R. Dickey and N. L. Senen!ier, "Total Systems
Concept," in The Encyclopedia of Management, Vol. II, ed. Carl Heyl (New York: Reinhold Publishing Corp., 1963), pp. 991-95.







15


However, if one returns to the earlier idea of total systems, it will be found that Moravec favors this technique but refers to it as "the single information flow concept."2 5 Therefore, there is no fundamental disagreement or controversy, only terminological contradictions.

Many such incongruities exist--what appears to be a controversy is really an issue of semantics rather than concepts. There appear to be two causes of this difficulty. Karlin expresses one of them as follows:

The terms systems approach and total system
bring . . . difficulty. In their conception, we
face all the problems that were faced in thinking
of economic and accounting systems. But in addition, almost all concreteness leaves the
scene and an uncomfortable, almost total abstractness enters. We have few, if any, examples and little, if any, direct experience with something
called a systems approach or a total system.26

In the absence of "concreteness" and "experience" the communicative powers of language fail, and in efforts to explain phenomena, collapse resulting in contradictions, confusion, and vaguely expressed dimensions.27 This, in turn, is manifested in the second cause, the lack of a pragmatic and concrete concept of Management Information


2 'oravec, Zoc. cit.

26Karlin, Zoc. cit., italics added.

27For exa-mple, see James G. March and Herbert A.
Simon, Organizations (New York: John Wiley & Sons, Inc.,
195%), p. 158, where the authors attribute the cause of such language limitations to the "process of uncertainity absorption."







16


Systems capable of being operationalized as well as understood. This appears to be the core of the problem. The Core Problem: The Lack of a
Management Information Systems
Concept

While nebulous boundaries and literary contradictions are, in themselves, serious matters, they are essentially only symptomatic of a larger problem---the failure to identify and specify all the dimensions--that is, the integrated collective of boundaries or attributes of Manaaement Information Systems. This needs to be done in

order that such systems may be related to experience, and thus, fully understood before attempting integrations with other, perhaps better, conceptualized fields. This difficulty finds its expression in the lack of a concept of Management Information Systems. However, this is not to say that there have been no attempts to conceptualize the Management Information System. Quite to the contrary, there have been many such constructions but these first, groundbreaking attempts have tended to be too global in scope, and therefore, too abstract. Such "field" theories unfortunately tend to be so broad as to be almost meaningless abstractions and are often characterized by "jargon," in the negative sense of that word.2 8 For example, one


2 8The word "jirgo" has tx'wo basic meanings. One is positive and represents the expression of technical knowledge in a field by those who possess competency in that







17


writer sought to establish the concept of Management Information Systems in the following terms, as:

An approach that visualizes the business organization as a single entity composed of various
interrelated and interdependent subsystems working together to provide timely and accurate information for management decision making, which leads to the optimization of overall enterprise
goals.29

Another writer says:

The one paramount problem facing management
today is the development of an integrated management effort . . . . The ultimate solution of this vital problem . . . rests with the development of an optimal, integrated management information system, the output of which can and
will contribute heavily to the eventual development of integrated management operations.30

There are many similar statements in the literature

on Management Information Systems, but these will serve as

adequate examples. It is perhaps unfair to characterize

these statements as jargonistic (in its negative sense),

but attempts, such as these, to cover all possible contingencies often raise more questions than they answer and

do not communicate much by way of operational specifics.

field. The other is negative and is characterized by "Obscure and often pretentious language marked by circumlocutions and long words." See Webster's Seventh New Collegiate Dictionary (Springfield, Mass.: G. & C. Merriam Co., 1965), p. 454.

29Donald L. Caruth, "How Will Total Systems Affect the Corporation?" Journal of Systems Management, Vol. XX (February, 1969), p. 10.
30Norman J. Ream, "The Need for Compact Management Intelligence," in Management Control Systems, ed. Donald G. Malcolm and Alan J. Rowe (New York: John Wiley & Sons,
Inc., 1962), p. 90.







18


In Karlin's terms, concreteness vanishes and the drift is towards a total abstraction. In this respect, McGuire has noted that

[Possibly] some sort of eclectic model . . .
will evolve . . . [but in the meantime] we must
be satisfied with looking . . . in a noncohesive manner, from all angles, so that we may
better be able to understand.3'

Seeking a cohesiveness for all related concepts and a totality of theory, particularily during the formative stages in a fieldoften leads to language problems which

result in either the loss or diminishment of meaning and significance. As Rigby, in his work on the methodology of research in business areas, observes:

[Such] language . . . is quite new . . .
(and! is meaningful to a relatively small group
of people . . . . A few basic terms . . . are becoming widely known but are only vaguely understood or are loosely interpreted.

Based on the examples cited earlier, it seems clear that a case can be made for asserting that Management Information Systems is such a term. Rigby continues:

Many terms . . . have a technical meaning
quite apart from that of conversational language. It may sometimes be better . . . to develop new terms for a new concept . . . rather
than to continue to use terms taken from conversational language. One advantage . . . [is


3'Joseph W. McGuire, "The Concept of the Firm," California Management Review, Vol. III (Summer, 1961), p. 88.

32Paul H. Rigby, Conceptual Foundations of business
Research (New York: John Wiley & Sons, Inc., 1965), p. 10. The emphasis is added.







19


that it avoids] confusion with concepts of
general conversation. Inventing new words, on the other hand, can mean new Zabels without new concepts or any concepts at aZZ. This practice of labels without concepts--words without meaning--is often referred to as jargon. It can slip into scientific writing when the writer
. . . [thinks] the new term is associated with a
new concept.33

This observation is applicable to Management Information Systems, a relatively new term which seems to have problems with its language. Attempts to express Managemerit Information Systems in universal terms lapse into this kind of jargon and suggest the absence of concept. The term has become a "catch" phrase designed to capture attention, but unfortunately, it often expresses no specific idea. If there is more to Management Information Systems than shibboleths, then conceptualization is demanded

in order to convey meaning and understanding compatible with Karlin's "experience" frame of reference. Then, as experience expands, so too can the concept. If Management Information Systems are a viable part of some integrated and operationaZ scheme such as systems, management, or business itself, a concept seems vital as a point from which to begin to operationalize such integrations.



33Ibid., pp. 17-18. The stress is supplied. This statement, in a sense, represents the purpose of this study--establishing the hypothesis that Management Information Systems is only a new term for an older concept still in the process o7 evolving.







20


The Significance of a Management
Information Systems Concept

The foregoing discussion indicates that: (1) Management Information Systems are often assigned a supportive or secondary role which is attached to other fields, and therefore, such systems lack their own set of boundaries, the interreZated collection of which may be designated as dimensions; and (2) terminological contradictions abound in the literature. Together, these form the central problem of Management Information Systems--the absence of a concept comprehending experience, and therefore capable of linguistic expression in meaningful terms. More positively, the need is for a Management Information Systems concept embracing all of the several interrelated dimensions which may be designated as a multi-dimensional concept.

These assertions are supported by the recognition

of many writers that serious problems with Management Information Systems exist. Most of these writings deal with matters of detailed operations, but since these emerge directly from the lack of a multi-dimensional concept, it is worthwhile to take note of them. Two examples will suffice to demonstrate the awareness of operational difficulties and the significance attached to them. Spencer sees five basic areas for concern:

1. Information systems are not designed for the
three levels of management planning and control . . .







21


2. The information system does not match
the organization . . .
3. The system covers dollars--not information . . .
4. The system produces encyclopedias instead of brief, pointed reports . . .
5. Internal operations are covered extensively, but external factors are disregarded
34

Notwithstanding that a case could be made for classifying operational problems as a contributing sub-problem,

it is readily apparent from the foregoing, as well as the

other citations, that these difficulties can be traced to

the placement of emphasis on one or more other primary areas

--in this case, data processing especially--and thence,

to the lack of an operational concept for Management Information Systems. This can be made clearer by reference

to Couger, who lists some of the following barriers to a

successful Management Information System:

1. Incomplete identification of managerial
information needs.
2. Design of independent systems for interdependent activities.
3. Systems priority not in accordance with
its importance to the firm.
4. Inadequate feasibility studies.
5. Lack of post-implementation audits.
6. Failure to include external information
requirements.
7. Use of unsophisticated systems analysis
and design techniques.3



34S. A. Spencer, "The Dark at the Top of the Stairs," Management Review, Vol. LI (July, 1962), pp. 5-6. The third objection in particular will be examined in detail in Ch. III.

3 5J. Daniel Couger, "Seven Inhibitors to a Successful Management Information System," Systems and Procedures







22


Couger comes close to defining the core problem, but he is more concerned with the pressing matters of the here and now. Although these are important, concerning as they do, present operations gone awry, their temporary solutions represent little more than putting out small fires. Perhaps McKechnie comes the closest to expressing the core of the problem:

In reality, a "total" system is impossible
to attain. Management must, however, be provided
with sufficient information. We shouldn't be
trapped into believing that a quick and easy
determination of what information is "adequate"
for executive decisions exists, even at the
highest levels. It will take all the skill that
can be mustered to coagulate specific bits and
pieces of data into . . . [information] that will be meaningful to the executive decisionmaking process.36

The significance of this is best demonstrated by reference to data processing in which the link with Management Information Systems is based on mechanization in general, and more specifically, on the process of acquiring and using computers. Data processing appears to be the most prominent reference point in the literature related to Management Information Systems, and there is a tendency to equate a data processing system (hardware and software Journal, Vol.. XIX (January-February, 1968), p. 17. In a somewhat different reference frame the second item is the subject of Ch. IV.

36A. K. McKechnie, "Why It Takes More than Hardware to I'ake an MIS," Systems and Procedures Journal, Vol. XIX (July-August, 196C), p. 28.







23


as an integrated, operational package) with a Management Information System.

In such instances, the significance of a Management

Information Systems problem becomes a function of the numbers of electronic data processing systems in use or projected for the future. Beginning in 1937, with the first computer, the Harvard Mark I, 7 the number of computers in use expanded from one to about 15,000 by 1963, and represented a capital investment of about $5.6 billion.38 In mid-1967, estimates indicated that about 48,000 computers were in use, over half of which had been installed in the preceding three years, and by 1971, the outlook is for about 100,000 install.ations.39 Moreover, it has been asserted that by 1985, "the business organization . . . will be a highly automated man-machine system."'0 This suggests that the problem in this context alone is not only significant now but will become increasingly so.

Data processing, however, is basically a narrow viewpoint, and the significance of Management Information Sys37McRae, op. cit., p. 35.

38Ibid., pp. 260-61. The figures are for Europe, Canada, and the United States.

"Gordon B. Davis, "The Auditor and the Computer," JournaL of Accountancy, Vol. CXXV (March, 1968), pp. 4445.

40Herbert A. Simon, "The Corporation. Will It Be
Managed by Machines?" in Mancemnent and the Corporation: 1935, ed. Melvin Anshen and George L. Bach (New York: McGraw-Hill Book Co., 1960), p. 18.







24


tems is not limited to this area. "Systems" comprehends more than data processing systems, and therefore, broadens the importance of a Management Information Systems-based problem. Concepts of information may reach far beyond the notion of systems, and certainly the concept of management also transcends data processing. What is needed is a multi-dimensional concept of Management Information Systems applicable to any and all of these areas. The Scope of the Study

The formulation of even a basic, beginning concept of Management Information Systems is complex, and it must, of necessity involve several individually complex variables. As indicated, it is desirable on the grounds of experience and the limitations of language as a surrogate for experience to hold the abstractiveness of a beginning concert to a level compatible with experience.41 Abstracting beyond this level would tend to severely impair if not destroy the concert's operationality. Therefore, to avoid some needless complications, the following five areas, even though they may have some ultimate relevance to Management Information Systems, will be omitted from direct discussion in this dissertation:

1. Management Science. As used here, this refers to the use of quantitative models and techniques of analysis,


41Implementations, however, are not the subject of this study.







25


including operations research and statistical decision making of both the deterministic and probabalistic varieties. The quantitative approach has contributed significantly to the knowledge of business operations, but it does not appear to be vitally necessary for the basic conceptualization of Management Information Systems; moreover, such methods are often highly abstract.

2. Planning, Programming, and Budgeting Systems.

This analytically oriented method of planning, now widely used by the U. S. Government, is sometimes regarded as a specialized type of Management Information System. However, it is a very broadly based, conglommerate technique which depends partly on quantitative techniques, partly on systems, partly on economics, and partly on an incompletely defined set of interdisciplinary relationships. The field is relatively new, but ripe for detailed study. Its inclusion here, however, would needlessly complicate the development of a Management Information Systems concept without significantly contributing to it.

3. Data Processing. Neither mechanization nor data manipulations are at issue *in this study. It will simply be assumed that hardware and software are available


42However, a simple, mathematical model of management will be employed in Ch. II, and the matter of information needs and uses by management, which have some relevance to this field, will be considered briefly in Ch. V.







26


to mechanize a Management Information System if this seems desirable.

4. Systems. As noted earlier, the notion of systems is extremely broad. An operational concept of Management Information Systems based directly on systems would tend towards a high degree of abstraction which seems to be a part of the problem. However, the notion of systems is an important underlying factor and will employed indirectly throughout the dissertation.

5. Economics. Finally, this study will not be concerned with evaluating the economic aspects of Management Information Systems. Cost-benefits, cost-effectivenesses, and other economic considerations are, of course, vital to any organization contemplating a formal Management Information System, but these are basically side issues, the analysis of which would detract from the purposes of this study. Therefore, it will be simply presumed that the Management Information System, when under serious consideration, has satisfied these economic criteria.

The Purpose of the Dissertation

The overall purpose of this study is a composite of three related objectives:

1. To identify and establish the relevant dimensions of a Management Information System as a set of interrelated and interdependent attributes or boundaries;







27


2. To demonstrate that what is currently called a Management Information System has had a long period of expression in the literature of accounting, although often designated by different terms, and therefore, that there is no fundamental difference between an Accounting Information System and a Management Information System. This will be shown by demonstrating that at least two of the dimensions of Management Information Systems can be determined directly from an accounting-based frame of reference and that the third dimension is a logical, although unexpressed, extension of the interdisciplinary aspects underlying the functions of accounting;

3. To combine the identified dimensions of Management Information Systems into a multi-dimensional concept appropriate to the present status of "experience."

The Methodology to Be Employed in the Dissertation

The writing of this dissertation, in terms of sources, is primarily developed by library research and draws upon both theoretically and empirically based studies. The methodology employed in developing the conclusions reached in this study involves two steps. First, a number of notions are analyzed individually, and oscond, the individual analyses are synthesized within a logical framework of relationships into a final result, the whole of which is consistent with its parts.







28


The Organization of the Remainder of the Dissertation

In Chapter II, the essence of a Management Information System is extracted from the literature, first by analyzing the term's component words and then synthesizing the results. This derived concept is compared with current expressions in the literature for consistency and compatibility. This essence may be likened to a statement on the present state of the art of the Management Information System and serves to establish the dimension of purposes for such a system.

Chapter III is characterized by a similar treatment of accounting systems and information which leads to the identification of a second dimension of Management Information Systems--the perimeters of the information pro-duced by such systems.

The dimension of processes which underlies the basic operations of a Management Information System and other information systems is developed in Chapter IV.

In Chapter V, the dimensions of purposes, perimeters, and processes identified in Chapters II, III, and IV respectively are combined into a multi-dimcnsional concept of Management Information Systemz, and some of the implications of this concept--particularily for financial accounting--are examined.







29


The findings and conclusions of the study are summarized in Chapter VI.












CHAPTER II

THE DIMENSION OF PURPOSES--A DERIVED CONCEPT
OF MANAGEMENT INFORMATION SYSTEMS

Purpose and Organization of the Chapter

In Chapter I it was shown that the literary references or allusions to Management Information Systems treat the subject as though it possesses one dimension which is determined by the reference frame in which it is considered, and which varies as the frame of reference is changed. Thus, the dimensions of a Management Information System might lie, from time to time, in data processing, systems, information, management, or something else. This approach, while useful for understanding the reference frame, contributes little towards increasing knowledge or understanding of the inherent nature of Management Information Systems. More importantly, it does not aid directly in providing a sound conceptual foundation on which applications may be built. The time appears ripe, therefore, for such a theoretical construct as well as for a survey of the present state of experienced knowledge about Management Information Systems and methods of application which can be analyzed, combined,

and expanded into a theory of Management Information Systems. Such a theory is likely to extend in more than one direction, and therefore, be multi-dimensional.


30







31


In constructing a theory, a reasonable starting

point often can be found in the common ground of present viewpoints and applications of the subject under

study--the state of the art. This method of analysis

seems particularily appropriate for subjects which have

been widely broadcast, such as Management Information

Systems.1 Moreover, the analysis of the common ground

aids in the initial identification and establishment of

one dimension--the purpose or purposes of the subject

under study. But on the other hand, the peculiar nature

of the Management Information Systems dissemination in

the literature makes the essence of the topic difficult

to extract directly from statements on or observations

of current practices. This absence of primary usage for

the term produces little agreement on the subject's di1 Rigby, op. cit., pp. 197-98. Rigby classifies this technique under the general umbrella term of "data collection," and asserts that it is a vital part of business research. He suggests that "to proceed otherwise is to ignore the basic principle that we can only understand and manipulate and/or adjust to our environment as we are able to construct a symbolic world that seeks to provide us with a simulation of our environment. . . . [Underlying this is an assumption] that the phenomena itself will reveal the significant concepts. . . . [However,] data collection cannot proceed without some ideas about the nature of the phenomena and hence, even where virtually nothing is known, making this understanding explicit rather than implicit will have the value of checking our logic before proceeding to collect the data and reducing vagueness." He goes on to declare that this technique becomes even more valid as the degree of knowledge about the phenomena under study increases. See also Karlin, loc. cit., on "experience," as cited in Ch. I, p. 15.







32


mension of purposes, that is, the set of objectives conditions, or attributes which identify and set Management Information Systems apart from other things. Isolating the common ground or expressing a consensus viewpoint under such conditions is difficult if not impossible.

This problem was suggested in Chapter I by several examples and will be demonstrated in the first section of this chapter by analyzing an expanded sample composed of the earlier and some additional statements on the subject. The remaining sections will be devoted to: (1) approximating the state of the art by the indirect means

of analyzing the component words of the term Management Information Systems; (2) assembling these analyses into a derived conceptual statement on the nature and purposes of Management Information Systems; (3) reconciling the derivation with statements on the subject in terms of consistency and compatibility; (4) comnparing the derived concept with some management process models for consistency and "fit" in applications; and (5) summary and conclusions.

The Lack of a Consensus Viewpoint on Management Information Systems

Blumenthal begins his book on Manacjeraent Information Systems by seeking the essence of the term2 and adopts as


2Sherman C. Blumenthal, !ancgemert Information Systems: A Framework for Pian- in- and Deoelopment (Englewood Cliffs, N. J.: Prentice-Hall, Jrc., 1969), Ch. 2.







33


a preliminary working notion Sackman's characterization:

[It is] an evolving organization of people,
computers, and other equipment, including associated communication and support systems, and their
integrated operation t- regulate and control selected environmental events to achieve systems
3
objectives.

Although Blumenthal regards this as a useful idea, he finds it disconcerting because of the reference to "systems," which needs elaboration. Consequently, he abandons the term Management Information Systems in favor of the broader word "systems."4 This is understandable since Blumenthal's primary concern is with data processing and its relationship to the practice of management. In this context his use of Sackman's definition for Management Information Systems is appropriate even though he applies it to a specific environment rather than developing a general theory. However, if one shifts his interests from Blumenthal's environment to another area, it is not clear which elements belong to Management


3Harold Sackman, Computers, Systems Science, and Evolving Society (New York: John Wiley & Sons, Inc., 1967), p. 42 (as cited in Blumenthal, op. cit.. pp. 1718). Blumenthal also notes that Sackman does not employ the term "information systems," but refers instead to a "man-machine digital system."

4Blumenthal, op. cit.. p. 18.

5At this writing (1970) Blumenthal is President, Libra Data Systems, Inc., a data processing consulting firm. His background also includes a term as President,
National Computer Analysts and a period of employment with the business systems staff of Touche, Ross, Bailey, & Smart, a firm of certified public accountants.







34


Information Systems and are transferable and which properly are a part of the environment and are nontransferable.

For example, it may be asked if a computer is a

necessary condition for a Management Information System. Are personnel, as people per, se required? Is integration mandatory or permissive or only desirable? Are the objectives sought those of people or of the system?

Blementhal responds to many of these questions but always in terms of mechanizing the processing of data. Underlying his thesis is the assumption that all Management Information Systems are linked inseparably to this mechanization process. He ultimately expresses his core idea of Manacgement Information Systems by stating that such systems consist of "parts of operational functions," that they are "the connective tissue" which binds all systems together, and that regardless of the operating level, they are based on "man-machine interactions."6 Is the emphasis on mechanization responsive to the basic character of Management Information Systems, or is it only a necessary condition supporting data processing theory and practice? The answer, of course, is not made clear by reference to a single source.

Li atteripts to integrate the three fields of account6Blumenthal, op. cit.., p. 36.






35


ing, computers, and Management Information Systems.7 After a lengthy evaluation of the interrelationships and interdependencies of accounting and computers (data processing), he turns his attention to Management Information Systems by remarking, "The integration of these applications creates some interesting situations, one of which is the opportunity to develop a management-information system. "8

Li never explains the character of this "opportunity," but proceeds directly to conceptualizing the required properites of a Management Information System. These lie in a complex taxonomy of "information,"" which leads to the following conclusion:

A management information system, simply, is
an organized method of providing each manager with all the data and only that data which he needs for decision, when he needs it and in a form which aids
his understanding and stimulates his action.10

Clearly, this statement implies different inclusion and exclusion sets than Blumenthal visualizes. Li should be close in orientation to Blementhal since he indicates a primary interest in computers.11 Their differences ap7David H. Li, Accounting/Computers/Malnagement Information Systems (New York: McGraw-Hill Book Co., 1968).

Tbid. , p. 213.

9Ibid., pp. 214-17.

t"mbid., p. 224. Li credits this expression to Bertram A. Colbert, "The Management Information System: Pathway to Profit," Price Waterhouse Revieo, Vol. XII (Spring, 1967), p. 4. Li changes the word "data" to "information."

Li, op. cit.. p. v.







36


pear to be due to divergent subordinate interests, Li

relating most to accounting while Blumenthal focuses on

Management.

It is in the context of management especially as

represented by the emerging discipline of "decision

science" that Greenwood concentrates his attention.12 He

sees the current state of the art, as far as decision

theory is concerned, as the integration of common elements:

Research of the decision-making literature
has resulted in . . . [some] major findings that
are either common to most decision theories or
processes, or constitute major changes in existing decision theories and practices. First among
these, systems analyses and systems models are
found to be a basic common denominator of all decision processes. . . . Second, "information" is found to be the primary ingredient upon which all types of problem solving-decision making processes
depend, requiring therefore the development of
organizational management information systems.13

The focus on decision processes leads Greenwood to

two conclusions relevant to this study. First, "decision

information systems" exist which are essentially hierarchical. The lower, more common level involves routine

decisions while the higher rank comprehends only decisions


12William T. Greenwood, Decision Theory and Information Systems: An Introduction to Management Decision Making (Cincinnati, 0.: South-Western Publishing Co., 1969).

13Ibid., p. iii. Greenwood identifies five such
major findings. The other three are: (1) a fundamental change in the traditional. procedures of making decisions;
(2) a requirement of "logical" analyses in all decisions;







37


responsive to "novel or unique problems."14 Second, Management Information Systems are not "decision information systems," but are contained within the latter.

A new common denominator has emerged for . . .
systematic approaches to business-management problem solving and decision making. The information required for business and management systems . . .
now emerges under the title of Management Information Systems. 1 5

Greenwood regards "systematic approaches" as logical reactions to the "need for highly interrelated and structured information to solve problems in an optimal manner."16 Although this may require information being made available in some instances on a real-time computerized basis, this is not a necessary condition. Instead, the essence of Management Information Systems is simply that information is the result of systematic procedures directed to objective optimization. 17

and (3) a realization that operations research and its computer programs are basically a middle rather than top management matter. The first is essentially data processing and will not be considered further; the third is beyond the scope of this study. The second possesses implications which will be considered in later chapters. Greenwood is a difficult writer to classify. He demonstrates interests in at least three areas---management, data processing, and quantitative analysis. However, since he always seems to return to the basic matter of management operations, he seems best placed in that area.

"4 bid., pp. 7-8.

_sThid., p. 204.

16lbid.

17!bid. What is to be optimized is not stated, and therefore could refer to goals generically and not just profits.







38


Greenwood's focus on methodical procedures as the core of Management Information Systems deserves expanding. Four distinct functions are involved: (1) work flows controlled by "complex production control systems;"

(2) major functions departmen!alized in accordance with organizational structure; (3) actual operating information flows represented by the "vertical superiorsubordinate authority-responsibility" structure; and (4) the communication or information sub-structure established indigenous to the individual departments.18 Complementing and integrating these four information subsystems so as to eliminate "all conflicts, inconsistencies, bottlenecks, and duplications found in a comparative analysis of the four [individual) systems" results in a Management Information System.19 This implies that the internal organization is a boundary for Management Information Systems although Greenwood does not make it clear whether external environmental matters are to be ignored.

Analysis of the statements of these three authors,

coupled with the expressions of the ten writers evaluated in the prior chapter, demonstrates that the inherent

attributes assigned to Management Information Systems vary



18Tbid., pp. 208-209.
19Tbid., p. 209.







39


widely or are unclear; objectives wander or are vague; and rationales are dissimilar.

Is there any consensus representative and expressive of the present state of the art? If one can be found, it will furnish a viable starting point for concept construction. The search may be facilitated by employing an orderly array of the central ideas posited by the cited writers. This can be accomplished by a matrix-like construct in which the rows are assigned to the thirteen cited writers, subdivided by apparent or expressed fields of primary interest. The columns represent various input requirements and suggested outputs or objectives. This appears as Table 1 on page 40.20

The table reveals no unanimous element of either

boundary (input) or objective (output). If unanimity is too rigid a criterion, it can be relaxed by discarding the blank cells which indicate no statement by the cited writer. As a consequence, the following results are obtained: (1) one out of thirteen, or 7.7 per cent, hold that Management Information Systems cannot be manually operated; (2) all temporal phases of information are seen as an implied attribute by 30.8 per cent; (3) total in20 This is not a complete representation of views arid is used only to show the infeasibility of extracting the
essence of Management Information Systeras by direct references to practices. This seems to be due essentially to the use of Management Information Systems in a supportive role.













TabZe 1


MANAGEMENT INFORMATION SYSTEMS
(The Common Ground)


ic _ WVritc.r I - - a _A y I
J w I v
c ]-1 I~ 1



-- -
- -- ~T - T 1 ___~T ~~v',x


__ __ 3y 3 *
3 6 - T- y116'

I T; _ 0 ___ _


0









LEGEND AND NOTES TO TABLE 1


LEGEND: Sources:


(A) Gregory and Van Horn; (B) Blumenthal; (C) Johnson, Kast, and Rosenzweig; (D) Moravec; (E) Hare; (F) Karlin; (G) Dickey and Senensier; (H) Greenwood; (I) Spencer; (J) Caruth; (K) Couger; (L) Li; and (M) Ream.


Inputs: (1) Mechanization required; (2) Mechanization not required; (3) Either or indeterminant; (4) Past events only; (5) Current events only; (6) Future events; (7) Some combination of events or indeterminant; (8) Internal events only; (9) Environmental events only; (10)
Both or indeterminant; (11) Transactions; (12) Total
information; (13) Total entry with edit function; and
(14) Mixed or indeterminant.


Outputs:




Primary Fields: Cell Entries:


(15) Profit optimization; (16) Overall goal optimization (satisficing); (17) Either or indeterminant; (18) Decisions; (19) Information; (20) Integration of operations; (21) Cost reduction; and (22) Others not classified.

(a) Data processing; ( ) Systems; (y) Management; and
(W) Others not classified (see note below).

X = yes; Y = implied; Z = no; ? = indeterminant; a blank cell indicates no statement by the writer. In the consensus row an entry as above indicates a down footing of cell entries which suggests unanimous agreement by all the sources relative to the issue in the columns footed. A 0 in the consensus row indicates a lack of consensus.


H


NOTE: Authors classified as "other" seem to work in more than one field, and
therefore are assigned a somewhat catholic classification.







42


formation, as a one-time entry with no subsequent editing, is regarded by 15.4 per cent of the authors as a necessary condition; and (4) on the output side, 7.7 per cent view some kind of optimization as a goal.21 However, regardless as to how the data are manipulated, whether by totaling, combining, grouping, or other methods, the results are indicative of the absence of a consensus viewpoint.22 Basically, the only view approaching a consensus is that the authors being primarily interested in data processing matters, in three cases out of four, believe that some form of mechanization is a necessary condition. However, as will be indicated, mechanization per se, although not without significance, hardly expresses the total inherent character of Management Information Systems. 23

Component Word AnaZysis

Since a direct approach to the study of Management Information Systems for the purpose of conceptualizing the subject seems impractical, a more indirect but hopefully more fruitful approach will be essayed in the following pages. This will be attempted by means of an


21Even if all optimization goals are combined only 23 per cent of the writers believe this.

22Nor do they exhibit even a simple majority.

2 However, it has some implications for future developments which will be considered in Chapter V.







43


examination and study of the three words composing the term Management Information Systems.

It must, of course, be recognized that the context in which words are used is a prime determinant of the meaning to be assigned them. The needed context can be supplied by combining the component meanings into the complete expression Management Information Systemic, provided it can be assumed that this expression grew out of and depends upon the underlying rationales of its individual word components. Under this assumption a synthetic statement on Management Information Systems can be derived which will identify the purposes of such systems, approximate the current state of the art, and lay a foundation for the identification of other dimensions, thereby expanding knowledge and understanding.24

Analysis of the Corponent
Word "Management"

Etymologically, the word management comes from the Latin manus, meaning "hand,"2 s and referring generally to the hand of man. Therefore, management means "by man." 26 Management is uniquely human action and inter24This would not be true if Management Information Systems is a contrived expression having no fundamental relationship with management, information, and/or systems. However, this does not appear to be the case.

2 5Webster's, op. cit., p. 513.

26H. W. Fowler, A Dictionary of Modern English
Usage, 2nd Ed. (New York: Oxford University Press, 1965), p. 238.







44


action,27 and diachronically, reflects the story of man himself.28 Moreover, being action oriented it is an applied art.

Management is the single discipline that has
transformed the findings of all the physical and social sciences into the towering achievements of our age. Without the genius and industry of the
manager, the scientists and social philosopher
would be mere dillettantes, engaging in intellectual
pastimes with no necessary relation to the world
of action. . . . All "mankind" is management's
province.29

This is not, however, to suggest that management is lacking in theoretical constructs, for a wide variety of theories or schools of thought on management exist. These are not necessarily competing or conflicting since their use is dictated by the situation under consideration, and indeed often appear to complement each other. An eclectic concept has not evolved and may never do so,30 but some authorities believe that an inventory of theories is advantageous since:

With this approach . . . the error of psuedosimplicity is avoided wherein it. is stated that if
one model is useful or "true" others are thereby "false" or unnecessary. In view of the great di27Claude S. George, Jr., The History of Management Thought (Englewood Cliffs, N. J.: Prentice-Hall, Inc., 1968), pp. 15-18; see also p. 178.
28Tiid., p. vii.

9Carl Heyl, Ed., The Encyclopedia of.ZManagement, Vol. I (New York: Reinhold Publishing Corp., 1963), p. xix.


3*McGuire, Loc. cit.







45


versity of business behavior, "both-and"-rather
than "either-or" appears to be the most valid
conception of theory construction.31

Two notions from the family of management concepts will be employed in this chapter and others will be used in subsequent chapters. The first, which will be used throughout this study, is the principle of the universality of management,32 which holds that since the practice of management permeates all human activity, there is a tendency for a good manager in one environment to be equally good as a manager in another situation.33

The second is more complex. If management is universal, as between, say, business and war waging, 34 the universality lies not in the situation but in an action to be taken. The attribute of action is well recognized. The dictionary defines management (among other Lhings) as "the judicious use of means to accomplish an end."3 5 More importantly, it is reflected in the assertion that the purpose of management is to "make decisions."36


31Harold L. Johnson, "A Behavioral Approach to the Business Enterprise," Southern Economic Journal, Vol. XXVII (July, 1960), pp. 1-2.

32George, op. cit., p. 15.

33Tbid., pp. 15-18.

34ibid., p. 17.

3 5Webster's, Zoc. cit., emphasis added.
36R. W. Morell, Managerial Decision-MakinO: A Loaical Approach (Milwaukee, Wisc.: Bruce Publishing Co., 1960), p. 1.







46


The theme is a popular one and seems to express a

consensus. For example, Mundel believes decision making is the "task of the manager."37 Dale says management "implies decision making."38 Suojanen maintains that regardless of the reference frame used to study management, decision making is an integral part of any management activity." Morris observes that a major problem in any organization is "trying to make operational the ideas of . . . [a manager] acting as a decision maker."40 Forrester regards management as a process which converts information into action, which "is identical with decision making." 41

Although there is general agreement that management

is rooted operationally in the making of decisions, Morell notes a difficulty in identifying a single reference frame for decision making due to an individual's interpretations being "unavoidably colored by his own personal precon37Mundel, op. cit.. p. 291.

3Ernest Dale, Management Theory and Practice (New York: McGraw-Hill Book Co., 1965), p. 5.

39Waino U. Suojanen, The Dynamics of Management
(New York: Holt, Rinehart and Winston, Inc., 1966), pp. 125-28.

4 William T. Morris, Management Science in Action (Homewood, Ill.: Richard D. Irwin, Inc., 1963), p. 169.

41Jay W. Forrester, Industrial Dynamics (Cambridge,
Mass.: Massachusetts Institute of Technology Press, 1961), p. 93.







47


ceptions. ,42 It is appropriate, therefore, to reduce the potential for misinterpretation by establishing a common basis of usage and meaning for the term decision making.

Decision making is the act or process of deciding;

to decide comes from the Latin decidere, meaning literally "to cut off." Hence, deciding is the procedure by which one arrives at a "solution that ends uncertainity or dispute;" brings to a definitive end; or induces the coming to "a choice" or making a judgment.43 Etymological derivations, however, are not managerial applications, and management theorists have sought to identify the managerial significance and meaning of decision.

Jamison says that a "decision grows out of the choice of one course of action from alternative courses."44 Owens views a decision as "the formation of an opinion or a conclusion, the termination of a controversy, or the making of a choice between possible courses of action . . ." Terry adopts a broader reference frame by attributing the process to the selection of a behavioral alternative from possible choices. 4 Glover, on the other


42Morell, op. cit., p. 5.

43Webster's, op. cit., p. 213.
44Charles Jamison, Business Policy (New York: Prentice-Hall, Inc., 1953), p. 1.20.
4 Richard N. Owens, Introduction to Business Policy (Homewood, Ill.: Richard D. Irwin, Inc., 1954), p. 115.
4 George R. Terry, Principles of Management (Homewood, Ill.: Richard D. Irwin, Inc., 1953), p. 106.







48


hand, sees behavior as intellectualism, and therefore, a decision is "the choice of alternatives based on judgment." 47 Tannenbaum asserts that a decision is always linked to actionable alternatives and is "a conscious choice or selection from among a group of two or more behavior alternatives."48 Drucker agrees by saying flatly that "a decision is a judgment."49 Simon, however, relates judgment to consciousness and asserts that this is not wholly true:

At any moment there are a multitude of alternative (physically) possible actions, any one of which a given individual may undertake; by some
process these numerous alternatives are narrowed down to that one which is in fact acted out. The words "choice" and "decision" . . . refer to this
process. Since these terms as ordinarily used
carry connotations of self-conscious, deliberate, rational selection, it should be emphasized that
. . . they [also] include any process of selection,
regardless of whether the above elements are present to any degree.50

Katona disagrees by pointing out that decisions as "thoughtful actions" are clearly distinguishable from habit or "unconditioned responses" and suggests that the key element is the existence of a problem or the per47John G. Glover, Business Operational Research and Reports (New York: American Book Co., 1949), p. 12.

4 Robert Tannenbaum, "Managerial Decision-Making," Journal of Business, Vol. XXIII (January, 1950), p. 23.

49Peter F. Drucker, The Effective Executive (New York: Harper & Row, Publishers, 1966), p. 143.

5OHerbert A. Simon, Administrative Behavior (New York: Macmillan Co., 1947), p. 4.







49


ception of one:

Genuine decisions . . . require the perception
of a new situation and the solution of the problem
raised by it; they lead to responding to a situation
in a new way. In contrast, habitual behavior is
rather common. We do what we did before in a similar
situation."

The performance of the act of making decisions is

perhaps best summed up by Barnard:

The acts of individuals may be distinguished
in principle as those which are the result of deliberation, calculation, thought, and those which
are unconscious, automatic, responsive, the results of internal or external conditions present or past. In general, whatever processes precede the first class of acts culiminate in what may be
termed "decision."2

Others consider the issue of decision on different

levels. Coales, for example, refers to decision making

as "prediction," and maintains that this depends upon

adequate mathematical models of behavior as inputs. 3

Churchman criticizes the normative overtones of decision

making by asserting that the argument favoring this approach shuts off changes in the future by adopting an

historical frame of reference since it says essentially,



sGeorge Katona, Psychological Analysis of Economic Behavior (New York: McGraw-Hill Book Co., 1951), p. 49.

52Chester I. Barnard, The Functions of the Executive (Cambridge, Mass.: Harvard University Press, 1938), p. 185.

53J. F. Coales, "Foreword," in Models for Decision,
ed. C. M. Berners-Lee (London: English Universities Press, Ltd., 1965), p. vi.







50


"If your present behavior is consistent with your past decisions, this is what you ought to do."54

The common ground in these statements suggests a selection process as well as implying a finality, the ending of wavering, or, put another way, the reaching of a conclusion.55 Morell believes these connotations contain three basic implications logically related to each other: (1) "selection" indicates a reason for selecting, and therefore decision making is "purposive behavior-guided by goals or objectives"; (2) goal seeking suggests the choice between alternatives is "from among means to achieve some end"; and (3) selecting one alternative posits an evaluation process culminating in a judgment. 56 Since judgment is involved, decision making is, therefore, a "definitively assertive intellectual activity." 57 On the basis of this analysis it seems best to exclude habit and reflex actions from the act of decision making.

The consensus viewpoint on the meaning of management may be summarized as follows: The purpose of management is the making of decisions which is a conscious activity


54C. West Churchman, Prediction and Optimal Decioion (Englewood Cliffs, N. J.: Prentice-Hall, Inc., 1961), p. 15.

sMorell, op. cit., p. 6.

s61bid., p. 8.

57Ibid., p. 11.







51


characterized by a selection procedure employing judgment and which is activitated by the perception of an issue to be resolved.

Analysis of the Component
Word "Information"

When put into the context of management as a decision making action, information is subjected to a variety of interpretations and meaning assignments by theorists. To Churchman, information is a pragmatic, a priori thing which he defines as "recorded experience which is useful for decision making." 58 Forrester, as indicated earlier, considers information to be the raw material of decision. Blumenthal, reflecting his data processing orientation, regards information as data that have been "recorded, classified, organized, related or interpreted within context to convey meaning." 60 Wiener sees information simply as "a name of the content of what is exchanged with the outer world as we adjust to it, and make our adjustment felt upon it."61 Probabalistically, information is the

agent that reduces uncertainty or changes anticipations



58Churchman, loc. cit.

59Forrester, ioc. cit.

60Blumenthal, op. cit., p. 30.
6 1Norbert iener, The Human Use of Human Being(Boston: Houghton Mifflin Co., 1950), p. 124.







52


about event outcomes. 62 Communicatively, information is data to which meaning has been assigned as a consequence of having been communicated.63 The dictionary also adopts the communication theme by defining information as "the communication or reception of knowledge or intelligence."64 Li considers information as a specific form of assistance made available to management in its performance of the core function of decision making. The applicational significance of information in this context is dictated by the class or type into which the information falls. According to Li there are nine classes of information:

(1) environmental; (2) constraining; (3) anticipatory;

(4) formulated; (5) transactional; (6) concurrent; (7) summary; (8) analytical; and (9) historical."

While these interpretations possess common elements, such as usefuLness, aiding, and having meaning, which are relevant to the decision making process, they do not describe the basic character of information. Legal processes, however, do identify the attributes of evidence,


62Theil, Zoc. cit.

63Claude E. Shannon, The Mathematical Theoru of
Communication (Urbana, Ill.: University of Illinois Press, 1949), Ch. 1.

64Webster's, op. cit., p. 433.

6 Li, op. cit., pp. 21--17. This scheme appears to be directed primarily towards improving the assimilation of information -into computer and data processing operetions.







53


and Herbert, drawing upon a legal frame of reference, asserts that information is identical to evidence. 66 It

is:

That which tends to.prove or disprove any matter
in question or to influence the belief respecting it
or that which demonstrates, makes clear, or ascertains
the truth of the very fact or point in issue, either
on one side or on the other.67

The question of the form in which evidence appears is clarified by Black: "The matter thus presented, in whatever shape it may come, and through whatever material organ it is derived, is evidence."68

Although the question of evidence in a legal environment refers generally to an issue before a court, the concept is easily extended to the environment of management, and accordingly implies the perception of a problem to be resolved. The decision making process is the choosing of a specific alternative or solution from a set of alternatives about which the se-lector or manager has information or evidence to guide or influence him. Put in another way, information provides management with "the support used in an inductive argument to reach a conclusion on a problem or objective."69


66Leo Herbert, "Audits of Management Performance--A Conceptual Framework for Training" (unpublished Training Manual, U. S. General Accounting Office, Washington, D. C., 57 pp.), p. 38.
67 Ibid., p. 36.
68
68Henry Campbell Black, Black's Law Dictionary, 4th Ed. (St. Paul, Minn.: West Publishing Co., 1951), p. 657.

69Herbert, Zoc. cit.







54


This concept of information is fully consistent with the statements cited above, including the ideas of reducing uncertainity, the assigning of meaning to data, and the implication of communication. It does not, however, supply criteria for distinguishing evidence from nonevidence, since anything, and, therefore, everything carrying influence is evidence per se. In much of the management literature the single criterion employed is zusefulness, but this does not resolve the matter since influencing implies use.

Fortunately, the law also furnishes criteria for the recognition of evidence which may be appropriate as standards for management. Legally, evidence depends on fulfilling three criteria: (1) relevancy; (2) materiality; and (3) competency. 70 ReJevancy is related to the problem and means that the evidence must have a logical connection with the issue and must support, either alone or in combination with other information, at least one solution. 71 Materiality is also associated with the problem but refers to the degree of influence the evidence carries



7 Ibid., p. 41.

71Tbid., pp. 41-43. See also Black, cp. 2it., p. 1159. The criterion of timeliness demanded by some theorists as an attribute for Manacement Information Systems seems to lie within the criterion of relevance since untimely events or evildnce become legally abstract or moot, and therefore irrelevant because they no longer concern existing facts.







55


to the mind and is obviously a subjective matter which varies from manager to manager and problem to problem. Competency is not linked directly to the issue but is a consideration of the source of the information, and therefore represents the subjective reliability the user places on the evidence.72

The implication of managerial rationality causes

these criteria to carry a somewhat normative connotation, but, as initial inputs to conceptualizing information, they seem to be in accord with the objectives and processes of managerial decision making. Therefore, the meaning of information in a management context may be summarized and expressed as follows: Information is evidence obtained from competent sources and which is relevant and material for the problem at hand,73 the purpose of which is to influence the decision maker with respect to selecting one of a group of alternative solutions to a problem. Analysis of the Component
Word "Systems"

The word systems is derived from Latin and Greek words meaning to stand or place together, and hence to unite or combine. The term is used in many fields and usually


72Herbert, op. cit., pp. 43-45.
73 These criteria have design implications which will be considered in later chapters.
74Eric Partridge, Origins: The Encyclopedia of Words (New York: Macmillan Co., 1959), p. 661.







56


implies a grouping or sec of procedures or objects. Karlin defines a system as "a set of transacting elements."75 Others see it as "an array of components designed to accomplish a particular objective."76 Similarly, Hare regards a system as "the elements, relationships, and procedures [necessary] to achieve a specific purpose."77

Although a set's contents can be expanded or contracted as desired, set theory implies a completeness or wholeness within specified bounds,78 which for systems seems to depend on purpose. Many writers view systems this way. Odiorne relates a system to the directing of a unified, total, relevant effort towards the attainment of an objective.79 The dictionary defines a system as "a regularly interacting or interdependent group of items forming a unified whole."8 Some call it "an organized



7 '5Karlin, Zoc. cit.

76Johnson, Kast, and Rosenzweig, op. cit., p. 113.

77Hare, ioc. cit.

78Richard E. Johnson, Neal H. McCoy, and Anne F.
O'Neill, Introduction to Mathematical Analysis (New York: Holt, Rinehart and Winston, Inc., 1962), pp. 7-10.

7 George S. Odiorne, Management by Objectives: A
System of Managerial Leadership (New York: Pitman Publishing Corp., 1965), p. vi.

80Webster's, op. cit., p. 895.







57


or complex whole."8i In law the term describes an "orderly combination or arrangement, as of particulars, parts, or elements into a whole."82 In biology it has been defined as that which possesses "organization and wholeness." 8

The consensus seems to attach a wholeness to systems which is defined by purpose, but there are troublesome facets to this notion. If it can be agreed that "management" is decision making and that "information," within the constraints given earlier, is whatever influences the manager, then the wholeness attribute of systems tends to expand the content of the information set to infinity. Attempts have been made to resolve this difficulty by dividing systems into two general classes, closed and open.

A closed system exists whenever "we look at a

limited number of parts and the relationships among them alone, and assume that the rest of the world around this system is constant, that there are no influences outside



8iRichard A. Johnson, Fremont E. Kast, and James E. Rosenzweig, "Systems Theory and Management," Management Science, Vol X (January, 1964), p. 368.

82Black, op. cit., p. 1621.

83 L. von Bertalanffy, "General Systems Theory: A New Approach to the Unity of Science," Human BioZogy, Vol. XXXVIII (December, 1951), p. 306.

84Karlin, loc. cit.







58


the system."65 Thus, closed systems are rather subjective although relatively simple to construct and understand. In Chapter I it was shown that many statements about Management Information Systems specify tightly constrained boundaries, thus closing the system.86 But there is dissatisfaction with closed management systems,87 and suggestions are being made to make them open.88

The open system can be likened to a "self-maintaining structure" or homeostatic organism which both influences and is influenced by its ecology; it is, therefore, dynamically responsive. This statement is a reasonable description of the realities of business enterprises,89 and Litterer asserts that only open systems can represent reality since "in some way, all systems of interest are open."91

However, "open" means not closed, and therefore, is absolute. This is inconsistent with establishing limiting criteria for information, and to avoid implying an


85 Litterer, op. cit., p. 154.

86See Ch. I, especially pp. 2-10.

87Charles Z. Wilson and Marcus Alexis, "Basic Frameworks for Decisions," Journal. of the Academy of Management, Vol. V (August, 1962), p. 164.

88See Ch. I, pp. 16-18.

"Johnson, Kast, and Rosenzweig, Systeas Theory, p. 372.
90Litterer, op. cit., p. 155.







59


impractical omniscience "open" must be assigned degrees which effectively make Management Information Systems operationally closed. Therefore, the concept of systems may be expressed as follows: Systems represent the completeness of information, within defined limits and relative to objectives, which is to be used by managers in making decisions.

A Derived Concept of Management Information Systems

It now remains to fuse the separate meanings of management, information, and systems into a statement which, as a starting point., may indicate the nature of Management Information Systems by approximating the current state of the art. The meanings of the words involved may be summarized briefly as follows: Management is decision making action; information is evidence influencing the mind regarding an issue; and systems suggests orderliness and completeness. The ideas may be synthesized into the following statement: A Management Information System is an organized method of providing each manager with all the evidence and only that evidence which he needs or wants for decision, when he needs or wants it, and in a form which aids his understanding and stimulates his action.

Essentially, this is the Colhert/Li statement9" with two differences. First, "data" in Colbert's statement


91See p. 35.







60


which Li supplants with "information," is replaced by "evidence." Second, managerial "wants" are added to his "needs." Both changes are made to take account of the influencing character of evidence on subjective minds. If a manager does not want certain evidence, it tends to have no influence on him; consequently, regardless of his needs (as perceived by others), it is no longer evidence. 92

Reconciling the Derivation to Statements
on Management Information Systems

Since the state of the art of an area like Management Information System is a matter of fact rather than derivation, the reasonableness of employing a derived concept as an approximation of fact depends upon being able to reconcile it with the facts which are represented by authoritative writings on the subject. Put another way, a derivation's validity depends on its doing no violence to current viewpoints. Comparisons of the derived concept of Management Information Systems with the statements on the subject cited earlier93 reveal it to be explicitly consistent with them, and a detailed specification indicating this agreement would be redundant. How92The implications of this notion will be considered in subsequent chapters as other dimensions of the Management Information System are added, thereby expanding the derived, one-dimensional concept.

93See Ch. I, especia]J.y pp. 3-17, and Ch. II, pp. 32-38.







61


ever, the original sampling was small, and therefore, it seems appropriate to demonstrate compatibility of the derived concept with other authoritative statements by

means of the method of comparison.

Dearden and McFarlan present two basic ideas concerning a Management Information System: (1) it is a means "for handling data"; and (2) its most sophisticated form is complete automation. The derivation is in agreement with the first idea since it states that a Management Information System is an organized method of providing evidence, and it has been demonstrated that evidence is information and information is data which have meaning. In regard to the writers' second notion, while management is a human action, its function, nevertheless, is decision making. Thus, if the human manager can be supplanted by a machine capable of complex heuristic processes, then the word "he" antecedent to "manager" can be replaced by "it" to indicate a machine manager or a human manager.95 This change does not alter the basic character of the derived concept.


94John Dearden and F. Walter McFarlan, Management Information Systems: Text and Cases (Homewood, Ill.: Richard D. Irwin, Inc., 1966), p. 7.

" sThere appears to be some progress in this direction, especially in so far as routine or repetitive decisions are concerned. See Allen Newell, J. C. Shaw, and Herbert A. Simon, "Elements of a Theory of Human Problem Solving," Psychological Review, Vol. LXV (August, 1958), pp. 151-66.







62


Chapin, whose interests lie in data processing, looks on a Management Information System as "a particular combination of human service, material service, and equipment service for handling information for a purpose," and goes on to state "that systems are concerned only with information."96 Essentially, this statement conveys the same ideas expressed by Dearden and McFarlan, and therefore, the derivation is consistent with Chapin's notion.

Boore and Murphy visualize a Management Information System as the result of the identification and use of "the network of all communication methods with an organization."97 As indicated earlier, evidence implies communication, influencing implies use, and decision making is the use. The derivation specifies all evidence needed or wanted is to be provided and is, therefore, consistent with this statement.

Litterer's viewpoint may be paraphrased. He regards a Management Information System as the set of inputs, including procedures, which are necessary aids to making



96Ned Chapin, An Introduction to Automatic Computers, 2nd Ed. (Princeton, N. J.: D. Van Nostrand Co., 1963), p. 223.

97William F. Boore and Jerry R. Murphy, The Computer Sampler: Management Perspectives on the Computer
(New York: McGraw-Hill Book Co., 1963), p. 354.







63


a set of operations successful.98 The derived concept includes this notion in its statement.

To Mattessich, the Management Information System is the link between evidence and decision making. Consequently, he writes: "Most management decisions are built upon assumptions about objects and events . . . [and] the basis of these assumptions . . . is evidence."99 The idea of influence used in the derived concept is subjective, and therefore, similar to assumption. The derivation, therefore, is quite consistent with Mattessich's expression.

Li's statements deserve particular attention since he expresses what is essentially the derivation and then discards it as being too general:

A management-information system is only [one]
information provision service . . . [and an organization has other information channels available] The only difference between information provided through
a management-information system and that provided
through other channels is that the former is organized and articulated, while the latter may or may
not be.'00

The derived concept is not incompatible with this

statement. Although organized methods are specified, the word "information" is replaced by "evidence" in the derivation to indicate both subjective quality and its possible


98Litterer, op. cit., pp. 299-304.

"Richard Mattessich, Accounting and AnalyticaZ Methods (Homewood, Ill.: Richard D. Irwin, Inc., 1964), p. 234.
00Li, oP. cit., p. 225.







64


range within the system. Li appears to be seeking a solution to the problem of open versus closed systems. His solution is a taxomony of information which, when properly carried out, implies certain control procedures over information inputs.101 It is for this reason, in part, that "information" was replaced by "evidence" in the derived concept. But more importantly, it has been demonstrated that evidence is whatever influences the mind, and thus classifying or typing information, although possibly useful, is not at issue. In summary, the derived concept appears to be compatible with statements about Management Information Systems.

It must be recognized that reconciling a derived concept with statements alone is only one facet of establishing its reasonableness as an expression of the current state of the art. How well the derivation relates to operational models of managerial processes is also at issue. Such models attempt to simulate behavior under a complete set of conditions and, when validated, approximate factual processes; they thereby contribute to the store of knowledge about real-world operations. 102 Consequently, since the state of the art is factual, the derivation cannot be accepted--even as a starting point


"'0Ibid., pp. 214-40.
102 Mattessich, op. cit., pp. 415-18.







65


--without reconciling it with some of these models. The

derived concept will, therefore, be evaluated as a potential input to one data processing construct, two

managerial planning models, and a mathematical representation of managerial functions.

The Blumenthal Model

From primarily a data processing viewpoint, Blumenthal has built a model of the management decision process and posited the role of Management Information Systems in it. The model consists of the following sixteen

propositions:

1. A datum is an uninterpreted raw statement
of fact.
2. Information is data (1) recorded, classified,
organized, related or interpreted within context
to convey meaning.
3. A level is a pool of resources (manpower,
money, materials, capital equipment), a backlog
of demand on resources (orders), or a file of information (2) about the status of resources and demands.
4. An activity center is one of the basic
organizational entities in an enterprise under the
common and direct supervision of a first line
manager, supervisor, or foreman, which regulates the flow between levels (3), and may transform the flows
between levels (3) . . .
5. An ac-zion is a prescribed regulativetransformative response of an activity center (4) to
information (2) about the levels (3) with which it
is concerned.
6. A decision center is one or more managementlevel people . . . who {l} prescribe the decision
rules that govern the actions (5) of one or more
activity centers (4), {2} make decisions for activity
centers (4) to execute (as actions) in situations
where the scope of prescriptions (decision rules) is exceeded, non-existent, or where a prescribed
action (5) was not properly responsive and further
adjustment is deemed necessary . . .







66


7. A functional unit is an activity center (4)
and its decision center (6) . . .
8. A management control center is one or more
management people . . . which acts as a decision
center (6) for a group of functional units (7), or for a group of subordinate management control centers (8).
9. An operational function is a CLASS of any
one or more TYPES of actions (5), carried on by the
same or different functional units (7), which regulate the inflow and/or outflow to or from sequences
of levels (3) as a group . . .
10. An action subsystem is the group of activity
centers (4) involved in an operational function
(9) . . .
11. A decision subsystem is the group of decision centers (6) and management control centers (8)
involved in an operational function (9) . . .
12. An information subsystem is a special
functional unit or units (7) involved in an operational function (9), and whose levels (3) and flows
consist of information (2) generated and used in the
action and decision subsystems (10, 11) of other
operational functions (9) . . .
13. A management information system is an
operational function (9) whose parts . . . are information subsystems (12) of other operational functions (9) .
14. An operational control module (OCM) is that
part of an information subsystem (12) supporting the
functional units (7) of an operational function
(9) . . .
15. An operational control information system
(OCIS) is all of the OCM's (14) in a management information system (13).
16. A management control module (MCM) is that
part of an information subsystem (12) supporting the
management control centers (8) of an operational
function (9) . . . .103

Blumenthal's mbdel is basically a synthesis of the

following three related concepts: (1) informationdecision-action; (2) programmed and non-programmed decisions; and (3) the hierarchy of planning and control.


10Bilumenthal, op. cit., pp. 30-36. The italics are in the original.







67


The first of these, often called inforrmation-feedback, is fundamentally a closed-loop control system about which Blementhal says:

The actual decisions involve three things: a
desired state of affairs, the apparent state of
actual conditions as reported by the information
network, and the generation of the kinds of action that will be taken in accordance with any discrepancy which can be detected between the apparent and
desired conditions. 104

Blumenthal recognizes that decisions required to bring affairs to their desired state are of two basic types: (1) programmed; and (2) non-programmed. The former are decisions of a routine, repetitive nature characterized by a relatively rigid, predetermined set of procedural rules for execution, and consequently, are susceptible to automation. Non-programmed decisons are characterized by uniqueness as reflected by peculiarities of the problem or its milieu.10 5

There is a broad band of uncertainity between what are clearly non-programmed decisions and those which are obviously programmed. The point of demarcation between them is not clear. Blumenthal believes this matter is best resolved by dividing the organization into three

hierarchical levels of management. At the nadir of decision making is the 2evel of "operational control," corresponding generally to programmed decisions. In between lies a


104Ibid., p. 30.

1 'Ibid., pp. 26-27.







68


wide continuum of decision operations which are neither wholly programmed nor wholly non-programmed, and it is in this broad area that the problem lies.106 Blumenthal's model seeks to integrate operational solutions at all three levels, but the main focus is on identifying, controlling, and automating the programmed level in a manner consistent with the non-programmed.

How well does the derived concept fit into this

scheme? First, the derivation's interpretation of information is compatible with the model's because both regard information as data having meaning. Second, the derivation is compatible with the concept of "informationdecision-action" especially since evidence wanted by the decision maker is equatable with the "desired state of affairs." Third, the derivation comprehends both programmed and non-programmed decisions since either ultimately results from direct action or from "programming" for indirect action, and both are the result of a decision maker having been influenced by evidence. Clearly, the derived concept of Management Information Systems is quite consistent with Blumenthal's data processing model. Ansoff's Strategic Planning Model

A number of theorists have sought to develop algorithmic processes for the non-programmed class of decisions


106Ibid., pp. 27-28.






69


but run headlong into the problem of diversity.

As every experienced executive knows, a major
part of a manager's time. is occupied in a daily
process of making numerous and diverse decisions.
The demands on the decision maker's time always seem to exceed his capacity; decisions of great
potential import come mixed with trivial but timeconsuming demands; the nature of decisions is multifaceted and continually variable. This diversity generally tends to increase with the level. of responsibility and becomes particularly pronounced for the top executive of the firm. On a single day he may be called upon to decide on a future course of the firm's business, to reconcile an
organizational conflict . . . and to resolve a host
of day-to-day operating problems.107

Ansoff attacks this difficulty by separating all decision making activities into three classes: (1) strategic;

(2) administrative; and (3) operating.108 Be regards the latter two as "tactical" in nature, i.e. , specific programs for employing allocated resources. The other decision class is "strategic," i.e., the application of integrated forces towards goal. attainments. After largely discarding the tactical class, Ansoff constructs a process model for strategic decision making.109

This model is essentially built on three progressive

steps which are controlled by feedback loops: (1) a "trigger" which is the perception of a problem requiring a de-cision; (2) a search of the feasible alternatives; and (3) an evaluation of the alternatives leading either to a se107H. Igor Ansoff, Corporate Strategy: An AnaZytical
Approach to Businees Policy for Growth and Expansion (New
York: MlcGraw-Hill Book Co., 1965), p. 1.

08Ibid., p. 5.


09Iid., p. 118.






70


lection (decision) or to recycling the search.110 The model also contains five preliminary decision points at which cumulative progress is evaluated and a subdecision reached to continue or to recycle. Each of these rests on "successively greater information."''' After passing the last subdecision point or "stop," a major decision is reached.''2

Ansoff's model is more developed than the derived concept in that his detailed emphasis on hierarchical ordering, cumulative information gathering, and "feasible alternatives"' 1 represents an attempt to specify the boundaries of information in rigorous terms, thereby reducing subjectiveness. However, it has been shown that information is a matter of influence, and therefore, its attributes are determined by use and not by externally imposed constraints. Ansoff's model calls for stipulated information, and the derivation is, therefore, compatible with it since it calls for evidence as needed but adds the element of use. In other respects, the derived concept is obviously consistent with Ansoff's model.

'Ibid., pp. 15-28.

'Ibid., pp. 200-201.

112Ibid., pp. 200-203.

113Ibid., pp. 15-18. This is "a" set and not "the" set of feasible alternatives. The latter may approach universality and the system should always be able to admit new alternatives since others will appear continually throughout the planning period. Thus, the system is closed but only at a point in time within the process.






71


The Gilmore-Brandenburg Model

The Cilmore-Brandenburg model is fundamentally an algorithm for strategic decision actions. "' Although expressed in terms of a product-market decision situation, it appears to be easily adaptable to other management situations.

The model employs two integrated processes. One of these concerns flows between intermediate decision points which depend on cumulative responses to strategic inquiries. After identifying a potential problem, the decision maker asks if a new operating program is indicated as a solution. If yes, is a new "competitive strategy" needed? If yes, is a new "economic mission" required? A no response at any level starts a recycling process in reverse to redefining or clarifying the problem, or perhaps concluding that it is not in fact a problem.'1 The other process provides additional decision points which are linked to feed back channels. At these intermediate points, the accumulated analysis and its proposed soJution is evaluated in terms of "synergy." A negative result activates recycling as above, while a positive one opens the channels for pro114Frank T. Gilmore and Richard G. Brandenburg,
"Anatomy of Corporate Planning," Harvard Business Review, Vol. XL (November-December, 1962), pp. 61-69.
1 1 5iid.






72


ceeding to the next step.116

Apparently, the test for synergy is employed as a surrogate for summarizing cumulative evidence and forces the decision maker to: (1) making certain a problem exists before committing the organization; and (2) satisfying himself that the decision contemplated is congruent with enterprise objectives. The derived concept is compatible with this model in that both treat information in the same way. Only the matter of testing for synergy needs clarification. This test, in itself, is evidence since it is designed to influence the manager and his subsequent actions.

George's General Theory of Uanagement

A general model of the managerial action of making decisions has been developed by George. 117 The model is in the form of a set of equations linked by logical mathematical deductions and begins with the assumption that management (Mg) is made up of conceptual acts (Ac) and physical acts (Ap) which affect or create conceptual environments (Ec) and physical environments (Ep). Furthermore, these acts are a function of group or enterprise goals

(Og) and the objectives of individuals (Oi). Given this,


1161bid. Ansoff (op, cit.. p. 75) offers perhaps the best definition of synergy, calling it the "2 + 2 = 5 effect" which means that the total of the combination is larger than the sum of its individual parts.

1"George, op. cit., pp. 160-71.







73


management can be expressed as:

[(Ac + Ap) - (Ec + Ep)] f (Og, Oi)118

Managerial actions (Ac + Ap) may also be expressed as a compound of the components of the management process, planning (P), organizing (0), directing (D), and controlling (C) which occur in varying proportions (W) that total unity. In these terms the actions may be stated as:

(Ac + Ap) = WIP + W20 + W3D + W4C

where

|W, = 1 and W1 > 01
i=1

and therefore

Mg = [(W1P + W20 + W3D + W4C) + (Ec + Ep)]

f (Og, Oi)'9

This is modified, however, by the fact that neither

the organization nor the individual have their goals fully met.

It may well be that a firm's goal is 90 per
cent achieved while the individual's goals are 20
per cent realized. Under these conditions employee
resistance may well result. This resistance, in
turn, would cause a change in managerial actions to
effect a greater achievement of individual goals.
By the same token, if the firm's goal is only
10 per cent realized and the employee's goals are
90 per cent achieved, then some change will be made



118Ibid., p. 169

119Ibid.







74


by the manager in order to effect a greater than
10 per cent achievement of the firm's goal.120

George believes that the best managers are those who promote high realizations in both sets of goals or at least are able to balance them. If the results of management are measured in terms of goal attainments, then managerial effectiveness (MgA) can be expressed as the percentage (p) of individual and firm goal achievements as follows:

MgA = p(Oi + Og)121

If it can be agreed that managerial acts (Amg) are dependent on the percentage of Oi + Og attained, then:

Amg = f (pOi + pOg)

If Og is known, Oi is a function of it, and therefore:

Oi =fOg and Og= f OiI22

George's model does not comprehend Management Information Systems as such. However, the derivation can


10Ibid., pp. 169-70. George does not address himself to the situation where the manager's individual or personal goals are largely achieved while the organization's are not. This produces conflict and studies in this area are inconclusive as to how it will be resolved, but generally it is believed that if the conflict threatens the manager's psychological self, his response will be to put his inner self above other interests. This will be taken up in more detail in Ch. IV, pp. 163-67. This notion has other imnlications which will be considered in Ch. V, especially' pp. 198-99.
121Tbid., p. 170.


Ibid.







75


can be reconciled to the model by inserting it into the model and evaluating the result in terms of consistency. This requires expanding the idea of environments to include the factor of evidence as well as a weighting factor for its influence on the manager. For simplicity, some of George's terms can be combined or restated, and the model, including a Management Information System, depicted as a diagram. This appears as Figure 1 on page 76.

In this diagram, pO is George's probability of attaining desired objectives (regardless of their composition). This, along with the status of the present environment (Ep), conceptual and physical combined, and other evidence or information (Ev) carries influence

(i) which leads to a decision (Dc) and results in a new environment (Ef). This set of relationships is a function of objectives (0), and since the environment is dynamic, both Ef and 0 feedback as new inputs to the process for the next decision. Should no decision be reached or a decision reached not to take an action leading to a new Ef, Ef is equivalent to Ep, and the process still recycles. Introducing a Management Information System into the model does not disturb the fundamental character of the conclusions reached regarding the decision making process. Therefore, the derivation is compatible with this

model.















r-- -- - - - - - e - - - - - - - - - - - - -1


PO


Ep Dc
EPi Dc




SL.


Ef


Figure 1

The Integration of a Management Information System
with the George Management Process Model


fo


-4


(







77


Summary and Conclusions

The fact that the subject of Management Information Systems is treated most oftenly in the literature as a secondary matter rather than a primary study field makes it difficult, if not impossible, to identify any of the dimensions of Management Information Systems or the current state of the art by means of direct references to the literature. Therefore, a concept which would represent the purposes of a Management Information System was derived by analyzing the component words of the term, Management information Systems. This derivation was expressed as follows: A Management Information System is an organized method of providing each manager with all the evidence and only that evidence which he needs or wants for decision, when he needs or wants it, and if a form which aids his understanding and stimulates his action.

This derived concept was suggested as a starting

point on which to build new constructs, and moreover, it was asserted that it also specified the purposes of a Management Information System, and therefore represented a reasonable statement of the approximate current state of the art of such a system. In support of the latter contention, the derivation was compared with various statements about and models of Nanagement Information Systems. It was foupd to be consistent with these in every ir! .' -.







78


stance, and it was concluded, therefore, that the derived concept not only approximated the current state of the art, but represented an adequate expression of the purposive dimension of such systems.










CHAPTER III

THE DIMENSION OF PERIMETERS---THE
DERIVED CONCEPT CLARIFIED

Purpose and Organization of the Chapter

In Chapter II, a concept of Management Information Systems was derived and stated as follows: A Management Information System is an organized method of providing each manager with aZZ the evidence and only that evidence which he needs or wants for decision, when he needs or wants it, and in a form which aids his understanding and stimulates his action. This expression is adequate for the identification of one of the dimensions of Management Information Systems--the purposes of such systems--but in its vagueness of expression suggests, but does not specify, the existence of other dimensions. It is, therefore, the purpose of the present chapter to clarify the derived concept, thereby identifying another dimension and, at the same time, indicating areas of incompleteness which suggest yet another dimension.

There are two primary reasons for adopting clarification as a modus operandi: (1) as indicated earlier, the derivation is only a one-dimensional, first approximation concept--a base on which to build; and (2) the derived concept is obviously incomplete and unclear as it is stated, especially as it pertains to the boundaries or attributes of information. This may be besl demonstrated in brief by raising a que estion: The manager is to he provided


79







80


with all the evidence or information, but at the same time, only the evidence or information he needs or wants (i.e., what he will use). The words all and only are antithetical, and,when considered within the present discussional context, imply the existence of criteria for the separation of evidence from non-evidence, and by definition, information from non-information. What are these criteria?'

In Chapter II, this issue was deferred temporarily

by borrowing evidence criteria from the legal profession, but legal criteria, in the absence of an outside but apparently omnipotent arbiter, such as a judge at a court trial, cannot be identified completely with non-legal or "trial" situations, especially if the principle of the universality of management2 is accepted. Therefore, legal. criteria are not fully responsive to the question raised above. In so far as Management Information Systems


'Of course, these are not the only questions which
might be asked legitimately. For instance, the following questions could be posed: Who is to determine precisely what the manager needs or will, in fact, use? The manager? Someone else? Are needs modified by "wants" as these are manifested by "uses"? If the evidence or information is to be presented in a "form" which aids understanding and stirmulates action, who is to do so and how is this to be done? These issues are, of course, quite valid and will be taken up in Chapter IV. Such considerations are extraneous to the subject matter of the present chapter, although the approach taken in this chapter, in so far as as starting point is involved, is more a matter of the author's convenience than logic. However, regardless of the starting point, the same conclusions would prevail ultimately.
2See Ch. I, p. 45,







81


are concerned, the need is for a set of criteria which is appropriate for all settings or situations, and which will clarify, if not resolve this matter. The process of clarification will also indicate another dimension to Management Information Systems, namely the perimeters of the information produced.

In order to accomplish this, it will be shown that

the dimension of purpose expressed in the derived concept of Management Information Systems has had, in one form or another, a long tradition of expression in the literature of accounting, especially the branch of accounting which has come to be called managerial or management accounting. Moreover, the field of management accounting has treated the Management Information System as a primary subject of interest rather than as a secondary or supportive, onedimensional matter as is the case in the literature of management. It follows, therefore, that there is a strong


3The word "perimeters" is used to denote this dimension because of its connotation of limits, a line of demarcation, or circumference. The notion of separation seems stronger in this word than in, say, "boundaries," etc. See Webster's, op. cit., p. 626,

4The derived concept, in fact, was found to be essentially an accounting expression. See Ch. II, p. 59. It should also be noted that the managerial accounting literature pertaining to Management Information Systems has often appeared under different names, such as "profit planning," etc., in past years. The popular term, Management Information Systems, is fairly recent in origin. This
may account for the managerial accounting literature germane to the subjecL being less well known than it should be.







82


relationship between Management Information Systems and managerial accounting, and it will be demonstrated that the perimeters of evidence can be established by reference to managerial accounting. At the same time the analysis will also pinpoint the areas of weakness and incompleteness remaining which represent the other dimension or dimensions that need to be considered in formulating a complete and operational concept of Management Information Systems.

Organizationally, the present chapter is divided

into five sections: (1) an exploration of the rationale of accounting and the apparent division of accounting into financial and managerial applications; (2) an analysis of some of the allusions or references to Management Information Systems which appear in the managerial accounting literature and a reconciliation of the derived concept of Management Information Systems with these statements;

(3) a restatement of the derived concept in accordance


sIt is difficult to classify much of the literature as being specifically managerial accounting since this classification implies a cutting across disciplines. Even within accounting, it is often impossible to fully distinguish managerial accounting from financial accounting since elements of both may appear in each. The management
literature contains much that is relevant to accounting, and likewise there is much in accounting writings pertaining to management. This, however, is not crucial since the survey of the literature to follow is not intended to be exhaustive, and any selectivity tends to be somewhat arbitrary.







83


with the clarifying analysis; (4) the identification of areas of incompleteness and the elements needed to complete a formulation of a complete and operational concept of Management Information Systems; and (5) summary and conclusions.

The Rationale of Accounting

Accounting is commonly subdivided into two main classes, financial and managerial:

The terms financial accounting and managerial
accounting reflect the differences in the uses of
accounting information. Essentially, financial
accounting pertains to the area of reporting overall operations; frequently the reports go to outsiders, including stockholders, who are not responsible
for the day-to-day operations of the company but do
have an interest in knowing about its economic progress.
Managerial accounting pertains to the type of information that is used b management for making internal
economic decisions.

Although many authorities assert that the original

purpose of accounting was "financial)" such writers often employ the term "accounting" as though it were synonymous with record keeping which forms only a part of the total accounting function.7 The most prevalent view today is that accounting developed initially for managerial purposes,



6 Harold Bierman, Jr., and Allan R. Drebin, Financial
Accounting: An Introduction (New York: Macmillan Co., 1968), p. 4.

7Williard E. Stone, "Antecedents of the Accounting
Profession," Accounting Review, Vol. XLIV (April, 1969), p. 284. However, even in ancient times, the records were
used internally as well as externally although the primary intent may have been for external uses.







84


that is, for internal owner uses.8 Ross, for example,

sees accounting systems arising as a response to some

perceived needs of internal management.9 On the other

hand, Scott regards the external-internal use distinction

as an artificial one and looks on accounting as an integrated response to the interactions of the marketplace, statistics, government and law, and economic

organizations.10 Goldberg suggests that although accounting most often finds its expression in financial,

that is, monetary terms, accounting and management share

so much common ground that they are virtually inseparable." It will be demonstrated presently that Goldberg's view is the most reasonable and valid one, espe8Eldon S. Hendriksen, Accounting Theory (Homewood, Ill.: Richard D. Irwin, Inc., 1965), p. 18.

9Barbara Ross, "The Accounts of the Stewards of the Talbot Household at Blakemere: An Example of Medieval Accounting Practice," Abacus, Vol. IV (August, 1968), pp. 51-72. Although this article deals in great detail with a specific medieval situation, the author implies that accounting in this and other situations began for the servicing of management's needs for operational information. See also Kenneth S. Most, "New Light on Medieval Manorial Accounts," The Accontant, Vol. CLX (January 25, 1969), pp. 119-21. Most asserts this directly by pointing out that accounting developed in manors, and since these were essentially sealed off from external influences or requirements, the response must have been for internal needs, and therefore accounting could have developed initially for managerial purposes only.

10DR Scott, The CulturaZ Significance of Accounts
(Columbia, Mo.: Lucas Brothers Publishers, undated), p. 7.

11Louis Goldberg, An Inquiry into the Nature of Accounting (Lvanston, Ill.: American Accounting Association, 1965), pp. 16-19.







85


cially in view of the purposive concepts of both management and information as developed in Chapter II.

Accordingly, the identification of two kinds of accounting, financial and managerial, as related to the universal practice of management, seems inappropriate. The distinction appears to depend on ultimate users. If it is used by those who generate it, i.e., internally, it is managerial, but if communicated to outsiders, it is financial. However, whether designed or used internally or externally as an aid for decision making, it represents evidence per se. In terms of Management Information Systems, this seems like a slender distinction to draw. Moreover, it seems to imply that financial accounting information, being directed as it is to out-siders, is not useful or appropriate for internal uses. But the issue is not the appropriateness of the information; the crucial issue is the information's influence and use. In this regard, Bierman and Drebin are quick to agree by stating that "both financial and managerial accounting are concerned with supplying information for decision making, and there is considerable overlap."12

Therefore, it would appear that accounting generically has the provision of information for decision making as its purpose, and subject to certain constraints, ful12Bierman and Drebin, Zoo. cil.







86


fills the derived concept's statement of purpose for Management Information Systems. Therefore, a more detailed investigation of the rationale of accounting is needed in order that the unified character of accounting and its relationship to Management Information Systems may be understood. Although this study is concerned with managerial aspects, and therefore suggests the approach should be from the managerial accounting point of view, this is inappropriate, as will be demonstrated. Consequently, the development of the rationale of accounting will be initially from the point of view that everything in accounting which is not designated as financial accounting is, by elimination, managerial accounting. Later it will be shown that financial accounting serves some of the purposes of managerial accounting, but the initial focus is on financial accounting.

Originally, organizations were more or less free to adopt and use their own rules for management and accounting information 13with little outside interference. This, however, made the statements of one enterprise incomparable with those of another.14 With the rise of large-scale, widely owned enterprises during the


13As defined earlier in terms of primarily internal or external users.

14A. A. Fitzgerald and L. S. Schumer, Classification in Accounting (Sydney: Butterworths, 1962), pp. 27-28.







87


industrial revolution, a demand for uniform measurement rules concerning the results of enterprise emerged. 15

This need was satisfied by an adaption of the double entry

bookkeeping system which dates back to medieval times.'6

This system was originally internally oriented,17but it

offered the seekers of uniformity the great advantage of

an established, relatively simple set of attributes for

information which had stood the test of time. These were

that information was expressed in monetary terms, and

only information based on "transactions" was admitted

to the system.18 These criteria were borrowed and adapted to apply to externally directed or financial account15 Harry C. Bentley, The Science of Accounts (New
York: Ronald Press Co., 1911), p. 10. See also Nicholas A. H. Stacey, English Accountancy: A Study in Social and Economic History: 1800-1954 (London: Gee & Co., Ltd., 1954), p. 1. Some writers see an earlier development of financial accounting arising from the riskiness of venture undertakings and the need for a common basis of evaluating results across undertakings. See George, op. cit., p. 32. Despite the demand for comparability over time, it still has not yet been fully achieved, and agitation for greater uniformity persists. For example, see Leonard Spacek, "The Need for an Accounting Court," Accounting Review, Vol. XXXIII (July, 1958), pp. 368-79.
16R. Gene Brown and Kenneth S. Johnston, Paciolo on Accounting (New York: McGraw-Hill Book Co., 1963), pp. 810. Double entry bookkeeping is often erroneously attri-buted to Luca Paciolo who was the first to publish a work on its principles and operation (in 1494), but he was not the originator. Its use by Genoese bankers as early as 1340 is known, but its date of origin and its inventor are unknown. See George, op. cit., pp. 30-39.

'7Hendriksen, Zoc. cit.


'8Brown and Johnston, op. cit., pp. 25-26.






88


ting. The double entry scheme was consistently applied to financial accounting, and over time, the financial focus gradually became the prevailing one for accounting and was reinforced as the numbers of enterprises which had to give a reporting of its activities to outsiders grew.19
Also, accounting writers of particular note in the
early twentieth century, 20 in their attempts to cope with the demands of a rapidly changing economic environment, tended to stress--almost exclusively--the financial aspects of accounting.

In the 1920's Paton developed a financially oriented

theory of accounting appropriate for the corporate form

of enterprise which attracted a great deal of attention

and served to reinforce the idea of the core function of


19William Andrew Paton, Accounting Theory with Special Reference to the Corporate Enterprise (New York: Ronald Press Co., 1922), pp. 10-11. Also, it should be noted that the number and variety of outsiders were growing as well. For example, the legislation of a federal income tax created an outsider of substantial importance.

20Four such writers stand out in particular: Henry Rand Hatfield, Modern Accounting (New York: D. Appleton & Co., 1913); C.E. Sprague, The Philosophy of Accounts, 5th Ed. (New York: Ronald Press Co., 1922); Arthur Lowes Dickinson, Accounting: Practice and Procedure, 2nd Ed. (New York: Ronald Press Co., 1914); and Paul-Joseph Esquerr6, The Applied Theory of Accounts (New York: Ronald Press Co., 1917). However, this is not to say that accounting writing was limited to the financial area. There was considerable intellectual activity in the managerial field as well during this period, but, nevertheless, the emergence of the accountant as a professional man rather than as a bookkeeping tradesman seemed to come from the public's demand for independent, qualified, and unbiased financial reports.







89


accounting as the communication of financial reports to

outsiders.2' Canning attempted to combine the practical

art of accounting, in terms of external reporting, with

the science of economic valuations, both of which were

expressed in monetary terms. 22 The American Institute

of Certified Public Accountants, the best known and most

influential of the "Professional" accounting groups,23

regarded financial accounting as accounting's raison d'

etre. Indeed, the financial emphasis--the provision of

21 Paton, op. cit.

22 John B. Canning, The Economics of Accountancy: A Critical Analysis of Accounting Theory (New York: Ronald Press Co., 1929). Canning asserts that the purpose of the accountant is "the determination of financial position." Ibid., p. 179.
23 This organization, often referred to as the AICPA, is the result of several mergers and name changes. The first group of public accountants in the United States was established in 1887 as the American Association of Public Accountants. In 1916, the name was changed to the American Institute of Accountants (AIA). This association merged with the American Society of Certified Public Accountants in 1936 and continued as the AIA until 1957, when the present name was adopted. See Joseph A. Silvoso and Royal D. M. Bauer, Auditing, 2nd. Ed. (Cincinnati, 0.: SouthWestern Publishing Co., 1965), p. 2; and "What's in a Name," JournaZ of Accountancy, Vol. CIII (June, 1957), p. 30. Henceforth, to avoid confusion and needless repetition, references to this chain of organizations will be either to the American Institute of Certified Public Accountants or to the "Institute." It should also be noted that the Institute has long regarded the "profession" of accounting as being limited to attest function in which the accountant performs as an independent agent, governed only by his own judgment, integrity, and a code of ethics. There are many other organizations of accountants, such as the National Association of Accountants, but these cover broader areas of interest than does the Institute's membership and none seem to have the influence of the Institute.







90


information to outsiders--became so pervasive that accounting was generally defined, until recently, as:

The art of recording, classifying, and summarizing in a significant manner and in terms of money,
transactions and events which are, in part at least,
of a financial character, and interpreting the results thereof.24

With respect to this statement, Kohler believes that the three expressions, "in terms of money," events," and "of a financial character" are specifically embodied in the concept of a "transaction. ,2 s The transaction is the basis for accounting activity and the core problem in accounting is the criteria for the recognition of a transaction:

Recognition is dependent on the occurrence of
the event or the existence of the condition, a determination of the accounts affected, an ascertainment of the money amounts involved, and an administrative review of the adequacy of referable, supporting data serving as objective evidence of component elements.26

A transaction is, therefore, an event, but only after the indicated criteria have been satisfied. Kohler be24 Committee on Terminology, Accounting Terminology Bulletin, Number , Review and Resum5 (New York: American Institute of Accountants, 1953), p. 9. This statement is a carry over of the statement published in 1941 by a similarly named committee. Italics have been added.
2 5 Eric L. Kohler, A Dictionary for Accountants (New York: Prentice-Hall, Inc., 1952), p. 9.


26 Ibid., p. 427.







91


lieves that accounting is solely a financial matter, and management decisions, whether internal or external, are best when based on the kind of "objective evidence" such a system generates.27

Kohler does not make any distinction between financial and managerial accounting. 28 However, it seems obvious that there may be certain occurrences falling outside these criteria which might be of use to management, andif known, might affect their decisions. But these are excluded from the accounting system Kohler posits.29 Therefore, it can be concluded that financial accounting maintained in accordance with these criteria is not inappropriate for managerial action but incomplete, and thus, since some information is furnished by such systems, financial accounting forms at least a part of a Management Information System.


27Ibid., p. 11. However, Kohler does indicate that
other evidence, "as supplemental data in corporate reports . . . may have some significance, as yet not fully developed, to management, investors, and others."

28Ibid. In fairness to Kohler, it must be noted that he was was writing in 1952, before the term "managerial accounting" had gained widespread use. In the third edition of this work published in 1963, he does employ the term, and in addition has since written an entire book on the subject. See Eric L. Kohler, Accounting for Management (Englewood Cliffs, N. J.: Prentice-Hall, Inc., 1965).
29Kohler, Dictionar', p. 11. Kohler asserts that "replacement cost, index-number valuation, Letc.,] neither having objective existence nor reflecting management accountability, is unsuited for accounting records or reports."




Full Text

PAGE 1

The Development of a Mul+i-DimensIonal Concept of Management Information Systems, with Particular Reference to the Conceptual Framework of Management Accounting By WILLIAM THOMAS STEVENS A DISSERTATION PRESENTED TO THE GRADUATE COUNCIL OF THE UNIVERSITY OF FLORIDA IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY UNIVERSITY OF FLORIDA 1970

PAGE 2

•f ACKNOVvLEDGFiENTS While a Ph.D. dissertation represents a doctoral candidate's original research, all dis£:ertations in large part reflect the intellectual stimulation provided by his faculty advisors. This study is no exception. My greatest debt is to my committee chairman, Lawrence J. Benninger. Professor Benninger not only struggled through each of ray many drafts but also constantly provided encouragement to continue. His unflagging commitment to the project of conceptualizing the Management Information System is deeply appreciated. The other menibers of my supervisory comjcnittee — Professors Ralph K. Blodgett, Charles W. Fristoe, and John K. J6mes--each contributed a certain, nonaccounting perspective to the Vvork . I would also like to acknowledge other contributions. Professor VJilliard E. Stone's support and willingness to let me use his classroom as a sounding board is most appreciated. Discussions with Professors William M. Fox and Walter Hill v;ere most helpful. Dr. Leo Herbert of the U. S. General i\cccuriting Office and Professor Carl T. Devinc of The Florida State University were always willing to take tim.e from busy schedules to help to clarify difficult areas. Finally, I am most grateful to Professor David Green, Jr., of the University of Chicago who offered the first and longest coivLinued support of both the subject of this study and its author.

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TABLE OF CONTENTS ACKNOWLEDGMENTS , ii LIST OF TABLES V LIST OF FIGURES vi ABSTRACT vii CHAPTER I INTRODUCTION 1 The Nature of the Study 1 The Signif icanoe of a Manag eraent Information Systems Concept. . 20 The Purpose of the Dissertation . 25 The Methodology to be Employed in the Dissertation ..... 27 The Organi zation of the Remainder of the Dis sertation ... 28 II THE DIMENSION OF PURPOSES— A DERIVED CONCEPT OF ^^ANAGEMENT INFORMATION SYSTEMS . 30 Purpose and Organiaatio'n of the Chapter 30 The Lack of a Consensus Viewpoint on Manag erne nt Information Systems 32 Compcyient ^lord Analysis ..... 42 .4 Derived Concept of Management Information Systems 59 Reconciling the Derivation to Statements on Management Information Systemis 60 Siimm.ary and Conclusions 77 III THE DIMENSION OF PERIMETERS— THE DERIVED CONCEPT CLARIFIED .... 79 Purpose and Organisation of the Chapter . ". 79 The Rationale of Accounting ... 83 Reconciling the Derived Concept to Managerial Accounting Statements Relating to Management In fo rM avion Sys-v ems 98 .4 Restatement of the Derived Concept of Manag emeyit Inform.ation Systems in Two Dimensions . . . 115 ii.i

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TABLE OF CONTiiNTS (continued) III Additional Elements Which Indicate the Existence of a Third Dimension to Management Information Systsms ...... 119 Summary and Ccrielusions .... 121 IV THE DIMENSION OF PROCE.SSSS — THE DERIVED CONCEPT EXPANDED . 124 Purpose and Organization of the Chapter 124 The Process of Management and Its Relationship to Management Information System.s 125 The Information and Communication Aspects of Management Info2'maticn Systems 141 The Behavioral Facets of Management and Communication Processes ........... 158 A Camparis on of the Processes of Management Information Systems laith the Implied Processes of Management Accouriting Information System^s 183 Summary and Conclusioyis .... 185 V A THREE-DIMENSIONAL CONCEPT OF MANAGEMENT INFORI^lTiTlQN SYSTEMS AND SOME OF ITS IMPLICATIONS FOR ACCOUNTING 190 Purpose and Organisation of the Chapter . / 190 A Complete Concept of Management Information Systems ..... 190 Some Implications of the Concept 192 Summ.ary and ConcZusio?is .... 214 VI SUMxM?.RY AND CONCLUSIONS 218 BIBLIOGRAPHY 225 BIOGPJvPHICAL SKETCH 248 i.v

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LIST OF TABLES TABLE PAGE 1 MANAGEMENT INFORMATION SYSTEMS (The Common Ground) 40 V

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LIST OF FIGURES FIGURE PAGE 1 The Integration of a Management Information System with the George Management Process Model 76 2 The Management Process 133 3 The Hierarchies of the Management Process 135 4 The Relationship of the Organization to the Hierarchies of the Management Process 138 5 Examples of Comjnunico.tions fretworks ... 151 6 Management and Communication Networks in an Organization . » . . 157 7 The Interrelationship of the Leadership and Management Processes 180 8 The lyiterrelationehip of the Managementt Communication j Information j and Leadership Processes 182 9 Financial Accounting Inform.ati on Systems Compared with Management Information Systems 205 vi

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Abstract of a Dissertation Presented to the Graduate Council in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy THE DEVELOPMENT OF A MULTI-DIMENSIONAL CONCEPT OF MAN/iGEMENT INFORMATION SYSTEMS, WITH PARTICULAR REFERENCE TO THE CONCEPTUAL FRAMEWORi'. OF MANAGEMENT ACCOUNTING by William Thomas Stevens June, 1970 Chairman: Professor Lavzrence J. Benninger Major Department: Accounting The term "Managem.ent Information Systems" has become popular in recent years; hov7ever, there does not appear to be any consensus regarding either its meaning or its proper area of usage. The expression is often employed one-dim.ensionally , that is, as a secondary support for other areas of interest such as data processing, manageraent, system.s, etc. This has led to a variety of meaning and contradictory assertions and suggests that Management Information System.s per se warrant the development of a multi-dim.ensional concept. The first step in developing the concept v/as to determine the present state of the art of Management Information Systems. Since there appeared to be no consensus on the subject, an indirect approach v/as indicated Accordingly, a first-approximation concept was derived by vii

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analyzing the individual meanings of the words comprising the term "Management Information Systems." "Management" was found to be the act of making decisions to resolve a problem; "inf oirmation" was whatever influences the mind, i.e., is used to settle the issue; "systems" conveyed the idea of wholeness and orderliness. Combining these analyses led to identifying one of the dimensions of a Management Information System as its pu:i'poses — the provision of information. It was found that the purposes of a Management Information System have had a long and almost verbatim expression in the literature of accounting, especially in the branch of accounting known as "management accounting." In addition, existing accounting research provided a means for identifying a second dimension of Management Information Systems--the perimeters or attributes of the information output of such systems. The set of perimeters for distinguishing information from non-information contained four elements. In order to qualify as informiation the system's output m.ust be: (1) relevant — logicc.lly connected v/ith the problem under consideration and carrying some degree of influence to the user as v.'ell as stemming from sources perceived as being competent; (2) verifiable^ which requires that independent parties using the same inform.ation come to essentially the same conclusions; (3) quantifiable, i.e., capable of being measured; and (4) viii

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fTee from bias both statistically and personally. The two diraensions of purposes and perimeters v/ere reconciled to statements in the literature concerning Management Information Systems and were found to be consistent with them.. Since they share two identical dimensions, it was concluded that a Management Accounting Information System is at least a subset of a Management Information System. VThether or not the systems are identical — different names for the same thing — depended upon their sharing a third dim.ension — the processes through V7hich the static dimensions of purposes and perimeters are translated into action. Three processes were identified: (1) management; (2) communication; and (3) leadership. These v;ere found to be interdependent as well as interrelated with the other dimensions. In addition, they were the same for both Management Accounting Information System.s and Management Information Systems. It was concluded, therefore, that these systems are conceptually identical and tha-c the differences in design and output v;hich exist are a function of the problem under study and not the systems . ix

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CHAPTER I INTRODUCTION The Nature of the Study The current literattare of business contains many references and allusions to Management Information Systems.^ Often, these ax^e indefinite, incomprehensible, incomplete, or inoperational . ^ These shortcomings appear to be due to tv;o primary difficulties. Firsts there are no well identified and generally accepted boundaries or attributes established for Management Information Systems. Hov.-ever, the v/ord "boundary" implies a "limit" or enclosure v/hich suggests an extension in only one direction. Since a Management Information System, extends in several directions simultaneously, it seems best to substitute the v/crd "diiTiensions" for boundaries. In this sense, it can be said simply that while one or more boundaries have been proposed for Management Information Systems, the dimensions of such systems have not beeii determined. Second^ the ^ Since the subject of this study is Memagement (and other) Information Systems, this term(s) will be capicalized consistently. ^There are literally thousands of such references or allusions and many of these are redundant. Therefore, for obvious reasons, not every statem.ent on the topic has been examined ox" analysed. Consequently, the corraaents to follow refer to only thos^" statements examirjed in the course of this study. 1

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literature on the subject contains many contradictions which indicate weaknesses in the language and/or dimensions employed. These two siibproblems, caken together, represent a significant problem; specifically, that a complete multidim.ensional, and operational concepr of Management Information Systems has yet to be fcrm.ulated. In order to demonstrate both the existence and nature of this problem, examples will be drav.m from current publications on the subject, and the matter of limits, taken both individually as boundaries and collectively as dimensions, will be considered first. Next, some examples of contradictions in the literature will follow, and finally the results of these analyses will be incorporated into an examination of the basic issue — the absence of a multi-dimensional concept of Management Information Systems. The Boundaries of a Management Information System A review of the literature in v;hich the expression Management Information Systems is employed reveals that the term is often used one-dimensional ly, that is. Management Information Systems are treated as secondary matters supporting some other primiary field of interest. In such inctances, the attributes assigned to the Management Inf orr.iation System are not those of the system but m.ore properly belong to the primary interest field and are ex-

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3 panded or contracted as needed in order to make them coincide and harmonize with the primary interest. This may be highly useful in the study of such primary fields. It m.ay even be representative of actual operations, but forcing essentially extraneous boundaries on to a subsidiary field does not depict a true integration of concepts. Moreover, these fluctuating boundaries add little to one's understanding of Management Information Systems per se and may leave seekers of knowledge in this area with feelings of uncertainity or confusion. There are four m.ajor fields in which the term Management Information Systems appears commonly, but in a supportive role. These will be examined in order to demonstrate the subproblem . area of confusion created by the uncertain boundaries assigned to Management Information Systems. Clearly, if the collective of boundaries is uncertain, dim.ensions cannot be established. Data process ing The interests of a number of V7riters are centered on data processing, especia].ly electronic data processing. In these instances, the Management Inf onriation System, frequently finds its dimensions expressed as an almost automatic consequence of fulfilling a specified set of objectives, of V7hich the follov;ing are typical: 1. To provide management with information it must have in order to take action before status becomes history; 2. to reduce over-all com.pany costs by using a raechanical system to provide timely man-hour and

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4 schedu.ling information that can be obtained currently only through manual means; 3. To provide a means of more effective manhour control; 4. To provide a means of reducing the flow time of schedule status and man-hour reports through a mechanical system; 5. To record a transaction immediately in a form directly usable by the computer program; 6. To reduce the manual transcription and mechanical conversion of the data used as input to the computer . ' The emphasis here seems to be on processing problems contained in a set of electromechanical components designed to manipulate data, and the existence or absence of a Management Information System is equated with the solution set to these problems. Nevertheless, these objectives do imply the existence of a set of boundaries for Management Inform.ation Systems. The first objective suggests that historical matters are not a proper part of a Management Information System — the relevant tim.e frame embraces only the present and/or the future. The second goal implies that some decreasing "over-all" cost function must exist, and furthermore that it cannot be manually performed. The fifth purpose indicates that "information" must result from a "transaction," which suggests that data emerging from other bases are not "information.""* ^Richard A. Johnson, Fremont E, Kast, and James E. Rosenzweig, The Theovij and Management of Systems (New York: McGraw-Hill Book Co., 196 3), pp. 197-9 8. "^This notion seems important and has attracted a considerable amount of recent attention v/hicb either sup-

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This viewpoint is quite specific and if it represented a consensus viev; there would be no problem, but unfortunately there is no expressed consensus on Management Information Systenis even within the field of data processing. To illustrate, Gregory and Van Horn, in a v;ork described by one authority as "monumental" ^ and "an ambitious attempt to get the v/hole of . . . [electronic data processing] between tv;o covers,"^ state that "data processing ... is an element of a much larger system — namely, the management information system."' This turns the earlier viewpoint inside out and makes the boundaries of Management Inform^ation Systems nebulous. Both reference frames, with some modifications, are commonly used. Each appears to possess merit with respect to certain aspects of data processing, but they tell one very little about the character of Management Information Systems . Syetevis T"ne primary interest of another group of writers lies in the broader, generic area of "systems," and in this exports the statv.s quo or proposes an expanded definition of a "transaction." This matter v/ill be taken up in some detail first in Ch . Ill, and later again in Ch. V. ^. W. McRae, The Irr.paot of Comvitters or. Accounting (New York: John Wiley £ Sons, Inc., 1964), p. 283. ^Ibid. ^Robert H. Gregory and Richard L. Van Horn, Automatic Data Processing Systems^ 2nd Ed. (Beimont, Calif.: VJadsworth Publishing Co., 19C3) , p. 565,

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6 panded frame of reference the boundaries of Management Information Systems expand accordingly. In his definitive work on systems analysis. Hare describes a system as a set of "elements, relationships, and procedures to achieve a specific purpose."® This implies a completeness or wholeness, but how this is related to a Management Inform.ation System is not made clear when, in almost the same breath, Hare regards "information" as both a means and an end, depending on the goal sought. At the same time, however, he believes that "management" cannot be a proper objective since it does not exist for itself.^ At most management represents a subobjective which underlies a functionally attainable goal. In the past, systems analysis either concentrated on such specialized Subgoals as mana4 gement, accounting, computer programraing , etc., or it emphasized some basic philosophy, set of values, or other generalized rationale in support of some broadly expressed purpose. At present, the trend is m.oving away from both the minutiae of specilization at one extreme and the sweeping generalization at the other. Current emphasis is placed upon gaining an understanding of the "patterns" of ®Van Court Hare, Jr., Systems Analysis: A Diagnostic Approach (New York: Harcourt, Brace and World, Inc., 1967) , p. ix. ^Ibid. There is a substantial body of management literature opposed to this vievrpoint. This will be considered at length beginning in Ch. II.

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7 existing or eir.crging relationships as these influence the achieveraent of goals. Although the broadness of the systems approach transcends data processing and approaches universality, as was the case of data processing, there is no consensus in the systems frame of reference. Karlin, for example, has an even broader outlook since he defines a system, simply as "a set of transacting elements. "^^ This, in effect, eliminates the restrictive boundary of purpose. The scope of the "system.?" approach is such that the Managem^ent Information System can erchrace as much or as little as one desires, depending on how close to universality one wishes to come. This analytical frame of reference doubtlessly has a number of uses but it does not appear to offer m.uch assistance to those seeking an understanding of the foundations of the term Management Information Systems, Infcrmation Some writers concentrate their primary interest on what m.ay be called "information." In such instances, the Management Information System has its meaning and boundaries expressed in terms of information. Theil, a pioneer ^ ^Arthur D. Karlin, "Thoughts on a Systems Concept," Paper read before the Southeastern Regional Meeting of the American Accounting Association, Chattanooga, Tenn. , April 30, 1966.

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8 in the study of information, describes information as "a change in expectations about the outcome of an event. "^^ This notion is broader than Hare's concept of systems and more specific than Karlin's, and therefore lies between the two. It is, however, closer to Karlin's viev; since it implies that an objective need not be expressed. Moreover, the restrictive idea of "wholeness" is not required since knowledge of the relationship patterns is not specified as a necessary antecedent condition. However, as v/ith the other reference frames discussed thus far, there is no consensus viev; on information. Deutsch, as an example, asserts that "information is what is transferred ... it is not events as such, but a patterned relationship between events. "^^ This notion seems closer to Karlin's idea of "transacting elements" comprising a system than it is to any common conception of information. In any event, the matter is not made clear by these statements. Also, information-oriented theories tend to go far beyond the usual notions of what constitutes "management," and conse^^Henri Theil, Economics and Information Theory (Chicago: Rand McNally and North Holland Publishing Co., 1967), Ch. I, as cited in William H. Beaver, "The Information Content of Annual Earnings Announcements," Emvirical Research in Accounting : Selected Studies ^ 196 S (Supplement to Journal of Accounting Research, Vol. VI), p. 68. ^^Karl W. Deutsch, "Mechanism, Teleology, and Mind," Philosophy and Phenomemologioal Research , Vol. XII (December, 1951) , p. 196 .

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9 quently, they disclose little about the inherent nature of a Management Information System. The search for boundaries must continue. Managenent A number of theorists fix their attention on what is sometimes vaguely called "management." Interpretations of the meaning and functions of management vary and Managem.ent Information Systems, when examined in this context, are equally varied. Although the term information also possesses variety in its assigned definitions, these are generally variants of the same concept, and therefore are essentially compatible or supportive of each other. This, however, is not strictly the case for management for v;hich there is a wide range of interpretations and theoretical constructs . A currently prevalent view of managem.ent is the one which can be called humanist . Mundel states that "management" iiTiplictly refers to "an integrated human group. "^"^ The essential action components of management are limited to those occurring because of or between people, or v;hich are related somehov; to human beings, hov/ever tenuous the relationship might be. However, the emphasis on people is * '^Marvin E. Mundel, A Conceptual Frameh)ovk for the Manaqement Soisnoes (New York: McGraw-J^i] 1 Book Co... 1967) , p. 66.

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10 mandatory, not permissive. People form the boundaries of management , ^ ^ and apparently also establish the boundaries of the Management Information System. Does this confound or clarify the matter? Can events of significance occur in the absence of people? Is the real issue one of effects on rather than by people? When fully extended, is this people-oriented notion so global that, in effect, it can lead only to either paradoxical observations or to moot propositions?^^ Another of the reference frames for management finds this overriding human factor softened. This approach has its focus centered on the action of deaision making, and in this respect, Simon notes that it is proper "to take liberties with the English language by using 'decision making' as though it were synonymous with 'managing.'"^' Decision making, when broadly interpreted, can be associated with human beings, but this shift in the meaning of "management" has the effect of narrowing the earlier con^ ^Ibid.^ pp. 66-68. ^^A well-known one can be paraphrased as follows: If a tree fell in the forest and nobody was there to hear it, would it make a noise? In the context of Management Information Systems under the humanist approach to managing, one could also ask, "VJould it be information? Could it ever be management information?" Under this approach to management the only relevant question is, "Did someone cut it down, or did it just simply fall down? ^'Herbert A. Simon, The Shape of Automation for Men and Management (New York: Harper and Row, Publishers, . 1965) , p. 53.

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11 cept of managerfisnt presented. The issue here seems to be one which focuses on event expectations and the potential actions which night be taken in order to influence, take advantage of, or outrightly control thera. Thus, the emphasis becomes active rather than passive, and accor^dingly it becomes the function of a Management Information System to supply the inputs upon v/hich such actions are to be based. This differs significantly from the pure humanist concept of management. In yet another approach to management — the ojygcnizational view — the commitment to people as the agents of action is shifted to a concern about the philosophical and psychological nature of those who manage. For exam.ple, Ev;ing believes that while managem.ent involves people at dif ferent functional levels — the managers and the managed — the most significant aspect of managing is the commitm.ent of the managers "to the life and growth of the organization."^ On initial inspection this may appear to clarify the idea of management and to narrov; its boundaries, but it at once raises a new issue--v;hat is an organisjation? Perhaps the sim.plest response comes from Litterer, who notes that an organization is essentially a purposeful entity.^' ^^David W. Ewing, The Managerial Mind (London: Collier-ilacmiJ.lan, Ltd., 1964), pp. 2-3. ^ ^Joseph A. Litterer, The Analysis of Organizations (l\ew York: Johri V7iley & Sons, Inc., 1965), pp. 5-6,

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^ 12 It V70uld appear, therefore, that the search for the boundaries or attributes of a Management Information System has come full circle back to "systems" in which specific purposes were required. Ey a narrower interpretation, it could also return to data processing v;herein the issue was one of decisions, costs, and so on. Dearden objects to over-emphasizing such corollary aspects of Management Information Systems, especially data processing. He suggests that the electronic processing of data, as a function, is not identical with the function of managing, and moreover that management is connected inextricably with its organization and its objectives without regard to whether or not people per se are active, passive, or even exist. Thus, the proper area of focus for a Management Information System is the organizational operations of management. ^ " Finally, although not exhaustively some students of managemient, especj.ally those interested in Management Science simply emp] oy the term Management Information Systems v/henever they deem it desirable to do so and avoid ^"john Dearden, "Can Management Information Be Automated?" Harvard Business Review, Vol. XLII (March-April, 1964) , pp. 128-35. ^ ^The orientation in this field is quantitati^'e , and accordingly includes operations resee^rch and other mathem.atical techniques used for both conceptualizing and implementing managerial operations.

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13 making any statements on the matters of boundaries, defini tion, or concept. It appears, therefore, that the boundaries of the Management Information System have not been firmly established; no consensus exists; and often the term appears to be employed as a supportive notion for other, more immediate interests of the writers. In such instances. Management Information Systems per se are neither studied nor analyzed. This results in doubt, confusion, and possibly misdirected attempts at implem.entation. One cannot grasp an idea effectively nor apply it without understanding the inclusions and exclusions of the notion. Contradictory Statements on Management Information Systems Not only are the boundaries of Management Information Systems unsettled, but often the language, terminology, and ideas expressed on the subject are contradictory, and this adds to the confusion. This v/ill be demonstrated by reference to the total systems approach to Management Information Systems. Moravec regards the "total system" as the natural objective of many existing computer installations in which ^^For example, see Eugene D. Homer, "A Generalized Model for Analyzing Manaqeraen t Information Systems," Managemeni Science, Vol. VIII (July, 1962), pp. 500-15. The key term of the title, Management Information Systems, not only remains undefined but never even appears in the text. This is by no means the only example of such outriaht avoidance in the literature.

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14 all major operations, such as purchasing, inventory control, and so on, are regarded as distinct "subsystems" but treated as a whole by integrating them. All information, regardless of duplications, developed in the subsystems is fed into the overall system, hence the term "total." The computer merges these inputs, and by means of editing programs, eliminates the duplications. Thus, in the final analysis, all information appears, but only once. This, in effect, encourages the gathering of a wide range of data — regardless of their ultimate usefullness — and the proliferation of subsystem.s for handling the information in order to ensure maximum coverage.^"' Others, hov;ever, use the term "total systems" quite differently. Under this interpretation, which is the more common one, the edit operation is shifted from the output to the input stage. The totality is achieved by entering everything into the system, but only once. This is accomplished by fully integrating the subsystems into a whole and viewing operations in terms of this entity. As a result, the merging and editing operations are eliminated.^'' ^ ^A. F. Koravec, "Advanced EDP System.s — The Total Systems and the Single Inform.ation Flov; Concepts," in .4coounting and the Computer (New York: American Institute of Certified Public Accountants, 1966), pp. 273-86. ^^E. R. Dickey and N. L. Senenpier, "Total Systems Concept," in The Ensy olopedia of Management , Vol. II, ed. Carl Heyl (Nav; York: Reinhold Publishing Corp., 1963), pp. 991-95.

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15 However, if one returns to the earlier idea of total systems, it will be found that Moravec favors this technique but refers to it as "the single information flov; concept."^ ^ Therefore, there is no fundamental disagreement or controversy, only terminological contradictions. Many such incongruities exist — what appears to be a controversy is really an issue of semantics rather than concepts. There appear to be two causes of this difficulty. Karlin expresses one of them as follows: The terms systems approach and total system bring . . . difficulty. In their conception, we face all the problems that were faced in thinking of economic and accounting systems. But in addition, almost all coricretenes r leaves the scene and an uncomfortable, almost total abstractness enters. We have few, if any, examples and little, if any, direct experience v/ith something called a systems approach or a total system. In the absence of "concreteness" and "experience" the communicative powers of language fail, and in efforts to explain phenomena, collapse resulting in contradictions, confusion, and vaguely expressed dimensions.^' This, in turn, is manifested in the second cause, the lack of a pragmatic cind concrete concept of Manageriient Information ^ Moravec, loa. cit , ^ ^Karlin, loc. cit.j italics added. ^ 'For example, see James G. March and Herbert A. Simon, Organizations (New York: John Wiley & Sons, Inc., 1958), p. 15S, where the authors attribute the cause of such language limitations to the "process of uncertainity absorption. "

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16 Systems capable of being operationalized as well as understood. This appears to be the cere of the problem. The Core Problem: The Lack of a Management Information Systems Concept IVhile nebulous boundaries and literary contradictions are, in themselves, serious matters, they are essentially only symptomatic of a larger problem-the failure to identify and specify all the dimensions-~tha.t. is, the integrated collective of boundaries or attributes of Management Information System^s. This needs to be done in oi'der that such systems may be related to experience, and thus, fully understood before attempting integrations v/ith other, perhaps better, conceptualized fields. This difficulty finds its expression in the lack of a concept of Management Information Systems. However, this is not to say that there have been no attempts to conceptualize the Management Information System. Quite to the contrary, there have been many such constructions but these first, groundbreaking attempts have tended to be too global in scope, and therefore, too abstract. Such "field" theories unfortunately tend to be so broad as to be almost meaningless abstractions and are often characterized by "jargon," in the negative sense of that word.^^ For example, one ^ ^The word "jargon" has tv;o banic meanings. One is positive and represents the expression of tecfmical knowledge in a field by those v?ho possess competency in that

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17 writer sought to establish the concept of Management Information Systems in the following terms, as: An approach that visualizes the business organization as a single entity composed of various interrelated and interdependent subsystems working together to provide timely and accurate information for management decision making, v/hich leads to the optimization of overall enterprise -I 2 9 goals . Another v/riter says : The one paramount problem facing management today is the development of an integrated management effort .... The ultimate solution of this vital problem . . . rests with the development of an optimal, integrated management information system, the output of which can and will contribute heavily to the eventual development of integrated management operations. " There are many similar statements in the literature on Management Information Systems, but these will serve a adequate examples. It is perhaps unfair to, characterize these statements as jargonistic (in its negative sense), but attempts, such as these, to cover all possible contin gencies often raise more questions than they answer and do not conmunicate much by way of operational specifics. field. The other is negative and is characterized by "Ob scure and often pretentious language marked by circumlocutions and long words." See Webster's Seventh New Col legiate Dictionary (Springfield, Mass.: G. & C. Merriam Co. , 1965) , p. 454. 2 ^Donald L. Caruth, "How Will Total Systems Affect the Corporation?" Journal of Systems Management^ Vol. XX (February, 1969), p. 10. ^''Norman J. Ream, "The Need for Compact Management Intelligence," in Management Control Sy stems ^ ed. Donald G. Malcolm and Alan J. Rov;e (New York: John Wiley & Sons, Inc. , 1962) , p. 90 .

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18 In Karlin's terms, concreteiiess vanishes and the drift is towards a total abstraction. In this respect, McGuire has noted that [Possibly] some sort of eclectic model , . . will evolve . . . [but in the meantime] we must be satisfied v/ith looking ... in a noncohesive manner, from all angles, so that v/e may better be able to understand. ^ ^ Seeking a cohesiveness for a.ll related concepts and a totality of theory, particularily during the formative stages in a field^ often leads to language problems which result in either the loss or diminishment of meaning and significance. As Rigby, in his v;ork on the methodology of research in business areas, observes: [Such] language ... is quite new . . . [and] is meaningful to a relatively small group of people .... A few basic terms . . . are becoming widely known but are only vaguely understood or are loosely interpreted,^'' Based on the examples cited earlier, it seems clear that a case can be made for asserting that Management Information Systems is such e term. Rigby continues: Many terms . , . have a technical meaning quite apart from that of conversational language. It m.ay som.etimes be better ... to develop new terms for a new concept . . . rather than to continue to use terms taken from conversational language. One advantage . . . [is '^Joseph W. McGuire, "The Concept of the Firm," California Management Review^ Vol. Ill (Summer, 1961), p. 88. '^Paul H. Rigby, Conceptual Foundations of Business Research (Mev: York: John Wiley & Sons, Inc., 1965), p. 10. The em.phasis is added.

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19 that it avoids] confusion with concepts of general conversation. Inventing new words, on the other hand, can mean new labels without new concepts or any concepts at all. This practice of labels without concepts — words without meaning — is often referred to as jargon. It can slip into scientific writing when the writer . . . [thinks] the new term is associated v;ith a new concept. ^ ^ This observation is applicable to Management Information Systems, a relatively new terra which seems to have problems with its language. Attempts to express Management Information Systems in universal terms lapse into this kind of jargon and suggest the absence of concept. The term has become a "catch" phrase designed to capture attention, but unfortunately, it often expresses no specific idea. If there is more to Management Information Systems than shibboleths, then conceptualization is demanded in order to convey meaning and understanding compatible with Karlin's "experience" frame of reference. Then, as experience expands, so too can the concept. If Management Information Systems are a viable part of some integrated and operational scheme such as systems, management, or business itself, a concept seems vital as a point from which to begin to operationalize such integrations. Ibid, J pp. 17-18. The stress is supplied. This statement, in a sense, represents the purpose of this study--establishing the hypothesis that Management Infor mation Systems is only a new term for an older concept still in the process of evolving.

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20 The Significance of a Management Information Systems Concept The foregoing discussion indicates that: (1) Manage itient Information Systems are often assigned a supportive or secondary role v/hich is attached to other fields, and therefore, such systems lack their own set of boundaries, the intevvelated collection of which may be designated as dimensions; and (2) tenainological contradictions abound in the literature. Together, these form the central problem of Management Information Systems — the absence of a .concept comprehending experience, and therefore capable of linguistic expression in meaningful terms. More positively, the need is for a Management Information Systems concept embracing all of the several interrelated dimensions v;hich may be designated as a multi-dimensional concept. These assertions are supported by the recognition of many writers that serious problems with Management Information Systems exist. Most of these writings deal with matters of detailed operations, but since these emer directly from the lack of a multi-dimensional concept, it is worthwhile to take note of them. Tv/o examples will suf fice to demonstrate the av;areness of operational difficul ties and the significance attached to them. Spencer sees five basic areas for concern: 1. Information systems are not designed for the three levels of management planning and control . .

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21 2. The information system does not match the organization . . . 3. The system covers dollars — not information . . . 4. The system produces encyclopedias instead of brief, pointed reports . . . 5. Internal operations are covered extensively, but external factors are disregarded Notwithstanding that a case could be made for classifying operational problems as a contributing sub-problem, it is readily apparent from the foregoing, as well as the other citations, that these difficulties can be traced to the placement of emphasis on one or more other primary areas — in this case, data processing especially — and thence, to the lack of an operational concept for Management Information Systems. This can be made clearer by reference to Couger, who lists some of the following barriers to a successful Management Information System: 1. Incomplete identification of managerial information needs. 2. Design of independent system.s for interdependent activities. 3. Systems priority not in accordance with its importance to the firm. 4. Inadequate feasibility studies. 5. Lack of post-implementation audits. 6. Failure to include external inforraation requirements . 7. Use of unsophisticated systems analysis and design techniques . ^ ^ '"•S. A. Spencer, "The Dark at the Top of the Stairs," Management Review^ Vol. LI (July, 1962), pp. 5-6. The third objection in particular will be examined in detail in Ch. III. ^^J. Daniel Couger, "Seven Inhibitors to a Successful Management Inforraation System," Systems and Pvoaedures

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22 Couger comes close to defining the core problem, but he is more concerned with the pressing matters of the here and now. Although these are important, concerning as they do, present operations gone awry, their temporary solutions represent little more than putting out small fires. Perhaps KcKechnie comes the closest to expressing the core of the problem: In reality, a "total" system is impossible to attain. Management must, howevex*, be provided with sufficient information. We shouldn't be trapped into believing that a quick and easy determination of what inform.ation is "adequate" for executive decisions exists, even at the highest levels. It will take all the skill that can be mustered to coagulate specific bits and pieces of data into . . . [inf orrr.ation] that will be meaningful to the executive decisionmaking process. The significance of this is best demonstrated by reference to data processing in which the link v/ith Management Information Systems is based on mechanization in general, and more specifically, on the process of acquiring and using computers. Data processing appears to be the most prominent reference point in the literature related to Management Information Systems, and there is a tendency to equate a data processing system (hardware and software Journal^ Vol. xf3( ( January-P'ebruary , 1968), p. 17. In a somewhat different reference frame the second item is the subject of Ch. IV. ^^A. K. McKechnie, "Why It Takes More than Hardware to Make an MIS," Systems and Procedures Journal, Vol. XIX (July-August, 1968), p. 28.

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23 as an integrated, operational package) with a Management Information System. In such instances, the significance of a Management Information Systems problem becomes a function of the numbers of electronic data processing systems in use or projected for the future. Beginning in 1937, v/ith the first computer, the Harvard Mark -Tj " ^ the number of computers in use expanded from one to about 15,000 by 1963, and represented a capital investment of about $5.6 billion.^® In mid-1967, estir.iates indicated that about 48,000 computers were in use, over half of which had been installed in the preceding three years, and by 1971, the outlook is for about 100,000 installations.^^ Moreover, it has been asserted that by 19 85, "the business organization . . . will be a highly automated man-machine systemi."'*" This suggests that the problem in this context alone is not only significant now but will become increasingly so. Data processing, however, is basically a narrow viewpoint, and the significance of Management Information Sys^'McRae, op. cit.^ p. 35. ^^Ihid.j pp. 260-61. The figures are for Europe, Canada, and the United States. '^Gordon B. Davis, "The Auditor and the Computer," Journal of Accountancy ^ Vol. CXXV (March, 1968) , pp. 4445. ** "Herbert A. Sim.on, "The Corporation: Will It Be Managed by Machines?" in Management and the Corporation: 1985 J ed. Melvin Anshen and George L. Bach (New York: McGraw-Hill Book Co., 1960), p. 18.

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24 tems is not limited to this area. "Systems" comprehends more than data processing systems, and therefore, broadens the importance of a Management Information Systems-based problem. Concepts of information m.ay reach far beyond the notion of systems, and certainly the concept of management also transcends data processing. VJhat is needed is a m.ulti-dimensional concept of Management Information System.s applicable to any and all of these areas. The Scope of the Study The formulation of even a basic, beginning concept of Management Information Systems is complex, and it must, of necessity, involve several individually complex variables. As indicated, it is desirable on the grounds of experience and the limitations of language as a surrogate for experience to hold the abstractiveness of a beginning concept to a level compatible with experience ^ Abstracting beyond this level would tend to severely impair if not destroy the concept's operationality . Therefore, to avoid some needless complications, the following five areas, even though they may have some ultimate relevance to Management Information System.s, will be omitted from direct discussion in this disserte^tion: 1. Management Science. As used here, this refers to the use of quantitative models and techniques of analysis, ^Implementations, however, are not the subject of this study.

PAGE 34

25 including operations research and statistical decision making of both the deterministic and probabalistic varieties. The quantitative approach has contributed significantly to the knowledge of business operations, but it does not appear to be vitally necessary for the basic conceptualization of Management Information Systems; moreover, such methods are often highly abstract.**^ 2. Planning J Programming ^ and Budgeting Systems. This analytically oriented method of planning, now widely used by the U. S. Government, is sometimes regarded as a specialized type of Management Information System. However, it is a very broadly based, conglommerate technique which depends partly on quantitative techniques, partly on systems, partly on economics, and partly on an incompletely defined set of interdisciplinary relationships. The field is relatively new, but ripe for detailed study. Its inclusion here, however, would needlessly complicate the development of a Management Information Systems concept without significantly contributing to it. 3. Data Processing . Neither mechanization nor data manipulations are at issue in this study. It v/ill simply be assumed that hardware and software are available ''^However, a simple, mathematical model of management will be employed in Ch. II, and the matter of information needs and uses by managem.ent, which have some relevance to this field, will be considered briefly in Ch. V.

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26 to mechanize a Management Information System if this seems desirable . 4. Systems. As noted earlier, the notion of systems is extremely broad. An operational concept of Management Information Systems based directly on system.s v/ould tend towards a high degree of abstraction which seems to be a part of the problem. However, the notion of systems is an imiportant underlying factor and will employed indirectly throughout the dissertation. 5. Economics . Finally, this study will not be concerned with evaluating the economic aspects of Management Information Systems. Cost-benefits, cost-effectivenesses, and other economic considerations are, of course, vital to any organization contemplating a formal Managem.ent Information System, but these are basically side issues, the analysis of which would detract from the purposes of this study. Therefore, it V7ill be simply presumed that the Management Information System, when under serious consideration, has satisfied these economic criteria. The Purpose of the Dissertation The overall purpose of this study is a composite of three related objectives: 1. To identify and establish the relevant dimensions of a Management Information System as a set of interrelated and interdependent attributes or boundaries;

PAGE 36

27 2. To demonstrate that what is currently called a Management Information System has had a long period of expression in the literature of accounting, although often designated by different terms, and therefore, that there is no fundamental difference between an Accounting Information System and a Management Information System. This will be shown by demonstrating that at least two of the dimensions of Management Information Systems can be determined directly from an accounting-based frame of reference and that the third dimension is a logical, although unexpressed, extension of the interdisciplinary aspects underlying the functions of accounting; 3. To combine the identified dimensions of Management Information Systems into a multi-dimensional concept appropriate to the present status of "experience." The Methodology to Be Employed in the Dis sertation The writing of this dissertation, in terms of sources, is primarily developed by library research and draws upon both theoretically and empirically based studies. The methodology employed in developing the conclusions reached in this study involves two steps. Firsts a number of notions are analyzed individually, and secondj the individual analyses are synthesized within a logical framework of relationships into a final result, the whole of which is consistent with its parts.

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28 The Organization of the Remainder of the Dissertation In Chapter II, the essence of a Management Information System is extracted from the literature, first by analyzing the term's component words and then synthesizing the results. This derived concept is compared with current expressions in the literature for consistency and compatibility. This essence may be likened to a statement on the present state of the art of the Management Information System and serves to establish the dimension of purposes for such a system. Chapter III is characterized by a similar treatment of accounting systems and information which leads to the identification of a second dimension of Management Information Systems--the perimeters of. the information produced by such systems. The dimension of processes which underlies the basic operations of a Management Information System and other information systems is developed in Chapter IV. In Chapter V, the dimensions of purposes ^ perimeters ^ and processes identified in Chapters II, III, and IV respectively are combined into a mu] ti-dimensional concept of Management Information Systems, and some of the implications of this concept-particular ily for financial accounting — are examined.

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29 The findings and conclusions of the study are summarized in Chapter VI.

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CHAPTER II THE DIMENSION OF PURPOSES — A DERIVED CONCEPT OF MANAGEMENT INF0RI4ATI0N SYSTEMS Purpose and Organization of the Chapter In Chapter I it was shown that the literary references or allusions to Management Information Systems treat the subject as though it possesses one dimension which is determined by the reference frame in which it is considered, and which varies as the frame of reference is changed. Thus, the dimensions of a Management Information System might lie, from time to time, in data processing, systems, information, management, or something else. This approach, while useful for understanding the reference frame, contributes little towards increasing knowledge or understanding of the inherent nature of Management Information Systems. More importantly, it does not aid directly in providing a sound conceptual foundation on which applications may be built. The time appears ripe, therefore, for such a theoretical construct as well as for a survey of the present state of experienced knowledge about Management Information Systems and methods of application which can be analyzed, combined, and expanded into a theory of Management Infonnation Systems. Such a theory is likely to extend in more than one direction, and therefore, be m.ulti-dimensional. 30 I

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31 In constructing a theory, a reasonable starting point often can be found in the cormion ground of present viewpoints and applications of the subject under study — the state of the art. This method of analysis seems particularily appropriate for subjects which have been v;idely broadcast, such as Management Information Systems.^ Moreover, the analysis of the common ground aids in the initial identification and establishraent of one dimension — the purpose or purposes of the subject under study. But on the other hand, the peculiar nature of the Management Information Systems dissemination in the literature makes the essence of the topic difficult to extract directly from statements on or observations of current practices. This absence of primary usage for the term produces little agreement on the subject's di^Rigby, op. ait., pp. 197-98. Rigby classifies this technique under the general umbrella term of "data collection," and asserts that it is a vital part of business research. He suggests that "to proceed otherwise is to ignore the basic principle that we can only understand and manipulate and/or adjust to our environment as we are able to construct a syiabolic world that seeks to provide us with a simulation of our environment. . . . [Underlying this is an assumption] that the phenomena itself will reveal the significant concepts. . . . [However,] data collection cannot proceed without some ideas about the nature cf the phenomena and hence, even where virtually nothing is known, making this understanding explicit rather than implicit will have the value of checking our logic before proceeding to collect the data and reducing vagueness." Ke goes on to declare that this technique becomes even more valid as the degree of knowledge about the phenomena under study increases. See also Karlin, loo. oit.j on "experience," as cited in Ch. I, p. 15.

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32 mension of purposes, that is, the set of objectives conditions, or attributes v/hich identify and set Management Information Systems apart from other things. Isolating the comraon ground or expressing a consensus viewpoint under such conditions is difficult if not impossible. This problem v;as suggested in Chapter I by several examples and will be demonstrated in the first section of this chapter by analyzing an expanded sample composed of the earlier and some additional statements on the subject. The remaining sections will be devoted to: (1) approximating the state of the art by the indirect means of analyzing the component words of the term Management Information Systems; (2) assembling these analyses into a derived conceptual statement on the nature and purposes of Management Information Systems; (3) reconciling the derivation with statements on the subject in terms of consistency and compatibility; (4) comparing the derived concept with some management process models for consistency and "fit" in applications; and (5) summary and conclusions. The Lack of a Consensus Viewpoint on Manag ement Information Systems Blumenthal begins his book on Management Inform.ation Systems by seeking the essence of the term^ and adopts as ^Sherman C. Blumenthal. Management Information Systems: A Framework for Plar.r.in^ and Development (Englewood Cliffs, N. J.: Prentice-Kali, Inc., 1969), Ch. 2.

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33 a preliminary working notion Sackraan's characterization: [It is] an evo3.ving organization of people, computers, and other equipment, including associated communication and support systems, and their integrated operation to regulate and control selected environmental events to achieve systems objectives . ^ Although Blumenthal regards this as a useful idea, he finds it disconcerting because of the reference to "systems," which needs elaboration. Consequently, he abandons the term Management Information Systems in favor of the broader v;ord "systems.""* This is understandable since Blumenthal 's primary concern is with data processing^ and its relationship to the practice of management. In this context his use of Sackman's definition for Management Information Systems is appropriate even though he applies it to a specific environment rather than developing a general theory. However, if one shifts his interests from Blumenthal 's environment to another area, it is not clear which elements belong to Management ^Harold Sackman, Computers ^ Systems Science j and Evolving Society (New York: John Wiley & Sons, Inc., 1967), p, 42 (as cited in Blumenthal, op. cit.. pp. 1718) . Blumenthal also notes that Sackman does not employ the term "information systems," but refers instead to a "man-machine digital system. " "•Blumenthal , op. cit.. p. 18. ^At this writing (19 70) Blumenthal is President, Libra Data Systems, Inc., a data processing consulting firm. His background also includes a term as President, National Computer Analysts and a period of employment with the business systems staff of Touche, Ross, Bailey, & Smart, a firm of certified public accountants.

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34 Inforniation Systems and are transferable and which properly are a part of the environment and are nontransferable. For example, it may be asked if a computer is a necessary condition for a Management Information System. Are personnel, as people per, se required? Is integration mandatory or permissive or only desirable? Are the objectives sought those of people or of the system? Blementhal responds to many of these questions but always in terms of mechanizing the processing of data. Underlying his thesis is the assumption that all Management Information Systems are linked inseparably to this mechanization process. He ultimately expresses his core idea of Management Information Systems by stating that such system>s consist of "parts of operational functions," that they are "the connective tissue" which binds all systems together, and that regardless of the operating level, they are based on "man-machine interactions."^ Is the emphasis on mechanization responsive to the basic character of Management Information Systems, or is it only a necessary condition supporting data processing theory and practice? The answer, of course, is not made clear by reference to a single source. Li attempts to integrate the three fields of account^Blumenthal, op. cit. ^ p. 36.

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>35 ing, computers, and Management Information Systems.' After a lengthy evaluation of the interrelationships and interdependencies of accounting and computers (data processing) , he turns his attention to Management Information Systems by remarking, "The integration of these applications creates some interesting situations, one of which is the opportunity to develop a management-information system."® Li never explains the character of this "opportunity," but proceeds directly to conceptualizing the required properites of a Management Information System. These lie in a complex taxonomy of "information,"^ which leads to the following conclusion: A management inform.ation system, sim.ply, is an organized method of providing each manager with all the data and only that data which he needs for decision, when he needs it and in a form which aids his understanding and stimulates his action.^" Clearly, this statement implies different inclusion and exclusion sets than Elumenthal visualizes. Li should be close in orientation to Blementhal since he indicates a primary interest in computers . ^ Their differences ap'David H. Li, Ac counting /Computers /Management Information Systems (New York: McGrav7-Hill Book Co., 1968). ^Ibid., p. 213. ^Ihid., pp. 214-17. ^'^Jbid.y p. 224. Li credits this expression to Bertram A. Colbert, "The Managemient Information System: PathV7ay to Profit," Price Waterhouse Revieu), Vol. XII (Spring, 1967), p. 4. Li changes the word "data" to "information." ^^Li, op. oit.. p. v.

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36 pear to be due to divergent subordinate interests, Li relating most to accounting while Blumenthal focuses on Management. It is in the context of management especially as represented by the emerging discipline of "decision science" that Greenv/ood concentrates his attention.*^ He sees the current state of the art, as far as decision theory is concerned, as the integration of common elements : Research of the decision-making literature has resulted in . . . [some] major findings that are either common to most decision theories or processes, or constitute major changes in existing decision theories and practices. First among these, systems analyses and systems models are found to be a basic common denominator of all decision processes. . . . Second, "information" is found to be the primary ingredient upon which all types of problem solving-decision making processes depend, requiring therefore the development of organizational management information systems. The focus on decision processes leads Greenwood to two conclusions relevant to this study. Firsts "decision information systems" exist which are essentially hierarchical. The lower, more common level involves routine decisions while the higher rank comprehends only decisions ^ ^William T. Greenwood, Decision Theory arid Information Systems: An Introduction to Management Decision Making (Cincinnati, 0.: South-Western Publishing Co., 1969). Ibid. J p. iii. Greenv70od identifies five such major findings. The other three are: (1) a fundamental change in the traditional procedures of making decisions; (2) a requirement of "logical" analyses in all decisions;

PAGE 46

37 responsive to "novel or unique problems."^'* Second, Management Information Systems are not "decision information systems," but are contained within the latter. A new common denominator has emerged for . . . systematic approaches to business-management problem solving and decision making. The information required for business and management systems . . . now emerges under the title of Management Information Systems. ^ ^ Greenwood regards "systematic approaches" as logical reactions to the "need for highly interrelated and structured information to solve problems in an optimal manner. "^^ Although this may require information being made available in some instances on a real-time computerized basis, this is not a necessary condition. Instead, the essence of Management Information Systems is simply that information is the result of systematic procedures directed to objective optimization.^' and (T) a realization that operations research and its computer programs are basically a m.iddle rather than top management matter. The first is essentially data processing and will not be considered further; the third is beyond the scope of this study. The second possesses implications which v/ill be considered in later chapters. Greenv7ood is a difficult writer to classify. He demonstrates interests in at least three areas--management , data processing, and quantitative analysis. However, since he always seems to return to the basic matter of management operations, he seems best placed in that area. Ibid. J pp. 7-8. ^ ^Ihid., p. 204. ^^Ihid. ^"^Ibid. Whiat is to be optimized is not stated, and therefore could refer to goals generically and not just profits.

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38 Greenwood's focus on methodical procedures as the core of Management Information Systems deserves expanding. Four distinct functions are involved: (1) work flows controlled by "complex production control systems;" (2) major functions departmentalized in accordance with organizational structure; (3) actual operating information flows represented by the "vertical superiorsubordinate authority-responsibility" structure; and (4) the comjnunication or information sub-structure established indigenous to the individual departments.^^ Complementing and integrating these four information subsystems so as to elim.inate "all conflicts, inconsistencies, bottlenecks, and duplications found in a comparative analysis of the four [individual] systems" results in a Management Information System.'^ This implies that the internal organization is a boundary for Management Information Systems although Greenwood does not m.ake it clear whether external environm.ental matters are to be ignored. Analysis of the statements of these three authors, coupled with the expressions of the ten writers evaluated in the prior chapter, demonstrates that the inherent attributes assigned to Management Information Systems vary ^^Ibid,, pp. 208-209. ^Ibid. J p. 209 .

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' ' M 39 widely or are unclear; objectives wander or are vague; and rationales are dissimilar. Is there any consensus representative and expressive of the present state of the art? If one can be found, it will furnish a viable starting point for concept construction. The search may be facilitated by employing an orderly array of the central ideas posited by the cited writers. This can be accomplished by a matrix-like construct in V7hich the rows are assigned to the thirteen cited writers, subdivided by apparent or expressed fields of primary interest. The columns represent various input requirements and suggested outputs or objectives. This appears as Table 1 on page 40.^° The table reveals no unanimous element of either boundary (input) or objective (output) . If unanimity is too rigid a criterion, it can be relaxed by discarding the blank cells which indicate no statement by the cited writer. As a consequence, the follov/ing results are obtained: (1) one out of thirteen, or 7.7 per cent, hold that Management Information Systems cannot be manually operated; (2) all temporal phases of information are seen as an implied attribute by 30.8 per cent; (3) total in^°This is not a complete representation of views and is used only to show the inf easibility of extracting the essence of Management Information Systeras by direct references to practices. This seems to be due essentially to the use of Management Information vSystems in a supportive role.

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40 Eh W *— < H W w ^ CI O 3 H O Eh ^ < O o o Cm g H O U H :s 0) w ^ S EH w o :2: '0 — •I 0 S,. i r X > M I 1t t X X X X T-Tl o o o o o >. 0 A t'. 0< j3 Q t J L CO. X V"i o o o o o o L: ~i-ri io 1 h — ----i .ill 9\ o o o c o ! o — ' t: c 0

PAGE 50

41 < O w w o IS Q < Q W o w ^^1 on nJ 01 (d (u O '-^ H ^ "—(DO!:: o is (U -H u o — e — — rd Xi ^ C 0) m > « o 5-i O O C Q O CI « O c -H (3 Q) C -P o :3 di O U •H Q ^ o O (0 o >^ o — w s V o p.. m 0) o o CO Q S3 H O W O c o •H JJ as N -H c 00 > O 4J -p a c 0) •-P -d 0) u c (U o (0 C H g 5-f +) --^ 0) •P o 1-1 d (0 H +J >i o ^.H Eh o CN M iH -P ^ c OJ > CO 0) c rH o d p c Q) e c o O -rH d (0 o •p o c -P OJ O -p H >i 5-1 -p o > 0) m > -P p tl -^ CD QJ ^ H > a\ (0 (!) ^ 4J JJ -P -M •H u 0) O >i u-i ^ « ^^ m — a) 5-i H O O ?^ OJ H E c o o w -p c ra a rl g •p O o n3 0) •H CO 0 1 •H -H -P 1 1 CO d Id (D (0 W CJ N Q 5^ fO (d r-i (U rH g — a u •H 00 0 -p +J rH +) CJ Oj-^HH 0 0 0 a g H -P S W Cn . (d c: 0 5h (d ^ 0 (d -H Q) C! ^ C -P ^ m 0 -H rd 4J H g 5H 0 (1) iH M tr> (d 0) (u ^ n 4-> -P CM 'd H ^ 0 0 c tn CJ H --^ fd g ^ 0 a 0 0) J-l CN fd -P G) rH 0 m m U c CO (1) c 0 •d a j::: 0 -H ^ Q) 0 +J -H -P ca -H •H -H +J 0 ^ 4-1 -P W (d •H fd g 'd to N ^ >^ i-H 'd 0) g -rl •H CJ II -H >H rH H .V Q) to U 0 C II (d ---X CJ •H > o (d tfi (d >i i-i CJ G) CJ td IS o 5h to p to CJ 0) to c; o o to »-( to i o •H A 4H to to CO CJ o o CJ Id -d H
PAGE 51

42 formation, as a one-time entry with no subsequent editing, is regarded by 15.4 per cent of the authors as a necessary condition; and (4) on the output side, 7.7 per cent view some kind of optimization as a goal.^^ However, regardless as to how the data are manipulated, whether by totaling, combining, grouping, or other methods, the results are indicative of the absence of a consensus viewpoint. Basically, the only view approaching a consensus is that the authors being primarily interested in data processing matters, in three cases out of four, believe that some form of mechanization is a necessary condition. However, as will be indicated, mechanization per se, although not without significance, hardly expresses the total inherent character of Management Information Systems.^' Component Word Analysis Since a direct approach to the study of Management Information Systems for the purpose of conceptualizing the subject seems impractical, a more indirect but hopefully m.ore fruitful approach will be essayed in the following pages. This will be attempted by means of an ^ *Even if all optimization goals are combined only 23 per cent of the writers believe this. 2 2 Nor do they exhibit even a simple majority. ^ ^However, it has some implications for future developments which V7ill be considered in Chapter V.

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43 examination and study of the three words composing the term Management Information Systems. It must, of course, be recognized that the context in v/hich v/ords are used is a prime determinant of the meaning to be assigned them. The needed context can be supplied by combining the component meanings into the complete expression Management Information Systems, provided it can be assumed that this expression grew out of and depends upon the underlying rationales of its individual word components. Under this assumption a synthetic statement on Management Information Systems can be derived which will identify the purposes of such systems, approximate the current state of the art, and lay a foundation for the identification of other dimensions, thereby expanding knowledge and understanding.^"* Analysis of the Component Word "Management" Etymologically , the word management comes from the Latin manus , meaning "hand,"^^ and referring generally to the hand of man. Therefore, management means "by man."^^ Management is uniquely hioraan action and inter^""This would not be true if Management Information Systems is a contrived expression having no fundamental relationship with management, information, and /or systems. However, this does not appear to be the case. ^ ^Webster's, op. oit., p. 513. ^^H, W. Fowler, A Dictionary of Modern English Usage, 2nd Ed. (Nev; York j Oxford University Press, 1965), p. 238.

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44 action,^' and diachronically , reflects the story of man himself.^® Moreover, being action oriented it is an applied art. Management is the single discipline that has transformed the findings of all the physical and social sciences into the towering achievements of our age. Without the genius and industry of the manager, the scientists and social philosopher would be mere dillettantes , engaging in intellectual pastimes with no necessary relation to the world of action. . . . All "mankind" is management's province. ^ ^ This is not, however, to suggest that management is lacking in theoretical constructs, for a wide variety of theories or schools of thought on management exist. These are not necessarily competing or conflicting since their use is dictated by the situation under consideration, and indeed often appear to complement each other. An eclectic concept has not evolved and may never do so,^° but some authorities believe that an inventory of theories is advantageous since: With this approach . . . the error of psuedosimplicity is avoided wherein it is stated that if one model is useful or "true" others are thereby "false" or unnecessary. In view of the great di^ 'claude S. George, Jr., The History of Management Thought (Englewood Cliffs, N. J.: Prentice-Hall, Inc., 1968), pp. 15-18; see also p. 178. ^^Ibid.j p. vii. *^Carl Heyl, Ed., The Engyclo-pedia of. Management^ Vol. (New York: Reinhold Publishing Corp., 1963), p. xix. ^"McGuire, loc. ait.

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45 versity cf business behavior, "both-and" • rather than "either-or" appears to be the most valid conception of theory construction.^^ Two notions from the family of management concepts will be employed in this chapter and others will be used in subsequent chapters. The first, which will be used throughout this study, is the principle of the universality of management J ^ ^ which holds that since the practice of management permeates all human activity, there is a tendency for a good m.anager in one environment to be equally good as a m.anager in another situation. The second is more complex. If management is universal, as between^ say, business and war waging, the universality lies not in the situation but in an action to be taken. The attribute of action is well recognized. The dictionary defines management (among other things) as "the judicious use of means to accomplish an end."^^ More importantly, it is reflected in the assertion that the purpose of management is to "make decisions ." ^ ^ ^ ^Harold L. Johnson, "A Behavioral Approach to the Business Enterprise," Southern Economic Journal^ Vol. XXVII (July, 1960), pp. 1-2. ^^George, op. oit.^ p. 15. ^^Ibid.^ pp. 15-18. ^"ibid., p. 17. ^ ^Webster's, loc. ait., emphasis added. 3 6 R. W. Morell, Managerial Decision-Making : A Logical Approach (Milvzaukee, Wise: Bruce Publishina Co., 1960), p. 1.

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46 The theme is a popular one and seems to express a consensus. For example, Mundel believes decision making is the "task of the manager. "^^ Dale says management "implies decision making."^® Suojanen maintains that regardless of the reference freiiTie used to study management, decision making is an integral part of any management activity. Morris observes that a major problem in any organization is "trying to make operational the ideas of . . . [a manager] acting as a decision maker. Forrester regards management as a process which converts information into action, which "is identical with decision making."**^ Although there is general agreement that management is rooted operationally in the making of decisions, Morell notes a difficulty in identifying a single reference fram.e for decision making due to an individual's interpretations being "unavoidably colored by his o-wn personal precon^ 'Mundel, op. ait.j p. 291. ^^Ernest Dale, Management Theory and Practice (New York: McGraw-Hill Book Co., 1965), p. 5. ^^Waino W. Suojanen, The Dynamics of Management (New York: Holt, Rinehart and Winston, Inc., 1966), pp. 125-28. ''^William T. Morris, Management Science in Action (Homewood, 111.: Richard D. Irwin, Inc., 1963), p. 169. "^Jay W. Forrester, Industrial Dynamics (Cambridge, Mass.: Massachusetts Institute of Technology Press, 1961). p. 93.

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47 ceptions . " "* ^ It is appropriate, therefore, to reduce the potential for misinterpretation by establishing a common basis of usage and meaning for the term decision making. Decision making is the act or process of deciding; to decide comes from the Latin deoideve ^ meaning literally "to cut off." Hence, deciding is the procedure by which one arrives at a "solution that ends uncertainity or dispute;" brings to a definitive end; or induces the coming to "a choice" or making a judgment. '•^ Etym.ological derivations, however, are not managerial applications, and management theorists have sought to identify the managerial significance and meaning of decision. Jamison says that a "decision grows out of the choice of one course of action from alternative courses."'*'* Owens viev.'s a decision as "the formation of an opinion or a conclusion, the termination of a controversy, or the making of a choice between possible courses of action . . ."'^ Terry adopts a broader reference frame by attributing the process to the selection of a behavioral alternative from possible choices.'*^ Glover, on the other ^^Morell, op. cit.j p. 5. •^Webster's, op. cit.^ p. 213. ** ''Charles Jamison, Business Policy (New York: Prentice-Hall, Inc., 1953), p. 120. *Ri chard N. Owens, Introduction to Business Policy (Homewood, 111.: Richard D. Irwin, Inc., 1954), p. 115. ''^George R. Te^rry, Principles of Management (Homewood, 111.: Richard D. Irwin, Inc., 1953), p. 106.

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48 hand, sees behavior as intellectualisra, and therefore, a decision is "the choice of alternatives based on judgment."'*' Tannenbaum asserts that a decision is always linked to actionable alternatives and is "a conscious choice or selection from among a group of two or more behavior alternatives."''^ Drucker agrees by saying flatly that "a decision is a judgment."'*^ Simon, hov\;ever, relates judgment to consciousness and asserts that this is not wholly true : At any moment there are a multitude of alternative (physically) possible actions, any one of which a given individual may undertake; by some process these numerous alternatives are narrov;ed down to that one which is in fact acted out. The words "choice" and "decision" . . . refer to this process. Since these terms as ordinarily used carry connotations of self-conscious, deliberate, rational selection, it should be emphasized that . . . they [also] include any process of selection, regardless of v;hether the above elements are present to any degree. ^° Katona disagrees by pointing out that decisions as "thoughtful actions" are clearly distinguishable from habit or "unconditioned responses" and suggests that the key element is the existence of a problem or the perJohn G. Glover, Business Operational Research and Reports (New York: American Book Co., 1949), p. 12. '*®Robert Tannenbaum, "Managerial Decision-Making," Journal of Business ^ Vol. XXIII (January, 1950) , p. 23. ''^Peter F. Drucker, The Effective Executive (New York: Harper & Row, Publishers, 1966), p. 143. ^"Herbert A. Simon, Administrative Behavior (New York Macmillan Co., 1947), p. 4.

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49 ception of one: Genuine decisions . . . require the perception of a new situation and the solution of the problem raised by it; they lead to responding to a situation in a new way. In contrast, habitual behavior is rather common. We do what we did before in a similar situation. The performance of the act of making decisions is perhaps best summed up by Barnard: The acts of individuals may be distinguished in principle as those which are the result of deliberation, calculation, thought, and those which are unconscious, automatic, responsive, the results of internal or external conditions present or past. In general, whatever processes precede the first class of acts culiminate in what may be termed "decision. " Others consider the issue of decision on different levels. Coales, for example, refers to decision making as "prediction," and maintains that this depends upon 4 adequate mathematical models of behavior as inputs. Churchman criticizes the normative overtones of decision making by asserting that the argument favoring this approach shuts off changes in the future by adopting an historical frame of reference since it says essentially. George Katona, Psychological Analysis of Economic Behavior (New York: McGraw-Hill Book Co., 1951), p. 49. ^^Chester I. Barnard, The Functions of the Executive (Cambridge, Mass.: Harvard University Press, 1938), p. 185. *^J. F. Coales, "Foreword," in Models for Decision^ ed. C. M. Berners--Lee (London: English Universities Press, Ltd. , 1965) , p. vi.

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50 "If your present behavior is consistent with your past decisions, this is what you ought to do."^'* The common ground in these statements suggests a selection process as well as implying a finality, the ending of wavering, or, put another way, the reaching of a conclusion. ^ ^ Morell believes these connotations contain three basic implications logically related to each other: (1) "selection" indicates a reason for selecting, and therefore decision making is "purposive behavior — guided by goals or objectives"; (2) goal seeking suggests the choice between alternatives is "from among means to achieve some end"; and (3) selecting one alternative posits an evaluation process culminating in a judgment. Since judgment is involved, decision making is, therefore, a "definitively assertive intellectual activity. "^^ On the basis of this analysis it seems best to exclude habit and reflex actions from the act of decision making. The consensus viewpoint on the meaning of management may be summarized as follov;s: The purpose of management is the m.aking of decisions v;hich is a conscious activity ^'*C. West Churchman, Prediction and Optimal Decision (Englewood Cliffs, N. J.: Prentice-Hall, Inc., 1961), p. 15. ^ ^Morell, op. cit.j, p. 6, ^^Ibid., p. 8. ^'^Ibid., p. 11.

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51 characterized by a selection procedure employing judgment and which is activitated by the perception of an issue to be resolved. Analysis of the Component Word "Information" V-Jhen put into the context of management as a decision making action, information is subjected to a variety of interpretations and meaning assignments by theorists. To Churchman, information is a pragmatic, a priori thing which he defines as "recorded experience which is useful for decision making."^® Forrester, as indicated earlier, considers inform.ation to be the rav; m.aterial of decision, ^ Blumenthal, reflecting his data processing orientation, regards information as data that have been "recorded, classified, organized, related or interpreted within context to convey meaning. "^"^ Wiener sees information simply as "a name of the content of what is exchanged with the outer world as V7e adjust to it, and make our adjustment felt upon it."^^ . Probabalistically , information is the agent that reduces uncertainty or changes anticipations ^^Churchm.an, too. ait. ^^Forrester, loa. cit. ^ ^Blumenthal, op. cit., p. 30. ^^Norbert Wiener, The Human Use of Human Beings (Boston: Houghton Mifflin Co., 3950), p. 124.

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52 about event outcomes. Coirmunicatively , information is data to which meaning has been assigned as a consequence of having been communicated.^^ The dictionary also adopts the communication theme by defining information as "the communication or reception of knowledge or intelligence."^ Li considers information as a specific form of assistance made available to management in its performance of the core function of decision making. The applicational significance of information in this context is dictated by the class or type into which the information falls. According to Li there are nine classes of information: (1) environmental; (2) constraining; (3) anticipatory; (4) formulated; (5) transactional; (6) concurrent; (7) summary; (8) analytical; and (9) historical.* ^ While these interpretations possess common elements, such as usefulness ^ aiding ^ and having meaning ^ which are relevant to the decision making process, they do not describe the basic character of information. Legal processes, however, do identify the attributes of evidence, ^^Theil, loo. cit. ^^Claude E. Shannon, The Mathematical Theory of Communication (Urbana, 111.: University of Illinois Press, 1949) , Ch. 1. ^''Webster's, op. cit.^ p. 4 33. *^Li, op. cit. J pp. 21 — 17. This schem.e appears to be directed primarily towards improving the assimilation of information into computer and data processing operetions.

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53 and Herbert/ drawing upon a legal frame of reference, asserts that information is identical to evidence. It is: That which tends to prove or disprove any matter in question or to influence the belief respecting it or that which demonstrates, makes clear, or ascertains the truth of the very fact or point in issue, either on one side or on the other. The question of the form in which evidence appears is clarified by Black: "The matter thus presented, in whatever shape it may come , and through whatever material organ it is derived, is evidence."^® Although the question of evidence in a legal environment refers generally to an issue before a court, the concept is easily extended to the environment of management, and accordingly implies the perception of a problem to be resolved. The decision making process is the choosing of a specific alternative or solution from a set of alternatives about which the selector or manager has information or evidence to guide or influence him. Put in another way, information provides management v.'ith "the support used in an inductive argument to reach a conclusion on a problem or objective ." ^ ^ ^^Leo Herbert, "Audits of Management Performance — A Conceptual Framework for Training" (unpublished Training Manual, U. S. General Accounting Office, Washington, D. C. , 57 pp. ) , p. 38. ^''ibid., p. 36. ^®Henry Campbell Black, Black's Law Dictionary , 4th Ed. (St. Paul, Minn.: West Publishing Co., 1951), p. 657. ^^Herbert, loc. cit.

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54 This concept of information is fully consistent with the statements cited above, including the ideas of reducing uncertain! ty, the assigning of meaning to data, and the implication of communication. It does not, however, supply criteria for distinguishing evidence fromi nonevidence^ since anything, and^ therefore , everything carrying influence is evidence per se. In much of the management literature the single criterion employed is usefulness, but this does not resolve the matter since influencing implies use. Fortunately, the law also furnishes criteria for the recognition of evidence which may be appropriate as standards for management. Legally, evidence depends on fulfilling three criteria: (1) relevancy; (2) materiality; and (3) competency."* Relevancy is related to the problem and means that the evidence must have a logical connection with the issue and must support, either alone or in combination with other information^ at least one solution.'^ Materiality is also associated with the problem but refers to the degree of influence the evidence carries ''^Ibid., p. 41. ''^Ihid., pp. 41-43. See also Black, op. sit . ^ p. 1159.^ The criterion of timeliness demanded by some theorists as an attribute for Management Information Systems seems to lie within the criterion of relevance since untimely events or evidence become legally abstract or moot, and therefore irrelevant because they no longer concern existing facts.

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55 to the mind and is obviously a subjective matter which varies from manager to manager and problem to problem. Competency is not linked directly to the issue but is a consideration of the source of the information, and therefore represents the subjective reliability the user places on the evidence. The implication of managerial rationality causes these criteria to carry a somewhat normative connotation, but, as initial inputs to conceptualizing information, they seem to be in accord with the objectives and processes of managerial decision making. Therefore, the mean ing of information in a management context may be summarized and expressed as follows: Information is evidence obtained from competent sources and which is relevant and material for the problem at hand,'^ the purpose of which i to influence the decision maker with respect to selecting one of a group of alternative solutions to a problem. Analysis of the Component Word "Systems" The word systems is derived from Latin and Greek word meaning to stand or place together, and hence to unite or combine.^"* The term is used in many fields and usually '^Herbert, op. oit.^ pp. 43-45. ''These criteria have design implications which will be considered in later chapters. '"Eric Partridge, Origins: The Encyclopedia of Words (New York: Macmillan Co., 1959), p. 661.

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56 implies a grouping or sec of procedures or objects. Karlin defines a system as "a set of transacting elements. "^^ Others see it as "an array of components designed to accomplish a particular objective."'^ Similarly, Hare regards a system as "the elements, relationships, and procedures [necessary] to achieve a specific purpose . " " Although a set's contents can be expanded or contracted as desired, set theory implies a completeness or wholeness within specified bounds, which for systems seems to depend on purpose. Many writers view systems this way. Odiorne relates a system to the directing of a unified, total, relevant effort towards the attainment of an objective.'^ The dictionary defines a system as "a regularly interacting or interdependent group of items forming a unified whole. " ""^ Some call it "an organized ' ^Karlin, loc. oit. Johnson, Kast, and Rosenzweig,
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57 or complex whole. In law the term describes an "orderly combination or arrangement, as of particulars, parts, or elements into a whole. "'^ In biology it has been defined as that which possesses "organization and wholeness."®^ _ The consensus seems to attach a wholeness to systems which is defined by purpose, but there are troublesome facets to this notion. If it can be agreed that "management" is decision making and that "inf orm.ation, " within the constraints given earlier, is whatever influences the manager, then the wholeness attribute of systems tends to expand the content of the information set to infinity. Attempts have been made to resolve this difficulty by dividing systems into two general classes, closed and open.®** A closed system exists whenever "we look at a limited number of parts and the relationships among them alone, and assume that the rest of the world around this system is constant, that there are no influences outside ®^ Richard A, Johnson, Fremont E. Kast, and James E. Rosenzweig, "Systems Theory and Management," Management Science^ Vol X (January, 1964), p. 368. ^^Black, 5p. oit,, p. 1621. ^^L. von Bertalanffy, "General Systems Theory: A New Approach to the Unity of Science," Human Biology ^ Vol. XXXVIII (December, 1951), p. 306. ''Karlin, loc. ait.

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58 the system."^ ^ Thus, closed systems are rather subjective although relatively simple to construct and understand. In Chapter I it was shown that many statements about Management Information Systems specify tightly constrained boundaries, thus closing the system. But there is dissatisfaction with closed management systems,^' and suggestions are being made to make them open.®® The open system can be likened to a "selfmaintaining structure" or homeostatic organism which both influences and is influenced by its ecology; it is, therefore, dynamically responsive. This statement is a reasonable description of the realities of business enterprises,®^ and Litterer asserts that only open systems can represent reality since "in some way, all systems of interest are open."^' However, "open" means not closed, and therefore, is absolute. This is inconsistent with establishing limiting criteria for information, and to avoid implying an ®*Litterer, op. cit.^ p. 154. ®^See Ch. I, especially pp. 2-10. ® 'Charles Z. Wilson and Marcus Alexis, "Basic Frameworks for Decisions," Journal of the Aoademv of Management^ Vol. V (August, 1962), p. 164. ®^See Ch. I, pp. 16-lB. 8 9 Johnson, Kast, and Rosensweia, Systems Theorv , p. 372. ^ f ^^Litterer, op. cit., p. 155.

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59 impractical omniscience "open" must be assigned degrees which effectively make Management Information Systems operationally closed. Therefore, the concept of systems may be expressed as follows: Systems represent the completeness of information, within defined limits and relative to objectives, which is to be used by managers in making decisions. A Derived Concept of Management Information Systems It now remains to fuse the separate meanings of management, information, and systems into a statement which, as a starting point, may indicate the nature of Management Information Systems by approximating the current state of the art. The meanings of the words involved may be summarized briefly as follows: Management is decision making action; information is evidence influencing the mind regarding an issue; and systems suggests orderliness and completeness. The ideas miay be synthesized into the following statement: A Management Information System is an organized method of providing each manager with all the evidence and only that evidence which he needs or wants for decision^ when he needs or wants it, and in a form which aids his understanding and stimulates his action. Essentially, this is the Colhert/Li statement'" with two differences. First, "data" in Colbert's statement '^See p. 35.

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60 which Li supplants with "infomation, " is replaced by "evidence." Seoondj mancjgerial "wants" are added to his "needs." Both changes are made to take account of the influencing character of evidence on subjective minds. If a manager does not want certain evidence, it tends to have no influence on him; consequently, regardless of his needs (as perceived by others), it is no longer evidence. Reconciling the Derivation to Statements on Management Information Systems Since the state of the art of an area like Management Information System is a matter of fact rather than derivation, the reasonableness of employing a derived concept as an approximation of fact depends upon being able to reconcile it with the facts which are represented by authoritative writings on the subject. Put another way, a derivation's validity depends on its doing no violence to current viewpoints. Comparisons of the derived concept of Management Information Systems with the statements on the subject cited earlier^ ^ reveal it to be explicitly consistent with them, and a detailed specification indicating this agreement would be redundant. HowThe .im.plications of this notion will be considered in subsequent chapters as other dimensions of the Management Information System, are added, thereby expanding the derived, one-dim,ensional concept. ^^See Ch. I, esf-ecia] ly pp. 3-17, and Ch. II, pp. 32-38.

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61 ever, the original sampling was small, and therefore, it seems appropriate to demonstrate compatibility of the derived concept with other authoritative statements by means of the method of comparison. Dearden and McFarlan present two basic ideas concerning a Management Information System: (1) it is a means "for handling data"; and (2) its most sophisticated form is complete automation.''* The derivation is in agreement with the first idea since it states that a Management Information System is an organized method of providing evidence ^ and it has been demonstrated that evidence is information and information is data which have meaning. In regard to the v/r iters' second notion, while management is a human action, its function, nevertheless, is decision making. Thus, if the human manager can be supplanted by a machine capable of complex heuristic processes, then the word "he" antecedent to "manager" can be replaced by "it" to indicate a machine manager or a human manager.'^ This change does not alter the basic character of the derived concept. '''John Dearden and F. Walter McFarlan, Management Information Systems: Text and Cases (Homewood, 111.: Richard D. Irwin, Inc., 1966), p. 7. ' ^There appears to be some progress in this direction, especially in so far as routine or repetitive decisions are concerned. See Allen Newell, J. C. Shavz, and Herbert A. Sinion, "Elements of a Theory of Human Problem Solving," Psyahological Review^ Vol. LXV (August, 1958), pp. 151-66.

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62 Chapin, whose interests lie in data processing, looks on a Management Information System as "a particular combination of hiiman service, material service, and equipment service for handling information for a purpose," and goes on to state "that systems are concerned only with information."^^ Essentially, this statement conveys the same ideas expressed by Dearden and McFarlan, and therefore, the derivation is consistent with Chapin's notion. Boore and Murphy visualize a Management Information System as the result of the identification and use of "the netv/ork of all communication methods with an organization."'' As indicated earlier, evidence implies communication, influencing im.plies use, and decision making is the use. The derivation specifies all evidence needed or wanted is to be provided and is, therefore, consistent with this statement. Litterer's viewpoint may be paraphrased. He regards a Management Information System as the set of inputs, including procedures, v;hich are necessary aids to making ^^Ned Chapin, An Introduction to Automatic Computers^ 2nd Ed. (Princeton, N. J.: D. Van Nostrand Co., 1963) , p. 223. ''William F. Boore and Jerry R. Murphy, The ComputerSampler: Management Perspectives on the Computer (New York: McGraw-Hill Book Co,, 1963), p. 354.

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63 a set of operations successful.^® The derived concept includes this notion in its statement. To Mattessich, the Management Information System is the link betv/een evidence and decision making. Consequently, he v;rites: "Most management decisions are built upon assumptions about objects and events . . . [and] the basis of these assumptions ... is evidence. "^^ The idea of influence used in the derived concept is subjective, and therefore, similar to assumption. The derivation, therefore, is quite consistent with Mattessich's expression. Li's statements deserve particular attention since he expresses v;hat is essentially the derivation and then discards it as being too general: A management-information system is only [one] information provision service . . . [and an organization has other information channels available] The only difference between information provided through a management-information system and that provided through other channels is that the former is organized and articulated, V7hile the latter may or may not be.^o" The derived concept is not incompatible with this statement. Although organized methods are specified, the word "information" is replaced by "evidence" in the derivation to indicate both subjective quality and its possible ^^Litterer, op. cit., pp. 299-304. ^ ^Richard Mattessich, Accounting and Analytical Methods (Homewood, 111.: Richard D. Irwin, Inc., 1964), p. 234. ^""Li, op. cit., p. 225.

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64 range within the systera. Li appears to be seeking a solution to the problem of open versus closed systems. His solution is a taxomony of information V7hich, when properly carried out, implies certain control procedures over information inputs. It is for this reason, in part, that "information" was replaced by "evidence" in the derived concept. But more importantly, it has been demonstrated that evidence is whatever influences the mind, and thus classifying or typing information, although possibly useful, is not at issue. In summary, the derived concept appears to be compatible with statements about Management Information Systems. It must be recognized that reconciling a derived concept with statements alone is only one facet of establishing its reasonableness as an expression of the current state of the art. How well the derivation relates to operational models of managerial processes is also at issue. Such models attempt to simulate behavior under a complete set of conditions and, v/hen validated, approximate factual processes; they thereby contribute to the store of knowledge about real-world operations.*"^ Consequently, since the state of the art is factual, the derivation cannot be accepted — even as a starting point ^^^Ibid., pp. 214-40. * "^Mattessich, op. cit., pp. 415-18.

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65 — without reconciling it with some of these models. The derived concept will, therefore, be evaluated as a potential input to one data processing construct, two managerial planning models, and a mathematical representation of managerial functions. The Blumentkal Model P'rom primarily a data processing viewpoint, Blumenthal has built a model of the management decision process and posited the role of Management Information Systems in it. The model consists of the following sixteen propositions : 1. A datum is an uninterpreted raw statement of fact. 2. Information is data (1) recorded, classified, organized, related or interpreted within context to convey meaning. 3. A level is a pool of resources (manpower, money, materials, capital equipment), a backlog of demand on resources (orders) , or a file of information (2) about the status of resources and demands . 4. An activity center is one of the basic organizational entities in an enterprise under the common and direct supervision of a first line manager, supervisor, or foreman, which regulates the flov; betv;een levels (3) , and may transform the flows between levels (3) . . . 5. An action is a prescribed regulativetransformative response of an activity center (4) to information (2) about the levels (3) with which it is concerned. 6. A decision center is one or more managementlevel people . . . who {1} prescribe the decision rules that govern the actions (5) of one or m.ore activity centers (4), {2} make decisions for activity centers (4) to execute (as actions) in situations where the scope of prescriptions (decision rules) is exceeded, non-existent, or where a prescribed action (5) was not properly responsive and further adjustment is deemed necessary . . .

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66 7. A functional unit is an activity center (4) and its decision center (6) . . . 8. A management control center is one or more management people . . . which acts as a decision center (6) for a group of functional units (7) , or for a group of subordinate management control centers (8) . 9. An operational function is a CLASS of any one or more TYPES of actions (5) , carried on by the same or different functional units (7) , which regulate the inflow and/or outflow to or from sequences of levels (3) as a group . . . 10. An action subsystem is the group of activity centers (4) involved in an operational function (9) . . . 11. A decision subsystem is the group of decision centers (6) and management control centers (8) involved in an operational function (9) . . . 12. An information subsystem is a special functional unit or units (7) involved in an operational function (9), and whose levels (3) and flows consist of information (2) generated and used in the action and decision subsystems (10, 11) of other operational functions (9) . . . 13. A management information system is an operational function (9) v;hose parts . . . are information subsystems (12) of other operational functions (9) . . . 14. An operational control module (OCM) is that part of an information subsystem (12) supporting the functional units (7) of an operational function (9) . . . 15. An operational control information system (OCIS) is all of the OCM^s (14) in a management information system (13) . 16. A management control module (MCM) is that part of an information subsystem (12) supporting the management control centers (8) of an operational function (9) . . . . ^ " ^ Blumenthal's model is basically a synthesis of the following three related concepts: (1) informationdecision-action; (2) programmed and non-programiried decisions; and (3) the hierarchy of planning and control. ^ ° -Blumenthal, op. cit.. pp. 30-36. The italics are in the original.

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67 The first of these, often called informationfeedback^ is fundamentally a closed-loop control system about which Blementhal says: The actual decisions involve three things: a desired state of affairs, the apparent state of actual conditions as reported by the information network, and the generation of the kinds of action that will be taken in accordance with any discrepancy which can be detected between the apparent and desired conditions . ^ ° Blumenthal recognizes that decisions required to bring affairs to their desired state are of two basic types: (1) programmed; and (2) non-programmed. The former are decisions of a routine, repetitive nature characterized by a relatively rigid, predetermined set of procedural rules for execution, and consequently, are susceptible to automation. Non-programmed decisons are characterized by uniqueness as reflected by peculiarities of the problem or its milieu.^" ^ There is a broad band of uncertainity between what are clearly non-programmed decisions and those which are obviously programmed. The point of demarcation between them is not clear. Blumenthal believes this matter is best resolved by dividing the organization into three hierarchical levels of management. At the nadir of decision making is the level of "operational control," corresponding generally to programmed decisions. In between lies a "^"ibid., p. 30. ^° ^Ihid.^ pp. 26-27.

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68 wide continuum of decision operations which are neither wholly programmed nor wholly non-programmed, and it is in this broad area that the problem lies.^"^ Blumenthal's model seeks to integrate operational solutions at all three levels, but the main focus is on identifying, controlling, and automating the programmed level in a manner consistent with the non-programmed. How well does the derived concept fit into this scheme? First, the derivation's interpretation of information is compatible with the model's because both regard information as data having meaning. Second, the derivation is compatible with the concept of "inf ormiationdecision-action" especially since evidence wanted by the decision maker is equatable with the "desired state of affairs." Third, the derivation comprehends both programmed and non-programmed decisions since either ultimately results from direct action or from "programming" for indirect action, and both are the result of a decision maker having been influenced by evidence. Clearly, the derived concept of Management Information Systems is quite consistent with Blumenthal's data processing model. Ansoff's Strategic Planning Model A number of theorists have sought to develop algorithmic processes for the non-programmed class of decisions ^'^^Ibid., pp. 27-28.

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but run headlong into the problem of diversity. As every experienced executive knows, a major part of a manager's time, is occupied in a daily process of making numerous and diverse decisions. The demands on the decision maker's time always seem to exceed his capacity; decisions of great potential import come mixed with trivial but timeconsuming demands; the nature of decisions is multifaceted and continually variable. This diversity generally tends to increase with the level of responsibility and becomes particularly pronounced for the top executive of the firm. On a single day he may be called upon to decide on a futvire course of the firm's business, to reconcile an organizational conflict . . . and to resolve a host of day-to-day operating problems. Ansoff attacks this difficulty by separating all decision making activities into three classes: (1) strategic (2) administrative; and (3) operating.^"® He regards the latter two as "tactical" in nature, i.e. , specific programs for em.ploying allocated resources. The other decision class is "strategic," i.e., the application of integrated forces towards goal attainments. After largely discarding the tactical class, Ansoff constructs a process model for strategic decision making. This model is essentially built on three progressive steps which are controlled by feedback loops: (1) a "trigger" which is the perception of a problem requiring a decision; (2) a search of the feasible alternatives; and (3) an evaluation of the alternatives leading either to a seH. Igor Ansoff, Corporate Strategy: An Analytical Apipvoacli to Business Policy for Growth and Expansion (New York: McGraw-Hill Book Co., 1965), p. 1. ^°^Ibid. , p. 118.

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70 lection (decision) or to recycling the search. The model also contains five preliminary decision points at which cumulative progress is evaluated and a subdecision reached to continue or to recycle. Each of these rests on "successively greater information. " ^ ^ ^ After passing the last subdecision point or "stop," a major decision is reached. Ansoff's model is more developed than the derived concept in that his detailed emphasis on hierarchical ordering, cumulative information gathering, and "feasible alternatives" ^ ^ ^ represents an attempt to specify the boundaries of information in rigorous terms, thereby reducing subjectiveness. However, it has been shown that information is a matter of influence, and therefore, its attributes are determined by use and not by externally imposed constraints. Ansoff's model calls for stipulated information, and the derivation is, therefore, compatible with it since it calls for evidence as needed but adds the element of use. In other respects, the derived concept is obviously consistent with Ansoff's model. ^ ' , pp. 15-28. ^ ^ ^Ibid. , pp. 200-201. ^^^Ihid. , pp. 200-203. ^^^Ibid., pp. 15-18. This is "a" set and not "the" set of feasible alternatives. The latter may approach universality and the system should always be able to admit new alternatives since others will appear continually throughout the planning period. Thus, the system is closed but only at a point in time within the process.

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71 The Gilmove-Bvandenhurg Model The GiliTiore-Brandenburg inodel is fundamentally an algorithm for strategic decision actions. Although expressed in terms of a product-market decision situation, it appears to be easily adaptable to other management situations . The model employs two integrated processes. One of these concerns flows between intermediate decision points which depend on cumulative responses to strategic inquiries. After identifying a potential problem, the decision maker asks if a new operating program is indicated as a solution. If yes, is a new "competitive strategy" needed? If yes, is a new "economic mission" required? A no response at any level starts a recycling process in reverse to redefining or clarifying the problem, or perhaps concluding that it is not in fact a problem. The other process provides additional decision points which are linked to feed back channels. At these intermediate points, the accumulated analysis and its proposed solution is evaluated in terras of "synergy." A negative result activates recycling as above, while a positive one opens the channels for pro''Frank T. Gilmore and Richard G. Brandenburg, "Anatomy of Corporate Planning," Harvard Business Review, Vol. XL (November-Deceml)er , 19S2) , pp. 61-69. ' ' 'Ibid.

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72 ceeding to the next step.^^^ Apparently, the test for synergy is employed as a surrogate for summarizing cumulative evidence and forces the decision maker to: (1) making certain a problem exists before committing the organization; and (2) satisfying himself that the decision contemplated is congruent with enterprise objectives. The derived concept is compatible with this model in that both treat information in the same way. Only the matter of testing for synergy needs clarification. This test, in itself, is evidence since it is designed to influence the manager and his subsequent actions . George's General Theoi'y of Management A general model of the managerial action of making decisions has been developed by George. The model is in the form of a set of equations linked by logical mathematical deductions and begins with the assumption that management (Mg) is made up of conceptual acts (Ac) and physical acts (Ap) which affect or create conceptual environments (Ec) and physical environments (Ep) . Furthermore, these acts are a function of group or enterprise goals (Og) and the objectives of individuals (Oi) . Given this, ^^^Ibid. Ansoff (op. oit . p. 75) offers perhaps the best definition of synergy, calling it the "2+2=5 effect" which means that the total of the combination is larger than the sum of its individual parts. 'George, op. ait., pp. 160-71.

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73 management can be expressed as: [(Ac + Ap) (EC + Ep)] / (Og, Oi)^^^ Managerial actions (Ac + Ap) may also be expressed as a compound of the components of the mianagement process, planning (P) , organizing (0), directing (D) , and controlling (C) which occur in varying proportions (W) that total unity. In these term.s the actions may be stated as: (Ac + Ap) = WiP + W2O + W3D + WitC where I |Wi = 1 and Wi > 0| i=i and therefore Mg = [(WiP + V720 + W3D + W4C) (EC + Ep) ] / (Og, Oi) ^ ^5 This is modified, however, by the fact that neither the organization nor the individual have their goals fully met. It may well be that a firm's goal is 90 per cent achieved while the individual's goals are 20 per cent realized. Under these conditions employee resistance may well result. This resistance, in turn, would cause a change in m.anagerial actions to effect a greater achievement of individual goals. By the same token, if the firm's goal is only 10 per cent realized and the em^ployee's goals are 90 per cent achieved, then some change will be made ^^^Ibid., p. 169 '''Ibid.

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74 by the manager in order to effect a greater than 10 per cent achievement of the firm's goal.^^° George believes that the best managers are those who promote high realizations in both sets of goals or at least are able to balance them. If the results of management are measured in terms of goal attainments, then managerial effectiveness (MgA) can be expressed as the percentage (p) of individual and firm goal achievements as follows: MgA ^ p (Oi + Og) ^ ^ ^ If it can be agreed that managerial acts (Amg) are dependent on the percentage of Oi + Og attained, then: Amg = / (pOi + pOg) If Og is knov/n, Oi is a function of it, and therefore : Oi = / Og and Og = / Oi ^ ^ ^ George's model does not comprehend Management Information Systems as such. However, the derivation can Ibid,, pp. 169-70. George does not address himself to the situation inhere the manager's individual or personal goals are largely achieved while the organization's are not. This produces conflict and studies in this area are inconclusive as to how it will be resolved, but generally it is believed that if the conflict threatens the manager's psychological self, his response will be to put his inner self above other interests. This will be taken up in more detail in Ch. IV, pp. 163-67. This notion has other implications v/hich will be considered in Ch. V, especially pp. 198-99. ^""^Ibid., p. 170.

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75 can be reconciled to the model by inserting it into the model and evaluating the result in terms of consistency. This requires expanding the idea of environments to include the factor of evidence as well as a weighting factor for its influence on the manager. For simplicity, some of George's terms can be combined or restated, and the model, including a Management Information System, depicted as a diagram. This appears as Figure 1 on page 76. In this diagram, pO is George's probability of attaining desired objectives (regardless of their composition) . This, along with the status of the present environment (Ep) , conceptual and physical combined, and other evidence or information (Ev) carries influence (i) which leads to a decision (Dc) and results in a new environment (Ef ) . This set of relationships is a function of objectives (0) , and since the environment is dynam.ic, both Ef and 0 feedback as new inputs to the process for the next decision. Should no decision be reached or a decision reached not to take an action leading to a new Ef, Ef is equivalent to Ep, and the process still recycles. Introducing a Management Information System into the model does not disturb the fundamental character of the conclusions reached regarding the decision making process. Therefore, the derivation is compatible with this model.

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76 r CO as C O •t^ O « E CO O K O a. c +^ E 0) QJ E Jh Co <» S G tD CD G S 5: ?3 0 O U 0 C Q) O U H 3
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77 Summary and Conclusions The fact that the subject of Management Information Systems is treated most oftenly in the literature as a secondary matter rather than a primary study field makes it difficult, if not impossible, to identify any of the dimensions of Management Information Systems or the current state of the art by mec^ns of direct references to the literature. Therefore, a concept which would represent the purposes of a Management Information System was derived by analyzing the component V7ords of the term. Management Information Systems, This derivation was expressed as follows: A Management Information System is an organized method of providing each manager with all the evidence and only that evidence which he needs or wants for decision, when he needs or wants it, and if a form which aids his understanding and stimulates his action. This derived concept was suggested as a starting point on which to build new constructs, and moreover, it was asserted that it also specified the purposes of a Management Information System, and therefore represented a reasonable statement of the approximate current state of the art of such a system. In support of the latter contention, the derivation was compared with various statements about and models of Management Information Systems. It was found to be consistent with these in every inj^^/Zice.

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78 stance, and it was concluded, therefore, that the derived concept not only approximated the current state of the art, but represented an adequate expression of the purposive dimension of such systems.

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CHAPTER III THE DIMENSION OF PERIMETERS THE DERIVED CONCEPT CLARIFIED Purpose and Organization of the Chapter In Chapter II, a concept of Management Information Systems was derived and stated as follows: A Management Information System is an organized method of providing each manager with all the evidence and only that evidence which he needs or wants for decision, when he needs or wants itj and in a form which aids his understanding and stimulates his action. This expression is adequate for the identification of one of the dimensions of Management Information Systems — the purposes of such systems — but in its vagueness of expression suggests, but does not specify^ the existence of other dimensions. It is, therefore^ the purpose of the present chapter to clarify the derived concept, thereby identifying another dimension and, at the same time, indicating areas of incompleteness which suggest yet another dimension. There are two primary reasons for adopting clarification as a modus operandi: (1) as indicated earlier, the derivation is only a one-dimensional, first approximation concept — a base on v;hich to build; and (2) the derived concept is obviously incomplete and unclear as it is stated especially as it pertains to che boundaries or attributes of information. This may be best demonstrated in brief by raising a question: The manager is to be provided 79

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80 with all the evidence or information, but at the same time, only the evidence or information he needs or wants (i.e. J what he will use). The words all and only are antithetical, and, when considered within the present discussional context, imply the existence of criteria for the separation of evidence from non-evidence, and by definition, information from non-information. What are these criteria?^ In Chapter II, this issue was deferred temporarily by borrowing evidence criteria from the legal profession, but legal criteria, in the absence of an outside but apparently omnipotent arbiter, such as a judge at a court trial, cannot be identified completely with non-legal or "trial" situations, especially if the principle of the universality of management^ is accepted. Therefore, legal criteria are not fully responsive to the question raised above. In so far as Management Information Systems Of course, these are not the only questions which might be asked legitim.ately . For instance, the following questions could be posed: Who is to determine precisely what the manager needs or will, in fact, use? The manager? Someone else? Are needs modified by "wants" as these are manifested by "uses"? If the evidence or information is to be presented in a "form" which aids understanding and stimulates action, who is to do so and how is this to be done? These issues are, of course, quite valid and will be taken up m Chapter IV. Such considerations are extraneous to the subject matter of the present chapter, although the approach taken in this chapter, in so far as as starting point is involved, is more a matter of the author s convenience than logic. However, regardless of tne starting point, the same conclusions would prevail ultim.ately. , ^ See Ch. II, p. 45.

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81 are concerned, the need is for a set of criteria which is appropriate for all settings or situations, and which will clarify, if not resolve this matter. The process of clarification will also indicate another dimension to Management Information Systems, namely the perimeters of the information produced.^ In order to accomplish this, it will be shown that the dimension of purpose expressed in the derived concept of Management Information Systems has had, in one form or another, a long tradition of expression in the literature of accounting, especially the branch of accounting v;hich has come to be called managerial or management accounting.** Moreover, the field of management accounting has treated the Management Information System as a primary subject of interest rather than as a secondary or supportive, onedimensional matter as is the case in the literature of management. It follows, therefore, that there is a strong The word "perimeters" is used to denote this dimension because of its connotation of limits, a line of demarcation, or circumference. The notion of separation seems stronger in this word than in, say, "boundaries," etc. See Webster's, op. ait., p. 626, ''The derived concept, in fact, was found to be essentially an accounting expression. See Ch. II, p. 59. It should also be noted that the managerial accounting* literature pertaining to Management Information Systems has often appeared under different names, such as "profit planning," etc., in past years. The popular term, Managem.ent Inform.ation Systems, is fairly recent in oriain. This may account for the managerial accounting literature germane to the subject being less well known than it should be.

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82 relationship between Management Information Systems and managerial accounting, and it will be demonstrated that the perimeters of evidence can be established by reference to managerial accounting. At the same time the analysis will also pinpoint the areas of weakness and incompleteness remaining v;hich represent the other dimension or dimensions that need to be considered in formulating a complete and operational concept of Management Information Systems. Organizationally, the present chapter is divided into five sections: (1) an exploration of the rationale of accounting and the apparent division of accounting into financial and managerial applications; (2) an analysis of some of the allusions or references to Management Information Systems v;hich appear in the managerial accounting literature^ and a reconciliation of the derived concept of Management Information System.s with these statements; (3) a restatement of the derived concept in accordance ^It is difficult to classify much of the literature as being specifically managerial accounting since this classification implies a cutting across disciplines. Even within accounting, it is often impossible to fully distinguish managerial accounting from financial accounting since elements of both may appear in each. The management literature contains much that is relevant to accounting, and likewise there is much in accounting v/ritings pertaining to management. This, however, is not crucial since the survey of the literature to follow is not intended to be exhaustive, and any selectivity tends to be somewhat arbitrary .

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83 with the clarifying analysis; (4) the identification of areas of incompleteness and the elements needed to complete a formulation of a complete and operational concept of Management Information Systems; and (5) summary and conclusions. The Rationale of Accounting Accounting is commonly subdivided into two main classes, financial and managerial : The terms financial accounting and managerial accounting reflect the differences in the uses of accounting information. Essentially, financial accounting pertains to the area of reporting overall operations; frequently the reports go to outsiders, including stockholders, who are not responsible for the day-to-day operations of the company but do have an interest in knowing about its economic progress. Managerial accounting pertains to the type of information that is used by management for making internal economic decisions.^ Although many authorities assert that the original purpose of accounting was "financial/' such writers often employ the term "accounting" as though it were synonymous with record keeping which forms only a part of the total accounting function.^ The most prevalent view today is that accounting developed initially for managerial purposes, Harold Bierraan, Jr., and Allan R. Drebin, Financial Accountzng: An Introduction (New York: Macraillan Co , 1968) p. 4 . / / / W.illiard E. Stone, "Antecedents of the Accounting Profession," Aocou-nting Review, Vol. XLIV (April, 1969), p. 284. However, even in ancient times, the records were used internally as well as externally although the primary xntent may have been' for external uses.

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84 that is, for internal owner uses . ^ Ross, for example, sees accounting systems arising as a response to some perceived needs of internal management.^ On the other hand, Scott regards the external-internal use distinction as an artificial one and looks on accounting as an integrated response to the interactions of the marketplace, statistics, government and lav;, and economic organizations.^" Goldberg suggests that although accounting most often finds its expression in financial, that is, monetary terms, accounting and management share so much common ground that they are virtually inseparable.^^ It v;ill be demonstrated presently that Goldberg's view is the most reasonable and valid one, espeEldon S. Hendriksen, Accounti-ng Theory (Homewood, 111.: Richard D. Irwin, Inc., 1965), p. 18. ^Barbara Ross, "The Accounts of the Stewards of the Talbot Household at Blakemere: An Example of Medieval Accounting Practice," Abacus, Vol. IV (August, 1968), pp. 51-72. Although this article deals in great detail with a specific medieval situation, the author implies that accounting in this and other situations began for the servicing of management's needs for operational information. See also Kenneth S. Most, "New Light on Medieval Manorial Accounts," The Acaovntant , Vol. CLX (January 25, 1969), pp. 119-21. Most asserts this directly by pointing out that accounting developed in manors, and since these were essentially sealed off from external influences or requirements, the response must have been for internal needs, and therefore accounting could have developed initially for managerial purposes only. ^°DR Scott, The Cultural Significance of Accounts (Columbia, Mo.: Lucas Brothers Publishers, undated), p. 7. ^^Louis Goldberg, An Inquiry into the Nature of Accounting (Evanston, 111.: American /accounting Association, 1965) , pp. 16-19.

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85 cially in view of the purposive concepts of both management and information as developed in Chapter II. Accordingly, the identification of two kinds of accovinting, financial and managerial, as related to the universal practice of management, seems inappropriate. The distinction appears to depend on ultimate users. If it is used by those v.'ho generate it, i.e., internally, it is managerial, but if communicated to outsiders, it is financial. However, whether designed or used internally or externally as an aid for decision making, it represents evidence per se. In terms of Management Information Systems, this seems like a slender distinction to drav;. Moreover, it seems to imply that financial accounting information, being directed as it is to outsiders, is not useful or appropriate for internal uses. But the issue is not the appropriateness of the information; the crucial issue is the information's influence and use. In this regard, Bierman and Drebin are quick to agree by stating that "both financial and managerial accounting are concerned with supplying information for decision making, and there is considerable overlap. "-^ Therefore, it would appear that accounting generically has the provision of information for decision making as its purpose, and subject to certain constraints, ful^ ^Bierman and Drebin, loo. oit.

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86 fills the derived concept's statement of purpose for Management Information Systems. Therefore, a more detailed investigation of the rationale of accounting is needed in order that the unified character of accounting and its relationship to Management Information Systems may be understood. Although this study is concerned with managerial aspects, and therefore suggests the approach should be from the managerial accounting point of view, this is inappropriate, as will be demonstrated. Consequently, the development of the rationale of accounting will be initially from the point of view that everything in accounting which is not designated as financial accounting is, by elimination, managerial accounting. Later it will be shown that financial accounting serves some of the purposes of managerial accounting, but the initial focus is on financial accounting. Originally, organizations were more or less free to adopt and use their own rules for management and accounting information^ ^ with little outside interference. This, hov;ever, made the statements of one enterprise incomparable with those of another.^** With the rise of large-scale, v/idely owned enterprises during the ^ ^As defined earlier in terms of primarily interna], or external users. ^^A. A. Fitzgerald and L. S. Schumer, Classification in Accounting (Sydney: Butterworths , 1962), pp. 27-28.

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87 industrial revolution, a demand for uniform measurement rules concerning the results of enterprise emerged. This need was satisfied by an adaption of the double entry bookkeeping system which dates back to medieval times. This system was originally internally oriented, ^ 'but it offered the seekers of uniformity the great advantage of an established, relatively simple set of attributes for information which had stood the test of time. These were that information was expressed in monetary terms, and only information based on "transactions" was admitted to the system.^® These criteria were borrowed and adapted to apply to externally directed or financial account^ ^Harry C. Bentley, The Science of Accounts (New York: Ronald Press Co., 1911), p. 10. See also Nicholas A. H. Stacey, English Accountancy : A Study in Social and Economic History: 1800-1954 (London: Gee & Co., Ltd., 1954), p. 1. Some writers see an earlier development of financial accounting arising from the riskiness of venture undertakings and the need for a common basis of evaluating results across undertakings. See George, op. cit.^ p. 32. Despite the demand for comparability over time, it still has not yet been fully achieved, and agitation for greater uniformity persists. For example, see Leonard Spacek, "The Need for an Accounting Court," Accountina Review, Vol. XXXIII (July, 1958), pp. 368-79. ^^R. Gene Brown and Kenneth S. Johnston, Paciolo on Accounting (New York: McGraw-Hill Book Co., 1963), pp. 810. Double entry bookkeeping is often erroneously attributed to Luca Paciolo who was the first to publish a work on its principles and operation (in 1494) , but he was not the originator. Its use by Genoese bankers as early as 1340 is known, but its date of origin and its inventor are unknown. See George, op. cit., pp. 30-39. ^ 'Hendriksen, loc. cit. ^^Brov-n and Johnston, op. cit., pp. 25-26.

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88 ting. The double entry scheme V7as consistently applied to financial accounting, and over time, the financial focus gradually became the prevailing one for accounting and was reinforced as the numbers of enterprises which had to give a reporting of its activities to outsiders 1 9 grew. Also, accounting writers of particular note in the early twentieth century,^ ° in their attempts to cope with the demands of a rapidly changing economic environment, tended to stress — ^almost exclusively — the financial aspects of accounting. In the 1920 's Paton developed a financially oriented theory of accounting appropriate for the corporate form of enterprise which attracted a great deal of attention and served to reinforce the idea of the core function of ^ ^William Andrew Paton, Aaaounting Theory with Special Reference to the Corporate Enterprise (New York: Ronald Press Co., 1922), pp. 10-11. Also, it should be noted that the number and variety of outsiders were growing as well. For example, the legislation of a federal income tax created an outsider of substantial importance. ^"Four such writers stand out in particular: Henry Rand Hatfield, Modern Accounting (New York: D. Appleton & Co., 1913); C.E. Sprague, The Philosophy of Accounts^ 5th Ed. (New York: Ronald Press Co., 1922); Arthur Lowes Dickinson, Accounting: Practice and Procedure , 2nd Ed. (New York: Ronald Press Co., 1914); and Paul-Joseph Esquerre, The Applied Theory of Accounts (New York: Ronald Press Co. , 1917) . However, this is not to say that accounting writing was limited to the financial area. There was considerable intellectual activity in the managerial field as well during this period, but, nevertheless, the emergence of the accountant as a professional man rather than as a bookkeeping tradesman seemed to come from the public's demand for independent, qualified, and unbiased financial reports.

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89 accounting as the communication of financial reports to outsiders.^ ^ Canning attempted to combine the practical art of accounting, in terms of external reporting, with the science of economic valuations, both of which were expressed in monetary terms, The American Institute of Certified Public Accountants, the best known and most influential of the "Professional" accounting groups,^ ^ regarded financial accounting as accounting's raison d' et2'e. Indeed, the financial emphasis — ^^the provision of ^ ^ Pa ton, op. oit. John B. Canning, The Economics of Accountancy : A Critical Analysis of Accounting Theory (New York: Ronald Press Co., 1929). Canning asserts that the purpose of the accountant is "the determination of financial position Ihid. , p. 179. 2 3 This organization, often referred to as the AICPA, is the result of several mergers and name changes. The first group of public accountants in the United States was established in 1887 as the American Association of Public Accountants. In 1916, the name was changed to the American Institute of Accountants (AIA) . This association merged with the American Society of Certified Public Accountants in 1936 and continued as the AIA until 1957, when the present name was adopted. See Joseph A. Silvoso and Royal D. M. Bauer, Auditing, 2nd. Ed. (Cincinnati, 0.: Southwestern Publishing Co., 1965), p. 2; and "What's in a Name Journal of Accountancy , Vol. CIII (June, 1957), p. 30. Henceforth, to avoid confusion and needless repetition, references to this chain of organizations will be either to the American Institute of Certified Public Accountants or to the "Institute." It should also be noted that the Institute has long regarded the "profession" of accounting as being limited to attest function in which the accountant performs as an independent agent, governed only by his ov7n judgment, integrity, and a code of ethics. There are many other organizations of accountants, such as the National Association of Accountants, but these cover broader areas of interest than does the Institute's membership and none seem to have the influence of the Institute.

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90 information to outsiders--became so pervasive that accounting was generally defined, until recently, as: The art of recording, classifying, and suirmiarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of a financial character, and interpreting the results thereof.^"* With respect to this statement, Kohler believes that the three expressions, "in terms of money," events," and "of a financial character" are specifically embodied in the concept of a "transaction."^^ The transaction is the basis for accounting activity and the core problem in accounting is the criteria for the recognition of a transaction: Recognition is dependent on the occurrence of the event or the existence of the condition, a determination of the accounts affected, an ascertainment of the money amounts involved, and an administrative review of the adequacy of referable, supporting data serving as objective evidence of component elements.^ ^ A transaction is, therefore, an event, but only afte the indicated criteria have been satisfied. Kohler be^ "* Comraittee on Terminology, Accounting Terminology Bulletin^ Number Ij Review and Resume (New York: American Institute of Accountants, 1953), p. 9. This statement is a carry over of the statement published in 1941 by a simi larly named committee. Italics have been added. ^ ^ Eric L. Kohler, A Dictionary for Accountants (New York: Prentice-Hall, Inc., 1952), p. 9. 2^ Ibid.^ p. 427.

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91 lieves that accounting is solely a financial matter, and management decisions, whether internal or external, are best when based on the kind of "objective evidence" such a system generates.^' Kohler does not make any distinction between financial and managerial accounting . ^ ^ However, it seems obvious that there may be certain occurrences falling outside these criteria which might be of use to management, and^ if known, might affect their decisions. But these are excluded from the accounting system Kohler posits. Therefore, it can be concluded that financial accounting maintained in accordance with these criteria is not inappropriate for managerial action but incomplete, and thus, since some information is furnished by such systems, financial accounting forms at least a part of a Management Information System. ^"^Ihid., p. 11. However, Kohler does indicate that other evidence, "as supplemental data in corporate reports . . . may have some significance, as yet not fully developed, to management, investors, and others." ^^Ihid. In fairness to Kohler, it must be noted that he was was writing in 1952, before the term "managerial accounting" had gained widespread use. In the third edition of this work published in 1963, he does employ the term, and in addition has since v/ritten an entire book on the subject. See Eric L. Kohler, Acaountiyig for Management (Englev700d Cliffs, N. J.: Prentice-Hall, Inc., 1965). ^^Kohler, Dictionary , p. 11. Kohler asserts that "replacement cost, index-number valuation, [etc.,] . . . neither having objective existence nor reflecting management accountability, is unsuited for accounting records or reports . " 1

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92 On first inspection, Kohler's position seems extreme, suggesting as he does that only that information which is proper for external reporting is appropriate for internal uses. However, Kohler did recognize the existence of a branch of accounting V7hich deals with "prospective" and other nontransaction based matters beyond the scope of financial accounting.^" This branch of accounting is "cost accounting" and seems to provide the basis of what is today known as managerial accounting. Over time, as financial accounting developed, so too did its internally oriented counterpart, cost accounting. At the same time, however, as the science of management developed, accountants sought ways to respond to the needs of management for information without regard to attributes imposed on information and reports designed for external consumption. The difference in users and uses allowed the cost accountant considerable latitude in determining information criteria and led to the view that cost accounting is strictly an internal process, the results of which are not generally communicated beyond the confines of the enter^°Ibid. ,127. ^^The point at which a science of management can be said to have commenced is, of course, arbitrary. For purposes of this discussion, it assumed to be ciraa 1900, and marked by Taylor's Scientific Managem.ent Movement. See George, op. cit._, pp. 86-87.

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93 3 2 prise. This appears to have resulted in accountants, engineers, and others specifying the information needed by management and the concomittant design of accounting systems to provide it. Thus, the early decades of the twentieth century saw a proliferation of specialized accounting systems designed to aid specific industrial and merchandizing operations.'^ While these were sufficient at the time to satisfy management's perceived needs, they all shared a common orientation to financial accounting's monetary expression of a transaction as a base.''* '^William A. Terrill and A. W. Patrick, Cost Aooounting for Management (New York: Holt, Rinehart and Winston, Inc., 1965), p. 4. However, over time, as cost accounting became increasingly integrated with the conventional accounts, cost accountants were somewhat forced to adopt the criteria of financial accounting. "For some examples see Uniform System of Accounts fov Hotels (New York: Hotel Association of New York City, 1933); F. H. Hill, Jr., Computing Cotton Fabric Costs (New York: McGraw-Hill Book Co., 1929); H. W. Eckardt, Accounting in the Lumber Industry (New York: Harper and Brothers Publishers, 1929); and H. G. Humphreys, The Accounts of an Oil Company (New York: American Institute Publishing Co., 1934). Perhaps the most prolific of such system designers was Walter Mucklow, a certified public accountant, who during the 1920 's and 1930 's produced a number of such works dealing with such subjects as real estate, land, lumber, cemeteries, etc. ''*Kohler, op. cit.^ p. 127. Others imply the monetary medium of expression but refer to "profit" (a residual monetary notion) as the carrying vehicle; see T. K. Cowan, The Cost Accounting Function (London: Sv/eet & Maxwell, Ltd., 1965), p. 22. Of course, cost accounting systems also employed other m>easures, such as units, but these were not integrated with the accounting records which were limited formally to monetary expressions.

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94 However, as the art of management evolved more in the direction of becoming a science, there developed a growing concern about the state of the art of cost accounting and its relationship to management. In 1949, Goetz asked: What are management's problems, and how can management solve them? What data are needed by management in attacking these problems, and how can these data be obtained? ... A managerial problem consists of a purpose in a situation. Different purposes or different situations impose different requirements as to . . . data. ^ ^ Goetz appears to be seeking an accounting theory which is entirely consistent with management theory, but while moving in this general direction he remained tied to the tradition of monetary expressions v;hich underlie financial accounting theory: Records should not be kept to ascertain costs: costs should be ascertained to solve specific management problems. The first view regards costs as absolutes, as single-valued truths accessible to the bookkeeper. The second regards costs as relative, as true only within a given frame determined by a management problem, i.e., by a purpose in a situation. . . . The accounting problem involved is one of ascertaining how the composition and importance of costs . . . change [with alternatives].^^ Vatter, one of the early writers in the area of mana^ ^Billy E. Goetz, Managemsnt Planning and Central: A Managerial Approach to Industrial Aaoounting (New York: McGraw-Hill Book Co., 1949), p. 1. ^^Ibid. ^''ibid. pp. 1-2.

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95 gerial accounting,^® also finds it difficult to go beyond conventional cost accounting by casting off the monetary base of expression completely; he does, however, expand the articulation of the purposes of managerial accounting by indicating a willingness to admit more than money-based information: Accounting data and procedures are intimately connected with processes of operation and management of the business enterprise . . . [and although] the data upon which a large part of the fact-finding associated v/ith management decisions is based are largely [traditional] accounting data . . . [But] managerial accounting is concerned with systematic collection of facts about the detailed operations . . . [of] the enterprise. ^ ^ Davis is also concerned about managerial accounting, but sees "productivity" which results from effective management as the common denominator; he believes that any accounting function committed to serving management should focus on this end. However, he finds it impossible to express productivity in any terms other than monetary. ^^The term managerial accounting appears to have been originated by James 0. McKinsey, Managerial Accounting , 2 Vols. (New York: Ronald Press, Inc., 1924). This work, however, was primarily a standard cost accounting work with a focus on supplying management information needs via accounting records expressed in dollar terms. Managerial accounting, as an expression, seems to be much like Management Information Systems in that the term is used extensively without the development of an underlying concept. ^ ^William. J. Vatter, Managerial Accounting (Nev; York: Prentice-Hall, Inc., 1950), pp. 97-98. Italics are added. ""Kiram S. Davis ^ Prcductivitv Accounting (Philadelphia: University of Pennsylvania Press, 1955), pp. 2-4.

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96 Smith, on the other hand, does not regard the emphasis on dollar data as the primary difficulty in managerial accounting : This is characteristic of the double-entry system of keeping accounts , v;hose prime purpose is to produce financial statements. Managerial accounting is not so restricted to financial data nor to the double entry system ... In fact, most of the financial studies and analytical processes employed for internal decision . . . never enter the formal financial ledgers and reports. '•^ Instead of seeking some common mode of expression. Smith feels that managerial accounting cannot be fully developed until it is recognized that it is dealing with management : The common denominator of the functions of both management and accounting is the making of an effective decision based upon appropriate information. The great contribution of managerial accounting is the elimination of intuition, which is neither dependable nor reproducible. . . . [The way to operationalize this lies in] a more intimate merger of the two older professions of management and accounting wherein the information needs of the manager determine the accounting means for their satisfaction."*^ It can be concluded, therefore, that, whether used internally or externally, accounting provides information to decision makers. Accounting, generically, has always had information as its product, whether called financial accounting or cost accounting. Today, as an apparent outgrowth of the increased emphasis on the managerial Richard L. Smith, Management Through Accounting (Englewood Cliffs, N. J.: Prentice-Hall, Inc., 1962), p. 43. '*^Ibid., pp. vii-viii.

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97 aspects of accounting, there exists something called managerial accounting which is evidenced by texts, educational courses, and other literature.**^ To some extent this appears to be only cost accounting under a new title, but it also seems that management accounting is a somewhat different accounting response to the need for inputs to the decision making function which began when the accountant undertook to measure gains and losses from operations to help management in appraising the outcome of decisions. While keeping a historical record remains a basic accounting function, much greater emphasis is now placed upon making accumulated experience a more useful guide to actions which affect financial results in the future. Managers formerly relied heavily upon intuition and personal observations to supplement the limited financial data available from the accounts, but now the functions of gathering, analyzing, and interpreting a broad range of economic information are extensively delegated to the accountant.'*'* Thus, in the last decade, there appeared to be an attempt to unite the "branches" of accounting by conFor example see Harold Bierman, Jr., and Allan R. Drebin, Managerial Accounting : An Introduction (New York) Macmillan Co., 1968; Charles T. Horngren, Cost Accounting: A Managerial Emphasis (Englewood Cliffs, N. J.: PrenticeHall, Inc., 19G2) ; and Nicholas Dopuch and Jacob G. Birnberg, Cost Accounting: Accounting Data for Management's Decisions (New York: Harcourt, Brace & World, Inc., 1969). These are all fundamentally cost accounting texts in terms of processes and inputs, although there appears to be some broadening of the information base in some instances. ''''Walter B. McFarland, Concepts for Management Accounting (Nev/ Yoi'k : National Association of Accountants, 1966), p. 2. The question of intuition will be explored at some length in Chapter V, pp. 198-202 and 207--208.

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98 verging them on a common, core function. This common function seems to be the service operation of furnishing information to decision makers, and accordingly the American Accounting Association has redefined accounting in this context and in terms which are appropriate for all its "branches" as: "The process of identifying ^ measuring , and communicating eoonom.io information to •permit informed judgments and decisions hy the users of the information. ^ Reconciling the Derived Concept to Managerial Accounting Statements Relating to Management Information Systems The concept of Management Information Systems derived in Chapter II is quite consistent with the definition given above. This broadened approach to accounting seems particularly appropriate if the principle of the universality of management be accepted. The distinction between managerial accounting for internal use and financial accounting for external applications suggests only that different A Statement of Basic Accounting Theory (Evanston, 111.: Araerican Accounting Association, 1966), p. 1. Italics are added. This is far removed from the definition quoted on p. 82, and is 180 degrees from the notion that the accountant "obviously . . '. is not making his statements for anyone other than the common stockholder." See George Oliver May, Twenty-Five Years of Accounting Responsibility : 1911-1936 , ed. Bishop Carleton Hunt (New York: Am.erican Institute Publishing Co., 1936), p. 395.

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purposes or situations require different information.'*^ If one is to champion the notion of a fully open information system, these purposes and situations would have to be additive but this suggests not differences but degrees. Therefore, the closed system, that is a system under control which relates information to both the problem and the user appears to be the only realistic approach to operationalizing information."*' A closed system, however, requires a set of perimeters.**® For information systems these are the criteria for including or excluding information. In Chapter II, it was indicated that evidence per se depends on usage, and thus the legal criteria of relevancy, materiality, and competency are somewhat Utopian in the absence of a judge or other authoritative arbiter and tend, consequently, to be negated in management situations. As a result, the derived concept is vague in this respect. However, this can be clarified, and the dimension of perimeters established by analyzing the bases for the criteria ''^Smith, op. ait., p. 8. See also the concept of evidence presented in Ch. II, pp. 52-55.. The belief in or the use of the information need not be rational. "* ''Harold M. Sollenberger , "Management Information Systems in the Real World," Management Services , Vol. VI (November-DecGinber , 196 9) , pp. 32-33. '*®Litterer, op. ait., pp. 154-55.

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for aaoounting information which underlie the 1966 statement on accounting. These consist of four basic standards (1) relevance; (2) verif lability ; (3) freedom from bias; and (4) quantif lability ^ If it can be agreed, for the moment, that Accounting Information Systems are a part of a Management Information System, then these criteria can be analyzed and extended, where appropriate, to Manage ment Information Systems. A complete and compatible extension will suggest that the two systems are identical in so far as the dimension of perimeters is concerned. The criterion of relevance is sim.iD.ar to the legal interpretation: Relevance is the primary standard and requires that the information must bear upon or be usefully associated with actions it is designed to facilitate or results desired to be produced. Known or assumed informational needs of potential users are of paramount importance in applying this standard. ^° Relevance exists in those instances V7hen either the information or the process by which it is communicated possesses the potential to influence action. This suggests that the information or evidence must be timely, that is, made available when required and presented in a usable form. The pov/er to influence users implies that the criterion of relevance has magnitude, the degree of '*°j4 Statement of Basic Accounting Theory, p. 7. ''''Ibid,

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101 which varies with purposes. As a result, information may have considerable relevance for some uses and little or none for others. Therefore, relevance is a function of the problem. This notion of relevance seems to comprehend all of the legal criteria, that is, the evidence must not only have a logical connection with the problem but it possesses an element of degree which is subjectively determined by the user. This, essentially, is the criterion of materiality. In addition, the weight assigned to the evidence by the user is the user's subjective evaluation of the reliability to be attributed to the source of the evidence, and therefore, relevance in this contextual sense also comprehends competency. However, all personal evaluations of this nature tend to be highly subjective, and in order that some degree of control may be exerted over subjectiveness , the criterion of verif lability is required for information. This criterion means that tv/o or more "qualified" individuals must come to essentially the same conclusion when the same evidence is used. Not only does verif lability provide for a measure of control over subjectiveness, it also tends to ensure the presence of all the evidence needed for a decision since the "information is commonly used by persons who have limited ^^Ibid., pp. 9-10. McFarland (op. ait., pp. 3-5) uses "relevance" • in approximately the same v?ay.

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102 access to the data."^^ Moreover, it tends to mitigate the effects of any conflicting interests the users of the information may have. VVhile personal interests may create a bias in the evidence, it is also possible for the information to be biased due to the use of inappropriate techniques; consequently, an information criterion of "freedom from bias" is indicated. This means essentially that the information gathering and conimunicating processes be impartial. The three criteria for accounting information examined thus far are equally valid for Management Information Systems. This does not, however, appear to be true for the last criterion for accounting information, the requirement that the evidence possess quantif lability , that is, be susceptible to being expressed in numbers. This criterion does appear to be appropriate for accounting information since accounting is often purported as to be a "measurement" process. The requirement of numerical expression is much broader than the criterion .^^ A Statement of Basic Accounting Theory, p. 7. ^^Ibid. See also Ch. II, pp. 73-74 and footnote no. 120 on p. 74. Statement of Basis Accounting Theory, p. 11. ^^Ibid. , p. 12. The theory of measurement Vi;ill be taken up later in the chapter.

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103 found in traditional accounting which restricts the information to monetary expressions ^^derived from transactions^' although it is still generally felt that accounting information is inherently economic in nature. ^® More specifically, it is believed in particular that data are made more useful with quanti.f ication than without. This may be true for accounting information, but the difficulty with the criterion of quantif lability for Management Information Systems is the danger that it may lead to either incomplete or inappropriate information due to what Roy calls "the deification of numbers."^" Roy develops this thesis by initially referring to Barnard's analysis of the inputs in the decision making process : Three kinds of considerations govern decision making: material that consists of precise information, material of hybrid character, and material of a speculative type. The first of these . . . may be ^^Ibid. , pp. 11-12. ^"^Ibid., p. 1. The position adopted is that "there is no implication that accounting information is necessarily based only on transaction data, and . . . information based on various types of non-transaction data meet the standards for accounting information." ^^Ibid., pp. 41-42. See also Smith, op. oit . , p. 17. ^^i4 Statement of Basic Accounting Theory, p. 12. * "Robert H. Roy, The Administrative Process CBaltimore: The Johns Hopkins Press, 1958), pp. 83-97.

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104 expressed in numbers, the second [is] "data of poor quality or limited extent," and the third "impressions and probabilities not susceptible of mathematical expression and purely contingent uncertainties . " ^ ^ Roy observes that in practice "numbers tend inordinately to dominate decision making. This comes about in two ways : First, by crowding out or pushing aside those intangibles v/hich cannot be quantified but which may exceed in importance that which is measurable and, second, by acquiring an aura of accuracy which leads the decision m.aker to forget that numbers som.etimes have dubious validity. Both of these tendencies suppress or subordinate judgment and accord to numbers a dogmatic and sacred quality which I have characterized as the deification of numbers. In application this results in decisions being made by: "(1) maximizing the available precise information; (2) according to all of the numbers complete and total confidence; [and] (3) allowing the numbers to set aside, negate, and dominate the intangible elements, even when these are of overriding importance."^'' But ideally: Decisions would be made by: (1) maximizing the available quantitative inf orm.ation; (2) according to the quantitative elements only that degree of confidence merited by the numbers; [and] (3) giving due and proper weight to all other intangible, non-quantifiable factors. ^ ^ ^ ^Chester Barnard as quoted in Roy, op. cit,^ p. 85. ^ ^Ihid. , pp. 85-8G. ^'Tbid.j p. 86.

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105 The relationship of the derived concept of Management Information Systems to the Statement of Basio Accounting Theory may be summ.arized as follows: The derivation is consistent with the American Accounting Association's definition of accounting, and with the exception of the criterion of quantifiabilitij , is fully consistent with the set of criteria for information recognition proposed. In addition, the comparison with the accounting reference frame clarifies the derivation, especially with respect to the boundaries of information. The issue of quantif lability leads to tvio possible, tentative conclusions: (1) accounting information systems are a subset of Management Information Systems; or (2) Management Information Systems are the result of applying theories of accounting information systems. In the latter case, the criterion of quantif iability is inappropriate. In order to resolve these discrepancies in conclusions, it is necessary to turn to other studies in the field of accounting information systems. The Interrelationship of Communication^ Understanding ^ and Relevance Fertakis has investigated accounting informationcommunication systems in temas of uses of the information communicated which are functions of understanding.^^ AlJohn P. Fertakis, "On Communication, Understanding, and Relevance in Accounting Reporting," Accounting Review, Vol. XLIV (October, 1969), pp. 680-91.

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106 though addressed primarily to financial accounting models, his analysis is equally appropriate for managerial situations. He notes the existence of a current tendency to widen the scope of accounting communication in order to increase "usefulness." This often results in increasing the quantity of data communicated and leads to "a plethora of footnotes and other material intended to explain, supplement, clarify, and caution."^'' However, despite the increased amount of data, "the extent to which information is being conveyed to statement users" is subject to serious question. Fertakis sees the communication process as the cause of the difficulty. Accounting communication traditionally assumes user rationality, and therefore treats the process as a simple matter of transmitting relevant, economic information. Little attention has been devoted to understanding the psychological factors which affect the users as people and their individual comprehensions of the communication. ^ ^ The solution seems to lie in focusing on the needs of the user as an individual, but there is no unique user of accounting information. ' ° Nevertheless, ^ ''ibid. , p. 680. ^^Ibid. , p. 681. ^'Ibid. The matters of communication processes and the psychological factors affecting communication will be examined in detail in Chapter IV. ''°Ibid. , p. 683.

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107 Fertakis believes that users may be classified in relation to the type of problem they seek to resolve through decisions made on the basis of information received.'^ These problems are of three types concerning questions about the following : 1. The firm in its internal functioning toward economic goals. 2. The firm in its external relationships to society as a means-ends mechanism. 3. The firm in its cultural context as a social and political body.'^ Fertakis states that the first of these relates to managerial accounting, the second to financial accounting, but the third, although a product of accounting information systems, has only an incidental connection with accounting.'^ However, information concerning all of these problems emerge from, accounting information systems,'** and similarly, the three problem areas summarize the issues facing management per se.' ^ Therefore, accounting in''^Ibid., p. 684 '''*Ibid. The last problem area is comprehended by a field becoming known as social accounting and which is not yet highly developed or articulated. See G. Stuvel, Systems of Social Accounts (Oxford: Clarendon Press, 1965). ' ^This is more obvious if, in accordance with the principle of universality of management, the word "firm" be replaced by "person," "group" or whatever the relevant environment comprehends. This does not alter in anv way the validity of this contention.

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108 formation systems collectively comprise a Management Information System. Although Fertakis focuses on personal perceptions and cognitions and does not discuss information criteria generically, some conclusions in this regard can be drawn from his work. Verif lability , in addition to offering a degree of control over biases, tests in part user rationality. Relevance, as suggested earlier, is subjective and depends on both the problem and the user as an individual. Regarding quantif lability , Fertakis believes that the traditional numerical expression is necessary and desirable for financial accounting information.'^ An admixture is implied for managerial accounting information, and he issues no statement regarding social accounting information. In addition, the drift away from straight quantification seems to be demonstrated in the footnotes to accounting statements which currently are often narrative rather than numerical in form.'' Therefore, it can be concluded from Fertakis' work that Management Information System.s are essentially applications of accounting information systems, and moreover, that the information boundary of quantif lability '^Fertakis, op. cit.y pp. 690-91. "For example, see the 19S7 Annual Report of the OliveT Corporation , especially notes 4 and 5 to the consolidated financial statements. These convey a great deal of information, none of which is expressed in numerical teriTis .

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109 is neither necessary nor sufficient. In addition, the derived concept, while fragmentary, is wholly consistent with this viewpoint. The Firmin-Linn "Transactions" Model The derived concept of Management Information Systems and the matter of information criteria may also be clarified by reference to the work of Firmin and Linn.'® They see Management Information Systems as being composed of eight informatioji generating elements which link the organization to its environment: (1) perception, "the initial entry of data, whether collected or generated, into the organization"; (2) recordation, the physical entry; (3) storage; (4) retrieval; (5) processing, the arrangement of data "according to the spscific needs of the organization"; (6) transmission; (7) presentation, the form of the communication; and (8) decision making, which pertains only to the information system itself.'^ All of these functional elements are present in a managerial accounting system, the product of v;hich is information, and therefore a managerial accounting system is at least a subset of a Management Information System.®" '® Peter A. Firmin and James J. Linn, "Information Systems and Managerial Accounting," Accounting Review, Vol. XLIII (January, 1968), pp. 75-82. ''^Ibid. , pp. 75-76 . ® ^Ibid. , p. 77.

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110 Notwithstanding this, the recent emphasis on Management Information Systems seems to have impinged upon managerial accounting systems. There appear to be three reasons for this. First, there have been basic changes in perspective. The advent of the computer and electronic data processing have made the concept of integrated information systems attainable in practice. Where formerly the accounting systems were the only formal information systems in the organization, others can be added as needed. These considerations also portend organization changes in structuring in order to take the best advantage of system integrations.®^ Secondj the last twenty years have seen the emergence of a variety of new and sophisticated approaches to organization theory, and these have new and different data requirements. These techniques cannot be implem^ented effectively if the information base is limited to that produced by the conventional accounting information system since it does not comprehend much of the information needed. Thirds although normatively, decision models should follow decision rules used by decision makers, there is a growing awareness that this is not, in fact, the case: ^'^Ibid. , pp. 77-78. ^^Ibid. , pp. 7B~19.

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Ill A vast amount of decision making is hueristic in nature and . . . the overwhelming number of uncertainties surrounding the decision frustrate optimization. In making decisions, the decision makers consider such dif f icult-to-quantif y factors as the compatibility of intended decisions with existing operating constraints, optimum time for decision, optimum amounts of information, conflicts of interest, the organizational scheme for rewarding successful decision making and penalizing failures, the relationship between payoff and risk, and degree of understanding of the decision which exists in the minds of subordinates.®^ Accounting has failed as the information system because it has traditionally been tied to "economic events." Moreover, not all economic events are recognized due to various constraining criteria which have been applied to them, such as "objectivity, quantif lability , verf lability , " and so on.®"* These can be generally characterized as "transactions," and thus many econom.ic occurrences of relevance to decision making are omitted from the system. "Price-level changes, increased employee skills, and intraentity changes in asset values are but a few examples of such 'non-transactions.'"®^ Firmin and Linn see the solution to the incompleteness of accounting information system.s as lying in a new and expanded concept of the transaction. Such a concept ® ^Ibid. , p. 79.

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112 can employ "multi-dimensional vectors" to include the nonmonetary aspects of conventional accounting transactions, and in addition should be enlarged to permit the entry point of information into the system to vary with the type of information. When extended to its ultimate limits, this suggests the possibility of collecting information in the smallest total unit which can characterize "the most basic or elemental property of the object being measured. "^^ It seems clear from the foregoing that information, when expanded, need not be quantifiable in nature. Furthermore, if the accounting system expands to these limits, it will cover all information and, therefore, will be identical to the Management Information System which Firmin and Linn define as "a system for accepting data as raw material, and, through one or more transmutation processes, generating information as a product."®' Clearly, the derivation, although more broadly expressed, is in every way consistent with this definition and with the detailed analysis made by Firmin and Linn. The Horngren Approach to Accounting Information Horngren sheds additional light on the relationship ^Ibid. ''ibid. , p. 75.

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113 of accounting systems to Management Information Systems and on the nature of information. He assigns the boundary of quantif iability to information produced by accounting systems by asserting: The accounting system is the major quantitative information system in almost every organization. An effective accounting system provides information for three broad purposes: (1) internal reporting to managers, for use in planning and controlling current operations; (2) internal reporting to managers, for use in making special decisions and in formulating long-range plans; and (3) external reporting to stockholders, government and other outside parties.^ ^ If the first part of this statement can be agreed to, then it follows that for "almost every organization" either the accounting information system is the Management Information System, or quantif iability is not a Management Information System attribute. Horngren is silent on this matter and moreover, does not raise the issue of quantifiability again. However, some conclusions may be drawn from his analysis of information. Of the three purposes indicated in the foregoing quotation, the first two are relative to managerial accounting, and the last is primarily the domain of financial accounting. But different purposes presuppose different types of information, and these Charles T. ?Iorngren, Accounting fov Management Control: An Introduction (Englev;ood Cliffs, N. J.: PrenticeHall, Inc., 1965), pp. 304. Italics added.

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114 vary with the level of use, i.e., the president's information needs differ from those, say, of a foreman.®^ Research findings indicate that there are three basic types of information: (1) "scorecard" information which is used to evaluate current status; (2) "attentiondirecting" information which identifies potential decision areas to be looked into; and (3) "proLlem-solving" information which is employed to determine the best alternative of the set of alternatives . ^ ° Horngren notes that the problemi-solving type of information is employed in the most complex decisions and "often require expert advice from specialists . . . ."'^ As it has been shown, such "advice" is clearly information and whether comprehended by the accounting inform.ation sys tem or not, it is not limited to numerical expressions.'^ Horngren also believes that information types must be put into the context of use, and therefore, states that the task of the accountant in furnishing information has three related facets to it: 1. Scove keeping. The accumulation of data. 8 9 Ibid. , p. 4. 9 0 H. A. Simon as cited Ibid. , pp. 4-5. 9 1 Ibid. t p. 5. 9 2 For example, an attorney is a "specialist" v7ho "advice" generally in qualitative terms. gives

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115 2. Attention-directing . The reporting and interpreting of information which helps managers to focus on operating problems, imperfections, inefficiencies, and opportunities. . . 3. Problem solving. This aspect of accounting involves the concise quantification of the relative merits of possible courses of action, often with recommendations as to the best procedure. . . .^^ Thus, Horngren specifies quantif lability for accounting information but apparently not for the Management Information System, which he refers to as the "over-all" information system.^"* With respect to the "over-all" information system, Horngren says that it should be "a single [integrated] , multiple-purpose system with a highly selective reporting scheme."^ ^ The derived concept is consistent with this statement since it specifies as a purpose the furnishing of managers with all the evidence needed or wanted for the problem at hand. A Restatement of the Derived Concept of Management Information Systems in Two Dimensions By employing managerial accounting as a frame of reference, both the role of information and its perimeters have been identified, thus clarifying the derived concept and adding a second dimension to the notion. In * ^Horngren, Accounting for Management Control ^ pp. 3-4. ^'^Ihid. ' ^Ihid.

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116 addition, comparing managerial accounting theory v/ith statements on Management Information Systems shows that managerial accounting systems are part of the Management Information System and often represent the entire system. The difference between the two systems seems to be the information criterion of quantif iability which is generally required for accounting systems, and although desirable not necessary for Management Information Systems. If this difference can be resolved then it would appear to be reasonable to assert that Management Information Systems and Management Accounting Information Systems are identical in two dimensions, and therefore are closely related, if not fully identical. Complete identity depends upon the sharing of all dimensions, and since these have not yet been fully developed, this cannot at the moment be asserted. The closeness of the relationship can be strengthened, however, by establishing an identity in the second dimension of perimeters. In this respect, it must be noted that accounting is often looked on as being a measurement process, and perhaps the difference in perimeters which lies in the criterion ^^This theme is a conmon one; for example, see A Statement of Basic Accounting Theory ^ p. 12; and Robert K. Jaedicke, Yuji Ijiri, and Oswald Nielsen (Eds.), Research in Accounting Measurement (Evanston, 111.: American Accounting Association, 1966), p. ix.

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117 of quantif lability can be reconciled by analyzing the theory of measurement. S. S. Stevens defines measurement as "the assignment of nximerals to objects or events according to rules. This takes place over four distinct scales which are arranged hierarchically: (1) the nominal saale , which is a simple classification or grouping process; (2) the ordinal scale, which is an ordering of the items in the class but without reference to the magnitude of differences between them; (3) the interval scale, which is the assignment of a specific interval or magnitude between the members of the class; and (4) the ratio scale, which comprehends the foregoing scales and also assigns a valid zero point. ^® Although there is some argument about the scale at which "true" measurement beginS/^^ Stevens points out that numbers are not reality but are only symbols, and like the mathematician v/ho lets symbol x stand for some number as a symbol for reality, symbolizing a class or category effectively is assigning it a number. '''S. S. Stevens, "On the Theory of Scales of Measurement," Science, Vol. CIII (January-June, 1946), p. 677. ^^Ihid. , pp. en-iQ. ^ ^Mattessich , op. oit.j p. 58. "Stevens, opj cit.j p. 678. The role of symbols in communication processes will be taken up in Chapter IV.

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118 Mattessich gives an analogy example to demonstrate the application of Stevens' theory: Temperature, for instance, can be measured in different ways and on different scales. The crudest way of doing so is by mere classification into "cold, as soon as some medium (e.g., water) freezes, and "warm" if it does not. These two categories can be considered as constituting a nominal seals since there is hardly any order relationship involved. . . If one adds the boiling point as a second criteria, not only a third class---which we may designate with "hot"--is obtained, but a move to the ordinal scale is realized. For even a savage recognizes that "warm lies between "cold" and "hot". . . . The disadvantage of this nev; scale is, of course, the unequal sizes of our three categories. The first reaches from the absolute zero (-273 Centigrade) to the point of freezing ... (a range of 273 Centigrades) ; the second class reaches from the freezing to the boiling point ( a range of 100 Centigrades) and the third class be infinitely large . . . [Temperature scales of intervals, such as Centigrade, Fahrenheit, etc., are of constant size, but with arbitrarily assigned zero points. The Kelvin scale however has a valid zero point — absolute zero--and is therefore, a ratio scale] Thus, if classif ication-~the nominal scale — can be accepted as measurement, it is also effectively quantification. There is support in the accounting literature for this point of view.^"^ Moreover, the derived concept of Management Information Systems specifies "an organized method," which implies, as a minimum, classification or the use of the nominal scale. It can be con^ " ^Mattessich, op, ait., pp. 59-60. ^'^^A Statement of Basic Aooounting Theory ^ p. 12.

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V, 119 eluded, therefore, that in these broad terms, both Accounting Information Systems and Management Information Systems have an information criterion of quantif lability , and as indicated earlier. Management Information Systems are therefore basically Accounting Information Systems, at least in application, since they share identically the dimensions identified thus far. Furthermore, the derived concept of Management Information Systems, when expanded to tv;o dimensions, has been shov7n to be entirely consistent with statements about Management Accounting Information Systems. The derivation of Chapter II expressed the dimension of purposes while the clarifying analyses developed in the present chapter express another dimension. Taken together, these suggest the following restatem.ent of the derived concept in tv/o dimensions: A Management Information System is an organized method of providing each manager with all the relevant, verifiable, quantifiable, and unbiased evidence he needs or wants for decision and presenting it to him in a form which aids his understanding and stimulates his action. Additional Elements Which Indicate the Existence of a Third Dimension to Management Information Systems The analyses of this chapter effectively serve two purposes. They not only clarify the original purposeoriented concept of Management Information Systems, thereby establishing another dimension for such systems, but

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120 they also serve to identify the areas in v;hich the twodimensional concept is incomplete. There appear to be three primary areas of incompleteness. Firstj management thus far has been considered only in terms of purpose — the. making of decisions. However, the making of a decision entails an action which implies some process or cycle for so doing. In accordance with the principle of universality of management this seems true regardless of either the level of management or the environment in which it occurs. Since decisions are made on the basis of evidence received from the information system, the relationship of the management process to the system needs to be considered.^""* Second^ a Management Information System not only possesses information but, in supplying it to managers, suggests a communication process.^" ^ The relationship and interdependencies of information/communication to the system need, therefore, to be included. Third, managerial use of the information generated and communicated by the information system is by people, and the behavioral considerations of perception, cognition, and influence by both sender and recipient are ^"^Firmin and Linn, loa. ait. ^"'•Horngren suggests this but does not develop the relationship fully, op. cit., pp. 6-7. ^ ° ^Fertakis, op. cit., pp. 681-82.

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121 important factors for effective information systems. Expanding the two-dimensional concept of Management Information Systems to give effect to these elements as a third dimension is the subject of the following chapter. Summary and Conclusions The concept of Management Information Systems derived in Chapter II, while consistent with statements on the subject^ was found to be one-dimensional, that is, expressive of purposes only, and was, therefore, incomplete and unclear, especially with respect to the dimension of perimeters — the criteria by which information is distinguished from non-information. In this regard, the legal criteria for evidence which v;ere employed in Chapter II was found to be inadequate and unsatisfactory for ex4 tension to management situations. Accordingly, the dimension of perimeters was added to the concept of Management Information Systems by clarifying the dimension of purposes expressed in the derivation. The reference frame of accounting and^ more specifically, managerial accounting was employed for this purpose. The rationale of managerial accounting was established as a service function aiding management in its decision making operations. The output of this service function was found to be information, the product of all accounting systems. It was also shown that the derived ^°tlbid. , pp. 685-88.

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122 concept is consistent with both the rationale of managerial accounting and statements on Management Information Systems m.ade in this reference frame although these frequently employed different subject titles. The perimeters of accounting information had been established previously as a set of four criteria: (1) relevancy, which pertains to the problem and comprehends the legal notions of relevancy, materiality, and competency without the assumption of rationality; (2) verif lability, which substitutes in part for rationality and in part for identifying and controlling interest conflicts (3) freedom from bias, which comprehends both statistical and personal biases; and (4) quantif lability , which is expressability in numbers. The only major difference between accounting information criteria and those of Management Information Systems was in the criterion of quantif lability , which was apparently a necessary condition for Accounting Information Systems but only desirable for Management Information Systems. The difference of quantif lability was resolved by reference to the theory of scales in measurement processes When quantif lability was interpreted in its broadest possible sense in this frame of reference, it was found to be a necessary attribute for both systems, and moreover was comprehended by the one-dimensional derived concept. It was concluded, therefore, that Management Information Sys-

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123 terns are basically identical to Management Accounting Information Systems since they share, identically the dimensions of purposes and perimeters established thus far. Finally, the concept derived in Chapter II was restated in two-dimensional terms and this restatement led to the identification of the specific elements missing in the restatem.ent . These elements indicated the existence of a third dimension which must be comprehended before a complete concept of Management Information Systems can be expressed and the identity or relationship of Accounting Information Systems to such systems can be determined. 1

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CHAPTER IV THE DIMENSION OF PROCESSES— THE DERIVED CONCEPT EXPANDED Purpose and Organisation of the Chapter Thus far, two dimensions of Management Information Systems have been identified. In Chapter II, the dimension of purpose was established by means of a derived concept. This derivation was clarified in Chapter III, and^ in the process of doing so, a second dimension of Management Information Systems, the perimeters or boundaries of information — the sole output or product of a Management Information System — were indicated. The results of the analyses of Chapter III suggested that since the dimensions of purposes and perimeters are the same for both Management Accounting Information Systems and Management Information Systems, the former system is at least a subset of the latter system, and^in fact, appears to be the same. The analyses also suggested the existence of another dimension to Management Information Systems-the processes or operations v/hich take place within the information perimeters specified and through which purposes are fulfilled. Whether or not Management Accounting Information Systems and Management Information Systems are only different labels for the same thing depends upon their exhibiting an identical third dimension of processes. The purposeof this chapter is two-fold: (1) to 124

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125 define the dimension of processes for Management Information Systems, thus expanding the two-dimensional clarified derived concept and completing the foundation for the expression of a complete and operational concept of Management Information Systems; and (2) to compare this dimension of the Management Information System with the dimension of processes in Management Accounting Information Systems in order to establish the existence or non-existence of identity between the two systems. Accordingly, the present chapter is divided into five sections: (1) an analysis of the process of manag ement as it pertains to the purposes and perimeters of Management Information Systems; (2) a similar analytical treatment of the process of communication and its relationship to the management process; (3) a consideration of the variable of personality as the controlling factor of behavioral processes, the justification of leadership processes as a surrogate for the behavioral variable, and the relationship of the surrogate to the management and communication processes; (4) a comparison of these three processes of Management Information Systems to the processes of Management Accounting Information Systems; and (5) a summary and conclusions section. The Process of Management and Its Relationship to Management Information Systems There appear to be tV7o basic means by which the m.anage. ment process can be analyzed: (1) by concentrating on

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126 conscious or subconscious mental procedures through which the manager makes a decision; or (2) through focusing on the set of interrelated activities which form the continuous operational process of management. Initially, the first approach seems potentially fruitful. Indeed, management, regardless of environmental conditions and whether taking place at individual, group, or total organizational levels, would be much better understood and predictable under the a priori condition of knowing the processes by which the mind works. However, in fact, little is knov/n about how the mind actually operates on a problem although there have been several speculative simulations of the problem-solving process run on computers.^ The conclusion of these studies appears to be expressed in terms of results rather than means, that is, both men and machines, when properly programmed, can solve identical problems and obtain identical solutions, but it is conjectural v;hether the processes are identical or even similar.^ Therefore, taking this approach to the analysis of the management process would be unduly speculative and beyond the realm of man's experience. ^Newell, Shaw, and Simon, loc. cit. ^Ibid. See also Allen Nev/ell and Herbert A. Simon, "Computer Simulation of Human Thinking," Science, Vol. CXXXIV (December, 1961), pp. 2011-17. It must be noted, however, that human processes can be explained without differentiating between conscious and subconscious levels. The basic limitation of the human problem solving approach

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127 The focus on activities as a reference frame underlies the approach to management theory now known as the Management Process School^ and is grounded in the work of Fayol,"* v;ho also appears to have been the first to conceptualize the principle of universality of management. ^ Fayol sees industrial operations as being composed of six fundamental activities: (1) technioalj which pertains to production; (2) commeroialj which comprehends buying, selling, and exchange; (3) financial^ which concerns the accumulation and use of capital; (4) security ^ which deals V7ith safeguarding assets and persons; (5) accounting ^ which involves information and its communication; and (6) managerial^ which directs the "planning, organization, command, coordination . . . [and] control."^ to processes is that the discoveries made thus far are at the level of fundamental research and are insufficiently articulated for application to practical situations at the present time. Significant breakthroughs in this area are predicted by the 1980's. ^George, op. cit., p. 145. ''Ibid. , p. 146. ^enri Fayol, General and Industrial Management ^ trar.s. Constance Storrs (London: Sir Isaac Pitman & Sons, Ltd., 1949), pp. 306. Fayol's work was originally written in French and published in 1916 in t]ie Bulletin de la Societe de I'Industrie Minerale in article form under the title of Administration industrielle et generale . ^Ibid. , p. 3.

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128 Of these activities, Fayol believes only the managerial is universal to all activity and the most important in an industrial milieu, f or^ as he notes: To manage is to forecast and plan, to organize, to command, to coordinate and to control. To foresee and provide means for examining the future and drawing up the plan of action. To organize means building up of the dual structure, material and human, of the undertaking. To command means maintaining activity among the personnel. To coordinate means binding together, unifying and harmonizing all activity and effort. To control means seeing that everything occurs in conformity with established rule and expressed command.' The process approach to management remains a popular one and has many proponents.® Dale, for example, refers to management as the process of "planning, organizing, staffing, direction, control, innovation, and representation."^ Litterer sees it as "planning, organizing, motivating, and controlling."^" But perhaps the best statement regarding management as a set of activities combined into a process is given by Fox: Whenever someone attempts to achieve a goal through the directed efforts of others he becomes ' Ibid, , pp . 5-6 . ^Even management theorists who do not favor this approach seem in agreement as to its value. For example, see Suojanen, op. oit., p. 1. Suojanen, whose approach is evolutionary rather than functional, believes the process notion possesses "operational merit and theoretical value . " 'Dale, op. cit . , pp. 5-7. ^"Litterer, op. cit., p. 179.

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129 a manager. Let us examine the kind of activities implied by this statement. First, a particular manager laust decide on a goal or the means for achieving it, or both ... he must see to it that the persons and physical factors necessary for the work to be done are present and related to each other as planned; and he must see to it that the goal is actually achieved as planned. In effect, he engages in the functions of planning ^ organizing, and controlling the work of others in addition to his own work . These are the three organic functions of management . By "organic" we mean that all three are invariably basic to and inherent in, managerial activity, whenever and wherever it is performed. In order to integrate the notion of management as a process with the dimensions of purposes and perimeters developed earlier, some combining of the functions and changes in terminology will be appropriate and will aid in clarifying the analysis. The activity of planning presents little confusion. It refers to the identification and establishment of goals, and the selection of the means for achieving thera.^^ There is less agreement, however, regarding other activities of the management process: organizing , commanding , coordinating, innovating , and motivating , These suggest different operations although they may exhibit some overlap, depending on the v;riter employing the terms. Nevertheless, these operations share the common denominator of action ^H^illiam McNair Fox, The Management Process (Homev70od, 111.: Richard D. Irwin, Inc., 1963), p. 3. 1 2 Horngren, op. cit., p. 7.

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130 which is taken to meet the objectives of planning. The notion of action also comprehends the activity of controlling.^^ However, the activities of planning and controlling are essentially static or passive.^ ^ Therefore, to distinguish the action of translating plans into results, the umbrella word, action^ which by implication embraces all activity, passive or active, is perhaps better replaced by the word doing, which comprehends only the dynamic activities connected with carrying out plans. The notion of control also presents some difficulty since the word has several meanings. Frequently, it is used in a dominating or coercive sense, i.e.j making sure that performance is proceeding according to plan.^^ This, however, implies an action. Therefore, to make the operation passive in terms of carrying out plans, that is, limited to making certain if performance is proceeding according to plan, this function is perhaps best designated as reviewing.'''^ The word reviewing seems to be ^^Ibid. ^"ibid. ^ ^Herbert, op. cit.^ pp. 5-7. ^^Ibid. , p. 6. This is not intended in any v/ay to suggest or imp].y that the divisions proposed by'Payol or others are inappropriate for other purposes. ^'Litterer, op. cit., p. 233. ^^Herbert, op. oit., p. 72.

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131 particularly appropriate for the processes of Management Information Systems which deal with the operation of gathering and disseminating information to those who perform actions. It can be said, therefore, that management is made up of three separate and distinct activities: (1) planning; (2) doing; and (3) reviewing. However, the notion of process implies either the existence of a continuing interrelationship among these activities or a flow of dependencies among them. Thus, action taken to attain an objective determined by planning cannot proceed without knowledge of the plan. Similarly, reviewing can. not take place without knowledge of both the plan and the action. New planning to correct either actions taken or the original determination of faulty objectives cannot be done in the absence of information on performance.^" The necessary relationships can be depicted graphically by representing the management process as a triangle as shown in Figure 2 on page 133. In this diagram, the angles indicate the points of interrelationship and in^^Ibid., p. 11. Ibid. 3 p. 7. Herbert notes that the normally static activities of the management process, planning and reviewing, become dynamic only while being acted upon. They are otherwise static and only doing is continually dynamic. . ' -

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132 terdependency which link the activities of planning (P) , doing (D) , and reviewing (R) . The arrows indicate the primary directions of communication flows which are implied by the preceeding discussion. The order of these flows will be modified in the course of developing the set of interrelationships which exist between the several processes relevant to Management Information Systems, but for now these will suffice to serve as a base from which the analysis can proceed. Fayol notes that m.anagement is not only a universal process applicable to all environments, but that this universality extends to all levels of activity: Management ... is neither an exclusive privilege nor a particular responsibility of the head or senior members of the business; it is an activity spread, like all other activities, between head and members . . . . ^ ^ Thus, the management process is repeated at all levels from, say, the president of the firm dov/n to the lowliest member of the firm, say, a janitor. However, this notion taken by itself would make the sum total of all relevant management processes extremely complex. What is needed is an hierarchy of processes which will order the relationships. Anthony regards m.anagement as a decision making hierarchy composed of three levels: (1) strategic planning; (2) management control; and (3) operational con^^Fayol, op. cit . ^ p. 6.

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133 P (Planning) ev.'ing) Figure 2 The Manag emev.t Process

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134 trol.^^ These levels correspond generally to the three activities of the management process, planning, doing, and reviewing.^ ^ Herbert, on the other hand, sees these as interdependents in the process which take place on equal levels rather than in a hierarchy.^'* The hierarchical arrangement derives from the universality of the three-part process at all levels. Thus, planning — the setting of a goal — occurs at the top level of management responsibility (Anthony's strategic planning level), but planning also takes place at the level of management which performs the detailed operations of the firm, the doing (Anthony's management control).^ ^ So, too, does this occur over the other operations of doing and reviewing. This is illustrated by Figure Z on page 135, which for simplicity depicts only the hierarchy of doing. At the highest level of doing, D, within the total management process, doing is planned, pi, reviewed, ri, and it is done, Di at a level which involves a new set of subelements, pa , ra , and so on. In accordance with Fayol's principle of unity of oommandj^^ the work is carried out ^ ^Robert N. Anthony, Planning and Control Systems: A Framework for Analysis (Boston: Harvard Business School, Division of Research, 1965), pp. 76-77. ^^Ihid. ^''Herbert, op. cit . ^ p. 8. ^ ^Ibid. , p. .5. . • " , ^^Ibid.^ pp. 5-6, 13-14. ^^Fayol, op. cit., pp. 20-41.

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135

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136 by each element and subelement at various levels, each possessing authority and responsibility at that level and for all subordinate levels cumulatively. The process of management, being universal, takes place at each level. ^® Put another way, doing, D, is an element of the management process and takes place at levels Di, D2 . . . D^. Each level, D ^ , is itself a management process made up of p, d, and r which is carried out on levels equal to or subordinate to Dj . The same is true for the other elements of the process, P and R.^^ Therefore, the total process of management in terms of an organization can be ^ Not infrequently, "management" is defined as getting things done through veopZe. This concept doubtlessly has merit for some applications but it seems inappropriate for purposes of the present study. This ca.n be demonstrated by raising the following questions. Does "through" people" mean people per se, including the manager? Or does it mean people other than the manager? If the former is the case, no quarrel can be had with the notion but it becomes rather meaningless since the focus must shift to "getting things done" which is simply an action which can range from mindless activities to carefully planned, executed, and reviev;ed acts. If, on the other hand, the idea is intended to mean other people, then it precludes an individual being able to manage his own activities. This interpretation is inappropriate for purposes of this writing since the approach taken throughout the study is that management is universal with respect to environmental situations, and therefore is concerned primarily v/ith the individual. Thus, in acordance with the notion of the process of management presented herein, as movement through the various tiers of the hierarchy occurs^ the variable of people cancels out of the equation. ^^This is consistent v;ith management models. For example, compare it with the strategic planning models of Ansoff and Gilmore-Brandenburg in Ch. II, pp. 6 8-72, which comprehend planning, p, doing, d, and reviev;ing, r, at the planning level, P.

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137 represented as it appears in Figure 4 on page 138. However, to simplify the analysis only the first two tiers of the process are shown in the diagram. Herbert notes that planning, when employed as a "standard for action, is static. That is, it is constant, as a yardstick."^" Thus, it becomes a benchmark or common denominator against which performance can be evaluated and alternatives analyzed. A new plan simply changes the standard. The reviev7 function, likewise, is static since it cannot take action except with respect to itself. The doing function is the only one that is constantly dynam.ic: Doing ... is the action v;hich is taken to carry out a planned operation. Doing is action which properly carries out the plan for a management act; is action v;hich erroneously carries out the plan; or is action which, through inaction, fails to carry out the plan. ^ ^ This is not to im.ply that planning or reviewing are constant for all future actions. Plans are changed constantly. New ones are developed, but they are static for the action which uses them as standards for action. Reviev/ing, which depends on both the action and the standard, ^"Herbert, op. oit . ^ p. 5. ^^Ibid.y p. 7. See also Firmin and Linn, op. ait., pp. 76-77. Herbert, op. cit.j p. 6.

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138 The Relationship of the Organization to the EievaycJiies of the Management Process

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139 shifts also as the standard changes.'^ Although Herbert's work is directed towards conceptualizing the nature of managerial auditing, the framework he develops also serves to identify the relationship between the management process and the Management Information System.^"* At any level of management, the review element of the process results in an evaluation, which internally^ at any level, is a form of decision making. The basis for the evaluation is information which compares or relates doing with the standard of planning.'^ However, there is another facet to reviewing, and that is the communication of the results of evaluations to appropriate action levels within the management process so they can take action or make decisions 4 as needed to maintain or im.prove their operations .' ' Management Information Systems, from this point of view and in accordance with the dimensions of purposes and perimeters developed earlier, would seem to have their ^^Ihid., p. 7. ^''Webster's {op. ait . ^ p. 58) defines an audit, in the accounting sense, as "a methodical examination or review," which is consistent with the view that the managerial accounting is at least a part of the Management Information System, see Firmin and Linn, op. ait.^ p. 77. ^^Ibid., pp. 76-77. '^Herbert, op. cit.^ pp. 38-39. ^^Ibid., p. 20.

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140 situs in the review element of the management process. But this assertion is incomplete as it stands since the attributes of information which define the boundaries or perimeters of Management Information Systems are limited to the planning and doing elements of the management process. This leads to the following ramifications: (1) the system is capable of generating complete evidence of the scorecard variety specified by Horngren;^^ (2) information of an attentiondirecting nature is partially produced; and (3) evidence pertaining to pr-ohlemsolving^''^ which appears to be the core function of decision making, is ignored entirely. In order to expand the operations of the reviev/ element to include information of attention-directing and problem-solving orientations, it is necessary only to expand or open the Management Infom\ation System to the extent of including the boundaries of the total environment in v;hich planning, doing, and reviewing take place, and then to control the evidence produced by reference to the criteria for information set forth in Chapter III. 3 8 In order to link the evaluation or audit process more closely with the total management process, Herbert {Ibid.^ p. 21) redefines the elements of management in terms of the review elem.ent. ^^Horngren, op. cit.^ pp. 4-5. ""'Ibid.

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141 However, since the review element is static, the results or effects produced by the information system are of no utility unless communicated,"*^ which is the subject of the next section. The Information and Communication Aspect of Management Information Systems A Management Information System has as its purpose the presentation of information for management's use. The act of presenting implies coimnunication. Conimunication is not a reflex action; it takes place by design which means that something must be communicated, and therefore many authorities find it either difficult or inappropriate to separate information from communication.'* To illustrate, the mathematical theory of communication is concerned with units of "bits" of information, with the effects of "noise," entropy, and redundancy which modify and influence the information, and with the optimal transmission of the information.'*'* It would seem appropriate, therefore, to consider information and communication together as a unit. However, information per se, in terms of limits, makes up the dimension of perimeters for '*^While this is also equally true of the static element of planning, this becomes an input to the information system rather than a force for direct communication. Colin Cherry, On Human Communication: A Review^ A Survey, and a Criticism^ 2nd Ed. (Cambridge, Mass.: Massachusetts Institute of Technology Press, 1966), p. 9. '*'*Rcy, op. ait., pp. 159-60.

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142 Management Information Systems."*^ No action as such underlies this dimension. Information as a consequence of the action of communicating forms the dimension of purposes."^ Therefore, since information is not an action, it plays no direct role in forming the dimension of processes which is limited to action.'*' Nevertheless, because of its importance to the Management Information System as a whole, it cannot be elim.inated from the present analysis but must be considered passively as an ultimate end to the communication action. The word "communication" is defined in a variety of ways, but there is a consensus that some kind of action underlies the concept. For example, S. S. Stevens looks on communication as "the discriminatory response of an organism to a stimulus."**^ The dictionary defines the word as "an act or instance of transmitting ... an exchange of information. "* ^ Thus, like management, authorities regard communication as an action, and^ as in the case " ^See Ch. Ill, pp. 112--14. "^See Ch. II, p. 77. 'Webster ' s, op. cit., p. 678. S. S. Stevens, "Introduction: A Definition of Communication" (in Proceedings of the Speech Communication Conference at the Massachusetts Institute of Technology) , Journal of the Acoustical Society of America, Vol. XXII (November, 1950), pp. 689-90. Emphasis is added. '''Webster's, op. cit., p. 168. Italics are added.

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143 of management, this implies a process through which the action takes place — the means to an end. Fertakis, for example, sees communication as a social function which transmits information to individuals or groups which either comprise or are concerned with the particular societal organism. The process by v/hich this is accomplished is a series of flows which are initiated by the communicatee rather than the communicator. The flov; moves from user to "query," from the question raised to the "data base," from the pool of data to a communicator response, and thence back to the user, thus closing the system of flov;s. ^° While this viewpoint has merit, especially for data processing applications, it essentially represents a one-dimensional system and does not provide a particularly useful reference frame for understanding the conimunication process per se. Others employ the reference frame of human language as the basis of the communication process. Winthrop, for example, looks on communication as a function of the "content of human language in terms of the vast variety of purposes to which human discourse ministers." But the ^"Fertakis, op. ait., p. 682. "Henry Winthrop, "Insights into the Nature of Meaning and the Symbolizing Function of the Hum.an Mind." in The Study of Foreign Languages^ ed. Joseph S. Roucek (New York: Philosophical Library, 1968), p. 72.

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144 "types of discourse" are virtually infinite in number, and therefore a more operational scheme of classification is lieeded. Morris envisions tv.'o basic classifications in this respect: (1) by the "meaning its signs are intended to convey"; and (2) by the "use or function to which . . . [sign complexes] are put." The classif icational criterion of signs is related to "modes," of which there are fouj;: (1) designative ^ which is descriptive; (2) appraising , which indicates a "preferential status for behavior"; (3) prescriptive ^ which specifies certain behavior; and (4) formative^ which stresses strictly logical functions of language structure. The other criterion focuses on uses rather than modes, of which there are also four types: (1) informative^ which cause action as though certain characteristics exist; (2) valuative ^ which seek to "cause preferential behavior"; (3) inoitive, which are uses intended to "bring out specific ways of responding;" and (4) stjstemic^ which tend to provoke or stimulate responses per se. Winthrop notes the parallel relationship between Charles Morris, Signs^ Language and Behavior , as cited in Vvinthrop, loo. cit. ^'ibid.

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145 modes and uses by commenting: When signs are used adequately they are said to be convincing if they are informative, effective if they are valuative, Tpersuasive if they are incitive, and correct if they are systemic. ^ From v/hat has been developed thus far on the nature of Management Information Systems, it seems clear that the elements of convincingness, effectiveness, persuasiveness, and correctness are all vital considerations. These are all related to the idea of influence which, while underlying the notion of evidence, is a personal matter. They v/ill, therefore, be taken up in detail in the next section which deals more directly with behavior. However, these elements have a close relationship to communication processes which will be considered in connection with the evaluative function of Management Information Systems. Cherry sees the communication process as taking place across three related hierarchal levels: (1) semanticalj which involves the assignment of meaning and intent to individual symbols or signs, be these data, signals, words, numbers, or some kind of cue; (2) syntactical ^ which deals with the assembly of the semantical fragments ^^Wintfirop, op. oit., p. 73. ^^See the restated derivation of the concept of Management Information Systems presented in Chapter III, p. 119.

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146 into a meaningful message or information and its transmission; and {3)pragmatic or operational , which concerns the recipient's decoding of the syntactic message and his response thereto. The interdependencies of the levels making up the process of communication create a number of potential problems for Management Information Systems. For example, the semantics and/or syntactics of sender and recipient may not be in agreement. The communication's transmission may be too fast, contain too much, or have a history of frequently being irrelevant or redundant. In the absence of operative feedback channels , recipients may believe that their decoding matches the sender's encoding when in fact it does not and^ as a result, take erroneous action. Alternatively, recipients may, by means of "cog57, Cherry, op.cit., pp. 243-45. In some of the literature, the pragmatic or operational level is referred to as the "effective" level, and communications are said to be ''effective" if and only if the action taken by the recipient is the one originally desired by the sender. 58i Norton M. Bedford and Vahe Baladouni , "A Communication Theory Approach to Accountancy," Aacountinq Review, Vol. XXXVII (October, 1962), p. 656. James G. Miller, "Information Input Overload," in Self-Organizing Systems (Ann Arbor, Mich.: University of Michigan Press, 1962), pp. 61-78. ^"r. G. Bulgarella and E. J. Archer, "Concept Identification of Auditory Stimuli as a Function of the Amount of Relevant and Irrelevant Information," Journal of Experimental Psychology, Vol. Ill (1962), pp. 354-57. See also R. Zajonc and E. Burnstein, "The Cognitive Fate of Messages, in Commumcation in Organizations : Some Hew Research. Find|n^s (Ann Arbor, Mich.: Edwards Brothers, Inc., 1959), pp

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147 nitive dissonance" or the "strain to symmetry," negate otherwise compatible semantics and take incorrect action. Such a result has the effect of violating the information criterion of verif lability , ^ ^ and thus negating the role of influence which information is designed to provide. In addition, much of the theory underlying the communication process implies that it is one-sided, that is, communication is regarded as being "good" if it corresponds to the hierarchal steps of the process properly and leads to responses desired by the communicator. Thus, the focus is limited to the point of view of the sender. Little research appears to have been directed towards establishing communications as an integrated whole, the quality of v/hich must comprehend both the sender's and the recipient's viewpoints . ^ ^ The Conimittee to Prepare a Statement of Basic Accounting Theory, whose work on information criteria was referred to in detail in Chapter III, also recognizes the potential of these problems and the importance of the communica^^Fertakis, op. ait., pp. 687-88. . ^^See Ch. Ill, p. 101. Obviously, two or more qualified individuals will not reach the same conclusion if one effectively "tunes out" certain information by means of "cognitive dissonance" or "strain to symmetry" unless the other parties to verif lability share the same cognitive dissonances or strains to syirjrietry , which seems to be unlikely, as will be shown later in the chapter (see pp. 163-66. ^^Fertakis, op, cit.j p. 683.

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148 tion process. Accordingly, the Committee sets forth some guidelines for comrauni eating information. These are: (1) appropriateness to expected use; (2) disclosure of significant relationships; (3) inclusion of environmental information; (4) uniformity of practice within and among entities; and (5) consistency of practices through time.^** Appropriateness to expected use means that information should be communicated with the needs of the user as the prim.ary consideration rather than the convenience of the sender or the design of the information system. This applies not only to information per se, but to its form as well.^^ The guideline calling for the disclosure of significant relationships refers to the desirability of presenting information in such a way that the recipient may comprehend and judge the nature of the activity from which the information is generated. Essentially, this is an editing problem — the relationships should be made clear but excessive detail avoided. The requirement that environmental information be included is primarily a syntactical one of establishing the context of the ^''Committee to Prepare a Statement of Basic Accounting Theory, op. oit. , pp. 12-13. ' hbid. , pp. 14-15. The matter of form will be taken up in the next section of this chapter. _^^Ibid. , pp. 15-16.

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149 information and^thus, clarifying it. The circumstances and information generating methods employed need to be disclosed if these might color the data (altering the semantics) or if there is any reasonable doubt about the context (syntactics) in the mind of the recipient.^' The Committee feels this is an increasingly important consideration and comments: Information may be relevant, verifiable, unbiased, and quantifiable, yet the setting in which it is presented and the background knowledge necessary for its proper interpretation may be critical for informed use.^® The guidepost of uniform practices is basically a semantical one and refers to consistent methods of classification, terminology, measurement, and meanings being used in communications. This differs from the final guide line of consistency of practices through time in that the latter relates to comparabilities across time segments and is, therefore , more recipient oriented than the former. These guidelines appear to be an attempt to reconcile the traditional one-sidedness of the comm.unication process which concentrates on the sender's point of viev; with the necessary consideration of the user's needs. Without abandoning the traditional approach, the guidelines seek ^''ibid. , pp. 16-17. ^ '^Ibid. , p. 16 . ^ ^Ibid. , pp. 17-18.

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150 to control the sender by grafting user-related criteria to the sender's process and^ at the least, open feedback channels of communication from user to sender. In the section on the process of management it was indicated that the over-all Management Information System and its control lies in the review element of the process Thus, in terms of communication processes in total, a Management Information System is a centralized function. This assertion immediately raises the issue of efficiency should it be centralized, decentralized, or something between these extremes? Guetzkow and Simon have investigated the efficiencies of certain cominunication process networks, and while there are a variety of conmuni cation networks which might be analyzed, only three are distinct forms per se, and therefore relevant to the present discussion: (1) all-channel; (2) circle; and (3) wheel. "^^ These networks are diagrammed in Figure 5 on page 151. In each of the diagrams a sending and/or receiving communication cell is represented by the small circles, of which there are six for each example shown. The cells '"Harold Guetzkow and Herbert A. Simon, "The Impact of Certain Communication Nets upon Organization and Performance in Task-Oriented Groups," Management Science^ Vol. I (April-July, 1955), pp. 259-77. This study was a replication and expansion of an earlier work by Harold J. Leavitt ("Sorae Effects of Certain Communication Patterns on Group Performance," Journal of Abnormal and Social Psychology J Vol. LXVI (January, 195]), pp. 38-50).

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151

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152 are linked to one another in various V7ays as shown by the lines. The arrows indicate communicational flow possibilities — both sending and receiving, which indicate a two-Day channel, or the one-way channel v^hich permits either sending or receiving, but not both. The all-ckannel network is characterized by the free access of all cells to all other cells in the network.'^ In the diagram shown there are six cells and thirty one-way or fifteen two-way channels in the network. Clearly, as the number of the cells becomes large, networks of this type become increasingly hard to organize and may hinder organizational efficiency.'^ Thus, the all-channel network seems inappropriate for practical applications in organizations of any substantive size. The circle network, which occurs in a wide variety of combinations, eliminates or blocks out channels to certain elements, thus restricting the system. The circle network shown in the diagram represents a highly limited scheme which implies an ordered or hierarchal arrangement of communication channels. Each cell can send and receive from two '^The number of one-way channel possibilities for any network can be calculated by the equation: n(n-l) |n>4l in which n represents the nui:±)er of cells. '^For example, an organization of 2,000 cells (employ ees) , which is not large as some organizations go, v.'ould have 3,998,000 one-way channels operative under the allchannel scheme .

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153 other cells, but. these are rigidly specified. The ultimate in restricted cornrrLunication netv/orks is the wheel which establishes a centralized intermediary cell through which all communications must flow, thus restricting the number of one-way channels available to cells other than the control cell to one.'^ According to Guetzkow and Simon, the commonly held notion of "a one-to-one relationship between effective functioning and freedom in communication" needs reexamination. The results of their study indicate that the circle network is, in fact, the least efficient in operation although it does seem to provide the greatest amount of personal satisfaction to the cells. The allchannel and wheel networks are approximately equal in efficiency once they have been adequately organized. The all-channel network, although furnishing more satisfaction to the cells than does the wheel network, is often highly complex and rather difficult to put into operation efficiently.'^ On the other hand, the wheel network of communications while not personally a satisfyincj arrangement possesses other advantages: '^Guetzkow and Simon, op. ait.^ pp. 265-67. '"*Ibid., p. 277. ' hbid,, pp. 266-67,

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154 [It reduces] the difficulty of the organizational problems to a minimum, yet hold[s] the requirements of the operating problem constant . . . [since it has] no channels to eliminate, no relays to establish, and already [has] . . . one person occupying a dominant position in the net.' Some Tentative Conclusions Regarding the Relationship of Management and Communication Processes to Management Information Systems Some tentative conclusions may now be drawn by reference to the discussion on the processes of m^anagement and communication which will serve both to expand the derived concept of Management Information Systems and establish the interrelationship of the two processes. Management is a human activity which takes place at all individual and group levels and is a three-part process made up of planning, doing, and reviewing. "Planning provides the standards for action or performance; doing is that action; and reviewing is the evaluation of the performance against the plan and the communication of the results to involved parties at all levels. The evaluation phase implies the gathering (or receiving) of information as well as analysis and transmission. Therefore, the inputs and outputs of the review function of an organization's management process constitute the essentials of the Management Information System. Moreover, at any particular level of the organization, whether individual, group. '^^Ibid.

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155 or the total organization, the inputs and outputs of the Management Information System are centralized in the appropriate review function for that level. This implies a centralized mode of organization insofar, as information and its communication are concerned . " The process of communication takes place on three hierarchal levels: (1) the semantical at which information is gathered, filtered, and defined; (2) the syntactical at which level information to be used is encoded and transmitted; and (3) the operational or pragmatic at which the information or message is received, decoded, and acted on. This process is most easily organized and most efficient v/hen it is centralized in a single communication agent. Although more difficult to organize, especially where the number of cells is large, the fully decentralized and free communication network is equally efficient and, in addition, is more satisfying to the ''The question of centralized vs. decentralized organizations was a controversial issue of the 1950 's. While the matter has not yet been fully resolved, the current view is that an organization has two facets to its structures: (1) its operations; and (2) its information system. A decentralized structure for the first seems indicated while a centralized scheme appears desirable for information. See Greenwood, op. ait.j p. 603. This notion appears to be in accord with the management process adopted for this study which clearly indicates a decentralization of operations or the element of doing. In addition, it must be noted that data processing is most compatible with the centralized form of organization. Although not germane to this paper, a case could be made for regarding data processing as operational only at the semantical level of the comrauni cation process.

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156 people involved.'® Therefore, the management process may be combined with communication netv;orks as shown diagrammatically in Figure 6 on page 157, and the following conclusions about the Management Information System of an organization and its communication networks can be reached: (1) because of the total potential number of communication cells involved for all levels, the Management Information System for the organization which links planning with action should be centralized, e.g., employ the wheel network of communications; and (2) since the number of cells at each level of group of individual elements is limited, the communication network should be free and decentralized.'^ Therefore, a Management Information System should be centralized in total for each management level, but at each of management's elemental levels it should be decentralized.®" Thus, the 7 8 Guetzkow and Simon, op. ait.j pp. 266-68. '^Of course, this is not true over all levels hierarchically, and/ within levels, the cells themselves v/ill decide what, if any, cells should be blocked out or have their channels eliminated. Ibid., p. 266. ®°For a concise discussion of the various arguments on centralized vs. decentralized Management Information Systems see Harold M. Sollenberger , Major Changes Caused by the Implementation of a Management Information System^ Research Monograph No. 4 (New York: National Association of Accountants, 1968), pp. 9-15. Although no consensus appears to exist regarding the matter, there is a general feeling that the total inf oiTn.ation system should be centralized, especially in situations where large and expensive electronic data processing systems are employed.

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157 Figure 6 Management and Communication Networks in an Organization

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158 individual at the lowest possible level for any management element finds his own internal processes open for his planning, doing, and reviewing, but, at the same time, they are linked inf ormationally to all higher echelons, including tlie organization's reviewing function.®^ However, these generalized conclusions are responsive to only one of the two salient parts of the issue. It must be remembered that management is a human activity, and likewise communications take place between humans, The management aspects of this have already been discussed, and with respect to communications, it has been noted that the communication process tends to focus on only the sender's point of view, even though attempts have been made to control the sender by means of establishing recipientrelated criteria. Since both management and communications directly involve human beings, an evaluation of these processes is not complete without giving proper consideration to the humans involved at all levels in all elements in terms of their behavioral or response patterns. The Behavioral Facets of Management and Communication Processes In a recent address, the Comptroller General of the more direct relationship between the evaluative process, information, and the management process will be established in a later section of this chapter (pp. 16083 ,

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159 United States stated that the Management Information System must serve all levels of management and its communications must be "tailor made to suit the needs of each level. Because this notion is a commion one , ® ^ it requires consideration and analysis in order to forestall possible misunderstandings about the nature of Management Information Systems and misdirected attempts at implementa tion. The fulfillment of this objective requires that the needs of the user in terms of both information content and communication format be determined. Primarily this involves the predictiveness and control of user responses to the information. There appear to be four basic ways in which this can be done: (1) by knowing and thus generalizing the probable responses to stimuli; (2) by asking the users or making use of feedback availabilities; (3) by concentrating information and its communication on the psychological generalizations relevant to the sender and abandoning the recipient as the primary consideration; or (4) by employing som.e combination of the foregoing. ®^Elmer B. Staats , "Management Information Needs in an Era of Change," an address before the 49th Annual Inter national Conference of the National Association of Account ants, June 17, 1968, New Orleans, Lousiana, as cited in GAO Review^ Vol. Ill (P'all, 1968), p. 70. ®^For example, see Russell L. Ackoff, "Management Misinformation Systems," Management Science^ Vol. XIV (December, 1967), pp. 149-50.

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160 Predicting Responses to Stimuli There have been a number of attempts at generalizing human responses to the receipt or communication of information. For examiple, Sutherland believes humans are rational .so that desirable responses are most likely to occur when the communication transmittal is perfect. According to Sutherland, a perfect transmission requires the incoproration of some nine factors, and this can be accomplished only by presenting information in chart or graphical form since "graphs and charts are the most easily understood."®'* Scully, however, feels that man is not only rational but basically economically motivated; therefore, communication must be expressed in dollars and cents language, especially in business enterprise situations. In order to make this fully operational in terms of satisfying user needs, rigid semantics defining the terms underlying monetary expressions must be commonly observed. It has already been demonstrated that some authorities see the "transaction" as the appropriate communication base®^ for fulfilling needs while others broaden ^Malcolm S. Sutherland, "Internal Reports to Managem.ent," The Controller^ Vol. XXIII (April, 1955), pp. 17577. ® V. W. T. Scully, "Translating Financial Data for Non-financial Executives," The Controller, Vol. XXIX (September, 1961), pp. 442-44. ^^Kohler, Dictionary, p. 9.

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161 the base to allow whatever may be quantified or expressed numerically. ® ' Others look on such communication bases as incomplete, overly simplistic, or weak with respect to their abilities to satisfy the needs of users. Garrity suggests that a set of alternatives should be communicated in order that rational recipients may determine their action responses in terms of making "progress" towards some goal, whether defined or not.^^ Woodhead believes that the narrative form of communication is best for information flov7s between superior and subordinate levels and should contain only generalizations, leaving the "operational realisms" for each level to decide. Wrapp, on the other hand, v;ould communicate almost noting from upper to lower levels and would rely on the rational abilities of the individuals at the lower levels to perceive goals and the best means for attaining them.^° All of these schemes are apparently subject to subsequent ® ^Committee to Prepare a Statement of Basic Accounting Theory, op. cit , j p. 12. ^^John T. Garrity, "Is the Role of the Controller Shrinking?" The Contvollev^ Vol. XXIX (May, 1961), pp. 220-24, 259. ®^ Harry Vvoodhead, "Giving Budgeting Appeal to the Forem.an," The Controller, Vol. XXIII (July, 1955), pp. 326-28. ^^H. Edv;ard V7rapp, "Good Managers Don't Make Policy Decision," University of Chicago Magazine, Vol. LX (October, 1967), pp. 15-16.

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162 review and communication of performance results. Apparently there is no consensus concerning the notion of supplying management's information needs by means of predicting user responses to information stimuli. Moreover, the stimuli/response concept does not appear to offer a fruitful means for resolving the issue of needs for the following two reasons. Firsts the variable in Management Information Systems is use rather than externally determined needs. Thus, Ackoff's idea that managers don't know what they need and their needs must be determined scientifically^^ is not without merit for studying the enterprise, but is irrelevant for Management Information Systems per se. Rappaport seems to be in agreement with this conclusion when he points out that it is not known to what extent, if any, that the evidence the manager "needs" actually improves uses, i.e., decision making. ^ ^ Second, the stimuli/response approach does not answer the crucial who , what, when, and how ^^See Ch. II, pp. 79-80, and also Roy, opV ait., p. 85. Similarly, the quality of the evidence is also irrelevant. For a graphic description supporting this conclusion, see Allen H. Seed, "The Rational Abuse of Accounting Information," Management Accounting, Vol. LI (January, 1970) , p. 11. ^^Ackoff, loo. cit. ^ ^Alfred Rappaport, {Ed.) , Information for Decision Maki Quantitative and Behavioral Dimensions (Englewood Cliffs, N. J.: Prentice-Hall, Inc., 1970), pp. 54-55.

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163 questions about responses. An advance knowledge of likely responses seems desirable from a control and integrative point of view, especially in context of the management process frame of reference described earlier in the chapter. Unfortunately, there is no field theory of behavior for either individuals or for the more complex group situation which will allow for valid generalizations about responses to stimuli. Sullivan notes that responses are controlled by the mind, and "what we have in our minds begins in experience . . . [and occurs] in three modes: the protaxic^ the parataxic^ and the syntaxic . " ^ Protaxic pertains to one's initial experiences in life and the order in which they occur. Taken together these form a wholeness of experience which forms a base for later development. Over time, this wholeness of experience is fragmented by the introduction of pieces or "parts" of experience which are not related to each other nor connected logically — they are just assumed to be "natural." These "mom.entary, unconnected states of being" comprise the parataxio mode of experience. The syntaxio mode occurs when one learns to distinguish "consensually validated" experiences which derive from group relationships, interpersonal activities, social experiences, and ^''Harry Stack Sullivan, The Interpersonal Theory of Psychiatry ^ ed. Helen Swick Perry and Mary Ladd Gav/el (New York: W. W. Norton & Co., 1953), p. 28.

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164 so on — all of which involve an appeal to "principles accepted as true."^^ Although these modes can be modified to some extent, they persist throughout the individual's life, and for any individual they tend to be relatively fixed. However, they are highly complex, deriving as they do from many complex variables. Thus, they are so varying from individual to individual that it becomes quite impossible to generalize about the individual's probable responses to stimuli. It is, of course, even more impossible to generalize about group behaviors. There are other distinct theories of behavior^' but a brief, but detailed description of Fox's tv/o-stage ^ ^Patrick Mullahy, Oedipus^ Myth, and Complex (Nev7 York: Hermitage Press, Inc., 1948), pp. 286-91. Sullivan, who died relatively young, was regarded as being one of the leaders in the field of psychiatry; however, he was frustrated by the complexities of the communication process, especially in its written mode, and consequently, he wrote very little (Sullivan, op. cit.j pp. 239-40) and never expressed the full nature of his experience modes in writing. The Mullahy work is the interpretation of a colleague with which Sullivan v;as in full accord (Ibid. ^ p. 28). ^^Harry Stack Sullivan, Conceptions of Modern Psychiatvy (Washington: William Alanson White Psychiatric Foundation, 1947) , p. vi. ^'The best known, of course, is the sex-based theory of Sigmund Freud. Most of these theories share the common focus of concern about the process through which an individual becomes what he is. The best knov;n of the several theories are set out in G. B. Levitas (Ed.), The World of Psychology J 2 Vols. (New York: George Braziller, 1963) .

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165 behavioral iriodel^® will shov\7 more explicitly why predictable behavioral generalizations are not feasible. Fox sees behavior as a pattern developed during childhood and carried over as a generally fixed input to adulthood. In the childhood stage one is influenced by physical factors such as general health as manifested by the ability to withstand fatigue, illness, and duress as well as physical needs for food, warmth, and so on. The interaction process generates his iprogram which is composed of "emotionally charged" values comprising his "psychological self" and functional values which provide the means for coping with non-emotionally based matters.' This program or "psychological identity" is largely fixed by the time an individual reaches adolescence. It is carried over as a fixed input to the individual's adult stage. At this level, the program interacts with a number of determining environmental, physical, and cultural variables, such as, the physiological capabilities. William McNair Fox, "A Dynamic Two-Stage, OpenEnded Systems Model of Behavior," Paper presented before the Annual American Meetings of the Institute of Management Sciences, October 2, 1969, Atlanta, Georgia. This model is somewhat similar to the three-stage model (in which adulthood is regarded as possessing two definitive and distinct roles — the adult and the parent) of Eric Berne, A Layman's Guide to Psy chiatry and Psy ahoanalysis (New York: Simon and Schuster, ].964) . Berne's work, in turn, seems to have many common points with Sullivan's. '^Fox, Systems Model of Behavior.

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166 needs, and demands of adulthood; the stimuli of immediate situations which are a combination of the physical environment, the demands and expectations of others, pre scribed cultural values, other environmental and psychological roles, taboos, and ethics; and the individual's personal set of coping behaviors. This interaction results in the establishment of a relatively fixed pattern of behavior which, at any point in time, is directed towards satisfying the individual's unique combination of physical and psychological needs with a minimum of fear and anxiety. Thus, the objective function of behavior is to reduce fear and anxiety. Clearly, these patterns are unique and vary widely from person to person and from group to group. Therefore, in order to be able to adequately predict an individual's behavior in a situation or as a response to communication stimuli, one needs to knov; the individual' physical state and his program for behavior. To some extent, the physical state can be controlled through the establishment of proper working conditions and the provision for adequate and satisfying nourishment. However the program of an individual is difficult to evaluate. Since the individual himself is probably unaware of the Fox defines "fear" as the physical factor apprehension about being physically injured---V7hile "anxiety" is the apprehension of being psychologically hurt.

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167 complex make-up of his program, even direct communication with him about it is often fruitless, except over long periods of time under controlled conditions . ^ ° ^ It can be concluded, therefore, that generalizations about specific behavioral responses of individuals to given stimuli require knowledge of the individual's program and the ability to either work within that framework or to alter it in order to achieve desired responses. Many of the behavioral studies pertaining to management seem to derive from the approaches taken by psychologists.^"^ Little work in this area seems to have been done by psychiatrists although research in this area seems to offer some promise of a break-through. Psychiatry, the practice of which is now limited to legitimately trained and accredited physicians, deals with the individual's total and "conscious reactions to his surroundings."^"^ Psychology, on the other hand, is ^^^Ihid. Unlocking the mind and achieving selfawareness, although a long and difficult procedure, seems to be the first step in psychiatric treatment. ^"^This technique seems to be creditable to the work of the first industrial psychologist, Munsterberg (Hugo Munsterberg, Psychology and Industrial Efficiency [Boston: Houghton Mifflin & Co., 1913]). It is interesting to speculate as to what the state of the art of knowledge about behaviorism might be had Munsterberg been a psychiatrist instead of a psychologist. Although a physician by training (M.D., University of Heidelberg, 1887), his work prece ded, or^ at least, was concurrent with the development of psychiatry. Much of the situation-oriented approach to human behavior in business environments is attributable to him. ^"^Berne, op. cit., p. 211.

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168 concerned primarily with "certain aspects of the personality as they work in various special situations ^ ^ Thus, although the problem is total in nature, psychology represents a fragmented, atomistic approach to a solution. Therefore, this approach to satisfying the needs of management by means of the communication processes underlying the Management Information System does not appear to be too useful or even wholly compatible with the process of management. Even in the work place environment, setting aside the outside personal environment, situations are too fluid to be controlled to the degree necessary to achieve a fully operational and valid predictiveness of responses. Estahlishiyio and/or Controlling Management Information Heeds by Means of Communication Processes Direct communication as a means for establishing management's information needs as a bass for the Management Information System is easiest employed by simply asking the relevant people what they want in the way of information and in what form. If communication . networks are funnelled hierarchially through the type of centralized Ibid. J p. 263. The emphasis is added. The field of psychoanalysis deserves brief mention to clarify these distinctions. Psychoanalysis refers to the individual's Id tensions, and therefore is practiced by those, whether medically qualified or not, who employ the therapuetic methods promulgated by Freud. Ihid.j and see also p. 211.

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169 information system posited in Figure 6^^°^ this presents no serious problem in so far as the planning or top management element of the process is concerned. Similarily, there may be little difficulty in dealing with the upper tiers of the doing element. However, this form of direct coiimunication with lower levels of doing may be so cumbersom.e that it becomes impractical. This seems especially true if each member in the lower levels requests different types of information and/or different formats. It simply may not be worth the cost of compliance, and moreover may be uncoordinated, both within and between functional levels, leading to conflicts or imcompatibilities , especially in the lateral, all-channel, group netv;orks. Another application of the direct communications approach is to make use of the full potential of two-way communication channels. Flows of communications from user to sender in a Management Information System are of two general types: (1) the transmission of raw data inputs — the system's information gathering process; and (2) performance results which become the data base for evaluating progress towards the attainment of designated organizational goals. However, in addition, these channels can be employed as monitors of information needs in that they can carry expressions of viewpoints by those ^See p. 157.

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170 using communications received from the review element. As Batten points out, this method can be extremely effective, but it has fallen into disuse in recent times because many people regard this as being too unsophisticated a control technique in today's highly complex environments : We are frequently told that this method is too elementary to use on other members of management or on technical people, that it insults their intelligence. In viev; of the sad mistakes that result from faulty communication, this just isn't so. Communication control must be built into the productivity climate. Where all employees realize their full responsibility in the communication process, feedback is a normal and natural thing. The feedback technique offers advantages of simplicity and the ability to provide communicators with some indication of what recipient responses are likely. In addition, it serves to identify areas of misunderstanding in both information gathering processes for later evaluation and in the evaluation communication itself. Fox goes so far as to assert that proper feedbacks provide enough information about a recipient's program for one to make some broad, but relevant generalizations about the recipient's probable responses to particular stimuli.^"' ^"^J. D. Batten, Tough-Minded Management (New York: American Management Association, 1963), pp. 89-90. ^"'Fox, Systems Model of Behavior.

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171 A more sophisticated monitoring technique involves integrating the three elements of planning, doing, and reviewing which make up the process of management. As Batten points out, "It is axiomatic that feedback must occur both as a result and as a prerequisite of an action."^ °® Thus, communication channels are employed in both directive and evaluative senses. Objectives and criteria for reporting action are communicated as a first step. Action is taken and the results communicated to the review element for evaluation. The evaluation is transmitted to both the planning and doing elements. When submitted to the planning element, it constitutes a report on plans per se and progress tov7ards goal attainments in terms of action taken on the plans. However, when sent to the doing element, it represents feedback of historical events, and the communication of actions taken to those who took them represents a surrogate for the responses of the individuals or groups involved which is developed after the fact. Although historical and irreversible as far as the events reviev;ed are concerned, the evaluation process of the review element discloses a great deal about the responses, the original inputs, and provides insights for the development of improved future communications and resultant responses. ^'^^Batten, op. oit.^ p. 89. ^'^ ^Herbert, op. cit , ^ pp. 9-10.

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172 The review function/ by employing its communication device, the Management Information System, can identify proximate cause for non-attainment or partial attainment of objectives. If the review discloses that doing was in accordance with its internal plan, and goals were not achieved, then the internal plan was faulty. However, if the internal plan was in agreement with the outside plan communicated from the planning element, and objectives were not fulfilled, then the planning element generated an unworkable plan. If the doing was not in accord v^ith planning, and goals were achieved, internal control has been violated; but it also suggests that alternative means for goal accomplishment exist and focus attention on the problem of identifying the best one. If doing was not according to plan, and objectives were not attained, the doing itself was faulty. If this condition persisted for some time, then internal reviev7 at the doing level as well as the doing must share responsibility for the failure. Similar evaluative analyses can be made for each level of each element, down to the lowest individual in the hierarchy . ^ ^ ° The reviev; element, thus, is built on the communication of information inwardly as well as outv/ardly. This notion is in accordance with the derived concept of ^^^Ibid., pp. 21-27.

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173 Management Information Systems developed earlier. However, the derived concept implies a passive role in the communication process whereas the purposes of the reviewing function suggest a more active role, especially since it comprehends the evaluation of results. This, in turn, infers the existence of a well established set of parallel relationships betv/een information and the management process. In constructing a conceptual base for the evaluation operation, Herbert makes a dd.stinction between the management process and the reviev7ing of the performance of those who manage. Herbert sees the evaluation process as being made up of three elements which are directly related to the elements of the management process but which are expressed in terms of information and com.munication. Criteria^^^ is similar to the element of planning in the management process, and represents the "appropriate standard for action." Cause has its parallel in the management element of doing, and is the result of action or lack of action. The element correlative to reviewing, however, has two aspects to it: (1) effect ^ which deals with the evaluation and is "the static result ^'^^Ihid., p. 21. ^^^Herbert employs the plural word "criteria" in a singular sense "to denote the possibility of more than one element to any plan." Ibid.

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174 of evaluating action or lack of action, using criteria as the yardstick"; and (2) report^ v;hich pertains to the act of communicating the results of the review. ^ ^ ' Although this conceptual construct demonstrates the relationship of information and communication to the management process, it is limited to the identification and evaluation of performance. The issue of evidentiary needs of management is not considered, and therefore the concept is incomplete insofar as Management Information Systems are concerned. Nevertheless, Herbert's set of conceptual relationships between information, communication, and the process of management is useful. Com.b3ning these with the tv70 dimensions of Management Information Systems established so far suggests that information needs may be detenrdncd by positing an active rather than passive role for the review element and the Management Information System. This has the effect of shifting the focus from the user to the sender, which is the topic of the next section. The Hierarchal Role of the Communicator in Establishing Information Needs and Controlling User Responses As noted earlier, the Committee to Prepare a Statement of Basic Accounting Theory, in recognition of the ^'^^Ibid.^ pp. 21-22.

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175 vulnerable position of information users in many situations, imposes user-related criteria on the communi. cator.^^"* This appears to be an attempt to soften the potential impact of the criterion of relevance by relating it to the user as well as to the problem since relevance demands that "either the information or the act of communicating it exert influence or have the potential for exerting influence on . . . actions."^ The exertion of influence, as noted earlier , is one of the functional purposes of information or evidence, and supports the notion that communication is the key to effective managerial control. Of more importance, however, for the conceptual purposes of this writing is the idea that the exertion of influence as an action process also describes the functional activity of leadership : Leadership is the activity of influencing people to cooperate toward some goal v/hich they come to find desirable. ^ ^ ^ ^ ^ ''Committee to Prepare a Statement of Basic Accounting Theory, op. oit.^ pp. 13-18. ^Ihid,, p. 9. * ^ ^See Ch. II, pp. 52-55. ^^^For ey'-'mole, see George T. Vardam.an and Carroll C. Halternmar (Eds .) , Mayiagement'.Control Through 'Comrriunication (New York: John Wiley & Sons, Inc., 1968), pp. 4-5. ^^^Ordway Tead, The Art of Leadership (New York: Whittlesey House, 1935), p. 20.

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176 This definition, however, is too narrow to describe the full range of leadership action, and therefore perhaps the most functional definition is the one given by Bass : When the goal of one member. A, is that of changing another member, B; or when B's "change in behavior will reward A or reinforces A's behavior, A's effort to obtain the goal is leadership . ^ ^ ^ The broad and somewhat all-inclusive scope of this definition is appropriate for conceptualizing Management Information Systems for several reasons. Firsts it overrides the coimnonly held idea that leadership is a function of the possession or exercise of power. Second^ this concept does not raise the issue of leadership subtypes which are essentially irrelevant to Manage ment Information Systems. The thirds and m.ost important^ consideration is that this concept implies an action which employs influencing matters and can also be related directly to the processes of management and ^Bernard M. Bass, Leadership ^ Psychology , and Organizational Behavior (New York: Harper & Row, 1960), p. 89. Italics added. ^^°Tead, op. cit.^ pp. 12-13. While there is often an overlapping effect of power on leadership, studies indicate that no necessary dependent relationship exists even in the extreme case of military situations. 12 1 The piost common division is into authoritarian, democratic, and laissez-faire . See Richard C. Anderson, "Learning in Discussions: A Resum.e of the AuthoritarianDemocratic Studies," Harvard Educational Review^ Vol. XXIX (June, 1959), pp. 201-15.

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177 communication. The action involves three steps: (1) when A tries to change B, attempted leadership takes place; (2) if B accepts A's try and changes his behavior, the level of successful leadership is realized; and (3) effective leadership occurs when the desired goal is obtained. However, it is A's effort which constitutes leadership per se, regardless of the outcome. According to Fiedler, this is not the same concept which underlies many current studies on leadership which have led to the conclusions that leadership does not depend on either the leader's experience or on the task; and moreover, that leadership "training" is generally ineffective in applied practice. However, these studies and conclusions specifically deal with effective leadership, not leadership as a process of influencing the behavior of others. The issue under consideration here is the ability to influence the actions of others, regardless of the results obtained, and is a natural function of the ^^^John K. Hemphill, "Why People Attempt to Lead," in Leadership and Interpersonal Behavior (New York: Holt, Rinehart and Winston, Inc., 1961), pp. 201-15. ^^^Fred Fiedler, "Leadership and Organizational Behavior," paper presented to the College of Business Administration Lecture Series, University of Florida, Deceiriber 4, 1969, Gainesville, Florida. ' The writer raised this specific question with Fiedler v;ho agreed that his subject under study was effective leadership rather than leadership as defined earlier. '^'Ibid.

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178 management process positied earlier rather than of leadership, as will be indicated. ^ ^ ^ Leadership appears to be related to Management Information Systems and the processes of management and communication in the following manner: Leadership represents the influencing of behavior, and the Management Information System provides the stimuli for behavior in the form of information. The Management Information System is the reviewing element's means of communicating or transferring the influencing agent, information. It can be concluded, therefore, that the reviewing element in the management process is active rather than passive and dynamic rather than static and, moreover, that this active, dynamic function is essentially a leadership role which uses the Management Information System as the means of operation. This, in turn, is dependent on the position of the review element and the Managem.ent Information System in the total management process. All of ^he implications of this conclusion as well as the implied results of Fiedler's work will be taken up in Ch. V. The matter of influence per se is not one that has been well researched since it covers not only a wide variety of contexts, such as m.arketing, production, total integration, balance, and so on, as well as complex personality variables. Perhaps the best study in this area is James G. March, "An Introduction to the Theory of Measurement and Influence," Amei-'iaan Political Science Review, Vol. XLIX (January, 1955), pp. 431-51. ^Fiedler, loc. civ. Fiedler concludes that effective leadership is a function of several variables — the relative s tructuredness of the task, the strength of the

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179 this, however, is essentially trivial unless there are some means for determining the effectiveness of the process. The means for accomplishing this and determining the position of the review element in the process embodied in the management process itself. This is depicted by Figure 7 on page 180, which is an expansion of Figure 6, which appeared on page 157. The planning element in the management process which corresponds to top management exerts -primary leadership on the lower levels of the process, the reviev; and doing elements. This leadership is in the form of expressed goals for the organization. The review element performs a secondary leadership role in that it communicates the goals of top management to those who will be charged with the responsibility and authority for taking the actions necessary to achieve them. The doing element is influenced by the receipt of this communication and takes action. The action level of doing, in turn, employs much of the same process of communication and leadership and communicates the results of its doing or performance to the reviev; element by means of the Management Information System and in accordance with the criteria established for evaluation. When the review element evaluates this performance, the results leader in terms of his position anH"Trrr personality^ The first tv7o are directly related to the management process, end the latter is determinable over time as a function of results and experience.

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180 Priraary Leadership Primary Leadership Pr iiaary Leadership H O 10 Secondary Leadership Figure 7 The Interrelationship of the oeadership and Management Processes

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181 are communicated both to the doing element as feedback which tends to control subsequent performance and to the planning element for later decisions and continued, new, or revised plans. At this stage of the process, the review element, through the Management Information System, is performing a primary leadership role since this communication influences subsequent behaviors at both the planning and doing levels. It may, therefore, be concluded that the Management Information System is the means through which the review element plays both secondary and prim.ary leadership roles in the m.anagement process, and that these roles are active rather than passive. Put another way, v;hen functioning as a relay agent between planning and doing, the review element stands in a staff relationship to the total process, but when evaluating results and thereby influencing subsequent actions, it performs a line function. Both of these operations employ the Management Information System, and therefore, the processes of both the staff and line functions form one of the dimensions of the Management Information Systems. It now remains to show the interrelationships of the management, communication, information, and leadership processes. These are illustrated graphically by means of Figure 8 on page 182. In this diagram, which is otherv/ise

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182 {effective leadership? Yes or no} planning (semantical) m w V o u +J r; 1 0 fu 1 >i 4-i M 0 (« • 0) 0 .^i U-l IW ^ : OJ CO Goals [Criteria] doing (syntactical) Criteria Establishment reviewing (pragmatic) I e 0) -p a, O M . Q) n3 (U E ^-^ -H CM O -P Reviewi ^[Criteria] >1 Qa u -w CO O Q) o 'd 1 1 rrpi -p u Q) t 1 4-1 in E W OJ -p -P •P U. Q) 0 0 rtJ Xi r— » Q) 0 Xi -P &) CQ -H Q) u •H X! -P O -H u c 0) c a, c -P (0 (0 U 0) •rH u (successful leader shiD? ) Evaluation [Cause] Fiauve 8 The Interi'elationskip of the Managemeyit, Ccmir.uni action^ Information i and Leadership Processes

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183 self-explanatory because of the previous discussions, the elements of the management process are indicated in standard type. Phases of the communication process appear within parentheses; correlative elements of information are described within brackets; and the various phases of leadership are enclosed within braces. Other data appear in italics. It can be concluded as a result that the processes of management, communication, information, and leadership are so interrelated and interdependent that they form a single dimension of Management Information Systems which may be designated as processes . A Comparison of the Processes of Management Information Systems with the Implied Processes of Management Accounting Information Systems Management Information Systems and Management Accounting Information Systems share the dimensions of purposes and perimeters in that both provide information having identical properties to managers for their use in making decisions . ^ ^' The identity of the systems depends on their sharing identica]. processes. The product of Accounting Information Systems serves management , ^ ^^ and since managGHient is a universal activity ^^^See Chs. II and III respectively. Indeed, in Ch. Ill, the perimeters of information were established by reference to an accounting fram.e of reference. * ^ ^Corrimittee to Prepare a Statement of Basic Accounting Theory, op. cit.^ p. 1.

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184 composed of the elements of planning, doing, and reviewing, the relationship of this system to the management process is the same as it is for the Management Information System. Indeed, Herbert notes that the review element is essentially the accounting operation in an organization. ^ ^ ^ Therefore, the means by which operations are carried on are the same regardless of whether they are named Management Information Systems or Management Accounting Information Systems. The information output of both systems must be communicated if it is to be used, and the communication process, by definition, is made up of the semantical, syntactical, and pragmatic operations. It is, therefore, universal and not dependent upon the system per se. The relationship of information to the management process in terms of criteria, cause, effect, and report was posited to explain an accounting operation' and extended to explain Management Information Systems processes, and it is, therefore, the same for both systems. Finally, the notion of leadership as a surrogate for behavioral variables seems to be embodied in Management Accounting Information Systems. In this regard, the Committee to Prepare a Statement of Basic Accounting ^Herbert, op. cit., p. 12. ^^^Ihid., pp. 21-22.

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185 Theory indicates that such systems produce information which is designed to influence the user's actions. Although controlled to some extent by the information criterion of verif lability , the design and communication action is, nevertheless, aimed at altering behavior, and therefore constitutes leadership, as defined. It may be concluded, therefore, that Management Information Systems and Management Accounting Information Systems possess identical dimensions and are, therefore, only different designations for conceptually identical things. Summary and Conclusions In this chapter, a third dimensions of Management Information Systems, that of processes , is analyzed and added to the emerging concept. Processes are the series of actions or operations which are directed to an end. The dimension of purposes indicates that the objective of a Management Information System is the communication of information to aid managers who have as their function the making of decisions. When the second dimension of perimeters is considered, it becomes evident that decision making and com.raunication are not performed by lifeless systems but are carried out by people who act in accordance with behavioral processes. Therefore, ^Committee to Prepare a Statement of Basic Accounting Theory, op. cit.^ pp. 14-15.

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186 a complete and operational concept of Management Information Systems needs to comprehend the process aspects of management. The other processes of communication and behavior must be consistent with both the management process and with the purposes and perimeters of the system. For the purposes of this study, management has been defined as the making of decisions and is a universal function which occurs without regard to either the environment or the status of the individual making the decision. The process by which a decision is translated into action, results evaluated, and revised or new decisions reached is three-step in nature: (1) planning; (2) doing; and (3) reviewing. These elements, taken together, comprise the management process which exists at all levels in an organization, ranging from the organization as an entity dovjn to each individual — all arranged hierarchially in a complex, interrelated but well defined network. The review element is primarily the communication agent in the management process which links planning with doing. Its output is information. The elements which make up the management process can be related directly to the information output. Planning generates criteria; doing produces a cause; and reviewing shows effect, and communicates results by means of the report. Effect and report also comprehend criteria

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187 and cause and constitute the output of the. Management Information System. Therefore, the system is the means by which the reviev/ing element functions. The outcome of the Management Information System, however, represents nothing at all unless it is communicated. While this is accomplished by the report, the process of communication must be considered and must be consistent with the management process. Communication is a three-step process involving semantics, syntactics, and pragmatics which, in total, lead to the influencing of behavior at the recipient level. The communication process is, therefore, wholly consistent v;ith the management process and its interrelationships with the product of information which is whativer in fact does influence recipients. Thus, the Management Information System is designed to influence behavior, and the reviewing element by the nature of its role and position v;ithin the managem.ent process must consider the potential behavior of the users or recipients of its output. The potential behavioral responses of individuals, hov'/ever, are difficult to predict or control by direct means, and thus "tailor-made" information outputs appear to be an illusory objective albeit a desirable one. In order to overcome this difficulty, it is best to shift the focus from recipient behavior and responses to

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188 communications to the sender of the communication, the reviewing element and its agent of operation, the Management Information System, In this connection, the process of leadership is a reasonable surrogate for the behavioral processes which form a part of the Management Information System. This seems appropriate for two reasons: (1) leadership requires communication; and (2) it has as its objective function the influencing of behavior. Thus, it is consistent with the dimensions of Management Information Systems, and, at the same, suggests that the review element in the management process is a leadership function. This appears to be inconsistent with the management process vmich suggests that goal formulation and the ultimate fulfillment of goals stems from the planning element. However, leadership has three steps in its process: (1) attempted leadersliip in which changes in recipient behavior are sought; (2) successful leadership which results v;hen recipients do alter their behaviors; and (3) effective leadership which occurs only if desired, over-all goals are attained through recipient changes in behavior. Clearly, the reviewing element through its agent of operation, the Management Information System, "attempts" leadership. In many cases, the reviewing element attains the level of successful leadership because

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189 recipients do alter their behavioral patterns. But^ ultimately, the reviewing element does not engage in effective leadership because the fulfillment of total goals is determined at the planning level which is charg with the responsibility and authority for establishing such goals. Therefore, the Management Information System is an agent of leadership functions, the control of which is maintained by the functional divisions of the management process, the purposes of the system, and the perimeters of information and is operated by m.eans of the communication process. Finally, a comparison of ^5anagement Information Sys tems and Management Accounting Information Systems reveals that these two systems share identical dimensions and are, therefore, only different names attached to the sarae thing. Thus, anything that may be said about the review element is applicable to the accounting function, and anything pertaining to the agent of operation, the Management Information System^ is also equally applicable to Management Accounting Information Systems.

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CHAPTER V A THREE-DIMENSIONAL CONCEPT OF MANAGEMENT INFORMATION SYSTEMS AND SOME OF ITS IMPLICATIONS FOR ACCOUNTING Purpose and Organization of the Chapter The separate dimensions of purposes ^ perimeters ^ and processes having been identified and analyzed in Chapters II, III/ and IV respectively, it now remains to combine these and thereby express a complete, three-dimensional concept of Management Information Systems and then to note some specific implications of the concept. A Complete Concept of Management Information Systems In Chapter II a first approximation concept of Management Information Systems was derived by detailing and combining definitions of the component words of the term. Consequently, the purpose of a Management Information System was identified as the means of providing each manager with all the evidence and only that evidence which he needs or wants for decision^ when he needs or wants it. This statement suggests that the boundaries separating information from non-information are established by the manager's needs or wants, but the needs or v;ants are a function of v;hether or not the manager uses the information. This is a personal matter which varies from manager to manager, and therefore can be determined only 190

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191 after the fact. The important issue, however, lies in determining what information is to be supplied by the system before the fact. Accordingly, in Chapter III, the derived, one-dimensional concept was clarified by adapting the accounting criteria of information to Management Information Systems which specified that the appropriate perimeters of information are all of the relevant i verifiable , quantifiable ^ and unbiased evidence pertaining to an issue. Although the tv;o dimiensions of purposes and perimeters adequately describe the objectives and inputs of the Management Information System, the justification for the system's existence lies in the uses made of it and in the results obtained. Consequently, in Chapter IV, the two-dimensional concept v/as expanded to comprehend a third dimension — the -processes of management, communication, information, and behavior as these depend upon, are related to, or define the Management Information System. Taking full account of the three dimensions of the Management Inform.ation System, a complete concept may be expressed, therefore, as follows: A Management Information System is a means of communication which combines the planning, doing, and reviewing elements of the management process into an integrated and coherent whole.

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192 It is designed to ipx'ovide each manager^ whatever his statuSj with all the relevant^ verifiable^ quantifiable^ and unbiased evidence he will use for making decisions. This information is to be presented to him in such a way so as to stimulate behavior that will lead to the attainment of the goals established for the entire management process. Some Implications of the Concept The multi-dimensional concept of Management Information Systems has significant implications for a nuiaber of fields of study. However, the analysis of these will be limited to the reference frame of accounting for a number of reasons. Firsts it is frequently asserted that accountants should be placed in control of the review function of the management process and its operational tool, the Management Information System.^ Accountants are the logical choice to be assigned this responsibility because the gathering of data and its dissemination is what accountants have always done historically, and therefore they are best suited for this role by virtue of their long experience in the field. ^ Second^ this study has shown that not only are the purposes of For example, see Robert Beyer, "Management Information Systems: Who'll Be in Charge?" Managem.ent Accounting, Vol. XLVIII (June, 1967), pp. 4-5. ^For example, see Mattessich, op. cit.^ pp. 421-22.

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193 accounting and Management Information Systems essentially the same, but the set of perimeters for the information product of Management Information Systems was developed by means of using an accounting reference frame of boundaries. Thus, the dimensions of perimeters for both managerial accounting and Management Information Systems are identical.^ Thirds the only output of both Management Information Systems and Accounting Information Systems is information.** Therefore, since the product and the dimensions of both systems are the same, an Accounting Information System is at least a proper subset of the Management Information System. ^ Fourth^ management, as a decision making function having a universal field of application, has always been the service object of accounting.^ Fifthj the dimensions of processes for both systems are consistent with each other and essentially identical . ' On this basis, it may be concluded, therefore, that Management Information Systems and Managerial Accounting Information Systems are essentially the same thing. Thus, ^See Ch. Ill, pp. 116-19. "See Ch. Ill, p. 96. ^See Ch. Ill, p. 109. ^See Ch. Ill, p. 96. 'See Ch. IV, pp. 183-85.

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194 many, if not all of the potential effects of a complete Management Information Systems concept may be discussed within an accounting frame of reference. Although many implications m.ight be inferred from the three-dimensional concept of Management Information Systems, or from the dimensions per se , as developed in this study, this analysis will be limited to a brief exploration of three areas which appear to be both important and potentially fruitful research areas. These are: (1) the nature and function of influence; (2) the potential role of intuition; and (3) the actual uses made of the information produced by the Management Information System or Accounting Information subsystems . Influence As defined earlier, information or evidence is that which influences or possesses the potential to influence.^ Therefore, information^ in behavioral terms, is a stimulus, but while studies have been done in the area of predicting human responses to stimuli, research appears to have been oriented largely to examining the response side of the behavj.oral equation under carefully controlled and perhaps artifical conditions.^ However, ^See Ch. JI, pp. 53-55. ^Such studies are often carried out by researchers employing psychology students at a college or university. It is difficult to maintain that this select group ap-

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195 as March points out in his pioneering study on the subject, there has been a paucity of research in the area of influence per se with respect to determining V7hat influences people, to what extent they are influenced, and how the influence is manifested in terms of response actions. Accordingly, March proposes a theoretical basis for making such measurements.^" Little in the way of follow-up research, however, seems to have been done on the nature and function of influence. This appears to be due to the primary research emphasis being placed on response outputs under highly controlled input conditions and the fact that the controlled conditions are inadequate surrogates for opera tionally complex environments. In this regard, financial accounting seems to offer a tailor-made opportunity foistudying influence under empirical and operational conditions. Thousands of corporate reports are published annually. These contain both the output of the Financial Accounting Information vSystem and undefined statemients by the managers of the corporation which may be either propriately represents other environm.ental situations. In addition, the conclusions may be suspect if these students perceive their participation in the experiment as a form of coercion and alter what their responses might otherwise be. Also such groups m.ay be "grade-wise" and attempt to respond as they perceive the experimenter want them to respond. Even the presence of "control" grou.ps does not overcome this fully^ and in addition such "control" groups are often drawn from the sam-e student population. * "March, loo. ait.

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196 true or untrue, historical or conjectural, overstated or understated, or an admixture of these possibilities.^^ The accounting portion of these reports, to the extent they are specifically comprehended by the auditor's attestation, while not uniform in so far as the treatment of the information is concerned, do exhibit a uniform, although limited perimeter of information, i.e., the "transaction."^^ Therefore, this represents a form of a partially controlled situation within an uncontrolled but closed, real world system — the entire report — and suggests the possibility of a research design through which responses might be observed and analyzed. In 1955, Horngren studied the matter of influence in this context indirectly by reference to decision responses of professional financial analysts. He concluded that despite the assertions of the American Institute of Certified Public Accountants who promulgate the perimeters of information for Financial Accounting Information Systems, much of the information communicated has little or no influence on the decisions of professional financial analysts. ^This matter will be taken ud in greater detail later in the chapter (pp. 211--13) . ^^See Ch. Ill, p. 90. '^Charles T. Horngren, "Security Analysts and the Price Level," Aooountina Review^ Vol. XXX (October, 1955), pp. 575--81.

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197 Although influence, as indicated earlier, is primari a function of use^^'* it would seem to be possible to design a research study employing corporate reports and comprehending March's suggestions. This could prove to be a means of better understanding the nature and operation of influence. This knowledge, in turn, would aid in improving the operations of the review element of the management process and the output of its communication device, the Management Information System. This would result in adding to the fund of knowledge about management per se. Intuition The notion of influence, however, immediately raises another question: In the event that the output of the information system does not influence the manager in arriving at his decision, how does he decide? Put another way, if he does not use the system's information, what does he use? Although little is known about either the actual processes or the inputs employed by humans for solving problems, there appear to be three reasonable input *'*See Ch. II, pp. 54-55. ^ ^Newell, Shaw, and Simon, op. cit.^ p. 151. The general viev; is that humans solve problems through a series of "processes." The nature of the processes, hoviever, is not known. Because com.puters can be programmed to solve problems, and do so by means of orderly pro-

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198 possibilities: (1) he uses whatever inputs are decreed by his psychological identity as necessary to reduce his own personal fears and anxieties; (2) he uses evidence obtained from outside the formal Management Information System; and (3) he m.ay simply have a feeling for the problem and guess at the best solution, disregarding much, if not all, of the evidence presented to him — that is, his decision is made intuitively.^^ The first possibility follows directly as a logical consequence of the Sullivan, Berne, and Fox behavioral models.^' If the objective function of behavior is to reduce fear and anxiety which are personal matters, how can the readily observable cases of valor and service to others be explained? In such instances, the values which combine to form the individual's program create a psychological identity which will not allow any other behavior. Any other behavior would lead to fear and cesses, it is often hypothesized or assumed that humans employ the same or highly similar processes. While this provides a useful tool for studying many phenomena, there is no evidence that the computer's processes are the same as man's. See also Allen Newell and Herbert A. Simon, "Heuristic Problem Solving," Operations Research^ Vol. VI (January-February, 1958), pp. 1-10. ^ ^A fourth possibility is, of course, that a combination of the three possibilities is used. The complexity of this possibility makes its discussion beyond the scope of this study. ^'See Ch. IV, pp. 163-66.

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199 anxiety.^® Thus, such instances of observation are evaluated within the reference frame of the observer's psychological identity rather than by reference to the actor's program. Therefore, a manager's psychological identity, as it is manifested by his eventual behavior, may be so emotionally charged that he overrides any evidence presented to him and bases his decision on his emotions . ^ ^ V7ith respect to the second possibility for decision inputs, the formal Management Information System is a closed system which is defined by the perimeters of its product. The manager, as a human being, is not equally closed. He cannot be sealed into an environmental vacuum and is, therefore, exposed to evidence lying outside the formal information system. He can be influenced by this evidence. Thus, he is subject to a nurriber of information "systems" in addition to the foriaal one. This does not, however, make the sum total of these information systems an "open system" in the strictest sense of the term, for this would imply omnipotence. Moreover, such subsidiary systems lack the characteristic of being an "organized method." Although such extraneous, outside ^ ^Fox, Systems Model of Behavior. ^^Such behavior is quite rational since, in this sense, rationality is a function of the individual's emotions and not of externally decreed norms. But rational does not mean acceptable which is externally established for the coirunon good.

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200 evidence exists and is probably used,^° these inputs seem susceptible to control in the area of routine or repetitive decisions which occur at the "operational level" in organizations and can be programmed. ^^ In terms of the management process posited in Chapter IV, such programming has the effect of negating the elements of planning and reviewing at such operational levels. The focus is solely on doing, and to the extent which this can be done effectively (which does not seem to have been studied empirically) , implies that the data processing system may be identical to the Management Information System for applications at that level, although not necessarily for other levels. Wl-iile the first tv;o suggestions are distinct possibilities, it is the third possibility — the suggested use of intuition — which possesses the strongest implications for Management Information Systems. Intuition has been a rather unpopular operation. Indeed, much of the emphasis which has been directed towards making management ^°For example, he may be influenced by his previous experiences, whether relevant or not; he may m.ake a different decision under one set of climatic conditions than he would under another; something on television or on the radio or in the nev;spapers may influence him, although not directly relevant to the problem; and his own perceptions of complex relationships and the potential impact of his decision on them may influence him. whether rational or acceptable or not. ^'See Ch. II, pp. S7-68. 2^See Ch. IV, pp. 129-31.

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201 a science rather than an art seems to be concerned with the elimination of intuition from decision making. ^ 3 This is justified on the generalized grounds that intuition "is neither dependable nor reproducible."^'* In addition, much of the current focus of management education appears to be directed towards the establishment, by one means or another, of curricula which will lead to operational surrogates for managers who lack intuitive management ability.^ ^ While there is no doubt that this objective is commendable, the potential role of intuition should not — indeed, cannot — be ignored because if managers, in fact, repeatedly attain desired goals by intuitive methods, then the method is both dependable and reproducible and represents a significant variable. In a recent article, Mihalasky asserts that intuition is dependable and reproducible (by certain individuals), and it should be taken into consideration because: The higher a man rises and the more complex his decision process, the more incomplete his support evidence is and the more intuitive he must become. ^ ^^Ackoff, loG. cit. ^ ''Smith, ov. sit.^ p. vii. ^ Charles E. Summer, Jr., and Jeremiah J. O'Connell, The Managerial Mind (Uomev^ocd , 111.: Richard D. Irwin, Inc. , 1964) , pp. 742-54. ^^John Mihalasky, "Question: VJhat Do Some Executives Have More of? Answer: Intuition, Mavbe," Think, Vol. XXXV (November-December, 1969) , p. 23.

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202 Mihalasky also states that he and his colleagues have devised a means for testing and measuring intuition. However, he does not disclose these since the study is still in the experimental stage. It follows, hov/ever, from the above that if intuition is not equally present in all individuals, then some surrogate is needed; and this surrogate seems to be more complete information. In this respect, the Management Accounting Information System, especially when in accordance with the expanded perimeters of information, seems identical with the proposed concept of Management Information Systems. The Financial Accounting Information System with its rather narrov7ly defined information boundaries offers an opportunity for testing this proposition. Hov/ever, it is first necessary to consider the uses made of financial accounting information. Uses Although the output remains the representation of management rather than the auditor,^® financial accounting, that is, accounting information directed primarily to outsiders, is under the control of the auditor. Financial accounting reports are attested to by certified public accountants for a variety of reasons; but in all Auditing Standards and Procedures (New York: American Institute of Certified Public Accountants, 1963), pp. 9-10.

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203 cases the perimeters of information, while perhaps comprehending the criteria of relevance, verif iability , quantif lability , and freedom from bias, are tightly constrained by being limited to "transactions."^^ The purpose of such a limitation is to ensure "fairness" in the output which appears to be a kind of semi-uniformity controlled by adherence to "generally accepted accounting principles" or additional disclosures , ^ ° When fully complied with, this prevents financial statements from being "misleading ." ^ ^ Kohler defines misleading as being untrue in whole or in part, obscure, or lacking material facts. ""^ This implies two things: (1) the contents of financial statements which are not misleading are understood by recipients of the contents; and (2) the information contained in financial statements is, in fact, used whether misleading or not,^^ This appears to be, however, only an assumption for there is little research on the matter of understanding ^^See Ch. Ill, p. 90. ^^Kohler, Dictionary, p. 177. ^^Silvoso and Bauer, op. cit., p. 36. ^^Kohler, Dictionary, p. 272. ^^For example, see "Reporting the Results of Operations," Opinions of the Accounting Trinciples Board, No. 9, DecemJaer, 19G6, pp. 109-11; and Paul Grady, Inventory of Generally Accepted Accounting Principle s for Business Enterprises , Accounting Research Study No. 7 (New York: American Institute of Certified Public Accountants, 1965), pp. 2-5.

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204 financial statements. It may be that financial statement recipients generally do not understand much of the information presented.^"* If proper comprehension of what is said to be a significant portion of information for making decisions is absent, what then explains decisions made, by say, investors which attain desired objectives? Luck? Intuition? Non-use of financial accounting inform.ation in practice? The use of information obtained from without the system? While all of these are valid possibilities, the use of a broader information base than that provided by financial accounting reports seems to be the iriost logical choice because the processes of financial accounting and the perimeters of its output are not the same as those of management accounting. Therefore, financial accounting alone is an incomplete and inappropriate base upon which to make an evaluation of an entire organization. This may be demonstrated by reference to the diagram appearing as Figure 9 on page 205. In this diagram, the boundaries of the entire organization are shown by the heavy square. The processes of the review function and '"^For example, see Abraham J. Briloff, The Effectiveness of Accounting Communication (New York: Frederick A. Praeger, Inc., 1967), Ch. 1. Briloff found that there was little consensus among financial statement users as to just what the auditor's report or "certificate" m.eans. The author of this dissertation found in the course of a preliminary study in this area that vn'.th the exception of financial and accounting people irony items appearing in attested financial statements are misunderstood.

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205

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206 of communication by the Management Information System within the organization are indicated by solid lines and follow the scheme presented in Chapter IV. The dashed lines show the information developed by the independent certified public accountant for communication to interested external users. The information flows of the Management Information System clearly comprehend the whol organization. However, the external evaluator, the certi fied public accountant, who bases his information on the perimeter of transactions, effectively gathers information only from the doing elements. These inputs to the management process of the independent accountant result in financial statements v/hich are communicated to outside users as a basis for evaluating the whole organization, as shown by the V7avy line. Thus, the financial accoun'r.. tant's evaluation of the organization is partial and does not seem to be expandable to conclusions pertaining to the total organization.^^ It would appear, therefore, that external decision makers in evaluating the whole organization must either be lucky, intuitive, or employ other information if their decisions are to attain the desired objectives. ^ ^See Ch. IV, especially pp. 134-48 and 160-66. ^^Tiiis is also implied by Charles T. Horngren and George H. Sorter, "'Direct' Costing for External Reporting," Accounting Beview^ Vol. XXXVI (January, 1961), pp. 84-92. Decision-making investors need total information rather than partial (p. 91) .

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207 The Interrelationship of Influence ^ Intuition^ and Use Information is that which carries influence; influence, in turn, suggests usage; and intuition beccines a necessary process when the information is inadequate for use in solving the problem at hand. However, intuition is not dependable nor reproducible by all decision makers. To overcome this limitation, it would appear to be best to expand the criteria for information or, to put it another way, to broaden the information base . Both the problem and this solution appear to be recognized in the literature.^' The increasing concern in this area seems to underlie the rationale employed by the Committee to Prepare a Statement of Basic Accounting Theory in proposing an expansion beyond the perimeter of transactions to the criteria of relevance, verifiability, quantif lability , and freedom from bias for distinguishing information from non-information.^^ If these be applied to Management Accounting Information Systems, then such systems become identical to Management ^^For some exemiples see George H. Sorter, "An 'Events' Approach to Basic Accounting Theory," Accounting Review, Vol. XLIV, (January, ].9 6 S ) , pp 12-19 ; Fertakis, op. oit . ^ p. 681; and Firmin and Linn, op. cit.^ p. 79. These writers all either suggest or imply the need to expand the transaction perimeter of information to broader limits. See Ch. Ill, pp. 98-99.

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208 Information Systems since the dimensions of purposes, perimeters, and processes become the same for both. This suggests, in turn, that if financial accounting, which is a form of management accounting directed in large part to the limited field of external users, has its information base similarily expanded, it will become basically identical to management accounting, and therefore, identical to Management Information System.s. This conclusion holds some definite implications for accounting in general and financial accounting in particular. Such implications, however, are weak unless reinforced by current user demands directly related to the implications. A strength of demand suggests that implications may be combined with these perceived needs to indicate trends. Indicated Trends in Accounting At present, the certified public accountant attests, in effect, only to the operations of the doing element of any organization, and his attestation is, therefore, incomplete as an evaluation of the entire organization. In the past, the certified public accountant has not been expected to communicate more information.^^ However, a demand for more information appears to be developing"* " ^^Kohler, Dictionary J pp. 8-9. ** "Marvin L. Stone, "Problems in Search of Solutions through Research," Empirical Research in Accounting: Selected Studies^ 1968 (Supplement to Journal of Accounting Research, Vol. VI), p. 63.

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209 which seems to be in response to the desires of financial statement users for an evaluation of the efficiency of management."*^ In effect, this is a demand by outsiders for a performance audit"* ^ which comprehends the entire organization rather than only the doing function. Some definite movement in this direction has occurred in recent years. For example, the company laws of Sweden and Finland require the independent auditor to evaluate and attest to management performance."*^ However, Bomeli concludes that the requirement "does not really produce an opinion regarding the efficiency of management.""*"* Although the results may be unresponsive to the demand, the enactment of the laws suggests the existence of a demand in this area. In this country, Marvin L. Stone, the president of the American Institute of Certified Public Accountants recently suggested that the day is not far off when the "•^Edwin C. Bomeli, "Management Reviev;s by Scandinavian Accountants," Journal cf Accountancy^ Vol. CXVIII (July, 1964) , p. 37. "•^The term "performance audit" is employed here to indicate that it may be different from a "management audit." The latter term "is properly applied only to the systematic method of appraising administrative performance developed and validated by the American Institute of Management." See Philip W. Shay, "Management Audit," in The Encyclopedia of Management j Vol. I, ed. Carl Heyl (New York: Reinhold Publishing Corp., 1963), p. 461. "* ^Bomeli, op. cit.j p. 33. '*'*Ibid.^ p. 37.

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210 Financial Accounting Information System will comprehend pro forma information as v/ell as historical, transactionbased, financial information.'*^ Fro forma accounting information is, in effect, management's statement on goals and their plans for achieving them. Thus, this information appears to possess the potential for serving as a basis for evaluating future performance. Other surrogate expressions of plans also might be added to the information attested to by independent accountants thereby expanding the information base towards the perimeters proposed in this writing and providing more formal information to external users. For example, the budget is a "plan of action expressed in figures""*^ for a specified time period. Standard costs are the manifestations emerging from a different level of planning which expresses in advance of doing, performance "that should be attained."**' Moreover, the use of future events is not v;ithout precedence in financial accounting even though "* ^Ibid. Stone also expressed this opinion in more positive terms in a paper read before the annual meeting of the American Accounting Association, San Diego, California, August 27, 1968. Stone made this statement notwithstanding the fact that the Rules of Proper Conduct of the American Institute of Certified Public Accountants forbids the use of a member's name in conjunction v;ith future estimates where he attests to their accuracv. See Silvoso and Bauer, op. cit., p. 25. '*^Horngren, Accounting for Manaaernent Control, p. 483. ""'ibid.

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211 the criterion of transactions implies an historical fact.**' It seems clear, therefore, that there is much in the way of extant information that could be added to the accounting information communicated to outsiders which would allow users to make decisions pertaining to the entire organization.''^ Hov/ever, the carrying vehicle for financial accounting information is generally the organization's annual report. These documents, as previously indicated, contain not only the attested accounting information but also statements by rrianagement not comprehended by the auditor's report which may tend to negate portions of the attested evidence. In addition, these statements may be conjectural, colored to make management appear better than it is, or simply untrue. For For example, the future use and wearing out of a fixed asset is estimated by depreciation; the possibility of debts being uncollectible in the future is taken account of in the present; and timing differences in income taxes are presumed to be payable in the future. While all of these stem from historical transactions, they are, nevertheless, assessments of the future which are comprehended by plans. ^^For example, Ansoff (op. cit . ^ Ch . 2) suggests that the most important piece of information is the "return on investment," and should be supplied in the event people do not know hov^ to calculate it. The rate of return, hov7ever, for internal purposes vrherein the elements of planning, doing, and reviev;ing are evaluated, is a poor measure of performance since it includes factors not under the control of the elements (and people) being evaluated. Thus, it may have similar limitations for evaluating the operations of the entire organization v;hich comprehend irrelevant activities.

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212 example, the 19 69 annual report of the Westinghouse Electric Corporation contains the following statement by management regarding the operations of its Power Systems division : The Westinghouse Power Systems Company pushed forward in 1969 with major expansion and modernization of its production facilities and introduction of new equipment designed to help satisfy the world's growing electrical needs. What does this statement mean? Could a user of this information be misled by it? Clearly, the statement indicates that the firm acquired some new facilities. Why? Because the firm projects increased sales and is planning v/ays and means of capturing some of them? Or does "modernization" mean that the old equipment was obsolete and not usable for operations as originally planned? 4 All of this is conjectural^ of course, but it does demonstrate that, in the absence of additional information, several interpretations are possible. Continuing to describe the same division, management goes on to say, "The company experienced a successful year in the turbinegenerator business. "^^ The word "successful" is relative to what? Last year's operations? To the plan for this year? Does it mean only that this operation did not lose money? Again, the reader cannot tell for certain Vi/hat ^"Westinghouse 1969 Annual Report (Pittsburgh, Pa.: Westinghouse Electric Corporation, 1969), p. 4.

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213 this means. Finally, although not exhaustively, the firm's management states that "Povrer Systems began manufacturing operations at a nuclear turbine plant at Charlotte, N. C, and a nuclear fuel assembly plant at Columbia, S. C."^^ Were these actions ahead of, according to, or behind plans? Were the plans the same for both plants? How do these data and their wordings influence users, especially vis-a-vis the rather cut and dried attestations of the accountant which appear in the same communication vehicle? This is not known, but it does suggest a particular trend. If the demand for more information persists and is met by expanding the perimeters of information to the limits suggested, then by definition, the expanded information would be included in the Financial Accounting Information System. But how would it be reported? As a first step, it would seem most natural to extend the present extent of p2'o forma information to include management's plans, expressed initially in the form of budgets or coiTimitments to the future and to include these in the annual report attested to by the independent accountant. This will provide users with a base for evaluating subsequent performance. The ultimate step in controlling and directing information to vulnerabDe third party or ^'ibid.

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214 external users appears to lie in having the auditor's report cover the entire annual report or other formal representations of management. If the latter occurs — and there seems to be a trend in this direction — then the Financial Accounting Information System will become identical with the Management Accounting Information System which is now identical v;ith the Management Information System. This will be so because the dimensions of all three, in terms of purposes, perimeters, and processes will be the same. Of course, differences in output will always exist, but these are a function of the problem under consideration rather than the system. Summary and Conclusions The three dimensions of Management Information Systems — purposes, perimeters, and processes — are combined in this chapter into a complete, three-dimensional concept which is expressed as follows: A Management Information System is a means of communication which combines the planning ^ doing, and reviewing elements of the management -process into an integrated and coherent whole. It is designed to provide each manager, whatever his status, with all the relevant, verifiable, quantif ia.ble , and unbiased evidence he will use for m.aking decisions . This information is to be presented to him in such a way

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215 so as to stimulate behavior that will lead to the attainment of the goals established for the entire management process . Some of the potential effects or implications of this concept for accounting are suggested as areas offering fruitful research possibilities. The information or evidence output of information systems is whatever actually influences the decision maker, but little is known about influence per se in terms of what^ how^ when^ and to what degree. In this respect the annual financial accounting reports of corporations seem to provide a set of semi-controlled conditions which can lay a foundation upon which an empirical research study of influence could be based. The question of influence leads to another question, namely, if the information does not influence the manager, hov; does he decide? One distinct possibility is that he employs intuition. Much of the development of a theory of management has been directed towards elixainating intuition from the decision process because it is neither dependable nor reproducible. However, at least one study in this area indicates that intuition is both dependable and reproducible by some individual managers. More importantly, however, intuition becomes increasingly necessary the higher the status of the manager in the decision-

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216 making hierarchy. This suggests that instead of ignoring or trying to eliminate intuition, research in this area should be carried out to aid in the design of better, more effective information systems. Both influence and intuition are related to the actual uses of the information produced by information systems. This, in part, is a function of understanding at the user level. The evidence, although within the perimeter dimension indicated, may be misunderstood by recipients and either used erroneously with poor decision results or ignored. Both understanding and actual uses of the information output of Financial Accounting Information Systems, as embodied in the formal financial statements and reports of corporations, appear to represent an opportunity base for effective research on these issues. In addition, there appears to be an emerging demand for a broadened set of criteria for the information to be admitted into Financial Accounting Information Systems. This also suggests the validity of the assertion that these areas possess research potential Finally, it is concluded that as financial accounting moves towards satisfying these demands, it will move towards the same dimension of information perimeters established for Management Accounting Information SystemiS It will, therefore, become conceptually identical with

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217 such systems which, in turn, are idci'itical with Management Information Systems. Thus, it is concluded that all such systems are, in fact, Management Information Systems, and differences in the particulars of information output are a function of the problem under study and not of the information system employed since these are essentially the same.

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CHAPTER VI SUMMARY AND CONCLUSIONS The term "Management Information Systems" has been popular in recent years and references to it continue to appear frequently in business literature. There does not, however, appear to be any consensus regarding the meaning of the term or its proper area of usage. The expression is often employed one-dimensionally , that is, as a secondary source of support for other, more primary • interest areas such as data processing, management, and systems analysis. While the use of secondary notions in support of other concepts is often highly effective methodology, the variety of meanings assigned to the term sometimes 4 lead to directly contradictory assertions. This, when com bined with the pervasiveness of the term itself suggests that Management Information Systems v/arrant analysis. Therefore, a major purpose of this study was to develop a multidimensional operational concept of Management Informa tion Systems which could serve as a base of understanding and knowledge upon which to build future experiences with both Management Information Systems and related fields. The first step in constructing the model was to determine the present state of the art of Management Infer mation Systems to the extent this could be represented by 218

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219 the areas in which a consensus or majority of agreement existed. In the absence of a consensus, a common, or simple plurality of agreement would have been acceptable. However, there appeared to be no areas exhibiting either a consensus or common agreement and a different approach, ^ therefore, was indicated. Accordingly, a tentative, onedimensional concept of Management Information Systems V7as essayed by means of deriving and then combining the commonly assigned meanings of the component words of the term Management Information Systems. "Management" v;as found to be the act of making decisions v/hich involved a conscious choice of one alternative from a set of alternatives. "Information" was equated with evidence, which^ in turn, means whatever influences the mind, that is, is used in order to resolve a problem. The word, "systems" conveyed the idea of v;holeness or totality, especially with respect to the problem. Combining these analyses led to a onedimensional, derived concept which was expressed as follows A Management Information System is an organized method of "providing each manager with all the evidence and. only that evid^ence which he needs or wants for decision, when he needs or wants it, and in a form which aids his understanding and stimulates his action. This preliminary analysis accomplished two things.

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220 First, it served to establish the purposes of a Management Information System as a relevant dimension. Second^ the one-dimensional, purposive, derived concept was found to be vague insofar " as the specific v/hich distinguished non-information from information which is to be presented to managers. This implied the existence of another dimension of Management Information System.s--the perimeters or characteristic attributes of information produced by such systems as opposed to non-information. The investigation into the basis of the perimeters which distinguish or separate information from non-information disclosed that the dimension of purposes ; is identical insofar as Managerial Accounting Information and Management Information Systems are concerned. The field of managerial accounting has had, in fact, a much longer period of expression in the literature than the relatively recent term of Management Information Systems. This suggested the possible existence of a set of perimeters for distinguishing information from non-information which could be extended to the output of Management Information Systems. The resulting analysis disclosed that, within an accounting frame of reference, information was separated from non-information by means of the following four distinct attributes: First, in order to qualify as information, the output had to possess relevancy , v/hich meant that it had to have a

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221 logical connection with the problem under consideration, and moreover it had to carry, in fact, some degree or weight of influence to the mind of the user as well as stemming from sources perceived as being competent. Seoondj the output had to be verifiable as well. This appears to represent a form of control which is applied primarily to the information user but also covers the information system itself. This attribute demands that identical conclusions about the information be reached logically by more than one party acting independently. Thirdj the output of the system also must be quantifiable, that is, capable of being measured. Although this is taken generally to mean susceptible to nvimerical expression, an analysis of the theory of measurement scales disclosed that the act of classifying data or arraying them in an organized form fulfills this requirement, and at the same time aids in establishing relevance. Fourth^ in order to strengthen controls of the information system and to validate the information's verif lability , the system's output must be free from bias^ both statistically and personally. Accounting was shown to be a service function, the purpose of which is to produce information. However, the field of accounting is apparently fragmented by the

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222 existence of two seeming3-y opposed operational schools: (1) managerial accounting which turns out information for managerial uses internally v^ithin the organization; and (2) financial accounting V7hich has its information output directed largely to managerial users who are external to the organization with which the information deals. Both of these accounting operations aid management in making decisions. Managerial accounting information follows the information perimeters described earlier, but financial accounting, which is the most commonly perceived function of accounting, has its information content determined by the much narrower dim.ension of transactions . However, transactions are comprehended by the broader dimension of perimeters characteristic of managerial accounting. It was concluded, therefore, that managerial accounting comprehended financial accounting, and, as a consequence, Financial Accounting Information Systems are a subset of Management Accounting Information Systems. Management /accounting Information System>s were seen to be identical v/ith Management Information Systems in two dimensions of ipurposes and perimeters , and therefore, are at least a subset of Management Information Systems. Whether or not these two systems are in fact identical depends on their equal sharing of a third dimension of Management Information Systems — the proces ses by means of which

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223 the static dimensions of purposes and perimeters are translated into the dynamic element of action and directed tov/ards the fulfillm.ent of goals. The Management Information System's dimension of processes comprehends the functional activities of management, communication, and as a surrogate for the human responses to the information output of the system, leadership. Each of these was found to be a three-step operation which is interrelated with each other and dependent upon the linked, interdependent, operational elements of planning, doing, and reviewing which make up the management process. In this scheme planning is responsible for developing organizational goals; doing implements the plans by taking actions needed to attain these goals; and reviewing is the element of communication and evaluation which binds these elements together into an integrated and organized process. The interdependence of the purposes and perimeters of the Management Information System and the functions of the review element of the management process suggested that the Management Information System was the operational tool by which the review element carried out its responsibilities. Controls over the leadership potential of the review element were built into the total integrated management process. It was found, in addition, that the review element is

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224 identical to the functions of accounting carried out within the purposes and the information perimeters established. It V7as concluded, therefore, that Managment Accounting Information Systems, if expanded to the perimeters indicated in actual operations, and Management Information Systems are identical since their dimensions are identical. Finally, it was suggested that pressures towards expanding Financial Accounting Information Systems towards the perimeters of Management Accounting Information Systems now exist which may eventually lead to an identity of such systemiS, and that any differences between such systems which V7ill continue to exist are differences in the problems addressed and not in the systems., :.;

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226 Berne,: Eric/ A Layman's Guide to Psychiatry and PsyahoanalysiSy New York: Simon and Schuster, 1964. Berners-Lee, CM. (Ed.), Models for Decision , London: English Universities Press^ Ltd. , 1965. Bierman, Harold, Jr., and Drebin, Allan R. , Financial Accounting: An Introduction, New York: Macmillan Co., 1968. , Managerial Accounting : An Introduction , New York: Macmillan Co. , 196 8. Black, Henry Campbell, Black's Law Dictionary , 4th Ed., St. Paul, Minnesota: West Publishing Co., 1951. s/ Black, Homer A., and champion, John E., Accounting in Business Decisions: Theory ^ Method^ and Use, Englewood Cliffs, New Jersey: Prentice-Hall, Inc., 1961. Blumenthal, Sherman C, Management Information Systems: A Framework for Planning and Development, Englev/ood Cliffs, New Jersey: Prentice-Hall, Inc., 1969. Bonini, CP., Simulations of Information and Decision Systems of the Firm, Englewood Cliffs, New Jersey: Prentice-Hall, Inc., 1963. Boore, Williarfi F., and Murphy, Jerry R. , The Computer Sampler: Managem.ent Perspectives on the Computer , New York: McGraw-Hill Book Co., 1968. Brink, Victor Z., and Cashin, James A., Internal Auditing^ 2nd Ed., New York: Ronald Press Co., 1958. v^Briloff, Abraham J., The Effectiveness of Accounting Communication, New York: Frederick A. praeger. Inc., 1967. Brown, R. Gene^ and Johnston, Kenneth S., Paciolo on Accounting, New York: McGraw-Hill Book Co., 1963. Brown, Richard (}'d.), A History of Accounting and Accountants, Edinburgh: T.C and E.G. Jack, 1905. v^Bruns, William J., and DeCoster, Don T. (Eds.), Accounting and Its Behavioral Implications , New York: McGrawHill Book Co. , 1969 .

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227 Bursk, Edward C, Clark, Donald T., and Hidy, Ralph W. (Eds.), The World of Business, Vol. I, New York: Simon and Schuster, 19 62. Canning, John B. , The Economics of Accountancy : A Critical Analysis of Accounting Theory, New York: Ronald Press Co". , 1929. Cartv/right, Dorwin^ and Zander, Alvin (Eds.), Group Dynamics: Research and Theory, 2nd Ed., Evanston, Illinois: Row, Peterson and Co., 1960. Chapin, Ned, An Introduction to Automatic Computers , 2nd Ed., Princeton, Nev; Jersey: D. Van Nostrand Co., 1963. Cherry, Colin, On Human Communication: A EevieWj, A Survey^ and a Criticism , 2nd Ed., Cambridge, Massachusetts: Massachusetts Institute of Technology Press, 1966. Childs, William K., Accounting for Management Control, Nev; York: Simons-Boardman Publishing Corp., 196 0. Churchman, C. VJest, Prediction and Optimal Decision , Englewood Cliffs, New Jersey: Prentice-Hall, Inc., 1961. Conmiittee on Terminology, Accounting Terminology Bulletin^ Number l^ Review and Resume, New York: American Institute of Accountants, 1953. Committee to Prepare a Statement of Basic Accounting Theory, A Statement of Basic Accounting Theory, Evanston, Illinois: American Accounting Association, 1966. Communication in Organizations : Some New Research Findings , Ann Arbor, Michigan: Edwards Brothers, Inc., 1959. Corbin, Donald A., Accounting and Economic Decisions, New York: Dodd, Mead, and Co., 1964. Cowan, T.K., The Cost Accounting Function, London: Sweet and Maxwell, Ltd., 1965. Dale, Ernest, Management Theory and Practice , New York: McGraw-Hill Book Co., 1965. Davis, Hiram S., Productivity Accounting , Philadelphia: University of Pennsylvania Press, 1955.

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228 Dearden, John and McFarlan, F. Walter, Management Information Systems: Text and Cases, Homewood, Illinois: Richard D. Irwin, Inc., 1966. De Cecco, John P., The Psychology of Language, Thought, and Instruction, Holt, Rinehart and Winston, Inc., 1967. Deinzer, Harvey T., Development of Accounting Thought, New York: Holt, Rinehart and Winston, Inc., 1965. Derry, T.K., and Williams, Trevor I., A Short History of Technology , Nev; York: Oxford University Press, 1961. Dickinson, Arthur Lov/es, Accounting: Practice and Procedure, 2nd Ed., New York: Ronald Press Co., 1964. Dopuch, Nicholas and Birnberg, Jacob G., Cost Accounting: Accounting data for Maytag emeyit ' s decisions , New York: Harcourt, Brace and World, Inc., 1969. Douglass, Paul, Communication Through Reports, Englewood Cliffs, New Jersey: Prentice-Hall, Inc., 1957. Drucker, Peter F. , The Effective Executive , New York: Harper and Row, Publishers, 1966. Eckardt, H.W. , Accounting in the Lumber Industry , New York: Harper and Brothers, Publishers, 1929. Esquerre, Paul-Joseph, The Applied Theory of Accounts , New York: Ronald Press Co., 1917. Ewing, David V?., The Managerial Mind, London: CollierMacmillan, Ltd., 1964. Faunce, William A., Problems of an Industrial Society, New York: McGraw-Hill Book Co., 1968. Fayol, Henri, General and Industrial Management , trans. Constance Storrs, London: Sir Isaac Pitman and Sons, Ltd., 1949. Fiedler, Fred E., Leader Attitudes and Group Effectiveness , Urbana, Illinois: University of Illinois Press, 1958. Fitzgerald, A.A. , and Schumer, L.S., Classification in Accounting , Sydney: Butterv/orths , 1962,

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229 Forrester, Jay W. , Industrial Dynamics, Carabridge, Massachusetts: Massachusetts Institute of Technology Press, 1961. Fowler, H.W. , A Dictionary of Modern English Usage, 2nd Ed., New York: Oxford University Press, 1965. Fox, VJilliam McNair, The Management Process, Homewood, Illinois: Richard D. Irwin, Inc., 1963. Garner, S. Paul, Evolution of Cost Accounting to 1925, University, Alabama: University of Alabama Press, 1954. George, Claude S., Jr., The History of Management Thought, Englewood Cliffs, New Jersey: Prentice-Hall, Inc., 1968. Glover, John G., Business Operational Research and Reports, Nev; York: American Book Co., 19 49 . Goetz, Billy E., Management Planning and Control: A Managerial Approach to Industrial Accounting , New York: McGraw-Hill Book Co., 1949. Goldberg, Louis, An Inquiry into the Nature of Accounting , Evanston, Illinois: Anierican Accounting Association, 1965. Grady, Paul, Inventory of Generally Accepted Accounting Principles for Business Enterprises , Accounting Research Study , Number 7 , Nev7 York: American Institute of Certified Public Accountants, 1965. Gras, N. S. B. , Industrial Evolution ,. Cambridge, Massachusetts: Harvard University Press, 1930. Greenwood, William T. , Decision Theory and Information Systems: An Introduction to Management Decision Making, Cincinnati, Ohio: South-Western Publishing Co., 1969. Gregory, Robert H. , and Van Horn, Richard L. , Automatic Data Processing Systems, 2nd Ed., Belmont, California: Wadsworth Publishing Co., 3963. Grier, Elizabeth, Accounting in the Zenon Papyri, New York: Columbia University Press, 1934. Gross, Neal, Masdn, Ward S., and McEachern, Alexander, Explorations in Role Analysis, Nev7 York: John Wiley and Sons, Inc., 1958.

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230 Hare, Van Court, Jr., Systems Analysis: A diagnostic Approach, New York: Harcourt, Brace and World, Inc., 1967. Hatfield, Henry Rand, Modern Accounting , New York: D. Appleton and Co., 1913. Hebb, D. 0., A Textbook of Psychology , Philadelphia: W. B. Saunders Co., 1958. , The Organization of Behavior, New York: John Wiley and Sons, Inc., 1949. Hendriksen, Eldon S., Accounting Theory, Homewood, Illinois: Richard D. Irwin, Inc., 1965. Henrici, Stanley B. , Standard Costs for Manufacturing^ New York: McGraw-Hill Book Co., 1947. Heyl, Carl (Ed.), The Encyclopedia of Management, 2 Vols., New York: Reinhold Publishing Corp., 1963. Hill, F.H., Jr., Computing Cotton Fabric Costs, New York: McGraw-Hill Book Co., 1929. Hill, Walter A., and Egan, Douglas M. (Eds.), Readings in Organization Theory: A Behavioral Approach, Boston: Allyn and Bacon, Inc., 196 6. Homans , George C, The Human Group, New York: Harcourt, Brace and VJorld, Inc., 1950. Hopf, Harry A., Historical Perspective in Management, New York: Hinkhouse, Inc., 1947. Horngren, Charles T., Accounting for Management Control: An Introduction , Englewood Cliffs, New Jersey: PrenticeHall, Inc., 1965. , Cost Accounting: A Managerial Emphasis , Englewood Cliffs, New Jersey, Prentice-Hall, Inc., 1962. Hudson, Kenneth, Industrial Archaeology: An Introduction, 2nd Ed., London: John Baker Publishers, Ltd., 1966. Hunt, Edward Eyre (Ed.), Scientific Management Since Taylor: A Collection of Authorative Papers, New York: McGrawHill Book Co. , 1924.

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231 Humphreys, H. G. , The Accounts of an Oil Company j, Nev7 York: American Institute Publishing Co., 1934. Jaedicke, Robert K. , Ijiri, Yuji, and Nielsen, Oswald (Eds.), Research in Accounting Measurement, Evanston, Illinois: American Accounting Association, 1966. Jamison, Charles, Business Policy ^ New York: Prentice-Hall, inc., 1953. Johnson, Richard A., Kast, Fremont E., and Rosenzweig, James E. , The Theory and Management of Systems ^ New York: McGraw-Hill Book Co., 1963. Johnson, Richard E., McCoy, Neal H. , and O'Neill, Anne F. , Introduction to Mathematical Analysis ^ New York: Holt, Rinehart and Winston, Inc., 1962. Katona, George, Psychological Analysis of Economic Behavior^ New York: McGraw-Hill Book Co., 1951. Kohler, Eric L. , A Dictionary for Accountants^ New York: Prentice-Hall, inc., 1952. , Accounting for Management j Englewood Cliffs, Nev; Jersey, Prentice-Hall, Inc., 1965. Koontz, Harold (Ed.), Toward a Unified Theory of Managementj New York: McGraw-Hill Book Co., 1964. , and O'Donnell, Cyril, Principles of Management: An Analysis of Managerial Fmictions. 2nd Ed., New York: McGraw-Hill Book Co., 1959. Leonard, William P. , The Managem.ent Audit: An Appraisal of Management Methods and Performance ^ Englewood Cliffs, New Jersey: Prentice-Hall, Inc., 1962. Lev, Baruch, Accounting and Information Theory^ Evanston, Illinois: American Accounting Association, 1969. Levitas, G. B. (Ed.), The World of Psychology ^ 2 Vols., New York: George Braziller, 196 3. Lewin, Kurt, Topology of Psychology ^ New York: McGrawHill Book Co. , 1949 . Li, David H, , Accounting /Computer s /Manag ement Information Systems^ New York: McGraw-Hill Book Co., 1968. Likert, Rensis, A'eu Patterns in Manaaement^ New York: McGraw-Hill Book Co., 1961.

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232 Litterer, Joseph A., The Analysis of Organizations, New York: John Wiley and Sons, Inc., 1965. Littleton, A. C, Structure of Accounting Theory, American Accounting Association, 1953. , and Yamey, B. S. (Eds.)., Studies in the History of Accounting , Homewood, Illinois: Richard D. Irwin, Inc., 1956. MacNeal, Kenneth, Truth in Accounting , Philadelphia: University of Pennsylvania Press, 1939. McFarland, Walter B., Concepts for Management Accounting, New York: National Association of Accountants, 196 6. McGregor, Douglas, The Human Side of Enterprise , New York: McGraw-Hill Book Co., 1960. McKinsey, James 0., Managerial Accounting, 2 Vols., New York: Ronlad Press Co., 1924. McRae, T. W. , The Impact of Computers on Accounting, New York: John Wiley and Sons, Inc., 1964. Malcolm, Donald G., and Rowe, Alan J. (Eds.), Management Control Systems, New York: John Wiley and Sons, Inc., 1962. March, James G., and Simon, Herbert A., Organizations, New York: John Wiley and Sons, Inc., 1958. Mattessich, Richard, Accounting and Analytical Methods, Homewood, Illinois: Richard D. Irwin, Inc., 1964. Mautz, R. K., and Sharaf, Hussein A., The Philosophy of Auditing, American Accounting Association, 1961. May, George Oliver, Twenty-Five Years of Accounting Responsibility: 1911-1936, ed. Bishop Carelton Hunt, New York: American Institute Publishing Co., 1936. Moore, Carl L., and Jaedicke, Robert K. , Managerial Accounting, 2nd Ed., Cincinnati, Ohio, South-Western Publishing Co., 1967. Morell, R. W. , Managerial Decision-Making: A Logical Approach, Milwaukee, Wisconsin: Bruce Publishing Co., 1960.

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233 Morris, Charles, Signs^ Language and Behavior, New York: George Braziller, 1955. Morris, William T., Management Science in Action, Eomewood, Illinois: Richard D. Irv;in, Inc., 1963. Mucklow, Walter, Cemetery Accounts, New York: Airierican Institute Publishing Co., 1935. , Land Accounts, New York: American Institute Publishing Co., 1935. , Lumber Accounts, New York: American Institute Publishing Co., 1936. , Real Estate Accounts, New York: Ronald Press Co., 1924. Mullahy, Patrick, Oedipus^ Myth^ and Complex, New York: Hermitage Press, Inc., 194 8. Mundel, Marvin E. , A Conceptual Framework for the Management Sciences, New York: McGraw-Hill Book Co., 1967. Munsterberg, Hugo, Psychology and Industrial Efficiency , Boston: Houghton Mifflin and Co., 1913. Neuner, John J.W., Cost Accounting: Principles and Practice, 3rd Ed., Homev;ood, Illinois: Richard D. Irwin, Inc., 1950. Neuschel, Richard F., Management by System, 2nd Ed., McGraw-Hill Book Co., 1960. Odiorne, George S., Management by Objectives: A System, of Managerial Leadership , New York: Pitman Publishing Corp. , 1965 . Owens, Richard N. , Introduction to Business Policy, Homewood, Illinois: Richard D. Irwin, Inc., 1954. Partridge, Eric, Origins: The Encyclopedia of Words, New York: Macmillan Co., 1959. Paton, William Andrew, Accounting Theory with Special Reference to the Corporate Enterprise , New York: Ronald Press Co., 1922.

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234 Prince, Thomas R. , Extension of the Boundaries of Accounting Theory, Cincinnati, Ohio: South-Western Publishing Co. , 1963 . Rappaport, Alfred (Ed.), Information for Decision Making: Quantitative and Behavioral Dimensions , Englewood Cliffs, New Jersey: Prentice-Hall, Inc., 1970. Ray, J.C. (Ed.), Independent Auditing Standards: A Book of Readings, New York: Holt, Rinehart and Winston, Inc., 1964. Rigby, Paul H. , Conceptual Foundations of Business Research, New York: John Wiley and Sons, Inc., 1965. Roucek, Joseph (Ed.), The Study of Foreign Languages, New York: Philosophical Library, 1968. Roy, Robert H., The Administrative Process, Baltimore: The Johns Hopkins Press, 1958. , and MacNeil, James H., Horizons for a Profession: The Common Body of Knowledge for CPAs, New York: American Institute of Certified Public Accountants, 1967. Sackman, Harold, Computers, Systems Science, and Evolving Society, New York: John Wiley and Sons, Inc., 1967. Schiff, Michael, and Benninger, Lawrence J., Cost Accounting , 2nd Ed., New York: Ronald Press Co., 1963. Schutte, William M. , and Steinberg, Erwin R. , Com^muni cation in Business and Industry, New York: Holt, Rinehart and Winston, Inc., 1960. Scott, .DR, . The Cultural Significance of Accounts , Columbia, Missouri: Lucas Brothers Publishers, undated. Shannon, Claude E., The Mathematical Theory of Communication, Urbana, Illinois: University of Illinois Press, 1949. Silvoso, Joseph A., and Bauer, Royal D.M. , Auditing, 2nd Ed., Cincinnati, Ohio: South-VJes tern Publishing Co., 1965. Simon, Herbert A,, Administrative Behavior , New York: Macmillan Co., 1947.

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235 , The New Science of Decision Making, New York: ^Harper and Brothers, Publishers, 19 60 . , The Shave of Automation fov Men and Management , ^New York: Harper and Row, Publishers, 1965. Smith, Richard L. , Management Through Accounting , Englewood Cliffs, New Jersey: Prentice-Hall, Inc., 1962. Sollenberger, Harold M., Ma^ov Changes Caused hy the Implementation of a Management Information System, Research Monograph^ Number 4, New York: National Association of Accountants, 1968. Sprague, C.E. , The Philosophy of Accounts, 5th Ed., New York: Ronald Press Co., 1922. Stacey, Nicholas A.H., English Accountancy: A Study in Social and Economic History: 1800-1954, London: Gee and Co. , Ltd. , 1954 . Stedry, Andrew C, Budget Control and Cost Behavior, Englewood Cliffs, New Jersey: Prentice-Hall, Inc., 1960. Stettler, Howard F., Systems Based Independent Audits, Englewood Cliffs, New Jersey: Prentice-Hall, Inc., 1967. Stuvel, G., Systems of Social Accounts, Oxford: Clarendon Press, 1965. Sullivan, Harry Stack, Conceptions of Modern Psychiatry, Washington: William Alanson V7hite Psychiatric Foundation, 1947 . , The Interpersonal Theory of Psychiatry , ed. Helen Swick Perry and Mary Ladd Gawel, New York: W. W. Norton and Co., 1953. Summer, Charles E. , Jr., and O'Connell, Jeremiah J., The Managerial Mind, Horaewood, Illinois: Richard D. Irwin; Inc. , 196 4 . Suojanen, Waino W. , The Dynamics of Management , Nev; York: Holt, Rinehart and Winston, Inc., 1966. Taylor, Frederick Winslow, Shop Management , Nev; York: Harper and Brothers, Publishers, 1919.

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236 , The Prinoiples of Scientific Management , New York: ^Harper and Brothers, Publishers, 1942. Tead, Ordway, The Art of Leadership , New York: Whittlesey House, 1935. Terrill, William A., and Patrick, A.W., Cost Accounting for Management , New York: Holt, Rinehart and Winston, Inc., 1965. Terry, George R. , Principles of Management, Homewood, Illinois: Richard D. Irwin, Inc., 1953. Theil, Henri, Economics and Information Theory, Chicago: Rand McNally and North Holland Publishing Co., 1967. Thibaut, John W. , and Kelley, Harold H., The Social Psuchology of Groups, New York: John Wiley and Sons, Inc., 1961. Tiffin, Joseph, Industrial Psychology, 3rd Ed., New York: Prentice-Hall, Inc., 1952. Uniform System of Accounts for Hotels, New York: Hotel Association of Nev; York City, 1933. Vardarr.an, George T. , and Halternman, Carroll C. (Eds.), Managerial Control Through Communication , New York: John Wiley and Sons, Inc., 1968. Vatter, William J., Managerial Accounting , New York: Prentice-Hall, Inc., 1950. Villers, Raymond, Dynamic Management in Industry , Englewood Cliffs, Nev7 Jersey: Prentice-Hall, Inc., 1960. Webster's Seventh New Collegiate Dictionary , Springfield, Massachusetts: G. & C. Merriam Co., 1965. Wiener, Norbert, The Human Use of Human Beings, Boston: Houghton Mifflin Co., 1950. Williams, Thomas H. , and Griffin, Charles H. (Eds.), Management Information: A Quantitative Accent, Homewood, Illinois: Richard D. Irwin, Inc., 1967. Woodworth, R.S., The Dynamics of Behavior, New York: Henry Holt and Co., 1958.

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237 Yamey, B.S., Edey, H.C., and Thompson, Hugh W. (Eds.), Accounting in England and Scotland: 1542-1800 : Double Entry in Exposition and Practice, London: Sweet and Maxwell, 196 3. Yinger, John Milton, Toward a Field Theory of Behavior: Personality and Social Structure , New York: McGrawHill Book Co. , 1965. Articles Ackoff, Russell L., "Management Misinformation Systems," Management Science, Vol. XIV (December, 1967), pp. 147-56. Adams, Howard C. , and Neuschel, Richard F., "Converting Management Reports into Profit Builders," The Controller, Vol. XXIII (April, 1955), pp. 170-74, 19497. Anderson, Richard C, "Learning in Discussions: A Resume of the Authoritarian-Democratic Studies," Harvard Educational ^ Review, Vol. XXIX (June, 1959), pp. 201-15. Archer, Stephen H., "The Structure of Management Decision Theory," Journal of the AcoAemy' of Management ^-'^ol. VII (December, 1964), pp. 269-87. Bavelas, A., "Leadership: Man and Function," Administrative Science (Quarterly, Vol. IV (1960), pp. 491-99. Beaver, William H. , "The Information Content of Annual Earnings Announcements," Empirical Research in Accounting: Selected Studies, 1968 (Supplement to Journal of Accounting Research, Vol. VI), pp. 67-92. Becker, Selwyn W. , and Green, David, Jr., "Budgeting and Employee Behavior," Journal of Business , Vol. XXXV (October, 1962), pp. 393-402. Bedford, Norton M. , and Baladouni, Vahe, "A Communication Theory Approach to Accountancy," Accounting Review, Vol. XXXVII (October, 1962), pp. 650-59. , and Dopuch, Nicholas, "Research Methodology and Accounting Theory — Another Perspective," Accounting Review, Vol. XXXVI (July, 1961), pp. 351-61.

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238 Berne, Eric, "Concerning the Nature of Communication," Psychiatric Quarterly, Vol. XXVII (1953), pp. 185-98. , "The Nature of Intuition," Psychiatric Quarterly , ^Vol. XXIII (1949), pp. 203-26 . Beyer, Robert, "Management Information Systems: Who'll Be in Charge?" Management Accounting , Vol. XLVIII (June, 1967) , pp. 3-8. Birnberg, Jacob G. , and Dopuch, Nicholas, "A Conceptual Approach to the Framework for Disclosure," Journal of Accountancy, Vol. CXV (February, 1963), pp. 56-63. , and Nath, Raghu, "Implications of Behavioral Science for Managerial Accoxanting , " Accounting Review, Vol. XLII (July, 1967), pp. 468-79. Bomeli, Edwin C. , "Management Reviews by Scandinavian Accountants," Journal of Accountancy , Vol. CXVIII (July, 1964) , pp. 33-37. Brehm, J.W., and Lipsher, D., "Communicator-Communicatee Discrepancy and Perceived Communicator Trustv/orthyness , Journal of Personality , Vol. XXVII (1959), pp. 352-61. Brink, Victor Z., "Controller's Management Role," The Countroller, Vol. XXVIII (September, 1960), pp. 403-406, 451. Broder, David S., "Notes on Communicating," University of Chicago Magazine , Vol. LXI (January-February, 1969), pp. 12-14. Browne, Dudley E. , "Today's Challenges to the Controller," The Controller, Vol. XXVIII (June, 1960), pp. 261-64, 266. Bulgarella, R.G., and Archer, E.J., "Concept Identification of Auditory Stimuli as a Function of the Amount of Relevant and Irrelevant Information," Journal of Experimental Psychology , Vol. Ill (1962), pp. 354-57. Caplan, Edwin H. , "Behavioral Assumptions of Managerial . Account ing--Report of a Field Study," Accounting Review, Vol. XLIII (April, 1968), pp. 342-62. , "Some Behavioral Assum.ptions of Manageirient Accounting," Accounting Review, Vol. XLI (July, 1966), pp. 496-509.

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239 Caruth, Donald L., "Hov; Will Total Systems Affect the Corporation?" Journal of Systems Management , Vol. XX (February, 1969), pp. 10-13. Coales, J.F., "Forev/ord," in Models fov Decision, ed. C. M. Berners-Lee, London: English Universities Press, Ltd., 1965, pp. v-vii. Colbert, Bertram A. , "The Management Information System: Pathv/ay to Profit," Price Waterhouse Review, Vol. XII (Spring, 1967), pp. 4-14. Cooper, W.W., "Theory of the Firm: Some Suggestions for Revision," American Economic Review, Vol. XXXIX (December, 1949), pp. 1204-22. Couger, J. Daniel, "Seven Inhibitors to a Successful Management Information System," Systems and Procedures Journal, Vol. XIX (January-February, 1968), pp. 16-18. Davis, Gordon B., "The Auditor and the Computer," Journal of Accountancy , Vol. CXXV (March, 1968), pp. 44-47. Dawes, Irving E., "Profit Planning: The Controller's Part, The Controller, Vol. XXIII (April, 1955), pp. 166-68. Dearden, John, "Can Management Information Be Automated?" Harvard Business Review, Vol. XLII (March-April, 1964) , pp. 128-35. Deutsch, Karl V7. , "Mechanism, Teleology, and Mind," Philos ophy and Phenomenological Research, Vol. XII (December, 1951) , pp. 185-223. , "On CoiTiraunication Models in the Social Sciences," Public Opinion Quarterly, Vol. XVI (Fall, 1952), pp. 356-80. Devine, Carl T., "Accounting — A Behavioral Approach," Indonesian Journal of Accountancy , Vol. I (April, 1962) , pp. 1-17. , "Research Methodology and Accounting Theory Formula tion," Accounting Review, Vol. XXXV (July, 1960), pp. 387-99. Dickey, E.R., and Senensier, N.L., "Tota] Systems Concept, in The Ency olopedia of Manag ement , Vol. II, ed. Carl Heyl, New York: Reinhold Publishing Corp., 1963, pp. 991-95.

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240 Etzioni, Amitai, "Lower Levels of Leadership in Industry," Sociology and Social Research^ Vol. XLIII (JanuaryFebruary, 1959), pp. 209-12. Fertakis, John P., "On Communication, Understanding, and Relevance in Accounting Reporting," Accounting Review^ Vol. XLIV (October, 1969), pp. 680-91. Firrain, Peter A., and Linn, James J., "Information Systems and Managerial Accounting," Accounting Review^ Vol. XLIII (January, 1968), pp. 75-82. Flanagan, John C. , "Leadership Skills: Their Identification, Development, and Evaluation," in Leadership and Inter-personal Behavior^ New York: Holt, Rinehart and VJinston, Inc., 1961, pp. 275-89. Fleishman, Edwin A., Harris, Edwin F., and Burtt, Harold E. , "Leadership and Supervision in Industry: An Evaluation of a Supervisory Training Program," Ohio State University Student Bureau of Education (Resident Monograph) , Vol. XXXIII, 1955. Freeman, E. Stev/art, "Measuring Sales, Gross Assets, and Invested Capital and Comparing Them to Profits," The Controller^ Vol. XXIII (February, 1955), pp. 59-62, 90-91. French, John R. P., Jr., and Snyder, Richard, "Leadership and Interpersonal Power," in Studies in Social Power, Ann Arbor, Michigan: University of Michigan Press, 1959, pp. 118-49. Gale, J. R. , "Why Management Information Systems Fail," Financial Executive, Vol. XXXVI (August, 1968), pp. 44-48. Garrity, John T. , "Is the Role of the Controller Shrinking?" The Controller, Vol. XXIX (May, 1961), pp. 220-24, 259. Gilmore, Frank T., and Brandenburg, Richard G. , "Anatomy of Corporate Planning," Harvard Business Review, Vol. XL (November-December, 1962), pp. 61-69. Green, David, Jr., "Towards a Theory of Interim Reports," Journal of Accounting Research, Vol. II (Spring, 1964) , pp. 35-49.

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241 Guetzkow, Harold, and Simon, Herbert A., "The Impact of Certain Communication Nets upon Organization and Perform.ance in Task-Oriented Groups," Management Science, Vol. I (April-July, 1955), pp. 259-77. Hamblin, Robert L. , "Leadership and Crises," Sociometry, Vol. XXI (1958), pp. 332-35. Hamilton, Douglas L. , "Changing Role of the Controller," Journal of Accountancy , Vol. CIX (January, 1960) , pp. 51-56. Hemphill, John K. , "Why People Attempt to Lead," in Leadership and Interpersonal Behavior , New York: Holt, Rinehart and VJinston, Inc., 1961, pp. 201-15. Homer, Eugene D. , "A Generalized Model for Analyzing Management Information Systems," Management Science j Vol. VIII (July, 1962), pp. 500-15. Horngren, Charles T. , "Security Analysts and the Price Level," Accounting Review, Vol. XXX (October, 1955), pp. 575-81. , and Sorter, George H. , "'Direct' Costing for External Reporting," Accounting Review, Vol. XXXVI (January, 1961), pp. 84-92. Hurwicz, Leonid, "What Has Happened to the Theory of Games?" American Economic Review, Vol. XLIII (May, 1953) , pp. 398-405. Johnson, Harold L. , "A Behavioral Approach to the Business Enterprise," Southern Economic Journal, Vol. XXVII (July, 1960) , pp. 1-10 . Johnson, Richard A., P^ast, Fremont E. , and Rosenzv/eig, James E. , "Systems Theory and Management," Management Science, Vol. X (January, 1964), pp. 367-84. Leavitt, Harold J., "Some Effects of Certain Conmiunication Patterns on Group Performance," Journal of Abnormal and Social Psychology , Vol. LXVI (January, 1951) , pp. 38-50. Luneski, Chris, "Som.e Aspects of the Meaning of Control," Accounting Review, Vol. XXXIX (July, 1964), pp. 591-97. MacDougall, Malcolm, "Disseminating Information within a Com.pany," Systems and Procedures Journal, Vol. XIX (May-June, 1968), pp. 28-32.

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242 McGuire, Joseph, "The Concept of the Firm," California Management Review, Vol. Ill (Summer, 1961), pp. 6488. McKechnie, A.K. , "Why It Takes More than Hardware to Make an MIS," Systems and Procedures Journal, Vol. XIX (July-August, 1968), pp. 28-30. Maier, N.R.F., Read, W. , and Hooven, John, "Communications Problems in Subordinate-Superior Relations," in Communications in Organizations : Some New Research Findings, Ann Arbor, Michigan: Edwards Brothers, Inc., 1959, pp. 12-24. Manis, M. , "The Interpretation of Opinion Statements as a . Function of Message Ambiguity and Recipient Attitude," Journal of Abnormal and Social Psychology , Vol. LXIII (1961) , pp. 76-81. March, James G., "An Introduction to the Theory of Measurement and Influence," American Political Science Review^ Vol. XLIX (January, 1955) , pp. 431-51. Margolis, J., "The Analysis of the Firm: Rationalism, Conventionalism, and Behaviorism," Journal of Business ^ Vol. XXI (July, 1958), pp. 187-99. Mattessich, Richard, "Mathematical Models in Business Accounting," Accounting Review, Vol. XXXIII (July, 1958), pp. 472-81. Mellinger, G.D., "Interpersonal Trust as a Factor in Communication," Journal of Abnormal and Social Psychology ^ Vol. LII (1956), pp. 394-40S. Mihalasky, John, "Question: What Do Some Executives Have More Of? Answer: Intuition, Maybe," Think, Vol. XXXV (November-December, 1969), pp. 22-28. Miller, Jam.es G., "Information Input Overload," in SelfOrganizing Systems, Ann Arbor, Michigan: University of Michigan Press, 1962, pp. 61-78. Milroy, Neil, "The Disintegration of an Information System," Journal of Accountancy , Vol. CXVI (December, 1963), pp. 63-64. Moravec, A.F., "Advanced EDP Systems — The Total Systems and the Single Information Flow Concepts," in Accounting and the Computer , New York: American Institute of Certified Public Accountants, 1966, pp. 273-86.

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243 Most, Kenneth S., "New Light on Medieval Manorial Accounts," The Accountant , Vol. CLX (January 25, 1969), pp. 11921. Mulder, M. , "Communication Structure, Decision Structure, and Group Perf orm.ance , " Soaiometry , Vol. XXIII (1960), pp. 1-14. Newell, Allen, and Simon, Herbert A., "Computer Simulation of Human Thinking," Science, Vol. CXXXIV (December, 1961) , pp. 2011-17. , and Simon, Herbert A., "Heuristic Problem Solving," Operations Research, Vol. VI (January-February, 1958), pp. 1-10. , Shaw, J.C., and Simon, Herbert A., "Elements of a Theory of Human Problem Solving," Psychological Review, Vol. LXV (August, 1958), pp. 151-66. Patton, Arch, "How Effective in an Executive?" The Controller^ Vol. XXIII (January, 1955), pp. 23-42. Peirce, James L., "The New Image of Controllership , " The Financial Executive, Vol. XXXI (January, 1963), pp. 13-15, 19, 36-37. Pelej, Joseph, "Controller Communication with Top Management," The Controller, Vol. XXVII (April, 1959), pp. 159-61, 202. Prince, Thomas R. , "Information SystemiS for Management Control," Accounting Review, Vol. XXXIX (April, 1964), pp . 4 6 7 7 2 . Rean\, Norman J., "The Need for Compact Management Intelligence," in Management Control Systems, eds. Donald G. Malcolm and Alan J. Rowe , New York: John Wiley and Sons, Inc., 1962, pp. 82-94. Ross, Barbara, "The Accounts of the Stewards of the Talbot Household at Blakemere: An Example of Medieval Accounting Practice," Abacus^ Vol. IV (August, 1968), pp. 51-72. Rothwell, W.S., "Financial Communication: What, Why, Hov;, and Who?" The Controller , Vol. XXVIII (September, 1960) , pp. 208-10, 432.

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244 Scully, V.W.T., "Translating Financial Data for Nonfinancial Executives," The Controller , Vol. XXIX (September, 1961), pp. 442-44. Seed, Allen H. , "The Rational Abuse of Accounting Information," Management Accounting , Vol. LI (January, 1970) , pp. 9-11. Sexton, R. , "The Communication Clinic Approach: A Proposed Solution to the Business Communication Problem," Journal of General Psychology , Vol. LX (1959), pp. 58-62. , and Straudt, V., "Business Communications: A Sur^vey of the Literature," Journal of Social Psychology , Vol. L (1959) , pp. 101-18. Shay, Philip V7. , "Management Audit," in The Encyclopedia of Management , Vol. I, ed. Carl Heyl, New York: Reinhold Publishing Corporation, 1963, pp. 461-66. Simon, Herbert A., "The Corporation: Will It Be Managed by Machines?" in Management and the Corporation: 1985, eds. Melvin Anshen and George L. Bach, New York: McGraw-Hill Book Co., 1960, pp. 17-55. Simone, Albert J., "A New Organization for Bridging the Communications Gap with and within the Decision Sciences," Collegiate News and View, Vol. XXII (May, 1969) , pp. 5-6. Simpson, R.L. , "Vertical and Horizontal Communication in Formal Organization/" Administrative Science Quarterly, Vol. IV (1959), pp. 158-96. Smiddy, Harold F., and Naum, Lionel, "Evolution of a •Science of Managing' in America," Management Science^ Vol. I (October, 1954), pp. 1-31. Sollenberger, Harold M. , "Management Information Systems in the Real World," Management Services , Vol. VI (November-December, 1969), pp. 30-37. Sorter, George H. , "An 'Events' Approach to Basic Accounting Theory," Accounting Review, Vol. XLIV (January, 1969) , pp. 12-19. Spacek, Leonard, "The Need for an Accounting Court," Accounting Review, Vol. XXXIII (July, 1958), pp. 368-79.

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245 Spencer, S.A., "The Dark at the Top of the Stairs," Management Review, Vol. LI (July, 1962), pp. 4-12. Stevens, S.S., "Introduction: A Definition of Communication," Jouimal of the Acoustical Society of America, Vol. XXII (November, 1950), pp. 689-90. , "On The Theory of Scales in Measurement," Soienoej ^Vol. cm (January-February, 1946), pp. Stone, Marvin L. , "Problems in Search of Solutions through Research," Empirical Research in Accounting : Selected Studies, 1968 Supplement to Journal of Accounting Research, Vol. VI, pp. 59-65. Stone, Williard, E. , "Antecedents of the Accounting Profession," Accounting Review, Vol. XLIV (April, 1969), pp. 284-91. Strauss, James H., "The Entrepreneur: The Firm," Journal of Political Economy, Vol. LII (June, 1944), pp. 11227. Sutherland, Malcolm S., "Internal Reports to Management," The Controller , Vol. XXIII (April, 1955), pp. 175-77. Tannenbaum, Robert, "Managerial Decision-Making," Journal of Business, Vol. XXIII (January, 1950), pp. 22-39. Triandis, H.C., "Categories of Thought in Communication and Job Satisfaction in Industry,", in Communications in Organizations : Some New Research Findings , Ann Arbor', Michigan: Edwards Brothers, Inc., 1959, pp. 335-44. von Bertalanffy, Ludwig, "General Systems Theory: A New Approach to the Unity of Science," Human Biology, Vol. XXXVIII (December, 1951), pp. 303-361. "What's in a Name?" Journal of Accountancy , Vol. CIII (June, 1957) , p. 30 . Wilson, Charles Z., and Alexis, Marcus, ''Basic Frameworks for Decisions," Journal of the Academy of Management, Vol. V (August, 1962), pp. 150-64. VVinthrop, Henry, "Insights into the Nature of Meaning and the Symbolizing Function of the Human Mind," in The Study of Foreign Languages , ed. Joseph S. Roucek, New York: Philosophical Library, 1968, pp. 71-82.

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246 Woodhead, Harry, "Giving Budgeting Appeal to the Foreman." The Controller, Vol. XXIII (July, 1955), pp. 326-28. Woods, Richard S., "Some Dimensions of Integrated Systems," Accounting Review, Vol. XXXIX (July, 1964), pp. 598614. Wrapp, H. Edward, "Good Managers Don't Make Policy Decisions," University of Chicago Magazine, Vol. LX (October, 1967), pp. 15-16. Zajonc, R. , and Burnstein, E., "The Cognitive Fate of Messages," in Communication in Organizations: Some New Research Findings, Ann Arbor, Michigan: Edwards Brothers, Inc., 1959, pp. 5-1]. Ziller, Robert C, "Leader Acceptance of Responsibility for Group Action Under Conditions of Uncertainty and Risk," Journal of Psychology , Vol. XXIV (January, 1959), pp. 57-66. Other Publications 1957 Amiual Report of the Oliver Corporation , Nev; York: Oliver Corporation, 1957. Higgins, John A., "Responsibility Accounting," Chicago: Arthur Andersen and Co., Certified Public Accountants, Subject File 801, Item 3. "Reporting the Results of Operations," Opinions of the Accounting Principles Board, Number 9, December, 1966. Westinghouss 1969 Annual Report, Pittsburgh, Pennsylvania: Westinghouse Electric Corporation, 1969. Unpublished Bhada, Yezdi , Some Implications of the Experience Factor for Managerial Accounting , unpublished Ph.D. dissertation. University of Florida, 1968. Davidson, H. Justin and Trueblood, Robert M. , "Accounting for Decision Making," unpublished mimeo, 1961.

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247 Fiedler, Fred, "Leadership and Organizational Behavior," Paper presented to the College of Business Administration Lecture Series, University of Florida, Gainesville, Florida, December 4, 1969. Fox, William McNair, "A Dynamic Two-Stage, Open-Ended Systems Model of Behavior," Paper presented before the Annual American Meetings of the Institute of Management Sciences, Atlanta, Georgia, October 2, 1969 Herbert, Leo, "Audits of Management Performance — A Conceptual Framework for Training," unpublished Training Manual, U. S. General Accounting Office, Washington, D.C. , 57 pp. Karlin, Arthur D., "Thoughts on a Systems Concept," Paper presented before the Southeastern Regional Meeting of the American Accounting Association, Chattanooga, Tennessee, April 30, 1966. Sorter, George H., The Boundaries of the Accounting Universe, unpublished Ph.D. dissertation. University of Chicago, 1964. Staats, Elmer B. , "Management Information Needs in an Era of Change," Paper presented before the Annual Meeting of the National Association of Accountants, New Orleans, Louisiana, June 17, 1968. Stone, Marvin L., "Communications, Forecasting, and Histori cal Costs," Paper read before the annual Meeting of the American Accounting Association, San Diego, California, August 27, 1968.

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BIOGRi^.PHICAL SKETCH William Thomas Stevens was born on August 24, 1927/ in Santa Cruz, California, the only child of Albert E. and Lucy E. Stevens. On graduation from Santa Cruz High School in 1945, he entered the U. S. Array and served until 1947. Following discharge from the armed forces, he was a free-lance writer until he entered business in 1952. From 1952 to 1957, he was the assistant manager of a chain of retail furniture stores responsible for internal operations. He served as Western Division Manager for a dairy equipment manufacturer from 19 5 8 to 196 0, when he formally entered the field of accounting and management as an auditor for the State of California. In 1962, he entered the accelerated graduate accounting program at the University of Chicago, graduating with a M. B. A. degree in 1964. He was a supervisory auditor for the U. S. General Accounting Office from 19 6 4 to 1966, and taught accounting at the University of Florida from 1966 to 1970 while working on his doctorate in accounting. He is nov; Associate Professor of Accounting at Sacramento State College. He and the former Clare Carlisle Coldwell were married in 1957, and are the parents of tv;in daughters born in 1966. 248

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This dissertation was prepared under the direction of the chairman of the candidate's supervisory conunittee and has been approved by all members of that committee. It was submitted to the Dean of the College of Business Administration and to the Graduate Council, and was approved as partial fulfillment of the requirements for the degree of Doctor of Philosophy. Dean, Graduate School Supervisory Committee: