What Knowledge is Useful? > Companies and Functions
Elusive but influential
The following excerpts are from a longer paper by Stephen A. Zeff, “The Contribution of the Harvard Business School to Management Control, 1908-1980,” presented at the history colloquium on April 17-18, 2008, in conjunction with the HBS centennial celebration. The full paper is forthcoming in Vol. 20 (2008) of the Journal of Management Accounting Research.
Beginning in 1937-38, following Professor Ross G. Walker’s return in 1935 from a five-year assignment as treasurer of a woolen mill, three of the course offerings in accounting reflected a major shift in focus, and Walker himself seems to have been the driving force. First, the description for the Accounting Principles course, with Walker a member of the teaching team, said, “The purpose of this course is to develop a capacity to use accounting materials and accounting reasoning in the solution of business problems. Accounting is treated not as a separate subject, but as an integral part of business administration.”
Then, in the second half of 1938-39, Walker debuted his “experimental” research course, Aspects of Budgetary Control. “In this course,” the catalogue reads, “budgetary control is interpreted as a formal technique of coordinating factors of operations with expected business activity. The following three aspects of the subject are considered: (1) budgetary organization and general procedure; (2) definition and control of operating expenditures; (3) integration of the various curves of operating costs with the problem of effective managerial selection of product and price….The emphasis throughout is upon the managerial need for basic data as to costs that are not only dependable, but have been digested to the point where all that remains is the determination of policy.”
Walker was hardly the first accounting academic to focus on budgetary control. In 1922, James O. McKinsey, at the University of Chicago, published a 474-page textbook, Budgetary Control, with The Ronald Press Company. But Walker went well beyond McKinsey in carrying the budget into a plan of action.
One of Walker’s students in the Aspects of Budgetary Control course was Robert S. McNamara (MBA ’39), who later said that Walker’s course had a “tremendous influence on my behavior” as President of Ford Motor Company and as Secretary of Defense. Robert N. Anthony recounted a conversation with McNamara in the 1950s, when the latter was at Ford: “Bob described the [control] system he had installed in Ford, and I congratulated him on it. He replied, ‘Thanks, but you know full well that this system is based on what we both learned from Ross Walker.’”
Walker offered the course one more time, in the second half of 1939-40, when Robert Anthony (MBA ’40) was a student. Anthony has traced his interest in management control to Walker’s course, following which Walker invited him to remain at the Business School after graduation and become his research assistant. In 1989, Anthony recalled the Walker of 1940: “Ross Walker’s lectures contained the main ingredients of today’s [Control] course—an emphasis on management uses of information and on behavioral considerations in the management control function.” Anthony accepted Walker’s invitation, and he and McNamara (following an unsatisfactory stint at Price, Waterhouse & Co. in San Francisco) shared an office and taught courses in accounting at the Business School in 1940-42.
During the second half of both 1940-41 and 1941-42, Walker was scheduled to teach Budgetary Control again, with the following course description (in part): “In this course industrial budgeting is interpreted as comprising the policies and techniques of formal managerial planning and coordination. The instruction emphasizes the practical integration of operating factors looking toward the maximum effectiveness of management in making the business enterprise a profitable undertaking. Managerial policies are thus seen in terms of concrete expectations, as projected in definitely planned results for the business as a whole. A serious effort is made to give adequate attention to the questions of administrative psychology which are connected with budgetary planning under practical working conditions….Accounting costs are, of course, seen as a special case in the broad area of managerial costing. An important teaching point is the need of the businessman for basic data as to costs and revenues, which are not only dependable guides as to the proper choice of managerial alternatives, but which require no further development or interpretative restatement in order to serve as a basis for administrative action.”
Finally, in the first half of 1940-41, Walker completed his redesign of the accounting offerings. Together with Professor W. Arnold Hosmer and Assistant Professor Thomas H. Carroll, he launched a course entitled Administrative Accounting, which, the catalogue reported, “looks at the reporting problem from the point of view of the controllership function in management, in which function the emphasis is upon the specific administrative purpose to which accounting data may be addressed, as contrasted with the characteristic general-purpose objectives of conventional accounting. Thus the problem materials of the course deal with the accounting prerequisites to particular executive action in business administration.”
Walker’s elective courses clearly placed emphasis on supplying accounting information for the purpose of the taking of executive action on planning and control decisions. With respect to the term “control,” Walker wrote, “Always when I use the word control, I am not thinking solely of the negative aspect of placing a limit on action, but also of its affirmative sense of assuring an adequate supply of the means of successful operation.” Walker, although unquestionably an influential figure in the Business School, was little known to academics outside the School. He wrote no books and few articles in his long career. Perhaps his most important article-length work, in 1938, did not appear in a journal but instead in a little-noticed collection of writings by Business School faculty and published by Harvard University Press. In the essay, he explained how “time and aggressive experimentation” had brought “the principle of pre-costing operating expenditures to its practical conclusion as a technique of control.” He added, pointedly, that “this principle is to be credited with much that has been done to free the executive from his old dependence upon the rigid cost data of conventional accounting, the essential objective of which is always a broad stewardship and not analysis of alternative courses of action.”