Managing the Future

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The Development of Accounting Thought

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Accounting has a long history. Some scholars claim that writing arose in order to record accounting information. Account records date back to the ancient civilizations of China, Babylonia, Greece, and Egypt. The rulers of these civilizations used accounting to keep track of the cost of labour and materials used in building structures like the great pyramids.

Accounting developed further as a result of the information needs of merchants in the city-states of Italy during the 1400s. In that commercial climate the monk Luca Pacioli, a mathematician and friend of Leonardo da Vinci, published the first known description of double-entry bookkeeping in l494.

The pace of accounting development increased during the Industrial Revolution as the economies of developed countries began to mass-produce goods. Until that time, merchandise had been priced based on managers hunches about cost, but increased competition required merchants to adopt more sophisticated accounting systems.

In the nineteenth century, the growth of corporations, especially those in the railroad and steel industries, spurred the development of accounting. Corporation owners – the stockholders – were no longer necessarily the managers of their business. Managers had to create accounting systems to report to the owners how well their businesses were doing.

The role of government has led to still more accounting developments. When the federal government started the income tax, accounting supplied the concept of “income”. Also, government at all levels has assumed expanded roles in health, education, labour, and economic planning. To ensure that the information that it uses to make decisions is reliable, the government has required strict accountability in the business community.

What does it mean “managing the future”? It means paying attention to the past, to the present, and to pastand current patterns of change in the world around you. In managing thefuture, understanding and initiating action are top priorities Constant innovation and improvement are valuable action steps. Relying solely on the past is neither possible nor good business. Using a past orientation results in missing opportunities and not keeping up with changes in today’s emphasis on the customer. The past-oriented manager wants to attract and retain customers, but focuses on other parts of the business: the accounting system, tax laws, the source and flow of available raw materials.

One future-oriented company that respects and has learned from the past and appreciates its founder is McDonald’s. This fast food firm knows that the past can’t be repeated. This firm is in constant search of innovations to remain competitive to build on its past reputation, and to improve its position in holding off more and more competitors. McDonald’s innovations include the Big Mac, the Egg McMuffin, etc.

McDonald’s keeps innovating and improving and learns from the past because it can’t afford to be lazy and nonresponsive. The competition is too fierce and opportunistic. The firm responds to its changing external and internal environmentwith new products, environmentally friendly wasteproducts, improved service and better ways of doing business.

Whether McDonalds Corporation founder Ray Kroc ever studied or considered the historical roots of management isn’t known. However by reviewing Kroc’s style and strategies we get the impression that, he used the past as a way of learning how to manage his and McDonald’s future.

Kroc was an innovator whofavoured taking action to stay ahead of the competition. The firm’s history clearly shows that hisinsistence on quality has become a part of McDonald’s internal cultural fabric.

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