Managerial and Social Implications
Chapter 5: Managerial control, auditing, and accountability
In 1978, Pfeffer and Salancik published their influential The External Control of Organizations, a treatise wherein they elaborated on the idea that all organizations are bound up with its environment and need to effectively manage these external relations to thrive and survive. Then again, organizations cannot effectively respond to all impulses and stimuli from the outside but must rather, as Daft and Weick (1984) put it, enact their own environment, that is, determine what environmental factors to recognize and respond to. As part of this external control of the corporation, Pfeffer and Salancik (1978) introduced the concept of external standards, meaning the performance parameters being used to evaluate the organization’s performance that are commonly established outside of the firm. Say Pfeffer and Salancik (1978): The most important aspects of [external standards] is that the acceptability of the organization and its activities is ultimately judged by those outside the organization . . . This does not imply that the organization is at the mercy of outsiders. The organization can and do manipulate, influence and create acceptability for itself and its activities. (Pfeffer and Salancik, 1978: 11). Albeit being written in the decade of great economic turbulence and at the very threshold of the new regime of financialization beginning in the 1980s, Pfeffer and Salancik (1978) here anticipate what Michael Power (1996) would refer to as the audit explosion, the sharp growth in auditing practices in the new regime of managerial control.
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