This book aims to examine the relationship of management and management accounting with uncertainty and to clarify the changing forms that management and management accounting have taken as different types and situations of uncertainty arise. This chapter begins by sketching the basic contents of the book and the fundamental concepts on which they are based. The overview in this chapter is done through the lens of the leading theories of business and management at the beginning of the twentieth century; other chapters go into additional detail about the specific phases in management accounting that emerged in this conceptual framework.

In a capitalist society, management and management accounting have mainly been considered either methods for business enterprises to create and capture profits or merely calculation techniques that are not inherently linked with capitalism or profit creation . Although the social and technical aspects of these two views of management and management accounting are connected in a practical business enterprise, it is still important for theoretical research to ask whether management and management accounting fundamentally contribute to making a profitable business, or whether they are simply a general technique used by any organization rather than a fundamental characteristic of a profitable business. To start, we should first clarify the essential characteristics of management and management accounting, as well as their relation to social problems. This may not be such a simple task, given that management and bookkeeping as a basis of accounting existed before the formation of capitalist society; scientific management, modern accounting, and management accounting developed as the development of the capitalist economy; and now management and management accounting are also used in socialist or state-controlled economies. Further, in capitalist economies they are closely linked with social problems such as risk management, supply chain management, and product life cycle costing. The key to understanding the essential characteristics of management accounting may be to look back over the basic theories of business enterprise and entrepreneurship from the beginning of the twentieth century when management accounting was established. This allows us to examine the relationship of management and management accounting with uncertainty, because uncertainty, which consists of unforeseeable events and foreseeable events to a certain extent in decision-making process, has exerted critical influence on the situations in which they are used and how their uses have changed over the years.

Unlike other animals, humans intentionally choose when and how to labor and, as Veblen (1898) indicates clearly, man is “in an eminent sense an intelligent agent” (p. 188) who not only acts in response to environmental stimuli but also mentally makes note of these habits and the propensity of these acts, appreciates their trends, and then puts the environmental forces around him to use in his life. This makes up the most important concept in Veblen’s theory that “workmanship” is a human instinct (see Taka 2005). As long as humans undertake mental and physical work, the behavior of management and accounting also serves as a self-control function for efficiency (Nishimura 2003). Even before the advent of scientific management, workers demonstrated self-control and self-responsibility, that is, they planned work procedures and controlled their processes to achieve the desired goals. This self-control function was present in humans even with no formal supervision or wage system (Taylor 1911, p. 16). However, as the scientific management system developed historically, what was previously self-controlled has been divided into the work of labor and the work of planning and control, namely labor and management. Moreover, accounting also developed simultaneously to keep up with this evolution in management functions. Personal memory and basic record-keeping were replaced with accounting systems for measurement and evaluation. Even though it took different forms in each age, management accounting also originated from these accounting functions.

At the beginning of the twentieth century, Taylor systemized the principles of scientific management, which replaced the rules of thumb and self-taught methods previously used by workers. According to these principles, workers could be more efficient by working in cooperation with managers who planned for and controlled the work process. At the same time, standard costs were developed based on the exact amount of time of a task required and workers could accomplish their tasks efficiently and earn wages proportionate to their efficiency. Moreover, this also laid the foundation for the management accounting system. As management and management accounting are derived from ‘workmanship’, their methods and techniques are primarily human-centered. However, they were actually affected by social situation (labor slowdown and labor disputes), and at present they strongly show their social color. Therefore, there is a further point that needs to be clarified: how and why does such a fundamental characteristic as workmanship connect with contemporary subjects such as risk management, environmental protection, and sustainable growth? For this clarification, in next sections, management and management accounting are first analyzed from the viewpoint of uncertainty related to profit opportunity and enterprise risk (which later leads to profit/loss), and then are connected to the concepts of the entrepreneur and the businessman. Then, the historical development of management and management accounting is examined in terms of uncertainty and the control of uncertainty.