The Search for Standard Costing in the United States and Britain

Overview

Two academics of significant stature in late 1946 set the stage for subsequent developments. J. H. Jackson (1947, p. 1208), dean of Stanford's business school, wrote of cost control as ‘the outstanding item of progress or growth in cost accounting during the last quarter century. Generally, the growth in the use of cost accounting for control purposes is intricately related to the progress and development that has taken place in standard costing.’ Like so many later observers, the dean did not distinguish theory and practice. T. Lang (1947, p. 1389), an accounting professor at New York University, focused on the new face of cost accountancy when he noted:

The Extent of Standard Costing

The sheer magnitude of articles in the N.A.C.A. Bulletin between 1946 and 1952 attests to the substantial escalation of standard costing in practice. Anecdotal stories of individual adoptions of the method ran a wide gamut of industries, limited only by the fact that the overwhelming majority were mechanized enterprises of substantial size. Most of these articles concentrated entirely on the standard costing method of a single firm, but K. E. Linnenkohl (1949, p. 725) of the New Era Milling Co. broadened his perspective to include the whole flour-milling industry: ‘Many of the most successful mills in the country have, therefore, adopted various forms of budgets and budgetary control using the standard costing method’. A. W. Acker of American Greetings (1949, p. 1406) admitted that his was only one company, but went on to suggest that there are an ever-increasing number that make use of standard costs in connection with a job-costing system. There was even a review (N.A.C.A. Bulletin, 1947b) of an article by A. R. Kassandar entitled ‘Types of Industries to Which Standard Costs are Applicable—and Why’. Standard costing was further embraced by municipal government as evidenced by A. W. Sykes’ (1951) article on Norfolk, where a labour standard for the street-cleaning function had been introduced that featured a measurement called the ‘curb-mile’.

Another measure of the extent of standard costing prominence in the Bulletin is provided by an analysis of a topical index supplement that appeared in Volume 30, Number 18, covering 1 May 1946 to 15 April 1949. Commencing with Volume 31 (1949–50), each had its own topical index. Table 1 shows the frequency with which topics pertinent to this study and others for comparative purposes appeared over the course of the eight years under analysis here.

Perhaps the most telling phenomenon revealed in these data is the way in which ‘hot topics’ appeared to ebb and flow with the times. It is evident that standard costing had cooled by late 1951, replaced by direct costing, whereas other topics were more consistently represented in the Bulletin. The data also confirm our assumption about the pattern of standard costing, that it came into prominence in the immediate aftermath of World War II and that after a few years and numerous adoptions, it was well enough known to be considered ‘old hat’.

Standard Costing Debates

As fruitful for the current discussion are those topics that featured disagreements amongst contributors to the Bulletin. A topic that inspired a number of letters to the editor was the interface between past performance and the setting of standards to measure current performance. A. Golub (1947, p. 769), responding to the article by Bergstrom (1947), argued that past performance should never be used as a standard. This position is moderated in an article by C. B. Nickerson (1948, pp. 1400, 1408), a Harvard professor, who wrote: ‘Despite many articles on the importance of establishing scientific standards and the dangers of relying on past experience in setting them, the past experience rightly plays an important part’, what the author called ‘the human aspect of cost control’. The discussion applied more frequently to the relationship between standard and actual cost. S. B. Pfahl (1947, p. 1168) observed to the editor that ‘the education of management toward appreciation of the merit of standard costs has come a long way during recent years but current indications are that too many still stick to “actuals” ’. J. H. Elliott and W. P. Marquis (1949, p. 528) of Carnegie Steel, an enterprise identified by Chandler (1977) as one of the slower industrial giants in its adoption of new accounting methodology, seconded this opinion, confessing to the ‘vast superiority’ of standard costing to actual as formerly done at Carnegie. However, words of caution were forthcoming from C. D. Cole (1948, p. 1311) who wrote in a letter to the editor that standard costs were not realistic in terms of their variation from actuals. He suggested that 25 per cent for labour variances and 10 per cent for material variances were not unusual. Unfortunately, there was no empirical evidence provided to support this contention.

Another issue of some discussion was the expense associated with a standard costing system and whether or not small companies could bear those costs. The CR definitely thought that standard costing was appropriate for smaller concerns, as will be subsequently discussed. This theme was a central focus of the article by G. C. Lyon (1946, p. 1131) of the Limerick Yarn Mills who observed that, ‘while it is true that the original standard cost methods were developed in and for the highly mechanized and automatic machine industries, it is equally true that the use of standard costs or the standard cost method can be adapted to fit the needs of almost any industrial accounting system’. C. W. Bennett (1948), a professional accountant and past president of the NACA, wrote a very lengthy article in which he attempted to convince small business, defined as fifty employees or fewer, on the benefits of a standard costing and variance analysis system. It will also be recalled that the Seattle Chapter to Promote Cost Accounting (1948) had urged that there were no essential differences between setting standards for large and small companies but for the expense of time-and-motion studies. W. E. Westerdahl (1951), identified as a public cost accountant, proclaimed that even small companies could do well by having a standard costing system and budgetary control. C. P. Taylor (1951, p. 801), a Tulane accounting professor, attempted to allay fears by suggesting that standard costing need not be either difficult to understand or costly to implement for a small or a large business. He argued that the operating cost of standard costing would be lower than any other method by which costing information is generated.

It should be noted that this issue was not unequivocal in the estimation of other commentators. A. J. Penz (1951), an accounting professor, suggested a number of queries that firms should ask themselves to determine if they were of sufficient size for a standard costing system. Two chemical industry representatives, F. J. Carr (1947) and W. W. Neikirk (1948), also urged caution. Virtually the entire negative position was couched in terms of cost considerations.

Additional Standard Costing Topics

An important question to be raised is, when did the firms whose standard costing stories are narrated in NACA literature introduce their systems? J. D. Duskin (1947, p. 144) of the Columbus Manufacturing Company, a cotton textile firm, set the options: ‘Today, more than ever before, many mills are introducing for the first time a program of cost and standards control or augmenting one already started’. However, the observation of J. F. Mickelson (1947, p. 445) of the International Silver Company serves to indicate that the point of origin is not necessarily the only factor in resolving the schism:

Thus, it would appear that both the quantity and quality of the standard costing adoptions should be considered in the determination of whether or not theory was still running far ahead of practice in the aftermath of World War II. Most of the adoptions that are discussed in Bulletin articles were of recent vintage. Such was the case at Stockham Pipe Fittings (Noble, 1947) and at Calumet & Hecla Consolidated Copper Company (Jack, 1948). Sperry Corporation, which did not utilize standard costing either before or during the war (Fleischman and Marquette, 2003), had adopted it by 1950.

Another topic that received consideration in the literature was the frequency with which standards should be revised. The CR's project, to be discussed subsequently, was very concerned with this issue. A. H. Pellenz (1947, p. 361) in a letter to the editor, voiced the opinion that this was a major standard costing discontinuity with the past: ‘Meanwhile, there is only one avenue open and that is to revise standard costs at more frequent intervals than in the past in order to keep pace with the level of prices’. Mickelson (1947, p. 454; see also, Shortness, 1951, probably the most sophisticated article on standards revision during this period) similarly distinguished those standards that needed more frequent revision:

A matter of some consequence was the opinion on standard cost reliability voiced by practising CPAs. D. M. Russell (1948, pp. 1543–4) of Lybrand, Ross Brothers, and Montgomery:

E. A. Green (1949) of Armstrong Cork wrote a comprehensive article on the internal audit of standard costs in which he laid out the questions that internal auditors need to ask about the standard system, including fourteen ‘key questions’ as to how the standards were developed.

It will be noted from Table 1 above that an inordinate number of articles involved distribution costs. This area was identified as one that trailed manufacturing in respect to the establishment of cost standards for control (e.g., Nad, 1950). This topic was a particular thrust in the N.A.C.A. Year Books, where no fewer than four major articles decried the shortfall in attention to distribution and marketing standards (Breitenbucher, 1946; Perry, 1946; Smith, 1950; Pugsley, 1951). H. C. Perry (1946, p. 14) stated the common indictment as follows: ‘It is amazing that the accounting profession has, in the face of these facts, been so negligent in providing controls for marketing costs which, in many types of business, are quite as important as production costs’.

Standard Costing Post-1945: The Traditional View of Practice

It has often been suggested that, during the twentieth century, Britain was the poor neighbour compared to the U.S. when it came to costing matters. The introduction of techniques such as standard costing and budgetary control supposedly lagged behind those across the Atlantic. Thus, agreeing with Parker (1969, pp. 11–12), Armstrong (1987, p. 426) has claimed that, ‘although the application of true management accounting methods was clearly beginning during this period [the late 1940s and early 1950s], the trend needs to be kept in perspective: even as late as 1960, it was not easy to find an English company which had a system of standard costing in use’. This view was echoed by Wardell and Weisenfeld (1991, p. 655) who claimed that whereas the use of standard costs, budgets, and performance report variances had become popular in the U.S. before World War II, a comparable widespread use of these techniques in Britain did not occur until the 1970s, ‘if then’.

One explanation for such beliefs was the outpourings of the AACP in the early 1950s. The AACP had been established against a backdrop of a widespread criticism of the British economy, both in terms of its poor rate of economic growth and low level of productivity, which were attributed to the poor quality of British management. While the AACP represented one initiative aimed at improving managerial quality in Britain in the late 1940s, another was government financial support for the establishment of the British Institute of Management in 1947. In the view of Tiratsoo (1997, p. 92), however, the reform initiatives implemented during the late 1940s and 1950s failed to generate any large-scale changes in U.K. management attitudes and practices, thus representing a ‘wasted opportunity’.

The reasons put forward to explain this lost opportunity are manifold, although attention has largely been focused on economic, cultural and political factors (Tiratsoo and Tomlinson, 1993). On the economic front, the need to restore British output to pre-war levels centred the attention of government and businessmen on technical matters and improvement of labour productivity. The general boom conditions that prevailed, together with the tolerance of cartels by government (Broadberry and Crafts, 1996), lessened the competitive pressures on individual managers and the need to adopt new managerial techniques. It was probably not so much a case of British family firms having too short-term a profit outlook, as argued by Chandler (1984), but rather of managers exhibiting a reluctance to change their management style. Certainly the employers’ organization, the Federation of British Industries, resented the criticisms levelled at British management (Jeremy, 1998, p. 444), especially when it came from the U.S. given the anti-American sentiment being expressed at this time just as after World War I (Tiratsoo and Tomlinson, 1997). It has also been suggested that the feather-bedding of confrontational trade unions and an unwillingness of successive British governments to address head-on issues such as over-manning, restrictive practices, etc., all militated against changes in management practices (Broadberry and Crafts, 1996).

Summarizing the findings of the reports of all sixty-six AACP teams which visited the U.S., Hutton (1953, p. 48) concluded: ‘All agreed that American management in general and on average was more effective’. In the accounting arena, the members of the 1950 Management Accounting Team ‘were most impressed by the budgetary control and standard-costing of operations in American firms, and recommended wider adoption of these aids to management in Britain, “to enable it to decentralize responsibility”’ (Hutton, 1953, p. 48). This finding has generally been used by subsequent historians to make the case that Britain's standard costing lagged. However, one of the few other AACP reports to mention costing in any detail, that of the team which visited the U.S. heavy chemical industry in 1952, despite finding ‘the use of standard rather than historical costing was a little more advanced’, nevertheless ‘found that the methods of costing and cost control used in America were those well known in Britain’ (Cost Accountant, Vol. 31, No. 9, 1953, p. 288). This echoed the comments from other reports in which very little new was found in terms of costing.

When the successor body to the U.K. section of the AACP, the British Productivity Council, sponsored ‘reverse-flow’ teams (U.S. visits to Britain), further limitations of British practice were identified. The report of the first such team, looking at cotton textiles, drew attention to the ‘lack of widespread use of standard costs’ (Cost Accountant, Vol. 31, No. 8, 1953, p. 248), while the third team, observing the pressed metal industry, commented that the emphasis of time-and-motion studies in Britain was on the former rather than the latter. It noted that few work simplification studies were undertaken, and there was a general lack of cost consciousness in comparison with the U.S. (Cost Accountant, Vol. 32, No. 1, 1953, p. 3). Such views, however, were not universal, and even the contemporary literature provides evidence of developments taking place, building on those already in place from earlier periods.

Contemporary Evidence: Theoretical Aspects of Standard Costing

In contrast with the situation in the U.S., for reasons which will be examined later, the number of texts and articles related to standard costing in Britain during and after World War II was very much smaller. Nevertheless, there were some important works published during the study period clearly indicating people in Britain who were as knowledgeable of standard costing developments as those in the U.S. Articles in the Cost Accountant, the journal of the Institute of Cost and Work Accountants (ICWA), and in the journals of various accountancy bodies, especially the Institute of Chartered Accountants in England and Wales (ICAEW), were relatively few and far between and tended not to go into the same degree of detail as papers published in the N.A.C.A. Bulletin. However, other publications of the time, including booklets published by the ICWA and the ICAEW and texts produced by individuals, many of whom were ICWA members, show that there was a deep understanding of standard costing and the importance of variances for effecting cost control.

Like the NACA, the ICWA published a number of booklets after 1945, covering topics related to costing and cost control, notably Uniform Cost Accounting and the Principles of Cost Ascertainment (1947), The Presentation of Information to Management (1950a), and An Introduction to Budgetary Control, Standard Costing, Materials Control and Production Control (1950b).² The last named, its purpose to set out ‘a summary of the present knowledge of the members of the Institute’ (ICWA, 1950, p. 6), especially with regard to standard costing and budgetary control, had its origins in 1946/47 when the ICWA's Council assigned the Branch Research Groups the task of examining these matters and reporting back. A draft booklet, based on these reports, was considered at the nineteenth National Cost Conference in May 1948 and subsequently amended prior to official publication. The booklet only extends to fifty-five pages of text, although it also contains twelve appendixes which were designed to ‘illustrate the principles of the operation of Flexible Budgets in conjunction with Standard Costs as described in this book’ (ICWA, 1950). Within the discussion of flexible budgets and standard costing in the text, the attention of the reader was drawn to a number of different variances, including price, volume, revisions, imperfect conditions, methods, and controllable variances (ICWA, 1950b, p. 18). Controllable variances comprised those for direct materials and direct labour, as well as for overhead (burden) expense, with direct materials subdivided into price variance and quantity (volume) variance and direct labour into wage rate and efficiency variances (ICWA, 1950b, pp. 31–2).

Although the ICWA publication did not refer to sales variances, the focus being on production throughout, at least two of the works published at around the same time did. The text of Evans-Hemming (1952, p. viii), fellow of the ICWA (FCWA) and the Royal Economic Society, written for the benefit of ‘Managements, Executives, and Students’, referred to ‘administrative and selling’ variances, while R. Warwick Dobson (1954, Ch. XI), CA, FCWA described variances under three main headings—profit (or loss) variances, cost variances (subdivided into primary cost variances and cost centre variances) and sales variances. Amongst the other types of variances noted by Evans-Hemming (1952), in addition to the standard direct cost variances for labour and materials, we find reference to calendar, period, price, rates of pay, revisions and volume variances. Warwick Dobson's (1954, Vol. 1, pp. 214–16) work not only lists and discusses variances such as calendar, efficiency, methods, and yield, but also mentions, sometimes only very briefly (one or two sentences), the factors that influence such variances. Thus, while discussing volume variance in relation to overhead variances within cost centre variances, he notes the following factors as being potential causes of such variance—variation in demand, excess capacity, absence of work, absence of instructions, absence of employees, absence of tools, absence of materials, and breakdown of machinery.

It is clear, therefore, that there were texts produced in Britain in the early 1950s which recognized issues which, as we have seen, were being discussed within the U.S. journal literature. Many of these reflected not simply theoretical discussions but examples describing practices at individual American firms. To what degree were these reflected in practice within British firms at this time?

Post-1945 Contemporary Evidence: Standard Costing in Practice

In contrast to the negative view of British practice propounded by later observers such as Armstrong (1987) and Wardell and Weisenfeld (1991), a detailed review of the contemporary literature of the 1940s and early 1950s reveals mixed opinions within Britain regarding the state of costing and cost consciousness. The ICWA booklet (ICWA, 1950), representing a survey of members’ knowledge, clearly showed positive signs of cost consciousness, despite some negative comments made at the time. Towards the end of the war, for example, F. Bradshaw Makin (1944, p. 17), a fellow of both the Chartered Institute of Secretaries and the Royal Economic Society, commented that it was ‘surprising to find how little is really known about cost allocation in many of the [country's] smaller or medium sized concerns’. The lack of inclusion of large firms in this condemnation presumably implies that such firms knew about cost allocation. Two years later, N. G. Lancaster (1946, p. 312), CA, in a paper on the issues of costing from the managerial perspective, reported he was surprised to learn that many of the firms that government accountants had visited during the war had no costing system at all. Makin's paper stimulated much correspondence over the succeeding months in The Accountant, the organ of the ICAEW, as to the state of cost consciousness and who might be responsible for any lack thereof. ‘E.N.H.’ (The Accountant, 29 July 1944, p. 62) blamed the directors and managers, who needed to be educated ‘to understand the necessity for skilled costing’, while C. Gee (The Accountant, 26 August 1944, p. 105) responded that it was the chartered accountants who needed to be so educated. ‘A.H.F.’ (The Accountant, 9 September 1944, p. 134) concurred, arguing that, ‘In modern industry, it will be found that directors and managers are in the main cost conscious, but many professional accountants and auditors are sadly lacking this state’.

Evidence of a growing cost consciousness and a concern with cost control was suggested in a report published by the cost accounting subcommittee of the ICAEW's Taxation and Financial Relations Committee in 1947, in which it was noted that ‘standard costing has found considerable favour in management circles in this country . . . [being] employed . . . in a wide variety of different industries, ranging from the manufacture of cosmetics to locomotives’ (ICAEW, 1947, p. 43). Such usage was confirmed by Evans-Hemming (1952, p. v) who, in the preface to his text on the subject, observed that he had introduced flexible budgetary control and standard costs into firms operating in:

Contemporary evidence from journal literature also supports the view of a growing usage of standard costing in Britain in the 1940s and early 1950s. During World War II, the fourth report of the Select Committee on National Expenditure stressed that cost investigations should be designed to secure maximum efficiency in production rather than simply aimed at saving taxpayers’ money (Cost Accountant, Vol. 20, No. 8, 1941, p. 96). It also urged that far greater stress be placed on ‘technical costing’ (or cost estimation) as opposed to ‘post-costing’ (or cost ascertainment).

A survey of the Cost Accountant for the period June 1950 to May 1956 reveals evidence of the use of standard costing amongst a wide spread of British firms spanning a number of industrial sectors (Boyns, 1998, pp. 60–2).³ H. M. Broadly, FCWA, FTI, referred to the extension of ‘standard cost accounting’ in the cotton spinning industry, noting that the system of cotton licenses and allocations in existence meant that spinners were ‘being forced to budget ahead’. He urged his listeners to put in standard costs without delay (Cost Accountant, Vol. 29, No. 9, 1951, p. 312). In the machine tool sector, C. Narbett, FCWA, the cost accountant of A. C. Wickham Ltd., noted his firm's use of standard costing methods (Cost Accountant, Vol. 29, No. 11, 1951, p. 378). The use of standard costing, however, was not just confined to manufacturing businesses. A report from the Joint Committee of the ICWA and the Institute of Municipal Treasurers and Accountants revealed the use of standard costing in a large gas board, part of the nationalized gas industry (Cost Accountant, Vol. 32, No. 6, 1953, p. 201).

Amongst the nationalized sections of the British economy, the development of the use of standard costing spread most rapidly in the early 1950s in the National Coal Board (NCB), formed in 1947. The NCB first adopted standard costing at a small number of collieries in 1952 (Boyns, 1997, pp. 114–16), something which had been made possible by the establishment of a work study section, or Field Investigation Group (FIG), within the NCB in 1948. Further encouraged by the AACP in 1951, the NCB persevered with its early experiments, subsequently extending the use of standard costs to 753 collieries in 1956, by which time most collieries had their own trained standard cost clerk. In another major industry touched by nationalization in the 1950s, iron and steel, however, standard costing failed to extend beyond a small number of firms prior to the 1960s (Edwards et al., 2002) despite the industry having been in the forefront of costing developments during the nineteenth and early twentieth centuries (Boyns and Edwards, 1997).

As well as indicating the use of standard costing, the short reports on visits to firms by ICWA branch members also reveal an increasing use of variances. G. W. Band (Cost Accountant, Vol. 29, No. 1, 1950, p. 33), CA, for example, referred to the use of standard material costs and departmental labour cost control sheets which recorded standard cost, actual cost, and the variation at a Scottish woollen mill. J. S. Taylor (Cost Accountant, Vol. 29, No. 1, 1950, p. 33), ACWA, referred to the use of standard hours, standard material values, and material cost variances in relation to the production of mother-of-pearl buttons. At his firm, standard marginal costing was used to control costs, with management also receiving a weekly report giving ‘standard marginal cost of sales detailed to product groups’. Nineteen months later, T. Evans (Cost Accountant, Vol. 30, No. 8, 1952, p. 265) of the metal toy manufacturer Mettoy Co. Ltd, describing the system of standard costing and budgetary control employed by the company, referred to the fact that:

It is clear that examples of the use of standard costing in Britain could be found in the early 1950s. This clearly undermines Armstrong's claim that it would have been difficult to find a British firm using a standard costing system in 1960, let alone having to wait until the 1970s as per Wardell and Weisenfeld (1991).

Standard Costing Post-1945: A New Interpretation

It has been shown above that standard costing was alive and well, and indeed developing, in Britain in the 1940s and early 1950s. While there may have been a dearth of major articles indicating the specific use made of this technique in particular businesses within mainstream British accounting literature, it would be incorrect to use this finding as evidence that standard costing was unknown in practice. Evidence of its use is to be found elsewhere, often buried away in the small print.⁴ Moreover, the use of standards and standard costs at previous points in British history suggests our findings for the post-World War II period should come as no surprise. Standard yields were developed for crops and livestock in Britain as early as the thirteenth century (Lamond, 1890, p. 71ff.; Scorgie, 1997) and were used on medieval estates (Noke, 1981; Macve, 1986, p. 240). ‘Trial smeltings’ of copper ore were undertaken at the beginning of the seventeenth century to provide standards for smelting costs (Hammersley, 1988, pp. 122–4), while Jeacle (2005) has shown how early elements of standard costing existed in the eighteenth-century Georgian cabinet-making trade. She has shown how regional versions of pattern books, which comprised easily replicated designs of household furniture, contained detailed standard labour costs for every design, thereby regulating the cabinet-making trade and pre-empting conflict over piece-work pay. Fleischman and Parker (1991) found plentiful evidence of the existence of production and costing standards in firms during the Industrial Revolution, not just at Boulton & Watt (Fleischman et al., 1995). Subsequent use of standards has been observed in relation to the efficiency of coal consumption at the Hafod copper works of Vivian & Sons in 1848 (Edwards and Newell, 1991), while Louis Parsons Merriam developed the use of the ‘standard cost price’ at the plastics manufacturer British Xylonite in the late 1870s/early 1880s (Boyns et al., 2004).

Moving into the twentieth century, the use of standard labour costs before World War I was noted at a factory in the Glasgow district employing 14,000 workers (possibly Singer) (Moran, 1933, p. 165), while Hans Renold Ltd developed the use of standard costing in 1918 and Austin Motors shortly thereafter (Perry-Keene, 1922–23). Between the two world wars, at least fifteen British concerns are definitely known to have utilized standard costing in some shape or form (Boyns and Edwards, 2007, Table 5, p. 1019). While we cannot be sure as to how widespread the use of standards in Britain was after World War II, Goodey (1946, p. 18) wrote, about the engineering industry, that it was ‘common knowledge that manufacturing houses keep material standards of every component and job made in order to compare actual costs for any unusual rise or fall, and at once find the cause’. Given this, one might reasonably ask the question, to what extent, if any, did the use of standard costing in the U.S. exceed that in Britain?

Although this is not a question to which, in our current state of knowledge, we can provide a definitive answer, there is some important evidence from just after World War II which may help shed light on this matter. In Britain, Lancaster (1946) commented that one senior government official estimated that 70 per cent of firms he had visited during the war had no costing system. While prima facie this seems to be a very high proportion, if accurate, it would suggest that a higher percentage of British firms had costing systems in place than was the case in the U.S. at this time. A contemporary assessment of the state of costing across the Atlantic at the end of the war suggests that, of the 187,370 business enterprises covered by the study, only 22 per cent (41,072) were found to keep cost records, with only 40,856 enterprises using a recognizable cost system (Black and Eversole, 1946). The existence of cost systems was also shown to vary greatly between industrial sectors, with older industries, such as textiles and malt beverages, and those heavily populated by large firms, such as steel, sugar, soap, and paper, exhibiting figures of 80 per cent or higher, while industries such as meat, ‘canned and frozen fruits and vegetables’, aluminum castings, copper base castings, lumber, and shoe manufacture showed figures of 10 per cent or less (N.A.C.A. Bulletin, Vol. 28, No. 8, 1946, pp. 517–19).

On the face of this evidence, therefore, a higher proportion of British firms (30 per cent compared to 22 per cent) may have been using cost systems than was the case in the U.S., contrary to the normally accepted view that British firms lagged behind their American counterparts. Other evidence revealed by the American study indicates that standard cost systems were to be found in 4,050 enterprises; that is, 9.91 per cent of the 40,856 businesses using a recognizable cost system or 2.16 per cent of the total number of enterprises covered by the study (Black and Eversole, 1946). Unfortunately, the number of firms using standard cost systems in Britain at this time is not known, but with its much smaller total number of businesses, its generally much smaller average business size, and fewer large firms, it seems probable that it was fewer than the 4,050 found in the U.S., but we simply do not know if this was the case and, if so, by how much. However, as we have seen, there is evidence, both archival and buried within the literature, of an increasing use of standard costing within British firms over time, commencing with the end of World War I (rather than World War II). According to C. A. Wilkes (1954, p. 301), the development of standard costs, described as ‘a milestone on the road to management accountancy’, had occurred during the interwar years in Britain.

If the use of costing systems was greater in Britain than in the U.S. immediately after World War II, there is a distinct possibility that the use of standard costing in Britain, both before and after the war, was not as markedly below that in the U.S. as has previously been assumed to have been the case. Such a finding raises two important issues for accounting historians. First, why did earlier historians come to accept and support the conventional wisdom that few, if any, firms used standard costing in Britain? Second, it raises profound issues about the efficacy and relevance of much past research which has focused on explaining the supposed lag in the implementation of standard costing in Britain compared with America.

Understanding Previous Historians’ Acceptance of a British Lag

There are a number of possible explanations for the emergence of the view that Britain lagged behind the U.S. in adopting standard costing. However, to comprehend this fully, it is necessary to understand the context in which this view emerged, in particular the developing argument that Britain's economic performance declined in the twentieth century. Booth (2001) has suggested that, during the 1960s and 1970s, many British historians came to accept the idea of the ‘British disease’, a concept which entered into the national psyche as part of an ‘ideology of declinism’ (Tomlinson, 1996). While most economic historians have ‘insisted that “decline” should be prefaced by the word “relative”’, Booth (p. 6) believes that the concept of the British disease was ‘always an absurd idea’ and that evidence of relative economic decline has been somewhat exaggerated. Booth (p. 3) considers that Britain's progress in the decade and a half following World War II appeared satisfactory, especially in the light of the fact that it had emerged from the war ‘effectively bankrupt, with an overstretched economy and massive popular expectations of economic and social improvement’. Booth's balanced judgment, based on a review of all the relevant statistical and other evidence, suggests that while Britain's living standards were definitely overtaken in the twentieth century, it is not the case that Britain fell continuously further and further behind its major competitors. Rather, the gap stabilized. While Booth's views may not have met with universal accord, they do provide a welcome reassessment of the reality of events in Britain in the twentieth century. Furthermore, our findings regarding the development of standard costing within British firms following World War II resonate with Booth's revisionist viewpoint.

It is our view that it is all too easy to describe the major historical event of the twentieth century as being the rise of America to economic dominance and the decline of Britain as an economic power. While it is not being denied that these changes did occur, it should not automatically be taken for granted that, in matters either of production or accounting technology, British firms necessarily lagged well behind their American counterparts. Clearly there was a view, held strongly in certain quarters and espoused in the outpourings of the AACP in the early 1950s, that British productivity lagged massively behind that in the U.S. and that the adoption of American business techniques could improve the position in Britain. However, as Booth and Bufton (2000) have suggested, it is undoubtedly the case that many U.S. firms in the mid-1950s could have benefited from elements of the Americanization agenda suggested for British firms. Their research has implied that the supposedly negative picture painted of British manufacturing industry, with a small number of efficient firms embracing the latest ideas and techniques accompanied by a long tail of inefficient firms, was not unique. It could equally well describe the situation in the U.S. at the time.

This picture, from both countries, of some leading firms adopting new techniques while others lagged behind, should likewise come as no surprise. In the U.S., Fleischman (2000) has argued that the adoption of scientific management, to which the development of standard costing is often closely linked, was not as rapid as has often been previously assumed and, furthermore, in those pioneering businesses where it was utilized, it was only adopted in a piecemeal manner. In Britain, while the example of Hans Renold Ltd indicates a fairly full adoption of scientific management methods and of standard costing (Boyns, 2001, 2003), other evidence suggests that, as in the U.S., the implementation of scientific management in Britain was carried out in a piecemeal fashion (Smith and Boyns, 2005). If the adoption of scientific management in both countries was limited and a far from smooth process, the question arises as to why previous accounting historians wholeheartedly embraced the idea of a substantial British lag in adoption compared to that in the U.S. It is our view that, while they were influenced by the debates and rhetoric surrounding the British disease and Britain's relative economic decline, they were also afflicted by the same myopia that caused the failure of earlier accounting historians to give full credit to the cost accounting of the British Industrial Revolution. Thirty to fifty years ago, a former generation of accounting historians (e.g., Garner, 1954; Parker, 1969; Chatfield, 1977; Wells, 1978) considered that the lack of published texts on costing during the eighteenth and much of the nineteenth centuries was occasioned by the belief amongst British entrepreneurs that trade secrets ought not be disclosed so as to maintain competitive advantage. Had they been privy to surviving business records, however, they might have altered their judgments. Archival-based research by accounting historians over the last twenty years has precipitated a revisionist viewpoint. Many examples have been found of the practical use of ‘sophisticated’ costing techniques despite the dearth of contemporary literature (Edwards, 1937; Solomons, 1952). Work on the British Industrial Revolution by Fleischman and Parker (1997) and on the nineteenth century by Boyns and Edwards (1997), for example, has revealed the existence of many costing techniques being used in practice. Even when the literature on costing began to increase from the beginning of the twentieth century, there is evidence of practice in British firms outstripping the literature, especially in the chemical industry (Boyns et al., 2004).

It is clear, then, that reliance on published literature as a guide to the state of costing practice in British firms can lead to unwarranted conclusions. Wells (1977, p. 49), for example, noted that ‘the systems in use in English factories were seldom described in the literature prior to 1914 (or since)’, while after World War II, Lawrence and Humphreys (1947, pp. 29, 35) contrasted the much greater willingness of Americans to write about costing matters:

While it is not true that case studies detailing practice were never published in Britain, it is true that they were relatively few and far between. The reasons for the small number of such articles being published in Britain compared with the U.S., however, are far from clear. Lawrence and Humphreys (1947, p. 29), having pointed to the much greater number of works published on costing in the U.S., merely noted that the ‘two societies differ entirely in their constitution, as befits the differing outlook and customs of the two nations’. Some writers have suggested that the problem in Britain is one of secrecy.⁵ This issue was dealt with explicitly by Wells (1977, pp. 48–9), who cited quotes from the early twentieth century suggesting that secrecy in British industry led to firms failing to disclose the nature of their systems. Wells found Pollard's dismissal of the secrecy argument in respect of British entrepreneurs during the Industrial Revolution to be ‘questionable’, but archival research since has shown that early entrepreneurs in the textile, mining, and iron industries often visited the works of their competitors, suggesting that secrecy was not a major consideration (Boyns and Edwards, 1996; Fleischman and Parker, 1997). In the 1890s, Plumpton, CA, considered that it would have been ‘suicidal’ for large steel makers in Sheffield to publicize their costs (Boyns et al., 1996, pp. 65–6). Despite this, he was not averse to describing possible cost systems, presenting two papers on this issue to the Manchester Chartered Accountants’ Student Society in 1892 (see Boyns et al., 1996, pp. 26–49). For Plumpton the issue was not secrecy in relation to cost systems, but secrecy in relation to the cost figures that were generated by such systems.

Since the 1890s, however, and despite the smaller number of works on costing published in Britain, those that were published increasingly undermined any tendency towards secrecy in respect of cost systems or techniques that might have existed in earlier times. Some standard texts on costing did appear in Britain in the late nineteenth and early twentieth centuries, not least Garcke and Fells’Factory Accounts, Norton's Textile Manufacturers Bookkeeping, Strachan's Cost Accounts: The Key to Economy in Manufacture, Hawkins’Cost Accounts, Lunt's Manual of Cost Accounts, and Wheldon's Cost Accounting and Costing Methods. All of these works appeared in multiple editions over many decades: Garcke and Fells (seven editions, 1887–1922), Norton (five editions, 1889–1931); Strachan (six editions, 1902–36); Hawkins (eight editions, 1905–30); Lunt (seven editions, 1920–39); and Wheldon (ten editions 1932–60). Nevertheless, the number of such texts is not massive, compared to the U.S., possibly suggesting a relative lack of demand in Britain.

Although the development of commerce courses, including aspects of accounting, had commenced in some of the new civic universities in Britain in the late nineteenth and early twentieth centuries (Napier, 1996a, 1996b; Jeremy, 1998), accountancy before World War II never became a university subject in Britain to the extent that it did in America. Indeed, the teaching of accounting in America developed rapidly in the 1920s, commencing with U.S. engineering colleges, later extended to the business schools ‘where, in 1947, almost half of the courses offered were in accountancy’ (Armstrong, 1987, p. 426). There was thus a much larger market for texts on costing in America than in Britain where before the mid-1960s the provision of general advanced education in management, let alone accounting, was poor. Indeed, the first business schools in Britain were not founded until the mid-1960s—Manchester began in 1965 (Wilson, 1992) and London in 1966. Napier (1996a, pp. 472–3) has suggested that although there was something of an ‘explosion’ in accounting research at British universities from the mid-1960s, the teaching remained markedly inferior to that in the U.S.

With the teaching of accounting limited in Britain and with the emphasis on commercial and financial accounting during the first half of the twentieth century, the market for costing texts in Britain was clearly constrained at this time. An alternative outlet for articles detailing costing practices within the country, the journals published by the various professional bodies, was likewise small. There were engineering journals which occasionally published articles on the subject and had done so since the middle of the nineteenth century, but they were not a major outlet since the engineering profession in Britain never played the key role in relation to costing as did the American Society of Mechanical Engineers in the U.S. (Wells, 1978). Furthermore, the journals produced by the major accountancy bodies for the benefit of their members published relatively little on costing, not least since the focus of their members’ interests was largely in the direction of financial reporting and general accounting. Even the Cost Accountant did not prove a major outlet for articles on actual practice at specific firms. Like the NACA, the ICWA was formed in 1919 on the back of the prominence given to the role of cost accountants during World War I (Loft, 1986, 1990). However, the ICWA appears to have been a somewhat different animal than its American counterpart. It was a much smaller body and its Cost Accountant was a different type of publication than the N.A.C.A. Bulletin and the Year Books. In 1941, membership of the ICWA stood only at 1,430, compared to the NACA's 9,708. By 1949, the NACA's membership had grown to 27,363, reaching 31,000 in 1953, whereas that of the ICWA only initially climbed above 5,000 in 1955 (figures from Banyard, 1985; various N.A.C.A. Bulletins).

Perhaps reflecting the ICWA's smaller membership, each annual volume of the Cost Accountant was much shorter in length than the N.A.C.A. Bulletin. Furthermore, there was no equivalent to the Year Book, although papers presented at the ICWA's annual National Cost Conference were often published subsequently in one or more editions of the Cost Accountant. The number of editions per annual volume was also fewer. The Cost Accountant only appeared monthly rather than semi-monthly as the N.A.C.A. Bulletin.⁶ In the late 1940s/early 1950s, each annual volume of the Cost Accountant only extended to just over 400 pages and, with a much greater emphasis on current branch news, information and examination results, it contained far fewer articles, generally between twenty-five and thirty per year, thus limiting the publication of papers describing practice at individual firms.

Overall then, it is not surprising to find a relative dearth of articles and works detailing costing practices in Britain after World War II. An additional factor may also have been the lack of willingness, for whatever reason, of Britons to write down their practices. It is possible that this reticence does not so much reflect a concern for secrecy as the insular nature of the British. Such influences clearly militate against finding large numbers of descriptions of new developments such as standard costing in the literature. However, as we have seen, it would be wrong to equate the lack of articles discussing theoretical issues or examples of standard costing in practice with a lack of standard costing in British firms post-World War II.

Implications of Our Findings for Past Research

If Britain did not lag greatly behind America in the adoption of standard costing, all of those studies which have looked for possible explanations of the supposed British failure in this respect have been misplaced. Broad-based studies which have looked for socio-cultural explanations for differences between the U.S. and Britain have been aimed at trying to analyse a non-issue. This is not to deny that socio-cultural factors may have played a role in what happened on both sides of the Atlantic, but that any impact was not such as to lead to a significant difference in the rates of adoption of standard costing. Rather, whatever impact such factors may have had, they either offset each other or were counteracted by other influences. It is our belief that comparative studies between the U.S. and Britain which take simple generalizations of the state of affairs in the two countries, especially those which do so from the perspective of Britain's relative economic decline and backwardness in everything, are bound to generate misleading results because they over-simplify reality. It may be, as suggested by Wardell and Weisenfeld (1991), that different workplace traditions and different management styles do influence the introduction of accounting techniques, but it is our contention that they do so at the level of individual firms or sectors, as suggested by McLean (1996) in relation to the British shipbuilding industry,⁷ rather than at the level of the economy as a whole. In both the U.S. and Britain, there is clear evidence from the mid-1960s that the nature of costing systems and the extent of adoption of standard costing varied greatly between different sectors of the economy. The evidence of the Encyclopedia of Cost Accounting Systems (PHES, 1965) suggests that even in the mid-1960s, standard costing was not equally applicable to all sectors within the U.S. Given this, it is not surprising to find differences in the application of specific costing techniques in Britain as revealed in recent archival research. In many ways, developments in Britain and the U.S. were similar.

Our finding that the rate of adoption of standard costing in the U.S. and Britain may not have been so different in the decade or so after World War II also raises the issue of the link between standard costing and scientific management. Many writers have suggested a strong link between the emergence of scientific management, on the one hand, and the development of standard costing on the other (e.g., Sowell, 1973; Epstein, 1978; Wells, 1978). In the British context, Napier (1996b, p. 438) has noted that the development of cost accounting in the 1920s was ‘motivated by a notion of “scientific costing”, derived apparently from essentially North American ideas of “scientific management”’. However, the precise nature of this relationship in practice is far from clear either in the U.S. or in Britain, and only more archival based work has the potential to resolve this issue. Given that it is widely accepted that different forms of scientific management were adopted in the two countries (Nelson, 1992), reflecting different emphases—the American emphasis on Taylorism in the workplace compared to a broader vision of scientific management in Britain (i.e., rationalization)—it might be suspected, a priori, that there would have been different patterns in the links between scientific management and standard costing across the Atlantic. This is clearly a matter which is beyond the scope of the current article, but it is one worthy of future research and detailed investigation.