Renewal , and the Role of Accounting : the Formation of the ‘‘ Penny Post ’’

Abstract

Organizational strategies, processes, and procedures may become insti- tutionalized during the early history of an organization, leading to dysfunctional rigidities when the environment changes. The postal system worldwide is under significant pres- sure to change its business model, including rescinding the provision of universal ser- vice and uniform pricing, as the posts are privatized and opened to competition. Cost accounting has become a key mechanism to achieve reform in the postal system. But is the introduction of a cost-based logic new to the design of post office reforms?Were the core policies of the post office originally developed without reference to cost? This paper analyzes the key document in the creation of the current postal business model: Rowland Hill’s (1837) ‘‘Post Office Reform: Its Importance and Practicability.’’ The pam- phlet shows a basic understanding of economic concepts including the elasticity of demand and opportunity costs as well as implementing practical accounting tech- niques that we now call value chain analysis, cost behavior analysis, activity-based costing and activity-based management, and target costing. This paper provides an analysis of Hill’s logic from the perspective of current management accounting tech- niques and terminology. It illustrates the use of management accounting in the refor- mation of social institutions and provides a rare example of the early decision-making use of management accounting concepts