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MANAGEMENT
CONTROL SYSTEMS
Performance Measurement, Evaluation and Incentives
Kenneth A. Merchant & Wim A. Van der Stede

Fourth Edition
 BRIEF CONTENTS

Preface xiii 11 Remedies to the Myopia Problem 448

Acknowledgements xvi 12 Using Financial Results Controls in
the Presence of Uncontrollable Factors 517

SECTION I
The Control Function of Management SECTION V
Corporate Governance, Important
1 Management and Control 3 Control-Related Roles, and Ethics

13 Corporate Governance and Boards

SECTION II of Directors 573
Management Control Alternatives
14 Controllers and Auditors 629
and Their Effects
15 Management Control-Related
Ethical Issues 677
2 Results Controls 33
3 Action, Personnel, and Cultural Controls 86
4 Control System Tightness 128
SECTION VI
Management Control When
5 Control System Costs 173
Financial Results Are Not the Primary
6 Designing and Evaluating Management
Control Systems 221
Consideration

16 Management Control in Not-for-profit

SECTION III Organizations 721
Financial Results Control Systems
Index 761
7 Financial Responsibility Centers 261
8 Planning and Budgeting 297
9 Incentive Systems 353

SECTION IV
Performance Measurement Issues
and Their Effects

10 Financial Performance Measures and

Their Effects 397

vii
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 CONTENTS

Preface xiii Prevention vs. Detection 92

Acknowledgements xvi Conditions determining
the effectiveness of action
controls 93
SECTION I
Personnel controls 95
The Control Function of Management Cultural controls 97
Personnel/cultural controls and
1 Management and Control 3
the control problems 101
Management and control 8 Effectiveness of personnel/cultural
Causes of management control problems 12 controls 101
Characteristics of good management control 15 Conclusion 103
Control problem avoidance 15 Notes 103
Control alternatives 19 Witsky and Associates, Inc. 105
Outline of this text 19 The Platinum Pointe Land Deal 106
Notes 20 EyeOn Pharmaceuticals, Inc. 114
Leo’s Four-Plex Theater 22 Axeon N.V. 121
Wong’s Pharmacy 23
Private Fitness, Inc. 23 4 Control System Tightness 128
Atlanta Home Loan 25
Tight results control 128
Tight action controls 131
SECTION II Tight personnel/cultural controls 137
Management Control Alternatives Conclusion 139
and their Effects Notes 140
Controls at the Bellagio
2 Results Controls 33 Casino Resort 142
Prevalence of results controls 34 PCL: A Breakdown in the Enforcement
Results controls and the control problems 37 of Management Control 168
Elements of results controls 38
Conditions determining the effectiveness 5 Control System Costs 173
of results controls 42
Direct costs 173
Conclusion 46
Indirect costs 174
Notes 46
Adaptation costs 182
Office Solutions, Inc. 48
Conclusion 186
Puente Hills Toyota 58
Notes 187
Kooistra Autogroep 71
Philip Anderson 189
Houston Fearless 76, Inc. 78
Sunshine Fashion: Fraud, Theft,
and Misbehavior among
3 Action, Personnel, and Cultural Employees 190
Controls 86
Better Beauty, Inc. 194
Action controls 86 Fit Food, Inc. 206
Action controls and the control problems 91 Atlantis Chemical Industries 212

ix
Contents

6 Designing and Evaluating Incentive system design 364

Management Control Systems 221 Criteria for evaluating incentive systems 365
Group rewards 370
What is desired and what is likely 221
Conclusion370
Choice of controls 222
Notes371
Choice of control tightness 229
Harwood Medical Instruments PLC 374
Adapting to change 230
Superconductor Technologies, Inc. 375
Keeping a behavioral focus 231
Raven Capital, LLC 384
Maintaining good control 231
Notes 232
Diagnostic Products Corporation 233
Game Shop, Inc. 242 SECTION IV
Family Care Specialists Medical Performance Measurement
Group, Inc. 252 Issues and Their Effects

SECTION III 10 Financial Performance Measures

Financial Results Control Systems and Their Effects 397
Value creation 398
7 Financial Responsibility Centers 261 Market measures of performance 399
Advantages of financial results Accounting measures of performance 401
control systems 261 Investment and operating myopia 404
Types of financial responsibility Return-on-investment measures
centers 262 of performance 406
Choice of financial responsibility centers 267 Residual income measures as a possible
The transfer pricing problem 269 solution to the ROI measurement
Conclusion 274 problems411
Notes 275 Conclusion413
Kranworth Chair Corporation 275 Notes414
Zumwald AG 283 Behavioral Implications of Airline Depreciation
Global Investors, Inc. 285 Accounting Policy Choices 415
Las Ferreterías de México, S.A. de C.V. 417
8 Planning and Budgeting 297 Industrial Electronics, Inc. 421
Haengbok Bancorp 422
Purposes of planning and budgeting 297
Corbridge Industries, Inc. 424
Planning cycles 299
King Engineering Group, Inc. 433
Target setting 301
Berkshire Industries PLC 442
Planning and budgeting practices,
and criticisms 310
Conclusion 312 11 Remedies to the Myopia
Notes 313 Problem 448
Royal Wessanen NV 315
Pressures to act myopically 448
The Stimson Company 323
Reduce pressures for short-term profit 450
Multiple Versions of the Plan 332
Control investments with preaction reviews 451
Vitesse Semiconductor Corporation 333
Extend the measurement horizon
VisuSon, Inc.: Business Stress Testing 342
(use long-term incentives) 453
Measure changes in value directly 455
9 Incentive Systems 353
Improve the accounting measures 455
Purposes of incentives 355 Measure a set of value drivers 456
Monetary incentives 357 Conclusion460

x
 Contents

Notes461 14 Controllers and Auditors 629

Catalytic Solutions, Inc. 462
Controllers 629
Dortmunder-Koppel GmbH 470
Auditors 633
Johansen’s: The New Scorecard
Conclusion639
System 478
Notes640
Mainfreight 488
Don Russell: Experiences of a Controller/CFO 641
Statoil 501
Desktop Solutions, Inc. (A): Audit
of the St. Louis Branch648
12 Using Financial Results Desktop Solutions, Inc. (B): Audit
Controls in the Presence of Operations Group Systems657
of Uncontrollable Factors 517 Andrew G. Scavell, Chief Risk Officer 660
The controllability principle 519
Types of uncontrollable factors 520 15 Management Control-Related
Controlling for the distorting effects Ethical Issues 677
of uncontrollables 522 Good ethical analyses and
Other uncontrollable factor issues 529 their importance 678
Conclusion529 Why do people behave unethically? 682
Notes530 Some common management
Olympic Car Wash 531 control-related ethical issues 684
Beifang Chuang Ye Vehicle Group 532 Spreading good ethics within
Hoffman Discount Drugs, Inc. 534 an organization 689
Howard Building Corporation, Inc. 541 Conclusion691
Bank of the Desert (A)554 Notes692
Bank of the Desert (B)556 Two Budget Targets 694
Fine Harvest Restaurant Group (A)561 Conservative Accounting in the General
Fine Harvest Restaurant Group (B)565 Products Division 694
Education Food Services at Central
Maine State University 695
SECTION V The “Sales Acceleration Program” 697
Corporate Governance, The Expiring Software License 698
Important Control-Related Wired, PLC 699
Roles, and Ethics Mean Screens USA, Inc. 700
Lernout & Hauspie Speech Products 701
Ethics@Cisco 708
13 Corporate Governance
and Boards of Directors 573
Laws and regulations 574 SECTION VI
The Sarbanes-Oxley Act 575 Management Control When Financial
Boards of directors 580 Results Are Not the Primary
Audit committees 583 Consideration
Compensation committees 585
Conclusion 586
16 Management Control in
Notes586
Not-for-profit Organizations 721
Arrow Motorcar Corporation 588
Golden Parachutes? 594 Corporations, B corporations, and
Pacific Sunwear of California, Inc. 598 not-for-profits722
Entropic Communications, Inc. 610 Key differences between for-profit
Bio/Precise Medical Devices, Inc. 625 and not-for-profit organizations 723

xi
Contents

Goal ambiguity and conflict 724 Notes 733

Difficulty in measuring and SCI Ontario: Achieving, Measuring, and
rewarding performance 725 Communicating Strategic Success 735
Accounting differences 727 University of Southern California:
External scrutiny 728 Responsibility Center Management System 746
Employee characteristics 731
Conclusion 731 Index 761

xii
 PREFACE

This text provides materials for a comprehensive course using this material with pre-work experience students
on management control systems (MCSs). MCSs are is that some of the cases might be too challenging. That
defined broadly to include everything managers do to said, there are several suitable candidates to select
help ensure that their organization’s strategies and from among the set of cases at the end of each chapter
plans are carried out or, if conditions warrant, are mod- to tailor to various audiences and/or to achieve various
ified. Thus, the text could also be used in any course course objectives (see also below).
that focuses on topics related to the back end of the This text is different from other MCS texts in a num-
management process, such as strategy implementation ber of important ways. First, the basic organizing
or execution. framework is different. The first major module dis-
Because management control is a core function of cusses management controls based on the object of
management, all students interested in business or control: results, actions, or personnel/culture. The
management can benefit from this text. However, object-of-control framework has considerable advan-
courses based on the materials presented here should tages over other possible organizing frameworks. It has
be particularly useful for those who are, or aspire to be, clean, clearly distinguishable categories. It is also rela-
managers, management consultants, financial special- tively all-inclusive in the sense that the reader can
ists (e.g. controllers, budget analysts, auditors), or relate many management controls and other control
human resource specialists (e.g. personnel directors, classifications and theories (for example, proactive vs.
compensation consultants). reactive controls, prevention vs. detection controls,
This edition includes 70 cases for classroom use. and agency theory concepts such as adverse selection
Case studies that stimulate learning through the analy- and monitoring vs. incentives) to it. It is also intuitive;
sis of complex situations such as those often faced in that is, students can easily see that managers must
the “real world” are generally recognized to be perhaps make choices from among these categories of manage-
the best pedagogical conduit for teaching a MCSs ment control. Thus, using the object-of-control focus,
course. Because MCSs, the contexts in which they oper- the text is structured around a framework that
ate, and the outcomes they produce, are complex and describes the core management control problems that
multidimensional, simple problems and exercises can- need to be addressed, the MCSs that can be used to
not capture the essence of the issues managers face in address those problems, and the outcomes that can be
designing and using MCSs. Students must develop the produced, both positive (intended) and negative (unin-
thinking processes that will guide them successfully tended).
through decision tasks with multiple embedded issues, Second, the treatment of management control is
incomplete information, and large amounts of rela- broad. Like all MCS textbooks, this text focuses inten-
tively unstructured information. They must learn to sively on the use and effects of financial performance
develop problem-finding skills as well as critical think- measures and associated results controls, which are in
ing and problem-solving skills, and they must learn common use at managerial levels in many organizations.
how to articulate and defend their ideas. Case analyses, However, it also provides a broader treatment of manage-
discussions, and presentations provide an effective ment controls (organized around the object-of-control
method for simulating these tasks in a classroom. framework) to put the financial results controls in proper
Although the text was designed primarily for use perspective. For example, the text describes many situa-
with graduate students and practicing professionals, it tions where financial results controls are not effective
can be, and has been, used successfully with under- and discusses the alternatives that managers can use in
graduate students who have had a prior management those situations (such as nonfinancial performance indi-
accounting course. All that should be recognized when cators or greater reliance on stronger cultures).

xiii
Preface

Third, the text provides considerable discussion on coverage of the latest MCS topics and issues, such as
the causes and remedies of the most common and seri- related to stress testing of budgets; mitigating man-
ous management control-related problems, including agement myopia; balancing sustainable value crea-
the implications of issues of uncontrollability on man- tion; motivating ethical behaviors; and using the
ager’s behaviors; the tendency of managers to adopt a EVATM or Balanced Scorecard measurement systems
short-term horizon in their decision-making; and man- or alternative budgeting approaches, just to name a
agers’ and employees’ propensities to engage in distor- few.
tive “gameplaying” evidencing misalignment with ● The cases are descriptive of the operations and
organizational objectives. issues faced by companies located in many different
Fourth, the text provides a whole chapter of ethics countries and regions around the world, including
coverage. There are many management control-related Asia, Europe, Latin America, Oceania, as well as
ethical issues, and both erstwhile and recent scandals North America.
across industries, including the automobile and bank-
ing sectors, but also the public and not-for-profit sec- The cases permit the exploration of the manage-
tors, clearly suggest the need to develop managers’ and ment control issues in a broad range of settings.
prospective managers’ ethical reasoning skills more Included are cases on both large and small firms, man-
fully. Related to this is coverage of corporate govern- ufacturing and service firms, domestic-focused and
ance, to which we also devote a chapter. multinational firms, and for-profit and not-for-profit
Fifth, the important concepts, theories, and issues organizations. The cases present issues faced by per-
are not discussed just in abstract terms. They are illus- sonnel in both line and staff roles at corporate, divi-
trated with a large number of real-world examples, far sional, and functional levels of the organization, as
more than typically included in any other MCS text- well as by members of boards of directors. Instructors
book. The examples make the textual discussion more can use this set of cases to teach a management control
concrete and bring the subject to life. course that is broad in scope or one that is more nar-
Finally, the mix of cases provided here is different rowly focused (for example, MCSs in service organiza-
from those included in other MCS textbooks in four tions by focusing on the cases from the retail, financial,
important ways: healthcare, education and other service sectors).
The cases provide considerable scheduling flexibility.
● Nearly all of the cases are real (that is, they describe
Most of the cases cut across multiple topic areas because
the facts of an actual situation) although some of them
MCSs are inherently multidimensional. For example,
are disguised (that is, they do not use the company’s
the classroom focus for the Statoil case in Chapter 11
real name and/or use scaled figures/data to avoid iden-
might be on performance measurement, as Statoil uses
tification or to protect data confidentiality). The rela-
a key-performance-indicator (KPI) structure that is
tively small number of cases that do not describe the
“balanced scorecard”-like. Or it could be on Statoil’s
(disguised) facts of an actual situation are “vignettes”
planning and budgeting system, which separates the
that are, even so, almost always based on an observed
functions of target setting, forecasting and resource
situation but do not describe all of it. Instead, they
allocation using the principles of “Beyond Budgeting.”
focus on a particular (narrower) issue. Reality (and
To illustrate the latter further or in more depth, Statoil
lack of disguise where possible) enhance student inter-
could be followed (or preceded) by the Mainfreight
est and learning about, for example, types of indus-
case, which offers ample opportunity for students to dis-
tries, companies, and organizational roles.
cuss and critically challenge the idea of beyond budget-
● Most of the cases (except the vignettes) include rich ing. In that context, both cases could be taught related
descriptions of the context within which the MCSs to the subject matter in Chapter 8 on planning and budg-
are operating. The descriptions give students oppor- eting instead of with Chapter 11. Yet, there are still suf-
tunities to try to identify and address management ficient cases listed with Chapter 11 to focus on remedies
control problems and issues within the multidimen- to the myopia problem, such as the new Johansen’s case
sional situations within which practicing managers that describes a retail company that has adopted a bal-
cope with them. anced scorecard-based performance evaluation system.
● Most of the cases are of relatively recent vintage, Students also have to consider the industry characteris-
and the set of cases has been chosen to ensure tics, the organization structure, the characteristics of

xiv
 Preface

the people in key positions, and the company’s history Engineering Group (an ESOP, or “employee stock own-
(e.g. a recent merger), so instructors can choose to use ership plan,” company), or in relevant control-related
the Statoil case, say, when they wish to focus on the roles, such as corporate risk officers (Andrew G. Scav-
effects of one or more of these factors on the design of ell, CRO).
MCSs. As a consequence, the ordering of the cases is not In developing the materials for this fourth edition,
intended to be rigid. Many alternatives are possible. A we have benefited from the insightful comments, help-
case overview sheet in the accompanying Instructors ful suggestions, and cases of many people. Ken owes
Manual to this text provides a matrix that helps instruc- special thanks to the two professors who served as his
tors disentangle the various relevant topics for which mentors at the Harvard Business School: William
each case could be fruitfully used. Bruns and Richard Vancil. Ken also appreciates the
In this fourth edition, we made various updates, valuable research assistance from Michelle Spaulding.
most obviously in those areas where the world has been And Wim is especially grateful to Olivia Hanyue Luo
moving fast during the past few years, particularly for her capable research assistance. At Pearson Educa-
since the 2008–2009 financial crisis and subsequent tion, we are indebted to Commissioning Editors Caitlin
economic recession. This includes changes in incentive Lisle and Rebecca Pedley for their support of this revi-
systems (Chapter 9), cor porate gover nance sion project from start to finish. Finally, Abhishek
(Chapter 13), and also ethics-related concerns Agarwal of Aptara and Matthew Van Atta made very
(Chapter 15). Throughout the text, we incorporated detailed and helpful suggestions in copyediting the
recent research findings and updated the survey statis- manuscript.
tics and examples provided. We also added some new, We thank the Asia Case Research Center at the Uni-
exciting cases. Twenty-one of the 70 cases included in versity of Hong Kong for granting permission to use two
this edition are new, and an additional 12 were revised of their Poon Kam Kai Series cases (PCL and Sunshine
or brought up to date. Some of the new cases cover rela- Fashion). We appreciate Darden Business Publishing’s
tively recent and/or perennially pivotal topics, such as help with their permission for use of the Johansen’s case,
“mobile monitoring” of employees (Witsky and Associ- and we also thank Winnie O’Grady for letting us use the
ates, Inc.); planning and budgeting f lexibility Mainfreight case. Finally, we thank our co-authors on
(Wessanen N.V.); alternatives to traditional budgeting several cases included in this text, the names of whom
(Mainfreight); project management (The Stimson are listed with the cases.
Company); comprehensive multi-criteria performance In closing, we wish to acknowledge that there is cer-
evaluations (Johansen’s); “hands-on” relative perfor- tainly no one best way to convey the rich subjects related
mance evaluations using real-world data (Fine Harvest to MCSs. We have presented one useful framework in
Restaurant Group); as well as crucial ethical considera- the best way we know how, but we welcome comments
tions (Ethics@Cisco). Others were intended to address about the content or organization of the text, or regard-
the topics in new and different settings, such as King ing any errors or omissions. Please direct them to us.

Kenneth A. Merchant Wim A. Van der Stede

Deloitte & Touche LLP Chair of Accountancy CIMA Professor of Accounting and Financial
Leventhal School of Accounting Management
Marshall School of Business London School of Economics
University of Southern California Department of Accounting
Los Angeles, CA 90089-0441 Houghton Street
U.S.A. London WC2A 2AE
U.K.

Phone: (213) 821-5920 Phone: (020) 7955-6695

Fax: (213) 747-2815 Fax: (020) 7955-7420
E-mail: [email protected] E-mail: [email protected]

xv
 ACKNOWLEDGEMENTS

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Modern Management Control Systems: Text and Cases, Shifts to Driverless Trucks in Australia’, The Financial
Prentice Hall (Merchant, K. A. 1998), pp. 308, 309, Times (October 19, 2015), © The Financial Times Lim-
388, 390, 391, 640, and 642, respectively; MER- ited, All Rights Reserved. Extract on page 87: from
CHANT, KENNETH A., MODERN MANAGEMENT ‘Manage Like a Spymaster’, The Economist (August 29,
CONTROL SYSTEMS: TEXT & CASES, 1st Ed., © 1998. 2015), online at econ.st/1U8j8KK, The Economist by
Reprinted and electronically reproduced by permission ECONOMIST NEWSPAPER LTD.; reproduced with per-
of Pearson Education, Inc., New York, NY. mission of ECONOMIST NEWSPAPER LTD. in the for-
mat Educational/Instructional Program via Copyright
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Tables 3.1, 3.2, 3.3, 4.1, 5.1, 6.1, 7.1, 7.2, 9.1, 10.1, 10.2, of Certified Fraud Examiners, 2014, online at www.
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1998), pp. 30, 31, 130, 166, 224, 253, 303, 306, 427, ECONOMIST NEWSPAPER LTD.; reproduced with per-
545, 546, 547, p. 547, and 548, respectively; MER- mission of ECONOMIST NEWSPAPER LTD. in the for-
CHANT, KENNETH A., MODERN MANAGEMENT mat Educational/Instructional Program via Copyright
CONTROL SYSTEMS: TEXT & CASES, 1st Ed., © 1998. Clearance Center. Extract on page 100: from ‘Method
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of Pearson Education, Inc., New York, NY. (September 7, 2014). Extract on page 131: from ‘Tesco
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All Rights Reserved. Extracts on pages 5 and 6: from Fraud and Abuse 2014 Global Fraud Study, Association
‘Atlanta’s Schools – the Reckoning’, The Economist of Certified Fraud Examiners, 2014, online at www.
(April 6, 2013), online at www.economist.com. Extract acfe.com/rttn/docs/2014 -report-to-nations.pdf.
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on page 6: from ‘Scathing Report Says Toshiba CEOs futurethink, author of Why Simple Wins. Case Study on
Had Role in Accounting Scandal‘, The Financial Times page 183: This case was prepared by Grace Loo (Lao)
(July 20, 2015), © The Financial Times Limited, All under the supervision of Professor Neale O’Connor,
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Bank in $6bn “Fat Finger” Slip-Up’, The Financial Times University of Hong Kong. Extract on page 188: from
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xvi
 Acknowledgements

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Grace Loo under the supervision of Professor Neale Financial Times (January 27, 2015), online at on.ft.
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xvii
Acknowledgements

Reserved Worldwide, License numbers 4032150712139 Street Journal, Copyright © 2015 Dow Jones & Com-
and 4032150524598. Extract on page 755: from ‘Sus- pany, Inc., All Rights Reserved Worldwide, License num-
tainability Matters, but What Does It Mean for Your bers 4032140775190 and 4032140995347. Case Study on
Company?’ NACD Directorship (July 30, 2015), online at page 769: from Bendle, N., copyright 2014, Richard Ivey
w w w . n a c d o n l i n e . o r g / M a g a z i n e /A r t i c l e . School of Business Foundation; Ivey Publishing, Ivey
cfm?ItemNumber=17504. Extract on page 760: from Business School, Western University, London, Ontario,
‘Debate Heightens over Measuring Health Care Quality’, Canada, N6G 0N1, [email protected], www.iveycases.com;
The Wall Street Journal (January 30, 2015), online at on. one-time permission to reproduce granted by Richard
wsj.com/1EvciGo, reprinted with permission of The Wall Ivey School of Business Foundation on January 11, 2017.

xviii
SECTION I
The Control Function
of Management

1
This page intentionally left blank
CHAPTER 1
Management and Control

Management control is a critical function in organizations. Management control failures can

lead to large financial losses, reputation damage, and possibly even organizational failure. To
illustrate this, let us start with some examples in the fi nancial services sector that, since the
fi nancial crisis have been beset by a raft of control failures related to rusty information sys-
tems;1 misconduct related to misselling fi nancial services such as pay-protection insurance
stemming from aggressive sales-based tactics;2 allegations that fi nancial services companies
helped their clients evade taxes;3 manipulation of interest rates, such as the venerable LIBOR
(the benchmark inter-bank rate that is used to calculate interest rates on major financial trans-
actions throughout the world);4 faults in internal controls surrounding the reporting of com-
modity prices by banks’ trading desks; more isolated but crippling unauthorized “rogue
trades”;5 and anti-money-laundering violations,6 just to name the most striking ones.
To provide some more detail about one particular case to demonstrate its relevance to man-
agement control systems (MCSs) and the significant risks when they fail, the Financial Services
Authority (FSA) fined UBS, a Swiss-based global bank, £29.7 million (discounted from
£42.4 million for early settlement) for systems and controls failings that allowed an employee
(Kweku Adoboli) to cause substantial losses totaling US$2.3 billion as a result of unauthorized
trading. In particular, UBS’ failings included the following:7

● The computerized system operated by UBS to assist in risk management was not effective in
controlling the risk of unauthorized trading.
● The trade capture and processing system had significant deficiencies, which Adoboli
exploited in order to conceal his unauthorized trading. The system allowed trades to be
booked to an internal counterparty without sufficient details, there were no effective meth-
ods in place to detect trades at material off-market prices, and there was a lack of integration
between systems.
● There was an understanding amongst personnel supporting the trading desk that the opera-
tions division’s main role was that of facilitation. They focused mainly on efficiency as
opposed to risk control, and they did not adequately challenge the front office.
● There was inadequate front office supervision. The supervision arrangements were poorly
executed and ineffective.
● The trading desk breached the risk limits set for their desk without being disciplined for
doing so. These limits represented a key control and defined the maximum level of risk that
the desk could enter into at a given time. This created a situation in which risk taking was not
actively discouraged or penalized by those with supervisory responsibility.
Chapter 1 • Management and Control

● Failing to investigate the underlying reasons for the substantial increase in profitability of
the desk despite the fact that this could not be explained by reference to the end-of-day risk
positions.
● Profit and loss suspensions to the value of $1.6 billion were requested by Adoboli, and these
were accepted without challenge or escalation. The combined factors of unexplained profit-
ability and loss suspensions should have indicated the need for greater scrutiny.

The FSA report concluded that these failings were particularly serious because:8

● Market confidence was put at risk, given the sudden announcement to the market and size of
the losses announced. Negative announcements, such as this, put at risk the confidence
which investors have in financial markets.
● The systems and controls failings revealed serious weaknesses in the firm’s procedures,
management systems and internal controls.
● The failings enabled Adoboli to commit financial crime.

Global regulators have similarly exposed flaws in banks’ internal control systems that
allowed traders to manipulate interest rates, such as LIBOR, around the world.9 To add, Stuart
Gulliver, the chief executive of HSBC, the largest financial institution in Europe, admitted that
“our anti-money-laundering controls should have been stronger and more effective, and we
failed to spot and deal with unacceptable behavior.”10
The press headlines to which these examples are selectively referenced speak for themselves.
Of course, not all banks have been entangled in each and every issue. However, that the list of
those being caught in these nets has been so long, sparing few, is surprising for organizations
whose reputations are among their most valuable assets. Failures of this type and magnitude
also damage the integrity of the wider market and financial system on a global scale. But these
failures have also been costly money-wise, where the wave of fines and lawsuits that has swept
through the financial sector since the financial crisis has cost big banks a whopping $260 bil-
lion, according to research from Morgan Stanley. The report also suggests that “actions taken
by banks to prevent future litigation issues include everything from changing remuneration
[compensation] policies [which we discuss under the rubric of results controls in Chapter 2 and
incentive systems in Chapter 9] to a greater focus on ‘non-financial metrics’ [Chapter 11], adding
compliance staff [Chapters 3 and 14], to elevating chief risk officers to boards [Chapter 13] and
using ‘robo-surveillance’ in trading rooms [a form of action controls which we discuss in Chap-
ter 3]” (brackets added).11 Clearly, the issues illustrated here touch on, and cut across, many of
the issues we discuss in this text.
To add, though, here is a quote from a Financial Times columnist that builds nicely on the
above but extends it to other sectors:

It turns out that bankers may not be alone. The traders who rigged Libor and foreign
exchange rates cheated clients out of money. Volkswagen, we now know, deliberately
polluted our air. The carmaker had a choice: install additional emissions cleaning equip-
ment; admit that its diesel cars were not very fuel efficient; or spew out illegal amounts of
nitrogen oxide. It chose the last of these options, and covered it up by designing soft-
ware to deceive the US regulators. […] This round-the-world tour of fraud also takes in
Toshiba. The nuclear-to-semiconductor conglomerate was hit by a record fine from
Japan’s stock exchange and ordered to improve its governance and internal controls, in
the wake of a $2bn accounting scandal. […] Not even the tech industry has proved
immune. European researchers revealed this week that Google has been charging adver-
tisers for having their ads seen on YouTube, even when fraud-detection systems discover
that the ‘viewer’ is a robot. That practice is clearly not in the same league as rate-rigging,

4
 Management and Control

years of accounting fraud or emission test deceit. But the disclosure reinforces a grow-
ing sense that companies around the world are pushing ethical boundaries [which we
discuss in Chapter 15].12

Another article commented that the issues at VW were predictable because of VW’s lax board-
room controls (which we discuss in Chapter 13) and its peculiar corporate culture (Chapter 3):
“The scandal clearly also has to do with structural issues at VW … There have been warnings
about VW’s corporate governance for years, but they didn’t take it to heart and now you see the
result,” says Alexander Juschus, director at IVOX, the German proxy adviser.13
Effective cultures, structures, and controls are quintessential as the above examples suggest,
but not only in the for-profit sector, as the next example illustrates (we discuss non-profit organ-
izations in Chapter 16). Consider the case of an award-winning teacher who at the time headed
Atlanta’s public schools, and who had been praised by the American Association of School
Administrators for the significant gains in student achievement she had overseen, where Atlan-
ta’s schoolchildren made sizable gains on the standardized tests used to determine yearly pro-
gress. At one school, for instance, the share of 13-year-olds who passed the test’s maths section
rose from 24% to 86%, and the share of those who “exceeded expectations” rose from 1% to
46% – both in a single year. However,

[…] the state of Georgia alleges that those remarkable leaps rested on neither pedagogy
nor determined study, but something far more invidious: cheating. A report by a special
investigative team […] found widespread evidence of cheating […]. Sometimes teachers
gave pupils the correct answers. Sometimes they erased pupils’ answers after the test and
filled in the correct ones themselves. The investigative team ferreted out cheating by ana-
lyzing erasure marks on test sheets. They flagged classrooms with an average number of
wrong-to-right erasures more than three standard deviations above the state average. The
chance of that occurring randomly is one in 370. More than half of Atlanta’s elementary and
middle schools had such classrooms, and many had erasures more than 20 to 50 standard
deviations above the norm. Of the 178 teachers accused of having taken part in the cheat-
ing, 82 confessed. [The head], said the report, either knew or should have known what was
going on. […] Prosecutors did not charge [the head] with taking part in the cheating, but
with putting “unreasonable pressure” on principals and teachers to do well, and for creat-
ing “an environment where achieving the desired end result was more important than the
students’ education.”14

This is an example of results controls (Chapter 2) and, clearly, not only the functional but also the
behavioral displacements that they can create (Chapters 5 and 11), in part due to target pressure
(Chapter 8), but also employees’ and organizations’ moral failures (Chapters 3 and 15).
Excessive target pressure was also identified as a culprit in the accounting scandal at Toshiba
that was mentioned in passing earlier:

In April 2015, an improper accounting scandal came to light that inflated profits by well
over $1bn at Toshiba, the Japanese industrial conglomerate, which makes laptops, mem-
ory chips and nuclear reactors. A panel of external lawyers and accountants that was
appointed to investigate was said to have uncovered emails showing that Hisao Tanaka,
chief executive, and Norio Sasaki, former chief executive and then vice-chairman,
“instructed employees to delay the booking of costs to make the financial figures look bet-
ter” […] and that “the problems were worsened by reporting procedures for projects that
were time-consuming and old-fashioned. Some of the paperwork was being done by junior
employees in their first few years at the company.” Experts further commented that “the
accounting issues at Toshiba also exposed concerns around Japanese corporate govern-
ance practices [which we discuss in Chapter 13], including the weak role of external

5
Chapter 1 • Management and Control

directors and the extensive power that many former chief executives continue to exer-
cise.”15 The scathing panel report also detailed what it said “were ‘institutional’ accounting
malpractices [Chapter 5] and a corporate culture [Chapter 3] in which employees were
afraid to speak out against bosses’ push for increasingly unachievable profits [Chapter 8].
[…] Pressures to meet aggressive, short-term profit targets [Chapter 11] – known as ‘the
challenge’ – existed from the presidency of Atsutoshi Nishida, who headed the company
from 2005 to 2009 and remained an adviser. Those pressures escalated as the company’s
earnings deteriorated in the wake of the global financial crisis and […] the Fukushima
nuclear accident. The panel declared that Mr. Tanaka and Mr. Sasaki were aware that prof-
its were being inflated and did not take any action to end the improper accounting. In some
instances, the report added, top executives pressured employees to achieve their targets
with suggestions that the company may withdraw from underperforming businesses if they
were not met. But the panel found no evidence any of the three current and former chief
executives had given specific instructions to division chiefs to inflate profit figures.”16 They
described a corporate culture – one of exerting pressure on employees to meet aggres-
sive, short-term profit targets spanning three generations of chief executives – in which
employees were afraid to speak out against bosses when they pushed for unrealistic earn-
ings targets.17

The consequences of failures of organizational control (which we define more precisely in

the later sections of this chapter) can reach far and wide beyond the organizations in which
they take place. As mentioned above, the banking failures have undermined the integrity of the
wider market and financial system on a global scale. But there are other major impacts:

Shareholders and customers are obvious victims of the current flood of bad news. They
are seeing their investments shrink, having their cars recalled and paying too much for
goods and services. But there is another set of losers: the employees and shareholders of
the companies that try to play fair. Back in the early 2000s, a company called WorldCom
upended the telecommunications industry by repeatedly posting profit margins that its
rivals simply could not match. Five big groups, including AT&T, responded by slashing
about 5 per cent of their combined workforces – more than 20,000 jobs. In 2002, WorldCom
was exposed as the US’s largest accounting fraud and its chief executive sentenced to jail.
However, the employees who were laid off at rival companies did not get their jobs back.18

And in the case of Atlanta’s schools:

[…] the scandal’s real casualties are Atlanta’s schoolchildren. Schools that cheated their
way to false improvements lost federal funds which could have been used to make actual
improvements. Because of their apparently high test scores, struggling pupils were denied
the help they needed and deserved. A generation of Atlanta’s students have, in fact, been
left behind.19

We discuss these impacts in the light of organizations’ corporate social responsibility and their
concerns about sustainability and the wider stakeholder communities in Chapter 16.
Not all control failures are as consequential, or of similar magnitude, as the examples listed
above; yet they can, and do, inflict costs and/or embarrassment. For example,

[…] this happened when Deutsche Bank paid $6 billion to a hedge fund client by mistake in
a ‘fat finger’ trade, where a junior member of the bank’s forex sales team, while his boss
was on holiday, processed a gross value instead of a net value, meaning that the trade had
‘too many zeroes’. Whereas the bank recovered the money from the U.S. hedge fund the
next day, the incident was “an embarrassing blow to the bank” and it also “raised fresh
questions about Deutsche’s operational controls and risk management.” The $6bn error

6
 Management and Control

also raised questions about why it was not spotted under the bank’s ‘four eyes principle’
[an action control discussed in Chapter 3], requiring every trade to be reviewed by another
person before being processed.20

Other examples of this type also occur in the public sector and do not always involve money
being inadvertently wired. This happened at the Bank of England (BoE), where its head of press
mistakenly sent an email to the media revealing that officials were quietly researching the
impact of Britain’s exit from the European Union, a major blunder given the secrecy of this
study. What had caused this mistake? The “auto-complete” tool in BoE’s internal email service.
The BoE confirmed that following this incident, it had switched off auto-complete from its email
system – that is, staff now have to write the full name of the recipient of their email messages
rather than being automatically proposed through the Outlook auto-complete functionality –
“to preserve the security of its data.”21
Employees do not always have to steal or engage in fraudulent activities to cause harm.
Sometimes it suffices to just “fall asleep.” This happened when a bank teller was making a pay-
ment of €64.20, but as he fell asleep, he left his finger on the number 2 key, accidentally putting
through a payment of €22,222,222.22. The payment almost went through when the supervisor
who was supposed to be looking out for such mistakes allegedly failed to notice and approved
the transaction. The mistake was spotted only by another colleague who managed to correct it
before it was too late.22 As we will see, this is an example of a rather simple internal control
procedure. We discuss internal controls as one type of what we call action controls in Chapter 3,
and we discuss how tightly they should be applied in Chapter 4. The example further illustrates
that not every control problem involves fraud, yet adequate control systems must also be able to
prevent mistakes. Furthermore, when there are irregularities or control breaches, money or
incentives like bonuses are not always the motive for the wrongdoing. For example,

[…] two clerical workers at the Laguna Niguel, California-based service center of the U.S.
Immigration and Naturalization Service (INS) were accused of destroying thousands of
immigration documents, including visa applications, passports, and other papers. Accord-
ing to the probe, the clerks started shredding unprocessed paperwork after an inventory
revealed a processing backlog of about 90,000 documents. A month later, the backlog was
reported to be zero. The shredding allegedly went on for about another month to keep the
backlog at zero, until INS officials discovered the shredding spree during an evening
shift.23

Although it is not entirely clear what the clerks’ motives were, there were no bonuses
involved here, and maybe they were concerned about keeping their job and/or also not doing
their job well or being lazy and cutting corners. Nonetheless, their actions were completely
inappropriate, and thus proper control systems are needed to mitigate such undesirable
behaviors.
However, more controls should not always be equated with better controls. When copious
MCSs are stifling, they can exacerbate rather than mitigate control problems. We discuss this
further in Chapters 4 and 5, where we consider not only direct, explicit, more easily quantifia-
ble, out-of-pocket costs, but also various types of indirect, implicit costs of tightening the con-
trols. For example, when financial irregularities were discovered at Eurostat, the European
Commission’s statistical service, it was not immediately clear whether these had occurred for
the personal enrichment of those involved; instead, some argued that the “secret accounts” may
at least initially have been set up to give Eurostat a way to pay for research quickly without
going through the Commission’s cumbersome procedures. Ironically, then, while the Commis-
sion had elaborate procedures to prevent financial fraud, these procedures may not only have
proved insufficient (because they clearly could be circumvented), they may actually have made

7
Chapter 1 • Management and Control

the problem worse. Because tortuous form-filling was required to request funds, requesters had
to jump through a number of bureaucratic hoops to get anything approved, and funds delivery
was notoriously slow, commission officials and staff may have taken to cutting corners and find-
ing “creative” ways to expedite the process. Of course, these “work-arounds” should be a red
flag for possible exploitation and potential improprieties, too.24
By this point, it should be no surprise that we are claiming, but also that it is widely accepted,
that good MCSs are important. Comparing the books and articles written on management con-
trol is difficult, however, because much of the MCS language is imprecise. The term “control” as
it applies to a management function does not have a universally accepted definition. An old, nar-
row view of a MCS is that of a simple cybernetic or regulating system involving a single feedback
loop analogous to a thermostat that measures the temperature, compares the measurement with
the desired standard, and, if necessary, takes a corrective action (turn on, or off, a furnace or air
conditioner). In a MCS feedback loop, managers measure performance, compare that measure-
ment with a pre-set performance standard, and, if necessary, take corrective actions.25
In this text, however, we take a broader view. Many management controls in common use,
such as direct supervision, employee selection and retention, and codes of conduct, do not
focus on measured performance. They focus instead on encouraging, enabling, or sometimes
forcing employees to act in the organization’s best interest. This is consistent with the observa-
tion that all the above examples have one key question in common: how can organizations of
all types ensure that their employees up and down the hierarchy carry out their jobs and
responsibilities properly? Moreover, some management controls are proactive rather than
reactive. Proactive means that the controls are designed to prevent problems before the organi-
zation suffers any adverse effects on performance. Examples of proactive controls include
planning processes, required expenditure approvals, segregation of duties, and restricted
access. Management control, then, includes all the devices or systems that managers use to
ensure the behaviors and decisions of their employees are consistent with the organization’s
objectives and strategies. The systems themselves are commonly referred to as management
control systems (MCSs).
Designed properly, MCSs influence employees’ behaviors in desirable ways and, conse-
quently, increase the probability that the organization will achieve its goals. Thus, the primary
function of management control is to influence behaviors in desirable ways. The benefit of man-
agement control is the increased probability that the organization’s objectives will be achieved.

Management and control

Management control is the back end of the management process. This can be seen from the
various ways in which the broad topic of management is disaggregated.

Management
The literature includes many definitions of management. All relate to the processes of organiz-
ing resources and directing activities for the purpose of achieving organizational objectives.
Inevitably, those who study and teach management have broken the broad subject into smaller,
more discernable elements. Table 1.1 shows the most prominent classification schemes. The
first column identifies the primary management functions of the value chain: product or service
development, operations (manufacturing products or performing/delivering services), market-
ing/sales (finding buyers and making sure the products and services fulfill customer needs),
and finance (raising money). Virtually every management school offers courses focused on only
one, or only part of one, of these primary management functions.

8
 Management and control

Table 1.1 Different ways of categorizing the broad area of management

Functions Resources Processes

Product (or service) development People Objective setting

Operations Money Strategy formulation

Marketing/sales Machines Management control

Finance Information

Source: K. A. Merchant, Modern Management Control Systems: Text and Cases (Upper Saddle River, NJ: Prentice Hall, 1998), p. 3.

The second column of Table 1.1 identifies the major types of resources with which managers
must work: people, money, machines, and information. Management schools also offer courses
organized using this classification. These courses are often called human resource manage-
ment, accounting and finance, production and operations management, and information sys-
tems, respectively. These are sometimes also referred to as the support management functions. 26
The term management control appears in the third column of Table 1.1, which separates the man-
agement functions along a process involving objective setting, strategy formulation, and manage-
ment control. Control, then, is the back end of the management process. The way we use the term
management control in this text has the same meaning as the terms execution and strategy imple-
mentation. In most organizations, focusing on improving MCSs will provide higher payoffs than
will focusing on improving strategy. A Fortune study showed that 7 out of 10 CEOs who fail do so not
because of bad strategy, but because of bad execution.27 The above examples reinforce this, too.
Many management courses, including business policy, strategic management, and manage-
ment control systems, focus on elements of the management process. To focus on the control
function of management, we must distinguish it from objective setting and strategy formulation.

Objective setting
Knowledge of objectives is a prerequisite for the design of any MCS and, indeed, for any pur-
poseful activities. Objectives do not have to be quantified and do not have to be financial,
although that is how they are commonly thought of in for-profit organizations. A not-for-
profit organization’s primary objective might be to provide shelter for homeless people, for
example; but even in these organizations, there have been calls to express the achievement
of these objectives in financial or quasi-financial terms, such as social return on invest-
ment. 28 However, many for-profit organizations also have nonfinancial objectives, such as
related to sustainability or personnel development and well-being (see Chapter 16). In any
organization, however, employees must have a basic understanding of what the organiza-
tion is trying to accomplish. Otherwise, no one could claim that any of the employees’ actions
are purposive, and no one could ever support a claim that the organization was successful.
In most organizations, the objectives are known. That is not to say that all employees always
agree unanimously as to how to balance their organizations’ responsibilities to all of their
stakeholders, including owners (equity holders), debtholders, employees, suppliers, customers,
and the society at large. They rarely do.29 That said, organizations develop explicit or implicit
compromise mechanisms to resolve conflicts among stakeholders and reach some level of
agreement about the objectives they will pursue. As Jason Luckhurst, managing director of
Practicus, a UK-based project-management recruitment firm, argues:

[To achieve organizational success], it takes a clear vision around which the entire busi-
ness [can] be designed, [and I] think it is something you should be able to communicate

9
Chapter 1 • Management and Control

simply to everyone, whether a client or [an employee]. Having a simple and easily under-
stood statement of intent is vital for setting clear objectives and targets.30

Strategy formulation
Having set the firm’s strategic intentions or objectives, strategies then define how organizations
should use their resources to meet these objectives. A well-conceived strategy guides employees
in successfully pursuing their organization’s objectives; it conveys to employees what they are
supposed to be doing. Or, as Mr. Luckhurst at Practicus states:

All the planning in areas as diverse as marketing, branding, financing and training, is
designed around [our] objective – as are [our] incentive [systems]. We have a detailed road
map, but it starts with a simple vision that everyone can understand and buy into. Every-
thing else we do comes on the back of those goals. In effect, we can reverse-engineer the
business to those objectives.31

Many organizations develop formal strategies through systematic, often elaborate, planning
processes (which we discuss further in Chapter 8). Put differently, they have what can be called
an intended strategy. However, strategies can sometimes be left largely unspecified. As such,
some organizations do not have formal, written strategies; instead they try to respond to oppor-
tunities that present themselves. Major elements of these organizations’ strategies emerge from
a series of interactions between management, employees, and the environment; from decisions
made spontaneously; and from local experimentation designed to learn what works well. None-
theless, if some decision-making consistency exists, a strategy can be said to have been formed,
regardless of whether managers planned or even intended that particular consistency. In that
sense, strategic visions sometimes come about through dynamic organizational processes
rather than through formalized strategic planning.32
Not even the most elaborate strategic visions and statements are complete to the point where
they detail every desired action and contemplate every possible contingency. However, for pur-
poses of designing MCSs, it is useful to have strategies that are as specific and detailed as pos-
sible, if those strategies can be kept current. The formal strategic statements make it easier for
management both to identify the feasible management control alternatives and to implement
them effectively. The management controls can be targeted to the organization’s critical success
factors, such as developing new products, keeping costs down, or growing market share, rather
than aiming more generally at improving profitability in otherwise largely unspecified ways.
Formal strategic statements are not a sufficient condition for success, however. As Adrian
Grace, managing director of Bank of Scotland – Corporate, states:

I have seen businesses with 400-page documents outlining their strategy and it’s clear
they should have spent less time outlining the vision and more time thinking about how
they will deliver on it. You can have the best vision in the world but if you can’t put it into
effect, you are wasting your time.33

It is on the execution side of the management process that MCSs play a critical role. Jason
Luckhurst explained:

The difference between merely having a strategic vision and achieving strategic success is
having a detailed understanding of what that vision means for every level of the business –
how much funding you need, the branding and marketing strategy, which channels you will
develop, how many people you need in which areas and when and what the organizational
structure will be. It is also important to revisit the vision often and be aware of how close
you are to achieving it at any given stage. This helps everyone in the company to stay
focused.34

10
 Management and control

Management control
Management control focuses on execution, and it involves addressing the general question: Are
our employees likely to behave appropriately? This question can be decomposed into several
parts:

● First, do our employees understand what we expect of them?

● Second, will they work consistently hard and try to do what is expected of them – that is, will
they pursue the organization’s objectives in line with the strategy?
● Third, are they capable of doing a good job?

Finally, if the answer to any of these questions is negative, what can be done to solve the man-
agement control problems? All organizations who must rely on their employees to accomplish
organizational objectives must deal with these basic management control issues. Addressing
management control issues, therefore, involves reflecting on how to influence, direct, or align
employees’ behaviors toward the achievement of organizational objectives consistent with the
espoused strategy.
From a management control perspective, strategies should be viewed as useful but not
absolutely necessary to the proper design of MCSs. When strategies are formulated more
clearly, more control alternatives become feasible, and it becomes easier to implement each
form of management control effectively. Managers can, however, design and operate some
types of MCSs without having a clear strategy in mind. As Adrian Grace, managing director
of Bank of Scotland – Corporate, proffers: “If you don’t have [a strategy] but you know how to
deliver, you might still make it. Success in business is 25% strategy but 75% execution.” 35
Or, the other way around, to devise a strategy and write it down is one thing; it is another
thing entirely to make the plan work in practice. That said, there is some evidence that
organizations with formal systems for managing the execution of strategy outperform those
that do not. 36

Behavioral emphasis
Management control involves managers taking steps to help ensure that the employees do what
is best for the organization. This is an important purpose because it is people in the organiza-
tion who make things happen. Management controls are necessary to guard against the possi-
bilities that people will do something the organization does not want them to do, or fail to do
something they should do. For example, aiming to achieve greater cost control is open to ques-
tion without reference to people because costs do not control themselves; people control them.
As many examples throughout the text will illustrate, employees can work against or around
systems, thereby leaving many objectives unmet or producing unintended consequences.
This behavioral orientation has long been recognized by practitioners. For example, Roman
Stanek, chief executive of GoodData in San Francisco, a business analytics company, acknowl-
edged that:

Having a vision and having confidence doesn’t mean anything unless you’re able to com-
municate it to your team […]. The ability to communicate well didn’t come easily for me. I
always assumed that everybody would see things the same way I see them, and now I
understand it takes a lot of time to get people aligned.37

If all employees could always be relied on to do what is best for the organization, there would be
no need for a MCS. But employees are sometimes unable or unwilling to act in the organization’s
best interest, so managers must take steps to guard against the occurrence of undesirable
behaviors and encourage desirable behaviors.

11
Chapter 1 • Management and Control

Causes of management control problems

Given the behavioral focus of controls, the next logical question to ask is: What is it about the
employees on whom the organization must rely that creates the need to implement MCSs? The
causes of the needs for control can be classified into three main categories: lack of direction,
motivational problems, and personal limitations.

Lack of direction
Some employees perform inadequately simply because they do not know what the organiza-
tion wants from them. When this lack of direction occurs, the likelihood of the desired behav-
iors occurring will be haphazard or random. Thus, one function of management control
involves informing employees as to how they can direct their contributions to the fulfillment
of organizational objectives. Indeed, this is also the key point that came through in the quote
from Stanek above.
Lack of direction is not a trivial issue in many organizations, although it is often taken for
granted (as the quote from Stanek also suggests). For example, survey evidence collected by
KPMG, a big-four professional services company providing audit, tax, and advisory services,
from approximately 4,000 US employees spanning all levels of job responsibility across a wide
range of industries and organizational sizes revealed that 55% of the sample respondents had a
lack of understanding of the standards that apply to their jobs. 38 Moreover, a study of 414
World-at-Work members in mostly managerial positions at large North-American companies
suggested that 81% of the respondents believe that senior managers in their organizations
understand the value drivers of their business strategy; 46% say that middle management
understands these drivers; but just 13% believe non-management employees understand them.
This indicates that organizational goals are not cascading down to all levels in the organization.
And while 79% of the respondents in this study believed that their employees’ goals are aligned
with organizational goals, 44% also stated that employees set goals based on their own views
rather than direction from leadership.39
Another survey from KPMG asked what factors might cause managers and employees to
engage in misconduct, which, as we will see across several chapters in this text, is an impor-
tant management control problem. The answer, in fifth place and mentioned by 59% of the
respondents, was “a lack of understanding of the standards that apply to their jobs.”40 Another
survey of 5,000 respondents, including “techies” (e.g. software developers or engineers), indi-
cated that only 28% of the techies said they understood their companies’ vision compared with
(also only) 43% of non-techies.41 And, in a university one of the authors of this text is familiar
with, a staff survey revealed that only half of the employees responded affirmatively to the
question whether “they had a clear understanding of the purpose and objectives of [the univer-
sity],” whereas (also only) 68% said this to be the case for the objectives of their department.42
All told, then, it should not be taken for granted that employees have a clear understanding of
direction. To the contrary, the survey evidence suggests that a lack of direction may be quite a
common occurrence.

Motivational problems
Even if employees understand what is expected of them, some do not perform as the organi­
zation expects because of motivational problems. Motivational problems are common
because individual and organizational objectives do not naturally coincide – individuals are
self-interested.

12
 Causes of management control problems

Employees sometimes act in their own personal interest at the expense of their organiza-
tion’s interest. Frederick Taylor, one of the major figures in the scientific management movement
that took place in the early twentieth century, wrote: “Hardly a competent worker can be found
who does not devote a considerable amount of time to studying just how slowly he can work and
still convince his employer that he is going at a good pace.”43 Such effort aversion and other self-
interested behaviors are still a problem today. Gary Gill, the author of KPMG’s Fraud Barometer
for Australia, believes that broad economic conditions have a significant effect on fraud levels:
“It goes up following a boom period. People want to maintain their standard of living, even if it
means criminal activity.”44 Another survey suggests that fraud is on the increase in the United
Kingdom’s public sector as austerity programs imply personnel reductions and fewer resources
being spent on internal controls, according to a report from PwC, a big-four competitor of
KPMG.45
Overall, survey evidence suggests that wasting, mismanaging, and misappropriating organi-
zational resources, among other types of employee misconduct, are prevalent in most organiza-
tions.46 Even ostensibly inconsequential forms of wasting time on the job can have high costs.
Surfing the Internet while on the job, for example, has been estimated to have cost US employ-
ers in the billions of dollars per year.47 All told, survey participants in the most recent report by
the Association of Certified Fraud Examiners estimated that the typical organization loses 5%
of its annual revenue to fraud. Applied to the estimated 2014 Gross World Product, this figure
translates to a potential global fraud loss of more than $3.7 trillion.48 Staggering as these statis-
tics may be, they suggest that it should not be taken for granted that employees will always reli-
ably act with the best interest of their organizations in mind. Because of this, the costs to
organizations are nontrivial, to say the least.
Indeed, the most serious forms of employees’ misdirected behaviors, such as fraud, can have
severe impacts, including deteriorated employee morale, impaired business relations, lost rev-
enues from damaged reputations, investments in improving control procedures, legal fees and
settlements of litigation, fines and penalties to regulatory agencies, and losses from plummet-
ing stock prices. Many of the examples that we included at the start of this chapter illustrate
this,49 and various fraud or integrity surveys, some of which have been conducted over many
years by major organizations, reinforce this with statistics.50
These huge fraud costs can be traced back to human weaknesses but also, and importantly,
as we will see later in this text, to the lack of effective MCSs. Anecdotal assertions abound. For
example, one manager claimed, rather brashly, that “every single person in your [business] is
trying to steal from you.”51 Another manager’s estimate, while more measured, still suggests
that:
Between 10 and 20% of a company’s employees will steal anything that isn’t nailed down.
Another 20% will never steal; they would say it is morally wrong. The vast majority of peo-
ple are situationally honest; they won’t steal if there are proper controls.52

Regardless of these opinions, one might argue that “stealing” is a rather literal, peculiar, and
perhaps too extreme or negative type of behavior to illustrate self-interest. Taking “stealing”
less literally, many other forms of misaligned behaviors occur when employees, for example,
manipulate their performance reports, either by falsifying the data or by taking decisions that
artificially boost performance, with the intention of earning higher, but undeserved, incentive
pay (see also Chapter 15). The most common cause of this is reported to be pressure to do
“whatever it takes” to meet business targets.53 This goes to the heart of results controls (which
we discuss in Chapter 2) and related performance targets (Chapter 8) and incentives (Chapter 9).
Well-designed MCSs are needed to protect organizations against these behaviors.
However, in addition to focusing on how MCSs can be used to prevent or mitigate these
negative or dysfunctional behaviors, this text’s emphasis is also, even primarily, on how MCSs

13
Chapter 1 • Management and Control

can be employed to motivate positive or productive behaviors; that is, how they encourage
employees to work consistently hard to accomplish organizational objectives. As we will dis-
cuss further below, whenever feasible, motivation should be the primary focus of effective
MCSs, most commonly brought about through results controls (Chapter 2) while also providing
any necessary behavioral constraints and/or mitigating any behavioral displacements through
a well-designed combination or “configuration” of action and personnel/cultural controls
(Chapter 3).54

Personal limitations
The final behavioral problem that MCSs must address occurs when employees who know
what is expected of them, and may be highly motivated to perform well, are simply unable to
perform well because of any number of other limitations. Some of these limitations are per-
son-specific. They may be caused by a lack of aptitude, training, experience, stamina, or
knowledge for the tasks at hand. An example is the too-common situation where employees
are promoted above their level of competence; that is, when employees are “over their
heads.” Sometimes jobs are just not designed properly, causing even the most physically fit
and apt employees to become tired or stressed, leading to on-the-job accidents and decision
errors.
Regarding lack of training, for example, Illinois-based Ace Hardware was forced to restate
its earnings for four fiscal years because of a $152 million accounting error made by a poorly
trained employee, who incorrectly entered accounts in ledgers in the Finance department at
the company’s headquarters. Ace CEO Ray Griffith stated: “We are embarrassed by it. We did
not provide the training, oversight or checks and balances to help that person do (the) job.”55
Errors such as these are not uncommon. For example, when Bank of America, a global US-
based bank, disclosed that it had made a significant error in the way it calculates a crucial
measure of its financial health, which led the bank to report that it had $4 billion more capital
than it actually had, the error raised serious questions about the “quality of its accounting
employees.”56 Similarly, at Tesco, the largest UK supermarket chain, when it announced to
have overstated its expected profits by £250 million, one commentator observed that “even if
there was no fraudulent intent and the problems stem from a misunderstanding of the rules
[…], the apparent scale of the error suggests that, at the very least, Tesco’s internal controls
need a thorough overhaul.”57
Moreover, research in psychology and behavioral economics suggests that all individuals,
even intelligent, well-trained, and experienced ones, face limitations in their abilities to per-
ceive new problems, to remember important facts, and to process information properly (or
rationally). In looking at the future, it has been shown, for example, that people tend to overes-
timate the likelihood of common events and events that have occurred relatively recently (both
of which are easier to remember) as compared with relatively rare events and those that have
not occurred recently. Such biases may, for example, affect employees’ propensities to assess
risks by biasing their estimates of either the likelihood or impact, or both, of certain risk events.
Sometimes training can be used to reduce the severity of these limitations. Nonetheless, these
limitations are a problem because they reduce the probability that employees will make
the correct decisions or that they will correctly assess the problems about which decisions
should be made.58
These three management control problems – lack of direction, motivational problems, and
personal limitations – can obviously occur simultaneously and in any combination. However,
all that is required to call for the necessity of effective MCSs is that at least one of these prob-
lems occurs, which will almost inevitably be the case in complex organizations as the above
arguments and examples have suggested.

14
 Control problem avoidance

Characteristics of good management control

To have a high probability of success, organizations must therefore maintain good management
control. Good control means that management can be reasonably confident that no major
unpleasant surprises will occur. The label out of control is used to describe a situation where
there is a high probability of poor performance, either overall or in a specific performance area,
despite having a sound strategy in place.
However, even good management control still allows for some probability of failure because
perfect control does not exist except perhaps in very unusual circumstances. Perfect control
would require complete assurance that all control systems are foolproof and all individuals on
whom the organization must rely always act in the best way possible. Perfect control is obvi-
ously not a realistic expectation because it is virtually impossible to install MCSs so well
designed that they guarantee good behaviors. Furthermore, because MCSs are costly, it is
rarely, if ever, cost effective to try and implement enough controls even to approach the ideal-
ized perfect control.
The cost of not having a perfect control system can be called a control loss. It is the difference
between the performance that is theoretically possible given the strategy selected and the per-
formance that can be reasonably expected with the MCSs in place. More or better MCSs should
be implemented only if the benefits by which they would reduce the control loss exceed the
costs. Except in cases where the consequences of failure are incalculable, optimal control can be
said to have been achieved if the control losses are expected to be smaller than the cost of imple-
menting more controls. Because of control costs, perfect control is rarely the optimal outcome
(or even conceivable). The benchmark, therefore, is adequate control rather than perfect con-
trol, except again in cases where failure is not an option and where control must be uncompro-
misingly focused on avoiding failure at any cost (such as in nuclear plants).
Assessing whether good control has been achieved must be future-oriented and objectives-
driven. It must be future-oriented because the goal is to have no unpleasant surprises in the
future; the past is not relevant except as a guide to the future, such as in terms of experiences or
lessons learned from control failures. It must be objectives-driven because the objectives repre-
sent what the organization seeks to attain. Nonetheless, assessing whether good control has
been achieved is difficult and subjective. It is difficult because the adequacy of management
control must be measured against a future that is inevitably difficult to predict, as are predic-
tions of possible unintended consequences of the controls. Good control also is not established
over an activity or entity with multiple objectives unless performance on all significant dimen-
sions has been considered. As difficult as this assessment of management control is, however, it
should be done because organizational success depends on good MCSs.
As the examples at the beginning of this chapter illustrate, organizations that fail to imple-
ment adequate MCSs can suffer loss or impairment of assets, deficient revenues, excessive costs,
inaccurate records, or reports that can lead to poor decisions, legal sanctions, or business dis-
ruptions. At the extreme, organizations that do not control performance on one or more critical
dimensions can fail.

Control problem avoidance

Implementing some combination of the behavior-influencing devices commonly known as

MCSs is not always the best way to achieve good control; sometimes the problems can be
avoided. Avoidance means eliminating the possibility that the control problems will occur.

15
Chapter 1 • Management and Control

Organizations can never avoid all their control problems, but they can often avoid some of them
by limiting exposure to certain types of problems and problem sources, or by reducing the max-
imum potential loss if the problems occur. Four prominent avoidance strategies are activity
elimination, automation, centralization, and risk sharing.

Activity elimination
Managers can sometimes avoid the control problems associated with a particular entity or
activity by turning over the potential risks, and the associated profits, to a third party through
such mechanisms as subcontracting, licensing agreements, or divestment. This form of avoid-
ance is called activity elimination.
Managers who are not able to control certain activities, perhaps because they do not have the
required resources, because they do not have a good understanding of the required processes,
or because they face legal or structural limitations, are those most likely to eliminate activities.
Here is an example:

When the German financial regulator ordered Deutsche Bank “to do more to ensure that
commodity prices cannot be manipulated by its traders,” the bank responded that it “has
since shut trading desks dedicated to energy, agriculture, dry bulk and freight and base
metals. Other commodity businesses have been transferred to Deutsche’s non-core bank
where they will be wound down or sold, while some parts remain active,” adding that “we
significantly scaled back our commodities business and exited entirely non-precious met-
als trading. As we have previously said, we continue to cooperate with authorities in their
industrywide review of certain benchmarks and are investing to further improve our control
environment.”59

When managers do not wish to avoid completely an area that they cannot control well, they are
wise at least to limit their investments, and hence (some of) their risks, in that area. An example is
cloud computing, which means that companies obtain computing resources (processing, storage,
messaging, databases, and so on) from outside, and pay only for what they use, rather than
develop their own computing infrastructure and run their own systems. With the increase in
demand for servers to store and process data, many companies would need to multiply their
server capacity manyfold, for which they sometimes have neither the money nor the skills, nor the
interest, because doing so falls outside of most companies’ core competencies. By using cloud
computing services, firms can leave all that to be managed by those who have the competencies
and, hence, can provide essential control over the process. Whereas this does not eliminate all
risks, it partially avoids some control problems related to data management and all that it entails.
Indeed, many companies have been expanding their use of cloud services, with growing
numbers running systems such as email services, human resources, and administrative pro-
cesses via the cloud, as well as data storage and backup. James Petter, UK managing director of
EMC, the data storage and software group, said: “Organizations move to the cloud for a number
of reasons, but they most often relate to agility, control and efficiency” (italics added). “More
than just hosting services, the cloud is ensuring availability and performance, protecting data
and helping businesses with change management by deploying functions and lessening disrup-
tion,” Joe King, senior vice-president at JDA, the supply chain software group, added.60
The economics-based literature that focuses on whether specific activities (transactions) can
be controlled more effectively through markets (external) or through organizational hierarchies
(internal) is known as transaction cost economics. A detailed examination of the theories and
evidence in this field of study is outside the scope of this text.61 We just note that the cost/benefit
tradeoffs of dealing with management control issues internally do not always favor arms-length,
market-based transactions or inter-organizational arrangements, and thus a careful balance has

16
Another random document with
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 DANCE ON STILTS AT THE GIRLS’ UNYAGO, NIUCHI

Newala, too, suffers from the distance of its water-supply—at least

the Newala of to-day does; there was once another Newala in a lovely
valley at the foot of the plateau. I visited it and found scarcely a trace
of houses, only a Christian cemetery, with the graves of several
missionaries and their converts, remaining as a monument of its
former glories. But the surroundings are wonderfully beautiful. A
thick grove of splendid mango-trees closes in the weather-worn
crosses and headstones; behind them, combining the useful and the
agreeable, is a whole plantation of lemon-trees covered with ripe
fruit; not the small African kind, but a much larger and also juicier
imported variety, which drops into the hands of the passing traveller,
without calling for any exertion on his part. Old Newala is now under
the jurisdiction of the native pastor, Daudi, at Chingulungulu, who,
as I am on very friendly terms with him, allows me, as a matter of
course, the use of this lemon-grove during my stay at Newala.
 FEET MUTILATED BY THE RAVAGES OF THE “JIGGER”
(Sarcopsylla penetrans)

The water-supply of New Newala is in the bottom of the valley,

some 1,600 feet lower down. The way is not only long and fatiguing,
but the water, when we get it, is thoroughly bad. We are suffering not
only from this, but from the fact that the arrangements at Newala are
nothing short of luxurious. We have a separate kitchen—a hut built
against the boma palisade on the right of the baraza, the interior of
which is not visible from our usual position. Our two cooks were not
long in finding this out, and they consequently do—or rather neglect
to do—what they please. In any case they do not seem to be very
particular about the boiling of our drinking-water—at least I can
attribute to no other cause certain attacks of a dysenteric nature,
from which both Knudsen and I have suffered for some time. If a
man like Omari has to be left unwatched for a moment, he is capable
of anything. Besides this complaint, we are inconvenienced by the
state of our nails, which have become as hard as glass, and crack on
the slightest provocation, and I have the additional infliction of
pimples all over me. As if all this were not enough, we have also, for
the last week been waging war against the jigger, who has found his
Eldorado in the hot sand of the Makonde plateau. Our men are seen
all day long—whenever their chronic colds and the dysentery likewise
raging among them permit—occupied in removing this scourge of
Africa from their feet and trying to prevent the disastrous
consequences of its presence. It is quite common to see natives of
this place with one or two toes missing; many have lost all their toes,
or even the whole front part of the foot, so that a well-formed leg
ends in a shapeless stump. These ravages are caused by the female of
Sarcopsylla penetrans, which bores its way under the skin and there
develops an egg-sac the size of a pea. In all books on the subject, it is
stated that one’s attention is called to the presence of this parasite by
an intolerable itching. This agrees very well with my experience, so
far as the softer parts of the sole, the spaces between and under the
toes, and the side of the foot are concerned, but if the creature
penetrates through the harder parts of the heel or ball of the foot, it
may escape even the most careful search till it has reached maturity.
Then there is no time to be lost, if the horrible ulceration, of which
we see cases by the dozen every day, is to be prevented. It is much
easier, by the way, to discover the insect on the white skin of a
European than on that of a native, on which the dark speck scarcely
shows. The four or five jiggers which, in spite of the fact that I
constantly wore high laced boots, chose my feet to settle in, were
taken out for me by the all-accomplished Knudsen, after which I
thought it advisable to wash out the cavities with corrosive
sublimate. The natives have a different sort of disinfectant—they fill
the hole with scraped roots. In a tiny Makua village on the slope of
the plateau south of Newala, we saw an old woman who had filled all
the spaces under her toe-nails with powdered roots by way of
prophylactic treatment. What will be the result, if any, who can say?
The rest of the many trifling ills which trouble our existence are
really more comic than serious. In the absence of anything else to
smoke, Knudsen and I at last opened a box of cigars procured from
the Indian store-keeper at Lindi, and tried them, with the most
distressing results. Whether they contain opium or some other
narcotic, neither of us can say, but after the tenth puff we were both
“off,” three-quarters stupefied and unspeakably wretched. Slowly we
recovered—and what happened next? Half-an-hour later we were
once more smoking these poisonous concoctions—so insatiable is the
craving for tobacco in the tropics.
Even my present attacks of fever scarcely deserve to be taken
seriously. I have had no less than three here at Newala, all of which
have run their course in an incredibly short time. In the early
afternoon, I am busy with my old natives, asking questions and
making notes. The strong midday coffee has stimulated my spirits to
an extraordinary degree, the brain is active and vigorous, and work
progresses rapidly, while a pleasant warmth pervades the whole
body. Suddenly this gives place to a violent chill, forcing me to put on
my overcoat, though it is only half-past three and the afternoon sun
is at its hottest. Now the brain no longer works with such acuteness
and logical precision; more especially does it fail me in trying to
establish the syntax of the difficult Makua language on which I have
ventured, as if I had not enough to do without it. Under the
circumstances it seems advisable to take my temperature, and I do
so, to save trouble, without leaving my seat, and while going on with
my work. On examination, I find it to be 101·48°. My tutors are
abruptly dismissed and my bed set up in the baraza; a few minutes
later I am in it and treating myself internally with hot water and
lemon-juice.
Three hours later, the thermometer marks nearly 104°, and I make
them carry me back into the tent, bed and all, as I am now perspiring
heavily, and exposure to the cold wind just beginning to blow might
mean a fatal chill. I lie still for a little while, and then find, to my
great relief, that the temperature is not rising, but rather falling. This
is about 7.30 p.m. At 8 p.m. I find, to my unbounded astonishment,
that it has fallen below 98·6°, and I feel perfectly well. I read for an
hour or two, and could very well enjoy a smoke, if I had the
wherewithal—Indian cigars being out of the question.
Having no medical training, I am at a loss to account for this state
of things. It is impossible that these transitory attacks of high fever
should be malarial; it seems more probable that they are due to a
kind of sunstroke. On consulting my note-book, I become more and
more inclined to think this is the case, for these attacks regularly
follow extreme fatigue and long exposure to strong sunshine. They at
least have the advantage of being only short interruptions to my
work, as on the following morning I am always quite fresh and fit.
My treasure of a cook is suffering from an enormous hydrocele which
makes it difficult for him to get up, and Moritz is obliged to keep in
the dark on account of his inflamed eyes. Knudsen’s cook, a raw boy
from somewhere in the bush, knows still less of cooking than Omari;
consequently Nils Knudsen himself has been promoted to the vacant
post. Finding that we had come to the end of our supplies, he began
by sending to Chingulungulu for the four sucking-pigs which we had
bought from Matola and temporarily left in his charge; and when
they came up, neatly packed in a large crate, he callously slaughtered
the biggest of them. The first joint we were thoughtless enough to
entrust for roasting to Knudsen’s mshenzi cook, and it was
consequently uneatable; but we made the rest of the animal into a
jelly which we ate with great relish after weeks of underfeeding,
consuming incredible helpings of it at both midday and evening
meals. The only drawback is a certain want of variety in the tinned
vegetables. Dr. Jäger, to whom the Geographical Commission
entrusted the provisioning of the expeditions—mine as well as his
own—because he had more time on his hands than the rest of us,
seems to have laid in a huge stock of Teltow turnips,[46] an article of
food which is all very well for occasional use, but which quickly palls
when set before one every day; and we seem to have no other tins
left. There is no help for it—we must put up with the turnips; but I
am certain that, once I am home again, I shall not touch them for ten
years to come.
Amid all these minor evils, which, after all, go to make up the
genuine flavour of Africa, there is at least one cheering touch:
Knudsen has, with the dexterity of a skilled mechanic, repaired my 9
× 12 cm. camera, at least so far that I can use it with a little care.
How, in the absence of finger-nails, he was able to accomplish such a
ticklish piece of work, having no tool but a clumsy screw-driver for
taking to pieces and putting together again the complicated
mechanism of the instantaneous shutter, is still a mystery to me; but
he did it successfully. The loss of his finger-nails shows him in a light
contrasting curiously enough with the intelligence evinced by the
above operation; though, after all, it is scarcely surprising after his
ten years’ residence in the bush. One day, at Lindi, he had occasion
to wash a dog, which must have been in need of very thorough
cleansing, for the bottle handed to our friend for the purpose had an
extremely strong smell. Having performed his task in the most
conscientious manner, he perceived with some surprise that the dog
did not appear much the better for it, and was further surprised by
finding his own nails ulcerating away in the course of the next few
days. “How was I to know that carbolic acid has to be diluted?” he
mutters indignantly, from time to time, with a troubled gaze at his
mutilated finger-tips.
 Since we came to Newala we have been making excursions in all
directions through the surrounding country, in accordance with old
habit, and also because the akida Sefu did not get together the tribal
elders from whom I wanted information so speedily as he had
promised. There is, however, no harm done, as, even if seen only
from the outside, the country and people are interesting enough.
The Makonde plateau is like a large rectangular table rounded off
at the corners. Measured from the Indian Ocean to Newala, it is
about seventy-five miles long, and between the Rovuma and the
Lukuledi it averages fifty miles in breadth, so that its superficial area
is about two-thirds of that of the kingdom of Saxony. The surface,
however, is not level, but uniformly inclined from its south-western
edge to the ocean. From the upper edge, on which Newala lies, the
eye ranges for many miles east and north-east, without encountering
any obstacle, over the Makonde bush. It is a green sea, from which
here and there thick clouds of smoke rise, to show that it, too, is
inhabited by men who carry on their tillage like so many other
primitive peoples, by cutting down and burning the bush, and
manuring with the ashes. Even in the radiant light of a tropical day
such a fire is a grand sight.
Much less effective is the impression produced just now by the
great western plain as seen from the edge of the plateau. As often as
time permits, I stroll along this edge, sometimes in one direction,
sometimes in another, in the hope of finding the air clear enough to
let me enjoy the view; but I have always been disappointed.
Wherever one looks, clouds of smoke rise from the burning bush,
and the air is full of smoke and vapour. It is a pity, for under more
favourable circumstances the panorama of the whole country up to
the distant Majeje hills must be truly magnificent. It is of little use
taking photographs now, and an outline sketch gives a very poor idea
of the scenery. In one of these excursions I went out of my way to
make a personal attempt on the Makonde bush. The present edge of
the plateau is the result of a far-reaching process of destruction
through erosion and denudation. The Makonde strata are
everywhere cut into by ravines, which, though short, are hundreds of
yards in depth. In consequence of the loose stratification of these
beds, not only are the walls of these ravines nearly vertical, but their
upper end is closed by an equally steep escarpment, so that the
western edge of the Makonde plateau is hemmed in by a series of
deep, basin-like valleys. In order to get from one side of such a ravine
to the other, I cut my way through the bush with a dozen of my men.
It was a very open part, with more grass than scrub, but even so the
short stretch of less than two hundred yards was very hard work; at
the end of it the men’s calicoes were in rags and they themselves
bleeding from hundreds of scratches, while even our strong khaki
suits had not escaped scatheless.

NATIVE PATH THROUGH THE MAKONDE BUSH, NEAR

MAHUTA

I see increasing reason to believe that the view formed some time
back as to the origin of the Makonde bush is the correct one. I have
no doubt that it is not a natural product, but the result of human
occupation. Those parts of the high country where man—as a very
slight amount of practice enables the eye to perceive at once—has not
yet penetrated with axe and hoe, are still occupied by a splendid
timber forest quite able to sustain a comparison with our mixed
forests in Germany. But wherever man has once built his hut or tilled
his field, this horrible bush springs up. Every phase of this process
may be seen in the course of a couple of hours’ walk along the main
road. From the bush to right or left, one hears the sound of the axe—
not from one spot only, but from several directions at once. A few
steps further on, we can see what is taking place. The brush has been
cut down and piled up in heaps to the height of a yard or more,
between which the trunks of the large trees stand up like the last
pillars of a magnificent ruined building. These, too, present a
melancholy spectacle: the destructive Makonde have ringed them—
cut a broad strip of bark all round to ensure their dying off—and also
piled up pyramids of brush round them. Father and son, mother and
son-in-law, are chopping away perseveringly in the background—too
busy, almost, to look round at the white stranger, who usually excites
so much interest. If you pass by the same place a week later, the piles
of brushwood have disappeared and a thick layer of ashes has taken
the place of the green forest. The large trees stretch their
smouldering trunks and branches in dumb accusation to heaven—if
they have not already fallen and been more or less reduced to ashes,
perhaps only showing as a white stripe on the dark ground.
This work of destruction is carried out by the Makonde alike on the
virgin forest and on the bush which has sprung up on sites already
cultivated and deserted. In the second case they are saved the trouble
of burning the large trees, these being entirely absent in the
secondary bush.
After burning this piece of forest ground and loosening it with the
hoe, the native sows his corn and plants his vegetables. All over the
country, he goes in for bed-culture, which requires, and, in fact,
receives, the most careful attention. Weeds are nowhere tolerated in
the south of German East Africa. The crops may fail on the plains,
where droughts are frequent, but never on the plateau with its
abundant rains and heavy dews. Its fortunate inhabitants even have
the satisfaction of seeing the proud Wayao and Wamakua working
for them as labourers, driven by hunger to serve where they were
accustomed to rule.
But the light, sandy soil is soon exhausted, and would yield no
harvest the second year if cultivated twice running. This fact has
been familiar to the native for ages; consequently he provides in
time, and, while his crop is growing, prepares the next plot with axe
and firebrand. Next year he plants this with his various crops and
lets the first piece lie fallow. For a short time it remains waste and
desolate; then nature steps in to repair the destruction wrought by
man; a thousand new growths spring out of the exhausted soil, and
even the old stumps put forth fresh shoots. Next year the new growth
is up to one’s knees, and in a few years more it is that terrible,
impenetrable bush, which maintains its position till the black
occupier of the land has made the round of all the available sites and
come back to his starting point.
The Makonde are, body and soul, so to speak, one with this bush.
According to my Yao informants, indeed, their name means nothing
else but “bush people.” Their own tradition says that they have been
settled up here for a very long time, but to my surprise they laid great
stress on an original immigration. Their old homes were in the
south-east, near Mikindani and the mouth of the Rovuma, whence
their peaceful forefathers were driven by the continual raids of the
Sakalavas from Madagascar and the warlike Shirazis[47] of the coast,
to take refuge on the almost inaccessible plateau. I have studied
African ethnology for twenty years, but the fact that changes of
population in this apparently quiet and peaceable corner of the earth
could have been occasioned by outside enterprises taking place on
the high seas, was completely new to me. It is, no doubt, however,
correct.
The charming tribal legend of the Makonde—besides informing us
of other interesting matters—explains why they have to live in the
thickest of the bush and a long way from the edge of the plateau,
instead of making their permanent homes beside the purling brooks
and springs of the low country.
“The place where the tribe originated is Mahuta, on the southern
side of the plateau towards the Rovuma, where of old time there was
nothing but thick bush. Out of this bush came a man who never
washed himself or shaved his head, and who ate and drank but little.
He went out and made a human figure from the wood of a tree
growing in the open country, which he took home to his abode in the
bush and there set it upright. In the night this image came to life and
was a woman. The man and woman went down together to the
Rovuma to wash themselves. Here the woman gave birth to a still-
born child. They left that place and passed over the high land into the
valley of the Mbemkuru, where the woman had another child, which
was also born dead. Then they returned to the high bush country of
Mahuta, where the third child was born, which lived and grew up. In
course of time, the couple had many more children, and called
themselves Wamatanda. These were the ancestral stock of the
Makonde, also called Wamakonde,[48] i.e., aborigines. Their
forefather, the man from the bush, gave his children the command to
bury their dead upright, in memory of the mother of their race who
was cut out of wood and awoke to life when standing upright. He also
warned them against settling in the valleys and near large streams,
for sickness and death dwelt there. They were to make it a rule to
have their huts at least an hour’s walk from the nearest watering-
place; then their children would thrive and escape illness.”
The explanation of the name Makonde given by my informants is
somewhat different from that contained in the above legend, which I
extract from a little book (small, but packed with information), by
Pater Adams, entitled Lindi und sein Hinterland. Otherwise, my
results agree exactly with the statements of the legend. Washing?
Hapana—there is no such thing. Why should they do so? As it is, the
supply of water scarcely suffices for cooking and drinking; other
people do not wash, so why should the Makonde distinguish himself
by such needless eccentricity? As for shaving the head, the short,
woolly crop scarcely needs it,[49] so the second ancestral precept is
likewise easy enough to follow. Beyond this, however, there is
nothing ridiculous in the ancestor’s advice. I have obtained from
various local artists a fairly large number of figures carved in wood,
ranging from fifteen to twenty-three inches in height, and
representing women belonging to the great group of the Mavia,
Makonde, and Matambwe tribes. The carving is remarkably well
done and renders the female type with great accuracy, especially the
keloid ornamentation, to be described later on. As to the object and
meaning of their works the sculptors either could or (more probably)
would tell me nothing, and I was forced to content myself with the
scanty information vouchsafed by one man, who said that the figures
were merely intended to represent the nembo—the artificial
deformations of pelele, ear-discs, and keloids. The legend recorded
by Pater Adams places these figures in a new light. They must surely
be more than mere dolls; and we may even venture to assume that
they are—though the majority of present-day Makonde are probably
unaware of the fact—representations of the tribal ancestress.
 The references in the legend to the descent from Mahuta to the
Rovuma, and to a journey across the highlands into the Mbekuru
valley, undoubtedly indicate the previous history of the tribe, the
travels of the ancestral pair typifying the migrations of their
descendants. The descent to the neighbouring Rovuma valley, with
its extraordinary fertility and great abundance of game, is intelligible
at a glance—but the crossing of the Lukuledi depression, the ascent
to the Rondo Plateau and the descent to the Mbemkuru, also lie
within the bounds of probability, for all these districts have exactly
the same character as the extreme south. Now, however, comes a
point of especial interest for our bacteriological age. The primitive
Makonde did not enjoy their lives in the marshy river-valleys.
Disease raged among them, and many died. It was only after they
had returned to their original home near Mahuta, that the health
conditions of these people improved. We are very apt to think of the
African as a stupid person whose ignorance of nature is only equalled
by his fear of it, and who looks on all mishaps as caused by evil
spirits and malignant natural powers. It is much more correct to
assume in this case that the people very early learnt to distinguish
districts infested with malaria from those where it is absent.
This knowledge is crystallized in the
ancestral warning against settling in the
valleys and near the great waters, the
dwelling-places of disease and death. At the
same time, for security against the hostile
Mavia south of the Rovuma, it was enacted
that every settlement must be not less than a
certain distance from the southern edge of the
plateau. Such in fact is their mode of life at the
present day. It is not such a bad one, and
certainly they are both safer and more
comfortable than the Makua, the recent
intruders from the south, who have made USUAL METHOD OF
good their footing on the western edge of the CLOSING HUT-DOOR
plateau, extending over a fairly wide belt of
country. Neither Makua nor Makonde show in their dwellings
anything of the size and comeliness of the Yao houses in the plain,
especially at Masasi, Chingulungulu and Zuza’s. Jumbe Chauro, a
Makonde hamlet not far from Newala, on the road to Mahuta, is the
most important settlement of the tribe I have yet seen, and has fairly
spacious huts. But how slovenly is their construction compared with
the palatial residences of the elephant-hunters living in the plain.
The roofs are still more untidy than in the general run of huts during
the dry season, the walls show here and there the scanty beginnings
or the lamentable remains of the mud plastering, and the interior is a
veritable dog-kennel; dirt, dust and disorder everywhere. A few huts
only show any attempt at division into rooms, and this consists
merely of very roughly-made bamboo partitions. In one point alone
have I noticed any indication of progress—in the method of fastening
the door. Houses all over the south are secured in a simple but
ingenious manner. The door consists of a set of stout pieces of wood
or bamboo, tied with bark-string to two cross-pieces, and moving in
two grooves round one of the door-posts, so as to open inwards. If
the owner wishes to leave home, he takes two logs as thick as a man’s
upper arm and about a yard long. One of these is placed obliquely
against the middle of the door from the inside, so as to form an angle
of from 60° to 75° with the ground. He then places the second piece
horizontally across the first, pressing it downward with all his might.
It is kept in place by two strong posts planted in the ground a few
inches inside the door. This fastening is absolutely safe, but of course
cannot be applied to both doors at once, otherwise how could the
owner leave or enter his house? I have not yet succeeded in finding
out how the back door is fastened.

MAKONDE LOCK AND KEY AT JUMBE CHAURO

 This is the general way of closing a house. The Makonde at Jumbe
Chauro, however, have a much more complicated, solid and original
one. Here, too, the door is as already described, except that there is
only one post on the inside, standing by itself about six inches from
one side of the doorway. Opposite this post is a hole in the wall just
large enough to admit a man’s arm. The door is closed inside by a
large wooden bolt passing through a hole in this post and pressing
with its free end against the door. The other end has three holes into
which fit three pegs running in vertical grooves inside the post. The
door is opened with a wooden key about a foot long, somewhat
curved and sloped off at the butt; the other end has three pegs
corresponding to the holes, in the bolt, so that, when it is thrust
through the hole in the wall and inserted into the rectangular
opening in the post, the pegs can be lifted and the bolt drawn out.[50]

MODE OF INSERTING THE KEY

With no small pride first one householder and then a second

showed me on the spot the action of this greatest invention of the
Makonde Highlands. To both with an admiring exclamation of
“Vizuri sana!” (“Very fine!”). I expressed the wish to take back these
marvels with me to Ulaya, to show the Wazungu what clever fellows
the Makonde are. Scarcely five minutes after my return to camp at
Newala, the two men came up sweating under the weight of two
heavy logs which they laid down at my feet, handing over at the same
time the keys of the fallen fortress. Arguing, logically enough, that if
the key was wanted, the lock would be wanted with it, they had taken
their axes and chopped down the posts—as it never occurred to them
to dig them out of the ground and so bring them intact. Thus I have
two badly damaged specimens, and the owners, instead of praise,
come in for a blowing-up.
The Makua huts in the environs of Newala are especially
miserable; their more than slovenly construction reminds one of the
temporary erections of the Makua at Hatia’s, though the people here
have not been concerned in a war. It must therefore be due to
congenital idleness, or else to the absence of a powerful chief. Even
the baraza at Mlipa’s, a short hour’s walk south-east of Newala,
shares in this general neglect. While public buildings in this country
are usually looked after more or less carefully, this is in evident
danger of being blown over by the first strong easterly gale. The only
attractive object in this whole district is the grave of the late chief
Mlipa. I visited it in the morning, while the sun was still trying with
partial success to break through the rolling mists, and the circular
grove of tall euphorbias, which, with a broken pot, is all that marks
the old king’s resting-place, impressed one with a touch of pathos.
Even my very materially-minded carriers seemed to feel something
of the sort, for instead of their usual ribald songs, they chanted
solemnly, as we marched on through the dense green of the Makonde
bush:—
 “We shall arrive with the great master; we stand in a row and have
no fear about getting our food and our money from the Serkali (the
Government). We are not afraid; we are going along with the great
master, the lion; we are going down to the coast and back.”
With regard to the characteristic features of the various tribes here
on the western edge of the plateau, I can arrive at no other
conclusion than the one already come to in the plain, viz., that it is
impossible for anyone but a trained anthropologist to assign any
given individual at once to his proper tribe. In fact, I think that even
an anthropological specialist, after the most careful examination,
might find it a difficult task to decide. The whole congeries of peoples
collected in the region bounded on the west by the great Central
African rift, Tanganyika and Nyasa, and on the east by the Indian
Ocean, are closely related to each other—some of their languages are
only distinguished from one another as dialects of the same speech,
and no doubt all the tribes present the same shape of skull and
structure of skeleton. Thus, surely, there can be no very striking
differences in outward appearance.
 Even did such exist, I should have no time
to concern myself with them, for day after day,
I have to see or hear, as the case may be—in
any case to grasp and record—an
extraordinary number of ethnographic
phenomena. I am almost disposed to think it
fortunate that some departments of inquiry, at
least, are barred by external circumstances.
Chief among these is the subject of iron-
working. We are apt to think of Africa as a
country where iron ore is everywhere, so to
speak, to be picked up by the roadside, and
where it would be quite surprising if the
inhabitants had not learnt to smelt the
material ready to their hand. In fact, the
knowledge of this art ranges all over the
continent, from the Kabyles in the north to the
Kafirs in the south. Here between the Rovuma
and the Lukuledi the conditions are not so
favourable. According to the statements of the
Makonde, neither ironstone nor any other
form of iron ore is known to them. They have
not therefore advanced to the art of smelting
the metal, but have hitherto bought all their
THE ANCESTRESS OF
THE MAKONDE
iron implements from neighbouring tribes.
Even in the plain the inhabitants are not much
better off. Only one man now living is said to
understand the art of smelting iron. This old fundi lives close to
Huwe, that isolated, steep-sided block of granite which rises out of
the green solitude between Masasi and Chingulungulu, and whose
jagged and splintered top meets the traveller’s eye everywhere. While
still at Masasi I wished to see this man at work, but was told that,
frightened by the rising, he had retired across the Rovuma, though
he would soon return. All subsequent inquiries as to whether the
fundi had come back met with the genuine African answer, “Bado”
(“Not yet”).
 BRAZIER

Some consolation was afforded me by a brassfounder, whom I

came across in the bush near Akundonde’s. This man is the favourite
of women, and therefore no doubt of the gods; he welds the glittering
brass rods purchased at the coast into those massive, heavy rings
which, on the wrists and ankles of the local fair ones, continually give
me fresh food for admiration. Like every decent master-craftsman he
had all his tools with him, consisting of a pair of bellows, three
crucibles and a hammer—nothing more, apparently. He was quite
willing to show his skill, and in a twinkling had fixed his bellows on
the ground. They are simply two goat-skins, taken off whole, the four
legs being closed by knots, while the upper opening, intended to
admit the air, is kept stretched by two pieces of wood. At the lower
end of the skin a smaller opening is left into which a wooden tube is
stuck. The fundi has quickly borrowed a heap of wood-embers from
the nearest hut; he then fixes the free ends of the two tubes into an
earthen pipe, and clamps them to the ground by means of a bent
piece of wood. Now he fills one of his small clay crucibles, the dross
on which shows that they have been long in use, with the yellow
material, places it in the midst of the embers, which, at present are
only faintly glimmering, and begins his work. In quick alternation
the smith’s two hands move up and down with the open ends of the
bellows; as he raises his hand he holds the slit wide open, so as to let
the air enter the skin bag unhindered. In pressing it down he closes
the bag, and the air puffs through the bamboo tube and clay pipe into
the fire, which quickly burns up. The smith, however, does not keep
on with this work, but beckons to another man, who relieves him at
the bellows, while he takes some more tools out of a large skin pouch
carried on his back. I look on in wonder as, with a smooth round
stick about the thickness of a finger, he bores a few vertical holes into
the clean sand of the soil. This should not be difficult, yet the man
seems to be taking great pains over it. Then he fastens down to the
ground, with a couple of wooden clamps, a neat little trough made by
splitting a joint of bamboo in half, so that the ends are closed by the
two knots. At last the yellow metal has attained the right consistency,
and the fundi lifts the crucible from the fire by means of two sticks
split at the end to serve as tongs. A short swift turn to the left—a
tilting of the crucible—and the molten brass, hissing and giving forth
clouds of smoke, flows first into the bamboo mould and then into the
holes in the ground.
The technique of this backwoods craftsman may not be very far
advanced, but it cannot be denied that he knows how to obtain an
adequate result by the simplest means. The ladies of highest rank in
this country—that is to say, those who can afford it, wear two kinds
of these massive brass rings, one cylindrical, the other semicircular
in section. The latter are cast in the most ingenious way in the
bamboo mould, the former in the circular hole in the sand. It is quite
a simple matter for the fundi to fit these bars to the limbs of his fair
customers; with a few light strokes of his hammer he bends the
pliable brass round arm or ankle without further inconvenience to
the wearer.
SHAPING THE POT

SMOOTHING WITH MAIZE-COB

CUTTING THE EDGE

 FINISHING THE BOTTOM

LAST SMOOTHING BEFORE

BURNING

FIRING THE BRUSH-PILE

 LIGHTING THE FARTHER SIDE OF
THE PILE

TURNING THE RED-HOT VESSEL

NYASA WOMAN MAKING POTS AT MASASI

Pottery is an art which must always and everywhere excite the
interest of the student, just because it is so intimately connected with
the development of human culture, and because its relics are one of
the principal factors in the reconstruction of our own condition in
prehistoric times. I shall always remember with pleasure the two or
three afternoons at Masasi when Salim Matola’s mother, a slightly-
built, graceful, pleasant-looking woman, explained to me with
touching patience, by means of concrete illustrations, the ceramic art
of her people. The only implements for this primitive process were a
lump of clay in her left hand, and in the right a calabash containing
the following valuables: the fragment of a maize-cob stripped of all
its grains, a smooth, oval pebble, about the size of a pigeon’s egg, a
few chips of gourd-shell, a bamboo splinter about the length of one’s
hand, a small shell, and a bunch of some herb resembling spinach.
 Nothing more. The woman scraped with the
shell a round, shallow hole in the soft, fine
sand of the soil, and, when an active young
girl had filled the calabash with water for her,
she began to knead the clay. As if by magic it
gradually assumed the shape of a rough but
already well-shaped vessel, which only wanted
a little touching up with the instruments
before mentioned. I looked out with the
MAKUA WOMAN closest attention for any indication of the use
MAKING A POT. of the potter’s wheel, in however rudimentary
SHOWS THE a form, but no—hapana (there is none). The
BEGINNINGS OF THE embryo pot stood firmly in its little
POTTER’S WHEEL
depression, and the woman walked round it in
a stooping posture, whether she was removing
small stones or similar foreign bodies with the maize-cob, smoothing
the inner or outer surface with the splinter of bamboo, or later, after
letting it dry for a day, pricking in the ornamentation with a pointed
bit of gourd-shell, or working out the bottom, or cutting the edge
with a sharp bamboo knife, or giving the last touches to the finished
vessel. This occupation of the women is infinitely toilsome, but it is
without doubt an accurate reproduction of the process in use among
our ancestors of the Neolithic and Bronze ages.
There is no doubt that the invention of pottery, an item in human
progress whose importance cannot be over-estimated, is due to
women. Rough, coarse and unfeeling, the men of the horde range
over the countryside. When the united cunning of the hunters has
succeeded in killing the game; not one of them thinks of carrying
home the spoil. A bright fire, kindled by a vigorous wielding of the
drill, is crackling beside them; the animal has been cleaned and cut
up secundum artem, and, after a slight singeing, will soon disappear
under their sharp teeth; no one all this time giving a single thought
to wife or child.
To what shifts, on the other hand, the primitive wife, and still more
the primitive mother, was put! Not even prehistoric stomachs could
endure an unvarying diet of raw food. Something or other suggested
the beneficial effect of hot water on the majority of approved but
indigestible dishes. Perhaps a neighbour had tried holding the hard
roots or tubers over the fire in a calabash filled with water—or maybe
an ostrich-egg-shell, or a hastily improvised vessel of bark. They
became much softer and more palatable than they had previously
been; but, unfortunately, the vessel could not stand the fire and got
charred on the outside. That can be remedied, thought our
ancestress, and plastered a layer of wet clay round a similar vessel.
This is an improvement; the cooking utensil remains uninjured, but
the heat of the fire has shrunk it, so that it is loose in its shell. The
next step is to detach it, so, with a firm grip and a jerk, shell and
kernel are separated, and pottery is invented. Perhaps, however, the
discovery which led to an intelligent use of the burnt-clay shell, was
made in a slightly different way. Ostrich-eggs and calabashes are not
to be found in every part of the world, but everywhere mankind has
arrived at the art of making baskets out of pliant materials, such as
bark, bast, strips of palm-leaf, supple twigs, etc. Our inventor has no
water-tight vessel provided by nature. “Never mind, let us line the
basket with clay.” This answers the purpose, but alas! the basket gets
burnt over the blazing fire, the woman watches the process of
cooking with increasing uneasiness, fearing a leak, but no leak
appears. The food, done to a turn, is eaten with peculiar relish; and
the cooking-vessel is examined, half in curiosity, half in satisfaction
at the result. The plastic clay is now hard as stone, and at the same
time looks exceedingly well, for the neat plaiting of the burnt basket
is traced all over it in a pretty pattern. Thus, simultaneously with
pottery, its ornamentation was invented.
Primitive woman has another claim to respect. It was the man,
roving abroad, who invented the art of producing fire at will, but the
woman, unable to imitate him in this, has been a Vestal from the
earliest times. Nothing gives so much trouble as the keeping alight of
the smouldering brand, and, above all, when all the men are absent
from the camp. Heavy rain-clouds gather, already the first large
drops are falling, the first gusts of the storm rage over the plain. The
little flame, a greater anxiety to the woman than her own children,
flickers unsteadily in the blast. What is to be done? A sudden thought
occurs to her, and in an instant she has constructed a primitive hut
out of strips of bark, to protect the flame against rain and wind.
This, or something very like it, was the way in which the principle
of the house was discovered; and even the most hardened misogynist
cannot fairly refuse a woman the credit of it. The protection of the
hearth-fire from the weather is the germ from which the human
dwelling was evolved. Men had little, if any share, in this forward
step, and that only at a late stage. Even at the present day, the
plastering of the housewall with clay and the manufacture of pottery
are exclusively the women’s business. These are two very significant
survivals. Our European kitchen-garden, too, is originally a woman’s
invention, and the hoe, the primitive instrument of agriculture, is,
characteristically enough, still used in this department. But the
noblest achievement which we owe to the other sex is unquestionably
the art of cookery. Roasting alone—the oldest process—is one for
which men took the hint (a very obvious one) from nature. It must
have been suggested by the scorched carcase of some animal
overtaken by the destructive forest-fires. But boiling—the process of
improving organic substances by the help of water heated to boiling-
point—is a much later discovery. It is so recent that it has not even
yet penetrated to all parts of the world. The Polynesians understand
how to steam food, that is, to cook it, neatly wrapped in leaves, in a
hole in the earth between hot stones, the air being excluded, and
(sometimes) a few drops of water sprinkled on the stones; but they
do not understand boiling.
To come back from this digression, we find that the slender Nyasa
woman has, after once more carefully examining the finished pot,
put it aside in the shade to dry. On the following day she sends me
word by her son, Salim Matola, who is always on hand, that she is
going to do the burning, and, on coming out of my house, I find her
already hard at work. She has spread on the ground a layer of very
dry sticks, about as thick as one’s thumb, has laid the pot (now of a
yellowish-grey colour) on them, and is piling brushwood round it.
My faithful Pesa mbili, the mnyampara, who has been standing by,
most obligingly, with a lighted stick, now hands it to her. Both of
them, blowing steadily, light the pile on the lee side, and, when the
flame begins to catch, on the weather side also. Soon the whole is in a
blaze, but the dry fuel is quickly consumed and the fire dies down, so
that we see the red-hot vessel rising from the ashes. The woman
turns it continually with a long stick, sometimes one way and
sometimes another, so that it may be evenly heated all over. In
twenty minutes she rolls it out of the ash-heap, takes up the bundle
of spinach, which has been lying for two days in a jar of water, and
sprinkles the red-hot clay with it. The places where the drops fall are
marked by black spots on the uniform reddish-brown surface. With a
sigh of relief, and with visible satisfaction, the woman rises to an
erect position; she is standing just in a line between me and the fire,
from which a cloud of smoke is just rising: I press the ball of my
camera, the shutter clicks—the apotheosis is achieved! Like a
priestess, representative of her inventive sex, the graceful woman
stands: at her feet the hearth-fire she has given us beside her the
invention she has devised for us, in the background the home she has
built for us.
At Newala, also, I have had the manufacture of pottery carried on
in my presence. Technically the process is better than that already
described, for here we find the beginnings of the potter’s wheel,
which does not seem to exist in the plains; at least I have seen
nothing of the sort. The artist, a frightfully stupid Makua woman, did
not make a depression in the ground to receive the pot she was about
to shape, but used instead a large potsherd. Otherwise, she went to
work in much the same way as Salim’s mother, except that she saved
herself the trouble of walking round and round her work by squatting
at her ease and letting the pot and potsherd rotate round her; this is
surely the first step towards a machine. But it does not follow that
the pot was improved by the process. It is true that it was beautifully
rounded and presented a very creditable appearance when finished,
but the numerous large and small vessels which I have seen, and, in
part, collected, in the “less advanced” districts, are no less so. We
moderns imagine that instruments of precision are necessary to
produce excellent results. Go to the prehistoric collections of our
museums and look at the pots, urns and bowls of our ancestors in the
dim ages of the past, and you will at once perceive your error.
MAKING LONGITUDINAL CUT IN
BARK

DRAWING THE BARK OFF THE LOG

REMOVING THE OUTER BARK

 BEATING THE BARK

WORKING THE BARK-CLOTH AFTER BEATING, TO MAKE IT

SOFT

MANUFACTURE OF BARK-CLOTH AT NEWALA

To-day, nearly the whole population of German East Africa is
clothed in imported calico. This was not always the case; even now in
some parts of the north dressed skins are still the prevailing wear,
and in the north-western districts—east and north of Lake
Tanganyika—lies a zone where bark-cloth has not yet been
superseded. Probably not many generations have passed since such
bark fabrics and kilts of skins were the only clothing even in the
south. Even to-day, large quantities of this bright-red or drab
material are still to be found; but if we wish to see it, we must look in
the granaries and on the drying stages inside the native huts, where
it serves less ambitious uses as wrappings for those seeds and fruits
which require to be packed with special care. The salt produced at
Masasi, too, is packed for transport to a distance in large sheets of
bark-cloth. Wherever I found it in any degree possible, I studied the
process of making this cloth. The native requisitioned for the
purpose arrived, carrying a log between two and three yards long and
as thick as his thigh, and nothing else except a curiously-shaped
mallet and the usual long, sharp and pointed knife which all men and
boys wear in a belt at their backs without a sheath—horribile dictu!
[51]
Silently he squats down before me, and with two rapid cuts has
drawn a couple of circles round the log some two yards apart, and
slits the bark lengthwise between them with the point of his knife.
With evident care, he then scrapes off the outer rind all round the
log, so that in a quarter of an hour the inner red layer of the bark
shows up brightly-coloured between the two untouched ends. With
some trouble and much caution, he now loosens the bark at one end,
and opens the cylinder. He then stands up, takes hold of the free
edge with both hands, and turning it inside out, slowly but steadily
pulls it off in one piece. Now comes the troublesome work of
scraping all superfluous particles of outer bark from the outside of
the long, narrow piece of material, while the inner side is carefully
scrutinised for defective spots. At last it is ready for beating. Having
signalled to a friend, who immediately places a bowl of water beside
him, the artificer damps his sheet of bark all over, seizes his mallet,
lays one end of the stuff on the smoothest spot of the log, and
hammers away slowly but continuously. “Very simple!” I think to
myself. “Why, I could do that, too!”—but I am forced to change my
opinions a little later on; for the beating is quite an art, if the fabric is
not to be beaten to pieces. To prevent the breaking of the fibres, the
stuff is several times folded across, so as to interpose several
thicknesses between the mallet and the block. At last the required
state is reached, and the fundi seizes the sheet, still folded, by both
ends, and wrings it out, or calls an assistant to take one end while he
holds the other. The cloth produced in this way is not nearly so fine
and uniform in texture as the famous Uganda bark-cloth, but it is
quite soft, and, above all, cheap.
Now, too, I examine the mallet. My craftsman has been using the
simpler but better form of this implement, a conical block of some
hard wood, its base—the striking surface—being scored across and
across with more or less deeply-cut grooves, and the handle stuck
into a hole in the middle. The other and earlier form of mallet is
shaped in the same way, but the head is fastened by an ingenious
network of bark strips into the split bamboo serving as a handle. The
observation so often made, that ancient customs persist longest in
connection with religious ceremonies and in the life of children, here
finds confirmation. As we shall soon see, bark-cloth is still worn
during the unyago,[52] having been prepared with special solemn
ceremonies; and many a mother, if she has no other garment handy,
will still put her little one into a kilt of bark-cloth, which, after all,
looks better, besides being more in keeping with its African
surroundings, than the ridiculous bit of print from Ulaya.
MAKUA WOMEN