ALFRED
P.
WORKING PAPER
SLOAN SCHOOL OF MANAGEMENT
PARTICIPATION IN THE BUDGETING PROCESS -WHEN IT WORKS AND WHEN IT DOESN'T
by
Peter Browne 11
WP 1172-80
November 1980
MASSACHUSETTS
INSTITUTE OF TECHNOLOGY
50 MEMORIAL DRIVE
CAMBRIDGE, MASSACHUSETTS 02139
PARTICIPATION IN THE BUDGETING PROCESS
WHEN IT WORKS AND WHEN IT DCESN'T
—
by
Peter Brov/nell
WP 1172-80
November 1980
Participation in the Pudgeting Process
When It Works and When It Doesn't
—
ABSTRACT
Over
the
twenty or
past
so
years,
a
great
volume of research
which
explores the question of the effects of participation in budgeting has been
published.
Yet the state of our knowledge in the area can be described
chaotic at best.
confirmation.
literature is replete with contradiction and failed
The
Tne
as
purpose
of
this
paper
is
to
provide
review
a
literature which attempts to unravel past results by employing
a
of
framework
of "conditional" factors upon which the effects of budgetary participation
can be shown to depend.
The paper concludes with a tabular summary or list
of the conditional factors uncovered in the review.
KEY WORD INDEX
Participation,
budgeting,
cultural
variables,
interpersonal variables, individual variables.
organizational
variables,
.
-1-
—
Part icipation in the Bjdgeting Process
When It Works and When
As a broad
generalization, two competing managerial philosophies exist
Firstly,
today.
Doesn't
It
a
philosophy,
"scientific management"
traditional
embracing the view that organisational participants are motivated solely by
economic forceo, that work is essentially unpleasant, and that human beings
are
ordinarily
viewpoint
inefficient
probably
has
principles
of management
viewed
basically
emerged
as
in
the
origins
its
where
1920s.
management
the
cf
labor
and
famous
were
viewpoint
competing
A
This
Taylorian
the
in
capital
tasks.
results of the
The
emerge,
to
century
this
early
managerial
identical
late
continues
wasteful,
and
Hawthorne
Studies
conducted at Western Eleccric from 1927 to 1932 indicated that sociological
and psychological
relations"
fundamental to the management of people.
were
of thought,
factors, long ignored by the scientific management school
philosophy
was
born
as
framework
competing
a
So,
the "human
for
managerial
effectivenes
A
great
deal
of
research literature
schools cf thought has been published
dealing
since
versus
"production
versus "concern
versus
for
"structure
oriented"
prod-action"
initiation"
"Theory Y" versus "Theory X"
labels
which
have
[Katz,
been
et
[Blake
to
greatly.
. ,
and
[Halpin,
[McGregor,
given
al
1960]
al
.
196 4],
;
1957]
the
same
for
people"
"consideration"
of
and,
course,
a
few of the
two
underlying
represent just
fundamentally
HHOTK
,
"Bnployee oriented"
"concern
1950],
Mcuton,
et
philosophies.
The labels attached to
1930.
the two alternative philosophies have varied
alternative
these
with
-2-
In
accounting,
managerial
of
area
the
which
concept
one
been
has
studied frequently is the issue of participation in the budgeting process.
The idea that lower level members in an organization would get a say in the
budget formulation, let alone exert the primary influence, would have been
abhorrent
Yet
the
the
to
concept
early disciples
of
the
doctrine.
management
scientific
possibly the most central element in the modern human
is
relations viewpoint, at least as far as management accounting is concerned.
The
results
of
fairly
a
long
of
line
inquiry
into
effects
the
budgetary participation are completely mixed, members of both
and
Meyer,
and As,
will
1966:
benefit
1978]
1973] morale
performance [Bass and Leavitt,
even
from a
satisfaction [French,
job
Cherrington and Cherrington,
and
1960],
Collins,
1975;
schools of
Research studies have shown
thought claiming support for their viewpoints.
that attitudes [Milani,
of
Israel
[French,
1963;
Kay
Kenis,
1979]
high level of participation in the budgeting process.
However,
contradictory
[Stedry,
1960;
Bryan
manager to conclude on
results,
Locke,
and
the
Participation doesn't work?
especially
1967]
can
basis of this
area
the
in
also
be
evidence?
of
performance
What
cited.
is
the
Participation works?
Participation works sometimes?
Hopwood [1976]
seems to think the last answer is true:
"While
it
appears
that
an
increase
in
participation
in
decision making can often improve morale, its effect on
productivity is equivocal at the best, increasing it under
some circumstances but possibly even decreasing it under other
circumstances.
Hie practical problem is in trying to identify
which conditional factors determine the wider impact of a
particular type of participative management programme."
A long overdue need exists for an extensive review of literature aimed
at
exposing
literature.
of
research
the
"conditional
factors"
which
have
This is the purpose of this paper.
results
focusing
specifically
By
on
been
uncovered
presenting
the
a
question
in
the
catalogue
of
when
.
-3-
participation works
the
when
linkage between
important
and
and
doesn't work,
it
this
research efforts of the
the
provide an
paper will
academic
community
practical needs of management who are confronted with the problems
of implementing and managing
A
practicing
managerial
communities
while
for
between
exists
clearly
gap
communication
program.
participative budgeting and decision-making
a
academics
have
and
academic
the
been
keen
to
pursue new and different perspectives and situations whithin which to study
budgetary participation,
integrating
and
they have been remiss
juxtaposing
the
the area of effectively
previous
of
mass
in
results,
leaving
the
practising community utterly befuddled on the question of the state cf our
Figure
knowledge in the area.
1
presents the basic framework suggested by
Hopwood's comment and the purpose of the paper is to discuss, classify and
catalogue
the
variables
which
form
intervening
the
set
of
conditional
factors
[INSERT FIGURE
The review of literature to be
basis of
a
classified
variables,
1
HERE]
presented will be further structured on the
framework which suggests that the conditioning variables can be
into
four
basic
interpersonal
categories;
variables
framework is set out in Figure
cultural variables, organizational
and
individual
2.
[INSERT FIGURE
2
HERE]
variables.
This
-4-
1
.
Cultural Variables
One
setting
cultural
consider
work or
participation will
when
addressing
comprises
not
points
clearly
which
studies
research
of
pair
the
question
the
to
whether
of
French
and
Coch
need
the
to
and
[1948]
French, Israel and As [1960] studies.
study an
Coch and French were able to secure the opportunity to
Manufacturing
Harwood
experiment at the
house"
Company in
"inThe
Virginia.
management agreed to test three possible schemes of employee involvement in
related
employee
representatives
management
while
employees
affected
involved
scheme
the
to
by
randomly assigned
to
of
participate
the
the three
the
scheme,
decision
company
usual
members
organizational
budget
a
the
to
second
the
in
were
final
was
meetings
in
top
of
all
Finally,
secured.
third
a
informing
simply
of
Groups
decision.
with
involvement
active
procedure
selected
scheme,
one
Under
production budget.
decisions
were
employees
of
schemes but were matched across schemes in
terms of efficiency ratings before the decision process.
The
results
schemes.
three
revealed
graphically
subject
group
The
to
desirability
relative
the
the
company
usual
of
the
procedure
experienced 17£ resignations in the first forty days (which was reported as
having
typical
been
in
deteriorations
significant
past
the
in
when
changes
budgetary
productivity.
group
The
made)
were
subject
and
to
the
partial participation scheme experienced no resignations in the first forty
days
and
slow
participation
improvement
condition
in
(also
productivity
while
experiencing
no
the
group
resignations)
in
the
total
provided
the
greatest productivity improvement.
French,
experiment
at
Israel
a
and
footwear
As
[1960]
factory
in
were
able
Norway.
to
This
repeat
time,
an
the
Harwood
increase
in
,
-5-
participation
did
French,
.
the
strength
Norwegian workers in general may have
produced
et
al
factory
footwear
the
that
speculated
participation
cf
participation" [French, Israel and As,
1960,
performance.
in
union
among
ties
attitude en the part of
an
pattern
legitimate
more
"a
the
representatives
union
through
is
that
workers
changes
significant
about
bring
not
rather
than
of
direct
18].
p.
While few other studies allow us to address the question of the impact
of cultural differences, there is a broad body of literature which bears on
the
question.
Strauss et al
by
literature
of
area
one
particular,
In
[1976] refer to as "legal" systems of participation inspired
.
Councils,
Workers'
example,
For
ideology.
socialist
have
formidable measure of joint-management to workers,
introduced in
facing
differential
between
control
is
a
the
were
Councils
provides all employees of an enterprise
to
et
exercised
personnel,
policy,
basic
Tannenbaum
firm.
the
providing
characterized
Workers'
Yugoslavia.
of
form
regard
with
organization
Yugoslav
their
and
1950
authority
ultimate
issues
development
post-war
successful
what
under
falls
al
the
at
significantly
less
.
[1964]
top
than
and
the
and
showed
the
technical
that
bottom of the
differential
comparable Italian, Austrian and United States organizations.
the
in
Two separate
studies have shown that the Yugoslav industrial system has proven itself in
of
terms
developments
[Hauck,
productivity
national
the
to
1955],
Yugoslav
[Kolaja,
1965;
experience
West Germany [Heller,
Pateman,
have
been
and
even
1971]
Similar
1970].
documented
in
France
Eritain [Fuerstenberg
1959].
Kibbutzism
in
Israel,
now
has
grown
extends
agricultural
context
activities.
Organizational structure in
and
well
to
a
a
beyond
large
range
its
of
traditional
manufacturing
Kibbutz factory is characterized
:
-6-
by many participative-type features.
For example, officers from first-line
supervisor upwards are elected by the workers and
between
to
consisting
three
of
organizational
[1970]
showed
years.
established
is
decisions.
that
A
they
In
and
is
study
of
more
are
addition,
responsible
Management
for
kibbutz
Israeli
efficient
a
tenure is limited
manager
production
manager,
plant
the
representatives,
five
and
their
and
wide
a
workers'
range
plants by
comparable
than
Board
of
Melman
non-kibbutz
plants and that labor-management conflict in the kibbutz is virtually nonexistent.
Hofstede [1967],
budget control,
findings
his
in
reporting
the results
of his extensive survey of
cautioned the reader against cross-culturally generalizing
which
dealt
with
five
companies
Netherlands.
the
in
Differences between the industrial climate of Europe and the United States
have been documented
[Kast,
Nowotny,
1964;
the most dangerous generalization
from
is
1964],
but
Hofstede feels that
to
Eastern culture (or
Western
vice versa)
game of budget control
game" [Hofstede, p. 281 ].
"the
as
I
described
it
is
a
Western
Organizational Variables
2.
That
variables
at
organizational
the
environmental
and
important is not self-evident from the accounting literature.
implications for budget system design and, more specifically,
levels
are
Rather,
the
the
role of
participation in effective budgetary control systems needs to be drawn out
by
a
review of literature principally in organizational behavior.
Three
variables
dominate
stability,
technology
structure,
will
be
accounting studies.
and
task
mentioned
I
the
in
emphasis
at
this
uncertainty.
connection
fourth,
A
with
level;
a
environmental
organizational
couple of significant
shall review the literature in each group in turn.
A.
Environmental Stability
In
the
significant study, Lawrence and Lcrsch [1967] attempted to answer
a
question
basic
effectively with
Lawrence
processing
located
facing
and
on
the most
organization
of
environmental,
firms
studied
containers.
continuum
a
kind
what
various
Lorsch
and
of
These
economic
three
in
industries
environmental
of
it
takes
market
and
industries;
were
conditions.
plastics,
represented
stability
deal
to
with
food
as
being
plastics
firms
turbulent and dynamic environment and container firms the
most stable environment.
Effective response to environmental conditions was defined by Lawrence
and
Lorsch
terms
in
of
They found
integration.
appropriate
the
that
were most highly differentiated
integrated.
at
firms
the
and
plastics industry
the
in
same
differentiation
time,
successfully
most
Formality of structure was low, there vere fewer levels in the
organizational
hierarchy,
less
objective performance criteria.
the
successful
and,
of
amounts
finding
that
successfully
performance
frequent
Of
relevance
integrated
in
locus of decision-making authority and
the
firms
lateral rather than vertical flows of information,
evaluation
and
fewer
context was
present
characterized
were
by
much lower and broader
a
higher degree of knowledge needed
a
for decision making was typically located at lower levels.
Consistent
with
these
findings
is
the
view
that
involvement
and
participation of organizational members at lower levels is desirable when
the organization faces
the
locus
of
a
influence
Even within the organization
dynamic environment.
in
decision-making
varied
depending
environment faced by major functional divisions.
divisions such as marketing
decision-making
influence
were characterized
and
control
than,
by
for
a
on
the
sub-
Eoundary-spanning
much broader base of
example,
which is relatively buffered from the external environment.
in
production
.
.
-8-
contrast, successful
In
food processing)
(containers and, in particular,
levels
lower
levels and
in
of
differentiation
were characterized by much
many more
integration,
and
decision-making
control
and
high
was
responsibility
hierarchical
The locus of influence
far greater level of formal structure.
a
environments
firms in relatively stable
the
in
organization
and
rather
than
flows were vertical
information,
authority and
horizontal
Indeed, it was observed that in the poorest performing firm in
the
.
container
members
organizational
industry,
lower
at
levels
in
the
hierarchy felt they had considerably more influence in decision-making than
their counterparts in the high performing container industry.
knowledge
to
organization
In
decisions
sound
make
was
The locus of
apparently elsewhere
in
the
2
theoretical work, Thompson [1967] isolates two dimensions of the
a
environment
by
faced
the
organization.
Firstly,
an
environment
can
be
homogeneous or heterogeneous by which he means that customers either want
the "same thing at the same time" (e.g.
different
times".
Secondly,
an
or "different things at
schooling)
environment
can
stable
be
or
unstable,
self-explanatory descriptions of the frequency and nature of changes in the
size, type and
Thompson suggests that organizations
share of the market.
facing homogeneous, stable environments should employ standardized rules as
control devices and that management should be authoritative and consist of
networks
of
rule
heterogeneous,
autoncmy
into
democratic
influence
enforcement.
unstable
the
andd
environments
structure
consist
of
and
contrast,
In
should
control
networks
of
build
system
and
equality
organizations
facing
decentralization
management
of
power
should
sharing
and
be
and
Hayes
broadly on
more
focused
[1977]
question
the
of
budgets in performance assessment in organizational
that
was
conclusion
performance
budgets
useful
tend
role
of
sub-units.
standards
as
which
departments,
production
in
more
are
the
to
His
for
evaluating
have
relatively
unambiguous objectives and cause-effect relationships and which tend to be
buffered
from
Marketing
environemnt.
external
the
development departments, on the other hand, were
suited
to
budgetary control.
budgeting
as
planning
tool,
planning
a
organizations
tool
budgeting
Following
environments.
assumes
as
sub-units
Lawrence and
facing
Lorsch,
to
be
so
tool.
a
high degree of integration.
well
important
As
role
unstable
a
in
external
such organizations or
organizational sub-units are likely to be highly differentiated
therefore in need of
and
contrast between
control
a
particularly
a
not
important
an
budgeting
and
organizational
or
raises
This
found
research
and
and
The need for integrative
planning in such organizations is also suggested by Lorange [1977] and the
role of budgeting and budgetary participation
in
satisfying this' need was
hypothesized and found by Merchant [1978].
It
therefore,
seems,
affects the uses of budgeting as
in
fashion.
opposite
control
devices
appears
those
environments
than
(integrative)
planning
importance
dealing
in
env ironmental
environment
the
future)
The
use
in
suited
unstable
of
vis
a
control tool,
performance
to
organizations
environments
budgets
unstable
a
as
of budgets
better
function
with
planning took, vis
a
external environment
stability of the
that the
assumes
environments
evaluation
[Hayes]
in
[Merchant].
stable
while
relatively
and
the
greater
Note
that
stability aside, the need for adaptive planning (scanning the
fcr
relevant information to be used in dealing with change in
remains.
Thompson
[1967,
p.
151]
calls
this
"opportunistic
.
-
surveillance".
Merchant
examined
[1978]
the
role
of
budgeting
in
role
of
satisfying this need but his results were inconclusive.
implications
The
participation
participation
facing
an
the
of
suggestions
decision-making
in
depends,
least
at
organization
as
a
clear:
are
part,
in
whole
findings
and
its
and
effectiveness of
the
environmental
the
on
the
for
individual
demands
units
functional
viewed separately.
B.
Technology
A major
factor at the organizational level is technology.
It has been
defined as "a technique or complex of techniques to alter 'materials'
anticipated manner" [Perrow,
1965,
p.
in an
9153.
Burns and Stalker [1961] investigated this aspect and its relationship
to
organization design.
where
the
managed
with
"mechanistic"
ization and detailed
other hand, rapid
a
technical
of
rate
In
study of British companies they found
that
firms
were
innovation
systems
was
successful
low,
characterized
definitions of duties and
functional
by
special-
responsibilities.
On
the
technical innovation was associated with firms which had
"organic" systems of management with more flexible organizational arrangements, more
consultation
and
participation
and
less
rigorously specified
tasks
Woodward [1965],
production
groupings of
characterize
in
a
sophistication
another study of British industry, used four main
processes
found
in
technology continuum.
In
groupings
unit
the
were
production and continuous process.
She
the
surveyed
increasing order of technological
production,
found
that
"organic",
characterized,
small
batch,
mass-
firms in the middle of
the technical continuum tended to be most "mechanistic"
extremes were more
organizations to
notably,
while firms at the
by high degrees of
-11-
authority
responsibility
and
delegation
much
and
more
permissive
participative management styles.
Thompson
perspective.
interdependence:
types
of
units
are
separate
from
technology manifests
him,
For
technology
views
[1967]
and
pooled
not
do
slightly
a
itself
in
interdependence,
interact
(but
nature of the
the
where
organizational
failure
where
different
any
of
one
renders the organization harm); sequentia l interdependence, where one unit
is
supplier
the
supply
one
another.
exists,
structure
organizational
of rules
and
according
providing
is
types
Thompson,
to
of
an
units
of
unit
appropriate
activities.
For
achieved by standardization
best
is
routines which are set down
interdependence
these
of
co-ordination
for
co-ordination
interdependence,
pooled
each
to
where
interdependence,
reciprocal
and
Corresponding
there
interdependencies
Where
another;
of
behavior of ail
tne
for
units.
co-ordination is by planning and the
sequential,
establishment of schedules for the interdependent units, and, finally,
reciprocally
interdependent
and communi cat ions.
lower-level
units,
co-ordination
is
by mutual
for
adjustment
Thompson makes it quite clear that participation and
influence
in
decisions
are
increasingly appropriate as
characteristics of co-ordination as we move from pooled through seq uential
to reciprocal interdependence.
The number of taxonomies of technology is substantial.
[and Stinchcombe,
schemes
process"
"the
suggested
1959]
in
[Trist and
degree
of
While Woodward
used length of production run, other classification
the
literature
Bam forth,
hardness
of
1951;
include
Gouldner,
materials
"variety and programmability" [Perrow,
"routiness
195^;
worked
1970].
on"
of
Hage and
the
production
Aiken,
[Rushing,
1969 J.
"9681
and
.
12-
However,
technology
of
impact
the
same basic result has emerged
the
different
on
from
most examinations of
organizational
repetitive, easily programmable production activities,
information
upward
with
structure
appropriate.
appears
Non-repetitive,
activities are not
production
flows
authority
production
short
to
For
more hierarchical
a
downward
and
amenable
so
responses.
flows
custom
run,
type
controls and
programmed
are
probably better managed with use of individual supervision with small spans
of control
Task Uncertainty
C.
Possibly closer
accounting
to
orientation
in
is
view that
the
organizations will respond differently (in terms of structure) to differing
levels of task uncertainty
uncertainty
with
deal
information.
needs
defines
[1977]
view is that
[1977]
s
organization
in
Galbraith
Galbraith*
.
process
to
uncertainty
as
order
in
more
and
to
more
difference
the
between the amount of information required and the amount possessed by the
organization and he views the amount required
as
being
a
function of the
diversity of outputs, diversity of inputs and the level of goal difficulty.
As
an
organization
information,
either
can
it
reduce
becomes
its
engage
need
for
more
in
complex
and
faces
a
greater
either of two strategies.
information
through
need
Clearly,
strategies
such
it
as
for
can
the
creation of slack resources'3 and the creation of self-contained tasks (i.e.
the
break-down
of
handling
capacity
creating
lateral
strategies
is
interdependence),
by
investing
relations.
particularly
in
The
or,
can
it
vertical
latter
relevent
in
of
increase
information
these
the
its
information
systems
information
context
of
and
by
handling
participation.
Galbraith, when referring to the creation of lateral relations, has in mind
the
idea
of
reducing
the
number
of
decisions
referred
upwards
in
the
-re-
where the information exists.
organization members
level
strategy used
deal
to
other words, increased influence of lower
In
decision-making
in
one
is
uncertainty and
with
point"
down to the "action
organization and bringing the "decision point"
organizational
key
level
attending
the
of
informational handling capacity expansion.
order
In
for
points
Galbraith
response to task uncertainty to work effectively,
this
conditions
several
to
must
which
be
satisfied.
Information required for decision-making must be accessible at the level at
which
relations
lateral
the
are
participants
created,
lateral
in
relationships must have the authority to commit their organizational
unit,
influence
and
Status
barriers
must
be
unaccompanied
a
function
knowledge
of
commensurate
by
sub-
information.
and
informational
differences
will be dysfunctional according to Galbraith.
One
body
of
organizational
research
empirical
response
task
to
which
uncertainty
bears
early
the
is
the
on
question
work
of
grouj
on
behavior and communication initiated by Bavelas [1950] and Leavitt [1951].
Shaw
[1955]
concludes
example,
In
that the
evidence
in
more
the
the
network
a
faces
information-processing
simple tasks.
of
case
complete
summary
suggests that more
are most
diffused
centrality position in
when
most
a
wheel networks)
contrast,
superior
presents
effective
networks
con pi ex
(for
in
of
this
centralized
and
networks
(
he
for
dealing with simple tasks.
example,
tasks.
research
Shaw
circle
suggests
networks)
that
a
are
high-
network is likely to become overloaded more easily
a
complex
requirements
task
of
than
the
when
the
position,
task minimizes
as
This evidence reinforces Galbraith's view.
in
the
case
the
of
-14-
Organizational Structure
D.
indicated
As
beginning
the
at
which the
relationship between
but
decentralized
was
higher
than
organizations,
they participate more
related
budget planning
in
activities.
organizations are granted
budget planning,
Swieringa and
a
sample
In
less
Moncur
managers
cf
to
behavior
in
influence,
satisfied with
be
centralized
in
report less involvement in
pressure,
5
and
see
budgets
flexibility.
investigated
various
in
having more
managers
responsibility,
[1972]
budgetary
and
budget-related
appear
and
contrast,
and limiting their
is one study
Specifically, managers
experience superior initiated
as being less useful
of
quantity of
the
the
from
that in structured
found
and
centralized organizations.
in
evidence
structure
organizations perceive themselves as
decentralized
budget
organizational
They hypothesized
investigated.
control was
section,
this
Bruns and Waterhouse [1975]
accounting literature is sparse.
in
of
the
branches
of
budget-related behavior
international
an
bank.
Included in their study were several organizational level variables such as
branch size
position
and
However,
organization.
the
in
the
results were
inconclusive.
The
results
behavior
organizational
that
suggestions
and
participation
and
offers
in
from
literature,
the
accounting appear to consistently indicate
organizational
some
advantages
technology and high levels of task uncertainty appear
suited
members.
opportunity
in
only
in
some
Organizations in unstable environments, faced with dynamic
circumstances.
well
both
ti
participation
contrast,
In
for
continuing need
lower
for
and
influence of lower
centralization,
level
level
providing
participation
adaptability to change)
to
be
particularly
organizational
little,
if
(without overlooking
may be
a
sounder
any,
the
response to
stable,
environments
homogeneous
technology,
and
asociated
low
to
interest
in
with
moderate levels of task uncertainty.
Inter-personal Variables
3.
study
The
was
responsible
aspects of managerial
behavioral
budgeting,
which
to
the present level
Foundation sponsored study.
of
a
budget
pressure
accounting,
Argyris'
was
and
[1952]
the
more specifically,
famous
Controllcrship
Argyris isolated at least four major problems
behavioral nature with budgets
(i)
catapulting
for
tends
:-
unite
to
employees
against
management
and
tends to place the factory supervision under tension
(ii)
budget
staff can obtain feelings of success only by finding
fault
with factory people
(iii)
the use of "needlers"
by top management
tends to make the factory
supervisors see only the problems of their own area of concern
(iv)
supervisors use budgets as
a
way of expressing their own
patterns
of leadership.
Specifically motivated
Fertakis
[1967]
and
CeCoster
by
Argyris'
fourth
Fertakis
and
conclusion
[1968]
presented
above,
listed
results of an
investigation of the amount of budget pressure induced by the leadership
styles of consideration and structure initiation.
They hypothesized that a
greater amount of pressure would result from leadership styles high on the
structure
initiating dimension
and
low
on
consideration than
structure initiation was low and consideration high.
interesting.
In
the
case
of
both
leadership
where
Their findings were
styles,
budget
pressure
resulted, although the relationship may have been stronger in the case of
structure initiating style.
-16-
In
closely related investigation, Hopwood [1972,
a
attempted
1971]
to
ascertain whether different amounts of job-related tension were experienced
by cost center managers evaluated by supervisors using "budget constrained"
"profit
versus
styles
conscious"
The
styles.
that
suggested
findings
greater tension was experienced by managers evaluated by supervisors whose
Hopwood reports that his two dimensions are
style was budget constrained.
not completely independent however, and, as
measures
his
can
questioned.
be
result, construct validity of
a
attempted
had
He
capture
to
'the
"consideration" and "structure initiating" dimensions mentioned earlier and
Related to this point
these are conceived as being completely independent.
is
interesting
an
imbalance
in
constrained)
absolute
finding
leadership
of
exists
style
direction
amount
Hopwood' s
in
budget
the
in
tension
the
is
Only
study.
structure
result
distinct
a
(budget
initiating
significant.
behavior
constrained
where
combined
The
with
same
similar
a
amount of profit conscious behavior was not found to be tension producing.
The last result of
of DeCoster
equally
1
s
begins to explain the surprising results
Fertakis who found consideration and
and
associated
leadership
Hopwood
style
with
felt
budget
actually moderating
pressure.
This
effect
the
structure
of
phenomenon
the
other
reported in the literature by Fleishman and Harris [1962].
that under conditions of high consideration,
initiation
of
was
one
first
Tney concluded
structure may be perceived by
subordinates as supportive and helpful, whereas under low consideration tne
same structuring behavior may be seen as restrictive and threatening.
interpretation has been
studies
[Fleishman
Skinner,
1972,
1969;
1973]
and
shown
Ko
Fleishman
for
such
,
and
to
1962;
be
Mi sum i
Peters,
criterion
consistent
and
1970;
variables
with data
Toshiaki
Hunt
as
and
,
from many other
1965;
Hill,
motivation,
This
Beer,
1971;
1966,
Dessler,
satisfaction,
s
.
.
-
-
turnover,
grievances,
and
performance.
even
However,
evidence
that
this
effect may be restricted to certain levels in the organization is provided
by
House
moderator
of
suggested
who
[1972]
consideration
may
relationships
only
that
structure-satisfaction
important
an
be
lower-level
for
organizational members.
Otley [1978],
extending Hopwood's work, concluded that only where
in
leadership
ambiguous
significantly higher.
styles
reported
were
job-related
tensior
The effects of intermediate levels of both types' of
leader behavior could be examined in Otley'
dichotomous
was
s
study as he expanded Hopwood's
"budget-constrained/profit-conscious"
classification
into
a
continuum
The
findings of Hopwood,
suggest
all
that
Fertakis,
exclusive
the
use
Otley,
of
one
and
single
DeCoster
Fertakis
and
leadership
style
in
a
budgetary context corresponds to neither reality nor to any prescriptions
of
behavior.
leader
Indeed
the
view more
recently
taken
in
the
organizational behavior literature suggests that leader behavior should be
situationally consistent only [Heller,
Vroom
1976;
and
Yetton,
1971;
Such
1973].
a
Kerr,
view
is
et
al.,
Ritchie,
1974;
inconsistent
with
the
exhortations of McGregor [19^1] who suggests that consistency in leadership
style
is
superior's
desirable
behavior
lack of variability.
because
and
adapt
it
to
allows
it.
subordinates
But
to
predict
their
predictability does not
imply
The antithesis of predictability is randomness:
"The critics and proponents of participative management would
do well to direct their efforts toward identifying the
properties of situations in which different decision-making
approaches are effective rather than wholesale condemnation or
deification of one approach." [Vrocm, 1970, pp. 239-240]
Argyris [1962] calls this "reality-centered"
idea is by no means novel
leadership
style,
so
Vroom'
-18-
the view of leadership style suggested by Vroom and
Put alternatively,
by Argyris is one by which we would expect to need to explain sane withinvariance
person
behavior.
leader
in
such
No
need
implied
is
by
the
behavior
has
theoretical views expressed earlier.
been investigated by Heller
hypothesized
afforded
to
found
and
that
the
degree
of
,;
sharing
power
skill differences between them,
the
amount
of
superior's
level,
the
training
required
to
the
influence"
and
importance- of
superior and
extent of agreement
subordinates
elevate
of control of the superior,
span
Keller
Vroom and Yetton [19733-
and by
the extent of agreement between
the company,
subordinate as to
to
[1971]
leader
subordinates in decision making depends on the
the decision to
as
view of
situation-specific
contingency or
Tnis
locus of
the
and
the
to
information availability.
Vroom
Yetton,
and
investigating
leadership style depended on the importance of
extent to which the leader
to make
a
decision
versus unstructured
acceptance
or
alone,
extent
to
found
that
high quality decision, the
a
possesses sufficient
the
question,
same
the
information
which the
problem
and
is
expertise
structured
(deterministic versus stochastic), the extent to which
commitment
is
critical
to
effective
implementation of the
decision, the extent to which subordinates are likely to disagree over the
preferred solution and the extent to which
These
two
expositions of
style
and
henc?
organizational
organizational
the
need
for
a
behavior
a
speedy decision is necessary.
studies
contingent view of
appropriate participation levels.
behavior
have
addressed
this
uncovered several important moderating variables.
are
two
major,
recent
appropriate
leadership
Many other
studies
issue,
however,
and
in
have
1
-19-
Halpin [1954]
found
stress
interunit
demands,
that pressure (in the form of time urgency,
physical
or
satisfaction
affected
danger)
military platoon members with structuring leadership styles.
found
to
resented
be
such as training,
platoon members
such
situations,
satisfaction in high
to
Oaklander
combat.
as
of
Structure was
pressure
low
in
while it was positively related
situations,
pressure
by the
task
Fleishman
and
[1964]
extended this result and concluded that source of pressu re was the critical
Where the source was seen to be external, structuring
moderator variable.
behavior was
preferred,
while
considerate
behavior
was
found
be
to
more
helpful in dealing with intraunit pressure.
Task characteristics have also been shown to moderate the leadership-
relationship,
criterion
precise
nature
concluded
of
that
the
when
although
there
is
relationship.
work
was
disagreement
sane
Filley
House,
intrinsically
not
and
as
Kerr
satisfying,
to
the
[1971]
increased
resentment seemed likely to occur as the imposition of structure increased.
House [1971]
elaborated on this conclusion by suggesting that performance,
in contrast to satisfaction, would benefit from
where routine,
confirmed
this
structuring leader behavior
structured tasks were involved.
conclusion.
However,
Hunt
Ritchie
Liebscher
and
suggests
[1976]
[ 1
that
973
the
relationship is likely to be the same for both performance and satisfaction
and
that,
situations,
structured
the
in
case
of
intrinsically rewarding
subordinates actually seem to
role
by their
superior.
No
prefer
evidence
is
unstructured
but
a
more directive,
cited
on
this
latter
point, however.
Level within the organization has already been mentioned in connection
with
the
suggestion
Hopwood
study.
that
structure
Other
is
evidence
preferred
tends
at
to
lower
confirm
levels
House's
and
[1972]
resented
at
-20-
levels
higher
[Stogdill
and
Coons,
Hunt,
and
Hill
1957;
Bradshaw,
1973;
However, Hunt and Liebscher [1971] and Hunt, Hill and Reaser [1971]
1970].
few or
report
differences
important
no
attributable
to
job-level.
While
there may be disagreement about the nature of the moderating effect of joblevel
there does
,
seem
to
unanimity on the point of the existence
be
of
job-level type of moderator.
Work group size has also been found to affect the relationship.
that
found
[1972]
technical
like
specialists
supervisors
while
with
supervisors tended to behave more
work groups,
small
in
exhibiting
large
considerate
supportive,
spans
Meyer
tended
control
of
behavior,
emphasize
to
administrative functions and to exhibit more structuring behavior.
Similar
results are due to Merchant [1978].
The
been
upward
to moderate
found
by superiors
"advocate"
the
superior
the
than
staff or
higher
may
more
interests
subordinate
view
due
to
time
significant
spent
by
amounts
of
be
[1972]
found
also
factors
suggested
1968],
in
the
the
existence
of
time
by
spent
to
the
subordinates
with
the
superior
with
please subordinates.
influence,
appropriate
These
suitable
and
leader
include
goal
communication
Massarik,
1950], task difficulty [Shaw,
relations
[Fiedler,
1967],
from
an
associated
the
powerful subordinate satisfier.
a
determining
literature.
important
as
less personal leader style, where
superior's upward
subordinate independence, to be
Other
Time spent
management
superior
the
higher level management, was found by Meyer [1972]
Herold
which has
variable
another
is
leadership-criterion relationship.
The use of more structured,
themselves.
is
of
organizational
with
for
subordinate's
this
influence
the degree
1963],
style
have
specificity
channels
been
[Korttn,
[Tannenbaum
and
the quality of leader-member
of trust
exhibited
by the
superior
.
[Zand,
and
1972]
[Mulder,
homogeneity
the
within-group
of
skills
1971].
concluding this section of the review of literature,
In
abilities
and
extremely
an
Almost without exception, the empirical
important caveat requires mention.
results reported here were produced with use of survey research techniques
raises
which
the
question
of
causal
the
direction
the
of
relationships
Ritchie [1976] asks the question most cogently:
studied.
"Does democratic supervision cause high peformance, or is
democratic behavior a luxury permitted only supervisors whose
subordinates are already highly productive?" [p. 57]
Goodstadt
groups
[1970]
will
presents
elicit general
evidence
indicates
that
supportive
work
effective
that
behavior by superiors while
a
less
effective unit will generate close supervision.
*j
.
Individual Variables
For
reasons of empirical
tractabil ity,
seems,
it
the major
level
of
emphasis in the accounting literature which deals with participation is at
the
individual
methodological
laboratory
level.
base
based
analysis.
In
organizational
at
The
this
research
is
level
is
clearly
researcher
level
greater
far
more
variables,
the
for
for
instrumentation
compared
with
higher
order
for
of
than
here
good
at
the
in
individual
levels
with
a
broader
experimental,
other
levels
satisfactorily
to
example,
the measurement
at
scope
difficult
addition,
that
provided
is
of
laboratory.
of
model
In
level variables,
analysis,
is
more
the
focal
sophisticated
The
research to be
variables of each study.
reviewed
here
is
grouped
The major variables
according
to
which have been studies are
performance, job satisfaction, attitudes, motivation, commitment to goals,
feedback, goal difficulty and personality traits.
.
-22-
Self report measures of job satisfaction are easy to obtain and hence
a
considerable number of studies has investigated the role of participation
as
affects
it
supervisors,
satisfaction.
job
Milar.i
participation and
developed
[1975]
assess
a
and
used
relationship
its
towards the company and performance,
between
the
level
participation
of
variables but his results
that managers who
of
industrial
instrument
to measure
field
In
to
study
an
job
He
found
and
the
a
significant relationship
satisfaction
performance were weak.
for
felt they were consulted
on
attitudes
satisfaction,
attitude
and
Vroom
found
[1964]
their operating budgets and
that their suggested changes were given proper consideration reported high
job satisfaction.
an
Similar results are due to Ivancevich [1972].
interesting contrast was found by Carroll and Tosi
improved
report
participation.
attitudes
They
satisfaction
and
job
suggested
that
the
extent
to
throughout the organization.
This
systematically
varying
the
organizational
subunits,
a
suggests
level
of
strategy
a
participation
practices
problem
in
participation
which
resulting
from
job
on
legitimacy of participation
management
participative
which
wbo failed to
9733
levels
effects of
the
satisfaction are conditioned by the perceived
and
r 1
However,
Heller
the
are
spread
approach of
different
in
explicitly
[1971]
endorses
Cherrington
and
Cherrington
[1973],
in
their
laboratory
participative budgeting, uncovered another moderating variable.
that the
reward structure has
a
major
participation and job satisfaction.
impact on
reward
was
based,
at
"budget" and "output-budget"
least
of
They found
the relationship
between
Subjects in their "group-based" budget
condition (corresponding to high participation)
where
study
in
part,
conditions)
.
on
The
reported high satisfaction
achieving
lowest
the
budget
satisfaction
(the
scores
_~~_
for subjects in the "group-based" condition were reported by those who were
rewarded
basis
the
on
budget
"imposed"
output
of
condition
only.
contrast,
In
(corresponding
subjects
low participation)
to
the
in
reported
highest satisfaction where the reward structure was based solely on output.
The lowest satisfaction scores reported by those in the "imposed" condition
were
from
according
only
rewarded
were
who
those
ability
their
to
to
achieve the imposed budget level.
Demski and Feltham
reward
budget-based
provide
[1978]
conclude
They
structures.
theoretical view of the need
a
that
event
the
in
for
that
effort and skill levels of budget participants are not fully observable (a
form
incompleteness)
of market
by
risk-averse management,
a
budget-based
reward structures are superior to other reward structures.
Hofstede [1967]
also uncovered a factor which appears to moderate the
effects
job-satisfying
of
participation.
his
In
extensive
survey
of
budgeting practices cited earlier, he found that the area of participation
was an important consideration.
the
technical
Specifically,
participation of foremen in
standards component of budget preparation was significantly
correlated with job satisfaction while participation in the development of
financial
aggregate,
more
Hofstede attributed
he referred
that
they
to
had
as
a
this
components
objectives
difference
contribution
budget
the
was
not.
result to the availability of what
in
external reference points
valid
of
to
individuals felt
Cnly wnere
.
make
based
on
their
on-the-job
experience, was participation satisfying.
The
role
:>f
members to budget
[197^]
employed
f avorableness
a
of
participation
goals
is
seen
in
as
achieving
an
commitment
important one.
of organizational
Foran and
De
Coster
laboratory setting to investigate whether the degree of
feedback
(concerning
the
extent
of
acceptance
of
_2 in-
Their results
subordinate recommendations) influenced commitment to goals.
were positive
the predicted
in
French,
direction.
Kay
Meyer
and
[1966]
found little difference between the level of goal comnitment of "high" and
participants
"low"
threat
that
Searfoss
participants.
"high"
of
response
suggested
and
levels
Monczka
and
condition
may
a
provide
[19733
evidence consistent with Foran and DeCoster, on the other hand.
the
They found
highly significant positive relationship between perceived participation
and goal directed effort and goal commitment.
The chosen level of goal difficulty and its relationship to subsequent
performance
level
participation.
budget
which
seemed
to
performed
results
a
indicate
Where
critical.
chosen
levels
intrinsic.
as
to
performance.
a
in
the
number
small
the
of
level
laboratory study in
aspirations
and
diff icul t-to-achieve
only
that
a
by
and
budgets
Stedry and Kay [1966]
field
and
although the
they
subjects)
of
do
of
evidenced
[1976]
that
reward
goal
the
is
by performance
results
nature
are
difficulty
will
than
the
and
be
reward
structure
independent
lower
as
than
directly
interesting
similar but more
of
extrinsic,
rather
of
where
is
in
also
performance,
reward
is
This result further confirms the importance of reward structure
discussed
[1973]
manipulated
investigation
(due
(as
Shapira's
measured).
affected
be
except for extremes of goal difficulty, more difficult goals
are more motivating
they
type of
inconclusive
are
found
He
positive effect on
similar
a
suggest that,
that
difficulty was
level
have
to
Stedry [1960] studied 108 students in
observed.
performance
suggested
also
is
study.
above
in
connection
with
t\
e
Cherrington
and
Cherringtnn
-:
Other
studies
which
aspiration
participation
and
include
[1965],
Raia
have
Locke
;
.
shown
levels
[1968]
direct
a
associated
with
Carroll
and
relationship
more difficult goals
and
Tosi
seniority influenced
Carroll and Tosi
motivating.
also
important
extent
the
conditioning
Some
[1973].
interesting moderating factors emerge from these studies.
that
between
suggested
Raia
which difficult goals were
to
suggest that maturity and self-assurance are
variables,
and
Stedry
and
Kay
and
[1966]
Swieringa and Moncur [1972] both noted the importance of age.
is likely
It
that these variables are highly correlated.
Collins
the
company
as
relationship.
low-tenure
additionally
[1978]
a
found
He
(less
variable
than
which
that
five
suggested
a
moderated
stronger
importance of tenure
the
the
participation-attitudes
positive
association existed
organizational
years)
with
members
than
for
for
high-
tenure (more than fifteen years) members.
Studies
which
have
directly
assessed
participation are few and far between.
due
to
inference
the
related.
That
that
motivational
the
impact
of
Yet references to motivation abound
performance
motivation
and
positively
are
remains an empirical question even though our priors might
be
strong.
as
motivation by developing an instrument based on the curious combination
Hofstede [1967] attempted to measure
a
concept he referred
of attitudes toward the budget and relevance of the budget.
may
be
correlated
Hofstede
found
that
with
motivation
among
many
but
the
variables,
empirical
quesiton
participation
greatest proportion of observed variance in motivation,
Again,
are high,
the
effect on motivation is observed,
participation has little effect.
similar conclusion.
Meyer,
Kay and
these
remains.
explained
as he measured
But he noted that past levels of participation were important.
to
the
it.
Where these
while where they are low,
French [1965]
reached
a
-26-
Merchant
particular
intrinsic
the
that
higher
component,
would
hypothesized
[1978]
levels
motivation,
of
asociated
be
with
in
high
participation.
Using Hackman and Porter's [1968] motivation measure and
construct
participation
for
Behavior Questionnaire
[1967] Budget-Related
for measures of both intrinsic
participation
between
motivation
Hofstede's
however
,
towards
the hypothesis was
system
of
(part
difficulty,
budget
by
confirmed
The relationship
budget
the
moderated
was
conception)
Fertakis'
fran
extrinsic motivation.
and
attitude
and
derived
factor-analytically
a
.
developments
Recent
[1974],
for
a
in
the
expectancy theory
of
use
theoretical
review of
research)
empirical
and
Mitchell,
(see
as
a
theoretical framework for deriving motivation measures are emerging in the
literature
accounting
fruitful
area
[Ferris,
further
for
Rockness,
1977;
research.
Indeed,
it
be
suggested
been
has
may
This
1977].
a
that
many research findings in behavioral/managerial accounting can be explained
in terms of an expectancy theory framework [Ronen and Livingstone,
Finally,
some limited
contribution
personality and
individual differences have been subject to
study in the area of participation.
is
Vroom's
[1960
]
Vroom
low
[ 1
context.
findings
on
964
]
the
also
Foran
measure
suggested
and
conce-ning
by
showed
the
DeCoster
the
974
authoritarianism
]
were
preference
but
unable
failure
manipulation was suspected in Foran and DeCoster'
Hofstede
also
provided
an
s
to
of
study.
to
on
high
participate.
the
in
replicate
the
same
Vroom's
participation
7
indirect test of the moderating
authoritarianism on job satisfaction.
known
participate while
relevance of ego-involvement
[ 1
best
the
individuals
opportunity to
distinct
a
Perhaps
that
showed
He
.
authoritarianism were unaffected
those
1975].
effect
of
Grouping authoritarianism into high.
-27-
moderate
low,
and
significantly,
Separately,
he
reported
that
the
attitude toward
with job satisfaction.
and negatively,
correlated significantly,
budget
the
was
correlated with participation only for high
and positively,
authoritarians.
toward
attitude
that
found
he
budget
Although
correlation between participation and job satisfaction was not
the direct
reported
for
of his
each
"authoritarianism"
three
groups,
it
seems
reasonable to conclude (as he did) that the Vroom result was replicated.
In
questionnaire
a
electronics companies,
their questionnaire,
in
goal
single
with
factor
strongest
for
in
They
individuals
study.
their
low
each
and
[19751
on
who
apparently content to be less influential
in
four
that three
items
action,
participation
all
loaded on
a
significantly correlated
that
this
"cautiousness"
a
Managers
found
and
was
however,
noted,
managers
level
choice of methods
in
analysis
factor
a
Moncur
participation
and
middle
137
independence of thought
satisfaction.
job
include
in
of
Swieringa and
in
setting,
survey
was
correlation
measure
which
they
are
relatively more cautious are
in
budgeting than those who are
more aggressive.
Need for independence
[Carroll
and
Tosi
,
1973]
[French,
are
Kay
also
and
Meyer,
suggested
as
1966]
and
important
self-estee
personality
differences which will condition the effects of participation, and age
an
individual difference variable,
was
found by Alutto and
:r
,
as
Acito [1974] to
moderate the participation - job satisfaction relationship.
Summary, Conclusions and Implications
The purpose of this review has been to point to conditions under which
participation in the budgetary process will yield desirable organizational
results.
Many
factors which
appear
to
"condition"
participation were uncovered, and, rather' than attempt
a
the
effects
of
sirmary of results
.
-28-
here,
a
checklist,
prepared.
The
providing for
list
is
ready reference by management, has been
a
presented
conditioning variables discussed
in
in
Table
this paper are
categories
four
The
1.
presented
in
of
the table
and under each heading, the conditioning factors discussed in the paper are
listed
[INSERT TABLE
It
is
that
hoped
this
paper
will
1
HERE]
provide
a
basis
for
managers
and
academicians alike to pursue new literature and research in the area with
perspective
but,
when
which
does
does
not
ask
the
participation work?"
question
"does
participation
this
paper
has
As
a
work?"
demonstrated,
no
simple answer to the former question exists.
In
conclusion,
introduced
at
the
I
might return to the two opposing schools of thought
beginning
of
the
paper.
These
Management" school and the "Human Relations" school.
the
basis of this paper,
courses" at each school!
were
My
the
"Scientific
recommendation, on
would be to "cross-register" and "enroll in seme
-29-
FOOTNOTES
1.
Differentiation was defined as the "difference in cognitive and
emotional orientation among managers in different functional
departments".
They defined integration as "the quality of the state of
collaboration that exists among departments that are required to
achieve unity of effort by the demands of the environment."
[p. 11].
Differentiation and integration were viewed as inter-related and
simultaneously difficult to achieve.
The more differentiation needed,
the more difficult was the achievement of successful integration.
2.
3.
4.
5.
This suggests an important but neglected view of the benefits of
participation namely improved decision quality which might potentially
result.
In the majority of cases the benefits of participation are
couched in terms of motivational desirability alone.
Miles [1965]
noted this point in his contrast between the "human relations" view and
the "human resources" view of participation.
In this context, slack is entirely functional.
The view that slack is
dysfunctional seems to predominate in the literature.
See Schiff and
Lewin [1974], for a review of literature, and [1970] for a subtle reply
to Argyris [1952].
Galbraith goes on to suggest that the use of lateral roles in the
organization clouds the authority responsibility link which may result
in organizational ineffectiveness due to role ambiguity.
Role
ambiguity may be desirable [Goodman, 1967] but it does behove personnel
management to carefully fit individuals to role descriptions due to
individual differences in tolerance of ambiguity.
Individual level
variables will be considered more fully in section 4 of this review.
Interpersonal
aspects
such
as
superior/ subordinate relationships will
be dealt with more fully in the next section of this review.
6.
Very few attempts at direct measurement of participation are to be
found in the literature.
Notable contributions in the literature in
this area are those of Milani, Hofstede [1967], Likert [1961], Vroom
[1960], Vrocm and Yetton [1973] and Keller [1971].
7.
A more recent study by Abdel-Halim and
confirm Vroom's finding, however.
8.
The Gordon
1963].
Personality
Profile
and
Rowland
[1976]
Personality
again failed to
Inventory
[Gordon,
-30-
PARTICIPATION
V
CONDITIONAL
FACTORS
FIGURE
1
-N
V
ORGANIZATIONAL
EFFECTS
-31-
Cultural
Variables
Organizational
Variables
Interpersonal
Variables
Individual
Variables
FIGURE 2
-32-
Cultural
Organizational
Interpersonal
Individual
Union ties
Nationality
Religion
Environmental Stability
Technology
Structure
Task Uncertainty
Leadership Style
Skill differences
Span of control
Tine Pressure
Work interest
Group size
Superiors upward
influence
Goal difficulty
TABLE
1
Checklist of Conditional Factors
Affecting the Impact of Participation
Reward structure
External references
Feedback
Seniority
Maturity
Age
Personality
-33-
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Zand,
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