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ALFRED
P.
WORKING PAPER
SLOAN SCHOOL OF MANAGEMENT
PARTICIPATION AND MANAGERIAL PERFORMANCE
Morris Mclnnes* and Ram T. S. Ramakrlshnan**
January 1987
MASSACHUSETTS
INSTITUTE OF TECHNOLOGY
50 MEMORIAL DRIVE
CAMBRIDGE, MASSACHUSETTS 02139
PARnCEPATION AND MANAGERIAL PERFORMANCE
Morris Mclnnes* and Ram T. S. RBfflakrlshnan**
January 1987
^College of Management
UMass-Boston
Boston, MA 02125
(617) 929-7830
**
Graduate School of Business
Columbia University
New York, NY 10027
(212) 280-3489
DEC 2
1 1989
ABSTRACT
The results are reported of a study testing participation's relationship to
performance among 415 senior operating managers In 13 large
managerial
companies.
A theoretical model Is first proposed. In which participation
affects performance by Increasing role, task, and goal clarity, and the
of
operating
monitoring, and then by Increasing managerial
usefIllness
confidence and motivation; the enhancement of these Information and attitude
proposed In turn to Increase performance.
The empirical
variables
Is
relationship between participation and performance Is found to be positive, and
explained by the Intervening variables Included In the model; the Information
and attitude effects each provide approximately equal amounts of explanation.
association
with
budget
slack
examined.
Participation's
Is
Greater
participation Increases both the expectation and the frequency of attaining
budget; however, this does not appear to entail greater budget slack, since
participation Is not significantly associated with the effort required to be
sure of making budget or with the level of effort expended on the managerial
Finally, four moderating conditions are h3rpotheslzed and tested. While
task.
participation's relationship to performance Is consistently positive. It Is
more pronounced for managers of lower ability, when greater Information
as3nBmetry exists between managers and their superiors, and for managers whose
responsibility centers face greater environmental uncertainty; it is less
pronounced when formal rewards are strongly contingent on attaining budget.
PARTICIPATION AND MANAGERIAL PERFORMANCE
proposed
management
management
the
in
participation's
on
directly
and
behavior
organizational
Several frameworks have
accounting.
literature, some of which focus
accounting
with performance [Becker and Green,
relationship
Brownell, 1982a; Brownell and Mclnnes, 1986], while others consider it as
1962;
within
aspect
an
task performance have
and
a lot of research attention over the years, in the literatures of both
received
been
making
decision
on
effects
Participation's
Livingstone,
1975;
various
with
favorably,
practices
Chenhall
do
business
in
1966;
Dunbar,
al., 1981, pp. 195-213].
et
exploratory
of
authors
the
[Hanson,
1971;
and
Ronen
All suggest, albeit
that participation is likely to affect performance
reserve f ions,
as
'
framework
the
organizations
[Argyris,
surveys
of budgetary control
Sord and Welsch, 1958;
1952;
Miller, 1966].
and
empirical
behavior
literature
Experimental
organizational
performance
the
Schweiger,
and
[Locke
entirely
been
evidence
predicted
in
an
are
in
tends
the
evidence is inconclusive
the
case
task,
toward
participation
supervisors.
first-line
In
Neither has the matter
although
the
the
weight
of
positive relationship
While Milani [1975] and Kenis [1979] report only
between
associations
tasks,
managerial
this
mixed.
goal setting, dealing in the main with
of
routine
the
the literature.
positive
subjects
for
are
and Locke et al., 1981].
1979;
resolved
empirical
weak
relatively
of
however,
results,
and
performance,
their
Searfoss and Monczka [1973] demonstrate
increasing importance of budgetary control, and stronger positive effects of
participation,
Merchant
related
[1981]
among
importance
is
as
the
shows
management
that
level
increases.
participation
and
Consistent
with this.
performance are significantly
the managers in his sample who are from large companies in which
placed
on
budgetary
control;
and Brownell [1982b] shows that
heavy
reliance
level
of participation in setting budgets, is associated with high performance.
on
budgets
in
performance
evaluation, accompanied by a high
there Is no theoretical reason to
contend
[1986]
participation to have a direct effect on performance.
expect
relationship
the
Mclrmes
and
Brownell
is
mediated
motivation as an intervening variable.
by
of
little
for
by
motivation,
and
principally
because
the
motivation, even though positive, is
As a possible explanation of this, they hypothesize that budget
insignificant.
intrinsic
motivation
advocate
further
attributed to working toward and attaining budgets.
examination,
effects
participation's
participation in setting budgets, thus impairing the
with
increase
may
budgeting
participation
between
correlation
slack
accounted
is
it
and managerial performance,
in
participation
between
relationship
But
While they find a strong positive
empirical restilts do not support this.
their
They propose that
on
both
to
motivation,
obtain
and
a
better
They
understanding
of
identify the impact of other
to
variables which may mediate the participation-performance relationship.
paper
This
(hereafter
proposes
reinforce
the
then,
performance
clarity,
and
participation
is
model
from
developed
first
and
the
being
the
relationship
the literature.
between
The model
is Infornatlve, Increasing role,
effect
enhancing
of
instrumentality
of
operating
better informed are postulated to
positive attitudes, namely managers' confidence in their abilities to
demands
information
these
structural
fuller
participation's
goal
monitoring;
meet
and
that
and
task
A
BM).
participation
builds on and extends the work of Brownell and Mclnnes [1986]
of the task, and their motivation to perform well.
and
attitude
effects
In turn,
are postULlated to enhance managerial
performance.
in BM's work, an expectancy model is used to measure motivation.
Ab
allows
its
in
an
examination
effects
the
motivation
on
model.
This
of participation's relationship with motivation through
the elements, the various expectancies and valences, contained
Thus, the BM results pertaining to participation's effects on
are able to be further tested in the present research; moreover, the
budget-slack hypothesis inferred from their results is directly examined.
-2-
variables
four
Finally,
effects,
performance
relationship.
proposed
affecting
thereby
Intervening
are
being likely to moderate the
as
of the partldpation-
strength
the
These are managerial ability, Information asymmetry,
the strength of the budget-reward contingency, and environmental uncertainty.
are
results
The
Participation
propositions.
and,
Insignificant
portion
participation
with
relationship
the
greater
of
model,
structural
the
slack
budget
but
an
by the Intervening
explained
Is
all
Is
not
supported;
in this study to be associated with enhanced intrinsic
to have a positive correlation with effort, which, even though
and
insignificant,
greater
found
is
empirical study testing these various
found to be positively related to managerial
Is
hypothesis
The
variables.
of
an
of
consistent
performance,
motivation,
reported
not
is
budget
And
slack.
which
sign
the
would
strength
the
be expected in the presence of
of
the participation-performance
is found to vary with the four moderating conditions; however, the
relationship
of the moderation, and the underlying mechanisms, are not in all four
direction
cases as predicted.
next
The
derlvPtlon
by
of
deals
section
with
the
development
of
the
hypotheses tested in the empirical study.
the
sections describing, in turn, the research and the results.
discusses
study's
the
limitations,
model
and the
This is followed
A final section
its implications for theory and practice,
and aveTiues for further research enquiry.
MODEL DEVELOPMENT
First,
performance
Finally,
structural
the
is
proposed.
moderating
model
Then
conditions,
mediating
question
the
and
their
participation's
effect
on
of budget slack is addressed.
effects
on
the
strength of the
participation-performance relationship, are considered.
The Intervening-Variables Model
Becker
and
participation's
Green
effect
[1962]
were
among
the
first
explicitly
to relate
on performance to intervening variables. They suggested
-3-
two
of mechanism, one resulting from the communication which accompanies
t3rpes
and
participation,
to
second
the
In nature, affecting attitudes.
examined here, referring to the first as the "Information effect" and
are
Both
psychological
other,
the
Within the latter, two variables,
effect".
"attitude
the
as
Independent of one another, are considered: these are (1)
being
visualized
as
managerial
confidence, and (2) motivation to work hard and Imaginatively at the
managerial task.
understanding
finds
[1979]
budgeting.
greater
goal
clarity
is
Rlzzo et al. [1970, p. 151] contend
an employee does not know what he has authority to decide, what he Is
"If
expected
accomplish,
to
decisions
will
and
expectations
greater
emerges from participative, compared with
Kenls
and
participative
with
associated
that
setting;
goal
Imposed,
requirements
task
of
and Saarl's [1979a] work suggests that a clearer
Latham
Effect;
Information
win
Increase
Tosl
[1970]
superior."
goal
and
task
role,
he will be Judged, he will hesitate to miUce
to rely on a trial and error approach In meeting the
have
his
of
how
and
They
are
clarity, and clarity about evaluative criteria,
managerial effectiveness.
and
Kenls
suggesting. In other words, that
report
[1979]
Mtdier and Plersoll [1970], Carrol and
empirical results consistent with this
contention.
Participation, by clarifying goal-paths, may also enhance the effectiveness
of
signalling
sustaining
Importance
feedback
monitoring
operating
sltiiatlons
their
to
track
performance,
requiring their attention, and directing, focussing, and
effort
perform
to
well.
Ijlrl
[1965]
highlights
the
to managers of Identifying goal Indicators to provide. In advance of
from
the
management
accounting system, timely and reliable evidence
about
progress
toward
using
students
as
clear
goals In producing high performance.
by
managers
helping
In
subsequent
the
subjects,
empirical
Erez [1977], from an experimental study
budget.
concludes that goal-directed feedback reinforces
studies
Nemeroff and Cosentlno [1979]).
His conclusions have been confirmed
(Latham et al. [1978]; Komakl et al. [1978];
.
-4-
In
participation leads to greater role,
that
goal clarity, and to an enhancement of the usefulness to managers of
and
task,
hypothesized
Is
It
sum,
monitoring
operating
these effects are In turn hypothesized
and
(H^tal-td]);
to Increase managerial performance (H2[a]-[d}).
Mento et al. [1980] demonstrate the Importance of confidence, the
Confidence
on the part of workers that their abilities are sufficient for the task,
belief
performance.
enhanced
to
Inherent
[1979b])
more
be
what
confident,
bolster
confidence.
Further, the
A better-Informed manager Is likely
doubts about the degree of delegated authority,
since
how It can be achieved, which can undermine purposeful
and
expected,
Is
may
effect may enhance confidence.
Information
to
participation
In
the supportlveness (Latham and Saarl
Conceivably,
managerial action, will be better resolved (Rlzzo et al. [1970]).
It
Hence,
participation
by
and
that
h3rpotheslzed
Is
being
better
confidence Is Increased by
managerleLl
Informed
(H3[a],[b]),
and
that greater
confidence enhances managerial performance (H4).
Motivation;
Several
participation
emd
studies
motivation
demonstrate
(Hofstede
positive
a
relationship
between
Searfoss and Monczka [1973];
[1967];
Searfoss [1976]; Kenls [1979]; Merchant [1981]; Tiller [1983]).
BM
also
find
a
positive, but In their case Insignificant, relationship
«
between
participation
and
particular
research
measurement
of motivation.
by
House
Livingstone
conceptual
scores,
[1975].
flaws
and
motivation.
observed
two
and
[1971],
hence
context,
the
the
have
to
are
applied
the
only
expectancy
ones,
theory
In this
to
the
They used a form of expectancy model first proposed
Introduced
In
They
the
to
the
discussion
expectancy
overall
model
accounting literature by Ronen and
of
their
irtilch
correlation
findings
they note some
could affect the motivation
between
participation
and
However, the' form of the model would not affect the relationships
between
apparently
In
motivation.
participation and the elements comprising the model.
offsetting
effects:
first,
-5-
BM find
the expectancies In the model are
especially
valences,
thus
participation,
by
enhanced
increasing
but
secondly,
the
valences, are diminished, thus decreasing
intrinsic
the
motivation;
motivation.
this
In
Livingstone
correcting
study,
expectancy
(H/RL)
the
conceptual flaws in the House/Ronen and
formulation,
the
following
model
is used to
measure motivation:
"^
n
f(PHPHAl + (l-PH)PHFi)Ui(W) + (PrPhAI " Pm^MAI^UiCB)
Where:
is
M
the motivation
managerial task.
Pg,
to
work
hard
] ,
imaginatively
and
P^ are the probabilities respectively
with high and with minimal effort.
of
1-1...
at
the
attaining budget
probabilities
respectively
of
*^®
'^®
PmaI
PrFI*
obtaining an incremental amount of reward 1 under the following
conditions: high effort/budget attained; high effort/budget
failed; and minimal effort/budget attained.
PflAl'
are the utilities of an incremental amount of
when
obtained respectively from having worked
hard and imaginatively at the managerial task, and from having
attained budget.
n^CW),
Uj^CB)
1
rewsird
action
The
or
simply
the
and
the level necessary to meet the organization's minimum
outcome is restricted to two states, attaining or failing
Motivation
is then measured by the Incremental expected utility over
utility,
level
at
Task
requirements.
budget.
is restricted to two choices, to work hard and imaginatively
space
work
to
is a special case of subjective expected utility (EU) theory.
model
This
valued as zero in the model, expected from working at the minimal
failing
between
intrinfllc
rewards,
rewards
budget.
rewards,
which
are
No
distinction is made in the form of the model
rewards
which
mediated, by
are
some
self-mediated,
external
party
and extrinsic
such
as the
manager's boss, peers, or others with whom the manager works.
The
extrinsic
from
ED
model
rewards
working
hard
reduces
to the H/RL model in the following circumstances;
can be obtained only from attaining budget, «md not directly
and imaginatively at the managerial task; intrinsic rewards
-6-
from extrinsic rewards, are obtained vlth certainty, and
distinguished
be
can
motivation as single average values rather than addltlvely; and there Is
affect
no likelihood of attaining budget with the minimal level of effort.
and
rewards
model
the
attaining
to
with
correlated
Green
In
expectancies
The
budget
trtilch
should,
refer to obtaining organizational
as
.
found
by
BM,
be
positively
With regard to the first of these, Becker and
participation.
postxilate that the downward communication which is facilitated by
[1962]
and reinforce formal -reward contingencies.
participation
will
model,
participation, through the information effect, should enhance the
then,
between
differences
for
example
And
with
of
second,
enhance
attainment
of
reciprocal
the
expectancy,
the
Pp'^
^^^
communication accompanying
Pg, that high effort will lead
result
from
clarification
of
1971], or from less demanding budgets because
[House,
organization's
the
'
could
This
(H5[c]).
relationships
moderation
a
Pa'°
where, these moderate formal organizational rewards,
the
to
should
participation
path-goal
between
^^^
In the
increments of pay and bonus, and increased prospects of promotion.
regard
budget
^'^
^^^
Ph'°
particularly
(H5[a],[b]),
to
clarify
beliefs
about
the feasible rate of
performance improvement over time [Hanson, 1966].
Participation's
motivation
are
less
expected
utilities,
valences
of
related
managers
Argyrls
positive
likely,
important
time
behavioral,
as
dearcut.
These
in
the
model.
to
these cognitive, effects on
will be reflected in the valences, or
If the budget-slack hypothesis holds, the
the intrinsic rewards are likely, as found by BM, to be negatively
participation.
to
opposed
on
If,
the other hand, participation is felt by
to enrich their task, as suggested by many behavioral theorists (e.g.,
Becker and Green [1962], Ronen and Livingstone [1975]), then a
[1952],
relationship
observed
as
issue
being,
participation
which
between
for
participation
instance
requires
and
the
intrinsic
by Merchant [1981], to result.
further
valences is
This Is an
testing for Its resolution.
For the
no prediction is made of the direction of the relationship between
emd
the
valences
in
the
-7-
expectancy model.
Hence, because of
In
positive relationship between participation and the expectancies
predicted
the
model, the overall relationship between participation and motivation is
the
hjrpotheslzed to be positive (Hg).
motivation
study,
BM's
performance.
and
In irhlch he concludes that
demonstrate a positive effect, and on the strong positive finding
studies
In
motivation
between
relationship
most
Mitchell's [1979] comprehensive review of the literature on the
on
Based
hypothesized
Is
to
positively
be
related
to
managerial performance (H7).
of
Completeness
structural
seems
model,
on
effect
and
beyond
variable,
other
performance..
the
ones
likely
already
to
play
considered
and
Included
In
the
a mediating role In participation's
Hence, the relationship observed between participation
performance
managerial
From a careful examination of the literature, nc
Model:
the
Is
h3rpothe8lzed
to be fully accounted for by the
Intervening variables In the model (Hg).
Budget Slack
BM
budget-slack hypothesis on a pattern in their data.
their
base
They
participation in budget-setting is associated with a greater expectancy of
find
receiving
they
[1970],
their
formal
argue
immediate
participation
attaining
budget
could
this
attaining
is
found
found
to
consistent
Moreover,
associated
be
following Schlff and Lewin
budget;
lead managers to believe easier budgets serve
self-interest.
budget.
is
from
rewards
with
an
with
Increased
easier budgets,
expectancy of
Finally, diminished intrinsic motivation deriving from the
be associated with greater participation, suggesting less
to
challenging, and perhaps easier, budgets.
Other
slack
of
[Lowe and Shaw,
BM's
budget
researchers
have
also
1968; Onsl,
presented
findings consistent with budget
1973; Collins 1978].
However, as in the case
study, none has measured budget slack directly, and so the presence of
slack,
and
the
conditions
giving rise to an increase in it, are only
Inferences.
-8-
level of perfomance and budget difficulty may vary from organization
The
participation
yet,
and
situation.
For
Instance,
and therefore higher levels of operating perfomance, than would be
and
contingency,
of
Moreover, an enhancement of the budget-reward
probability
the
of
attaining
could
biidget,
both
be
Predictability can
economically-efficient control strategies.
with
consistent
Importance for some organizations, Justifying the sacrifice of
overriding
potential
performance
operating
coordination,
at
Individual
the
hence
and
level
performance,
with
at
a
the
view
to increasing
total-system
level
And managers, If risk-averse, would presumably
[1960], Dunbar [1971]).
(Stedry
to
sltxiatlon
budget-setting could result In budgets which are both easier,
In
without participation.
case
have
from
because of the accompan3rlng communication, contain superior operating
'
strategies,
the
even
and
organization,
to
to trade a lower mean level of compensation for a higher expectancy
be
willing
of
attaining, and therefore a lower risk of falling, budget (Demskl and Feltham
[1976]).
slack budget Is defined here simply to be one which demands less effort
A
than
would
In
the
necessary
solely
above
this
proxy
for
aspects
of
study
present
Since the normal level of effort may be
^normal'.
effort has to be related to prevailing normt.
peculiar,
sltxiatlonally
done
considered
be
measuring
by
Incremental
effort
to the amount
to meet the organization's minimum requirements.
level,
mlnlmtoi
budget
required
This Is
The effort,
to be sure of making budget Is used as a
Budget alack Is then examined In relation to several
slack.
participation,
to
level
the
of effort expended, to expected and
actual performance versus budget, and to managerial performance.
Moderating Variables
Brownell
evidence
moderating
variables.
proposing
[1982a],
about
effects
participation's
from
Earlier,
for
various
reasons which might explain the conflicting
relationship
Individual,
Instance,
he
-9-
to
performance,
Interpersonal,
(Brownell
[1981])
and
suggested
contextual
demonstrates the
this
Internals,
a dominant part in human affairs.
plays
High
believe
that
luck
compared
with
high extemalti, exhibit greater job satisfaction and
"externals"
where
decentralization
of
conditions
Similarly,
that participation has a stronger effect on performance
shows
[1981]
vice-versa.
and
conditions,
participative
under
performance
in
"Internals" on
believe they exercise a high degree of influence on events, whereas
trait
Merchant
of the personality trait "locus- of -control".
effect
moderating
an
administrative,
rather than an
Interpersonal, control style is used.
variable;
the
strength
variable;
and
environmental
postulated
of
moderate
to
information
variable;
individual
an
ability,
four moderating conditions are tested: managerial
study
present
the
In
the
asymmetry,
contingency,
bxidget-reward
uncertainty,
strength
the
contextual
a
au
of
inter-personal
a control system
variable.
Each is
participation-performance
the
relationship by its effect on the intervening variables, as is now discussed.
Ability;
Managerial
setting
less
education.
developmental
from
thereby
tool,
superior
predicted
[1975]
find
that participative goal
Analogously, participation could be used in organizations as a
having
to
subordinate
stronger
a
effect
for managers who are
Participation could result in a transferrence
about their abilities.
subordinate's
Yukl
and
a more favorable effect on performance for workers with relatively
has
uncertain
Latham
of
knowledge
and
skills,
thus enhancing the
ability;
however, in the present context its principal effect is
to be one of
bolstering confidence and motivation, and through these
managerial performance (H9[a]).
Information
managers
Asymmetry:
Communication has greater potential value to budgeted
the greater the information as3nmnetry between them and their superiors
(Christensen
Penno
[1982];
performance,
because
facilitates,
is
of
the
hypothesized
Hence,
[1984]).
greater
to
participation's
effect
on
incentive value of the communication it
be more positive under conditions of greater
information asymmetry (H9[b]).
-10-
Budget-reward
discernible
a
have
Contingency;
moreover,
[1981]);
relationship
noted
that
particularly
participation
enhances
by an evaluative style which stresses the budget
rewaris
formal
Making
attaining
course,
of
was
contingent on attaining
highly
way to underscore the Importance of both budgetary control and,
one
is
budget
It
[1982b]).
(Brownell
participation to
effect on performance, budgets oust be important (Merchant
accompanied
when
performance
noted earlier that for
was
It
the
budget.
hypothesized
is
to
Hence,
be
the
participation-performance
more positive under conditions of higher
budget-reward contingency (H9[c]).
The Importance of downward communication, which is
Uncertainty!
Environmental
to facilitate the Information effect, is likely to increase as the
hsrpotheslzed
operating
environment
(Galbraith
[1974]).
hypothesized
to
be
more
changes
Hence,
more
the
rapidly
and
with
less
participation-performance
positive
the
predlctablllt>
relationship
is
greater the environmental uncertainty
faced by a manager's responsibility center (H9[d]).
THE RESEARCH
this
In
were
.collected,
measured,
and
section
the research is described, beginning with how the data
proceeding to how each of the variables was ope rationalized and
finally
addressing briefly the methods of analysis used to test
the hypotheses.
Data Collection
A
clarity
of
questionnaire
was
used
to
gather
the data.
It was pre-tested for
of expression and for the time needed for its completion using a sample
20 managers of the same level of seniority and from similar companies as the
intended
research
sample.
The average time taken in pre-testlng to complete
the questionnaire was 30 minutes.
Most
both
ends
of
of
the questions asked for a response on a seven-point scale, with
the
scale anchored by verbal descriptions.
-11-
In the case of some
answer by Indicating a number selected
to
anchored
at
end
the
points
and
at
salient
In a few cases, respondents were asked to give a "yes-no"
points.
Intervening
asked
descriptively
scale
a
from
were
respondents
questions,
answer^ or a brief verbal response.
with
was
subsequently
was
research
Initial contact
either the chairman or the president, and the
executive,
chief
the
Included In the study.
wern
companies
large
Thirteen
administered
with
the
aid
of a senior member of
corporate management.
Companies
below
Just
asked
select a representative sample of about 50 of
to
operating managers, carrying functional responsibility at a level
senior
their
were
general
management.
questionnaire
The
was
distributed to the
accompanied by a cover letter signed by the corporate executive who was
sample,
coordinating
for
Included
research
the
returning
In
each
A
company.
pre-addressed envelope was
questionnaires directly to the researchers.
completed
response was guaranteed, with a view to reducing bias which might
Anonlalty
of
arise
If
respondents
were
corporate
management.
Thus, returns could be Identified by company, but not by
believe
to
their
answers
could be Inspected by
Individual respondent.
Measurement of Variables
measurement
The
of variables Is described, following the order of their
Introduction in the theoretical development.
Participation;
to
guage
score,
Llkert-type
The
and
[Brownell,
[1978,
participation measure developed by Milanl [1973] was used
the degree of involvement and influence in budget-setting.
six-item,
seven.
The
scale
has
scale,
p. 211])
previously
to
assess
performance
of
their
been
iton
for
calling
for
a response from one to
cm additive construction of the overall
demonstrated
to
comprise
a
single factor
The Spearman-Brown (SB) reliability measure (see Nunnally
computed
asked
also
designed
is
1982b].
each
This is a
for its use in this study was 0.69.
the
extent
responsibility
of
their
centers,
Respondents were
participation in evaluating the
and
the
degree to which they
felt
Inluence
could
they
performance
of
goals
for
set
their
and the tradeoff between goal-difficulty and the level
centers,
responsibility
level
the
of incentives tied to goal attainment.
collection,
easuring
managerial
with
preferable
quality
the
of
least
to
their
own
performance,
other
rating
even
It would be
and validity of self-ratings of the
reliability
in
university
such
researchers
correlational
the
common
teaching
Nevertheless, with regard
with
practitioners in other
[Blackburn
and Clark, 1975;
as judged by the correlations between self-ratings and
sources,
[1974]).
in
1978; ETS, 1981]), appear to be quite reliable in rating
Chrichton,
bias,
produces objective performance.
managers,
(e.g.,
and
Heneman
effects
behavior to be able to compare them with objective
latter,
the
Doyle
some
the
managerial
fields
professional
that
attitudinal
and
or with ratings from some other source.
performance,
at
cognitive
environment,
assessing
in
a self-ratitg approach to
effects mediate macagerlal behavior which, in conjuction
These
operating
the
on
solely
As argued by Thornton [1980], a self-rating
performance*
exploring
are
organization.
rely
to
most relevant measure of performance in studies, such as this
the
which
one,
necessary
was
it
actually
Is
Because of the anonimity of response used in the data
Performance:
Managerial
claim
as
superiors, peers or subordinates.
It is true
suffer from a leniency bias (e.g.,
self-ratings
Be that as it may, research, such as the present study, using
methods
of
analysis
will
not
be adversely affected, provided
if it does exist, is not systematic with any of the other variables
In the study.
The
minor
modification,
scale,
method developed by Mahoney et al. [1963, 1965], with a
self-rating
was
used in the study.
Ratings, assessed on a nine-point
were asked for each of nine sub-dimensions of managerial performance, as
follows:
planning,
investigating,
staffing,
responding
to
coordinating,
evaluating,
supervising,
unexpected events, negotiating, and representing.
-13-
In
.
rating
overall
addition,
an
different
positions
mixes of managerial Input, this latter
different
require
Since
should not be expected to be a simple average of the ratings on the nine
rating
overall
rating,
Pindyck
and
nine
Of
the
being
remainder
the
55 percent of the
explained by Job-specific factors.
The
(see BM [p. 592] for a description of this procedure).
sub-dimensions
pairwise
36
that
regression
Independent.
A
sub-dimensions
was
run;
of
the
nine
elsewhere
in
the
questionnaire,
recently
been
superior
rating.
assess
to
measure
of
significantly
These
tests,
confidence
Pindyck-Rublnfeld
are
performance
indeed
fairly
rating on the nine
in
respondents
Finally,
how
well
were
asked,
their performance has
The overall self-rating of managerial
rated by their superiors.
correlates
the
of the variance in the overall rating is
sub-dimensions.
by
violate
sub-dimensions
overall
the
percent
69
two
nine
the
explained
performance
only
comparl«»ons,
demonstrating
a
l(-.ast
Rubinfeld [1976] procedure was applied to test the independence of
criterion,
provide
and explain at
Independent,
be
should
sub-dimensions
the
Mahoney et al. [1963, pp. 106-107] propose that the
sub-dimensions.
performance
the
managerial performance was asked for.
of
(r"0.331, p<0.01) with the assessment of
in the absence of an independent check,
validity
the
and
reliability
of the
self-ratings
A
to
measure of budget performance was also elicited, by asking respondents
assess
their
recent experience with regard to variances against budget for
their responsibility centers.
The
Information
one
end by "precise" and at the other end by "very vague", were used to measure
respondents'
clarity,
the
Effect;
tmderstandlng
Seven questions, each assessed on a scale anchored at
of
aspects
of
their
Jobs.
Two related to role
one referring to delegated powers and the other to the relationship of
manager's
decision-making
authority
-14-
to
the
task
of the responsibility
responses
The
center.
related
task
to
coordination
reciprocal
organizational
an
average
Is
understanding
used
measure
The
as
a
referred
r23"0.593;
for
asked
and
SB
of task clarity.
circumstances
to
organizational
of
and
performance,
goals.
ri3-0.422,
attained,
simultaneously
of the responsibility center with other
work
the
(ri2"0'600,
These
clarity.
of
The responses to these three questions are significantly
units.
Intercorrelated
overall company mission, and tvo referring to the
the
to
Three
referring to the alsslon of the responsibility
one
clarity,
relation
In
center
are significantly correlated
questions
and an average Is used as a aeasure of role clarity.
p<0.01),
(r~0.423,
two
these
to
In
an
measure
-
0.78), and
And two related to goal
which all goals could not be
assessment
of
the
degree
of
priorities, first among dimensions of current
between current performance and longer-term development
then
responses
to
these
two
questdons are significantly correlated
(r'0.699, p<0.01), and an average Is used as a measure of goal clarity.
were
Respondents
Informal
monitoring
questions
these
participation
and
p<0.01),
effort
the
Into
formal
to assess the value to them of formal and
The responses to
not correlated; further analysis shows that the amount of
are
allowed
a
manager In the design of formal monitoring systems Is
with the value attributed to formal monitoring (r"0.466,
negatively
This
(r~-0.075).
asked
carrying out their managerial tasks.
In
correlated
positively
also
with
suggests
developing
the
value
attributed
to
Informal monitoring
that managers Invest a relatively fixed amount of
monitoring, and If they are not permitted to Influence
system to meet their needs they will develop informal, or personal,
systems.
Thus, informal and formal monitoring are alternatives, and the value
attributed
to monitoring is additive of the two.
Therefore, the sum of the two
responses is used in the analysis.
AttittKJe
to
Variables;
To measure managerial confidence, reference was first made
Job-related knowledge and skills, and respondents were asked to assess their
degree
of^
-confidence in these for meeting the demands posed by their managerial
tasks.
-15-
was
questionnaire
all
relative
reward,
each
end,
their
preference
hard
Seventeen rewarding
rewards they experience from their managerial work.
to express their preference for an increment of
asked
of all the other rewards, using a scale
increments
to
a
The first time they were asked to express
"
if the Increment of reward were to be obtained as a result of
and
as
obtained
calculated.
A principal Issue In pre-testlng the
were used.
"extremely xindesirable.
other
working
was
respondent
one end by "extremely desirable," through "indifferent" to, at the
at
anchored
were assessed, and a
ensure that the sample of managers perceived the list to
to
twice
were
model
expectancy
EU
the
2,
relevant
the
Respondents
Table
In
shown
outcomes,
In
each
for
score
motivation
contain
variables
the
All
imaginatively
result
[Uj^CW)
attaining
of
and the second time if it were to be
] ,
budget [Uj^(B)].
They were also asked to
the probability of receiving an increment- of each reward in each of four
assess
as
clrcuDstances,
budget
attained
budget
having
attained
budget
having
failed
budget
[Pmai
worked
worked
having
[^Hpili
of
having
[PhaI^*
failed
probability
having worked hard and imaginatively, and having
follows:
^^^
]»
tPi>{pi].
budget
attaining
hard
and
with
minimal
having
worked
Finally,
with
imaginatively,
measures
high
[PhK
but having
effort, but nevertheless
with
minimal effort and
were
^^^
elicited
with
of
minimal
the
[Pm^*
effort.
Two
to
direct
of motivation were also asked for, one relating
the strength of desire to "meet or beat budget" (budget motivation), and the
other
to
to
strength
the
performance"
was
assessments
performance
desire
"ensure
to
(performance motivation).
provide
correlate
of
your
unit's highest possible
The purpose of these direct assessments
a check on the scores prodxiced by the EU model.
positively
motivation
with
budget
(r"0.328,
motivation
p<0.10);
(r-0.198,
The EU scores
p<0.01),
and
these results provide a measure of
confidence in the validity and reliability of the EU measure of motivation.
-16-
with
necessary
sure
"be
to
Then
assume a high level of effort, thus holding effort
to
to assess the conditions under which they coxild expect to attain
and
constant,
the probability of budget-attainment.
constant
asked
were
respondents
budget"; the Idea here was to elicit an
attaining
of
holding
measure,
effort
vere asked to provide an assessment of the effort
Respondents
Slack!
Budget
their
budgets.
"only
when
scale
The
for
last question was anchored at one end by
this
conditions are extremely favorable" and at the other end
operating
by "even when operating conditions are extremely unfavorable."
simply
meet
to
measured
was
Effort
by
first referring to a minimal level, sufficient
Respondents were
least expectations of the organization.
the
asked
to rate their effort Incremental to this minimal level, first in terms of
hours
spent
and
in
intensity during working hours.
of
terms
The two
significantly correlated (r*0.A54, p<0.01), and a single measure
are
responses
then
was constructed by multiplying the two, hours times intensity, together.
referring
one
ability,
Two
Variables;
Moderating
were
Respondents
knowledge
correlated
designed
to
assess
managerial
to
Job knowledge and the other to Job-related skills.
to
assess
necessary
skills
and
significantly
asked
were
questions
extent
the
their
for
(r"0.660,
p<0.01),
to which they possess all the
The
Jobs.
and
two
responses
are
average is used as a
their
measure of managerial ability.
Information
asking
as3rmmetry
respondents
potential
how
performance
accurately
in
difference
between
advance
the
assessed
was
accurately
of
their
using
advance
in
responsibility
two
direct
questions, one
they are able to estimate the
centers,
and
the
other how
their superiors are able to make the same estimate. The
two
responses
is
used
as
a measure of information
asyimetry.
The
the
data
strength of the budget-reward contingency was assessed using some of
which
probabilities
of
were
gathered
receiving
to
estimate
Increased
the
EU
motivation
model.
The
pay, bonus, and an enhanced prospect of
-17-
level
minimal
three
the
as
used
is
the
a
and having worked at the
budget;
nonetheless
former
the
and
budget~reward
attained
budget.
probabilities
contingency.
The
are taken as
The responses
of formal reward are significantly Intercorrelated
BM
r23"0.537;
ri3"0.648,
(ri2"0«707,
of
elements
three
the
across
strength
the
of
measures
latter
the
make
to
having
but
effort,
of
between
differences
failed
having
but
Imaginatively,
each of two circumstances: having worked hard and
In
assessed
were
promotion
measure
measure
of
0.84),
budget-reward
the
and
an
average of
contingency in the
anfilysis.
uncertainty was assessed using six questions selected from
Environmental
the
use of financial controls.
volatility
and
predictability
costs
and
assessments of
of input costs and output prices.
And two
"technical
as
and legislative factors, policy
from elsewhere in the organization, and competitor actions."
responses
six
such
prices,
emanating
changes
The
Four asked for
about the dynamism and predictability of factors in the environment other
asked
than
[1972] used to study the effect of the operating
on
environment
the
Khandwalla
questionnaire
the
are
significantly intercorrelated, and an average value is
used in the analysis as a single measure of environmental uncertainty.^
Analysis
analysis
The
respondents.
is
Later,
between
participation
company
as
well
as
conducted
the
using
single
a
pooled
sample of all 415
main result of the study, the positive relationship
and managerial performance, is shown to hold within each
across the 13 companies.
This provides justification for
treating the respondents as a single sample.
Most
of
However,
the
examined
using
provided
by
presented
The
model
structure and completeness of the intervening-variables model are
path
BM
here.
is
individual hypotheses are tested using simple correlation.
the
A fairly full explanation of path analysis is
analysis.
[pp. 593-594]
,
and
therefore
only
a
brief
description
is
The reader is referred to the model as presented in Table 4.
non-recursive,
and
so
the
-18-
path coefficient pjj is the direct
•
of variable
effect
Is
regressed
also
can
In
on
J,
for
3
on variable 1.
It Is simply the standardized slope when 1
with all other variables In the model controlled for.
It
obtained using the correlation coefficients, r^j, vhlch are shown
be
Table
J
the
variables
Included
In
the model. The following set of
simultaneous eqtiatlons has to be solved:
Plj "•'XPlk^J
^Ij
llltistrate,
To
participation
an
explanation
managerial
and
of
observed
the
performance
(r52»
equal
relationship between
to 0.233) was derived
from the following calculation;
P51 + (P52P21 + P53P31 +P54P4l)
^51
+ (P5AP43P31 + P5AP42P21 + P53P32P2l)
+ (P54P43P32P2l)
direct
The
found
Is
P51,
path
Insignificant
model
k.
are
portion
obtained.
participation's
In
this
to
by
the
Is
left
be 0.060.
model
Thus, 75 percent of the correlation,
(I.e.,
unexplained.
tl-CO.060/0.233) ]*100),
and
an
By dividing through by T^i, the
the overall relationship accounted for by the various paths In the
of
portions
from
explained
Is
r5i.
coefficient Unking participation and managerial performance,
The total explanatory power of a particular variable, say
relationship
to
managerial performance Is obtained by
summing the terms In the preceding equation which contain p^^.
The
effects of the moderating variables are estimated from the following
regression equation:
Y
ai + a2X + a3Z + 84X2
Where:
7
Is managerial performance
X
Is participation In the managerial process
Z
Is a binary variable, assigned a value 1(0) for a hlgh(low) value of
the moderating variable
XZ Is the Interaction between participation and the moderating variable.
-19-
The
Is measured by the coefficient a^, and a t-test is used
effect
moderating
to assess its significance.
RESULTS
rate
of
and
companies,
had
Respondents
perecent.
69
received
were
questionnaires
Completed
an
from
415 managers, a response
average
of 16 years with their
total of ten years in their present jobs and jobs similar in
a
content and responsibility to their present jobs.
The Intervening Variables
information
effect,
performance
are
between
coefficients
four
of
and
attitude
H5);
and
and
the
two
performance,
information
seven
all
effect
are
1
and
attitude
the
effect,
and
managerial
All eight coefficients between the two
.
of the information effect are
elements
four
elements
with
of
similarly,
H2^[a]-[d]);
all four
information effect 'and managerial
the
with H2[a]-[d]).
(consistent
significant
All
the two participation measures and the two elements
coefficients
are
and significant (consistent with H3[a]
positive
are
between
the
and motivation, and
between
the
four
elements
of the
two elements of the attitude effect are positive,
(consistent
significant
confidence
and significant (consistent with H4 and
positive
coefficients
eight
and
of
(consistent
the
effect
the
Finally,
H7).
Table
between
coefficients
the
in
positive
are
managerial
and
shown
significant
and
performance
elements
the
measures
participation
positive
coefficients between participation, the elements of the
correlation
The
with
H3[b], and with the proposition
that cognitive mechanisms enhance motivation).
Participation's Effects on Motivation
relationships between participation and the elements of the EU model
The
of
motivation
expectancies
working
hard
participation.
are
of
shown
in
Table
2.
Consistent
with H5[a] and [b], the
receiving incremental amounts of formal rewards as a result of
and
attaining
Indeed,
all
budget
are
significantly
associated
with
17 of the correlations between participation and
positive, and 14 are significant; 13 of the correlations between
are
Py's
the
participation
of
none
These results suggest that
are negative is significant.
enhances reward expectancies In a general way, and cot simply for
which
expectancies
reported
positive, nine of these are significant, and
are
Ps's
which
those
participation
the
the
and
Table
in
participation
and
moderate formal organizational rewards.
consistent
2),
with
association
the
H5[c],
Moreover (not
between
expectancy of attaining budget with high effort (Pg) is
the
positive and significant (r-0.247, p<0.01).
work-related
The
utilities
Although
participation.
significantly
higher,
shown
not
Table
their
2,
unaffected
mean
levels
by
are
and their standard deviations considerably smaller, than
(U(B)'s), suggesting that work provides greater,
the
budget-related
utilities
and
more
satisfaction
uniform,
in
essentially
are
(U(W)'s)
than
the
budgets
which
are
part
of
the
management control system.
budget-related utilities are In general positively associated with
The
participation.
significant.
Of
The
only
the
15
with
contrast
results
two
which
are
positive,
finding
BM's
which
correlations
of
a
are
negative
are
nine are significant.
negative
relationship
not
These
between
participation and the Intrinsic valences.
The Structural Model
analysis
The
Interpreting
number
the
structured
model
linking
performance Is set out In Tables 3 and 4.
managerial
the
of
the. output of path analysis Is that It rapidly becomes unwieldy as
of variables Included In the model Increases.
should
model
balanced against the Interpretive difficulty.
1
the
are
reduced
four
and
A difficulty In using and
variables
Is
participation
be
by
reduced
Hence, the number of
to the point vb&re the Insight obtained from the
The variables In Table
aggregating first the two participation variables, and then
Information-effect
variables.
-21-
This
Is
done
simply by averaging
reduced set of variables, and their
The
then.
shown In Table
3..
The
model,
The
flgirres
on
the
way
power
correlation coefficients, are
the results of the path analysis, are given In Table 4.
and
the &rcs of the model are the path coefficients, calculated in
explained
The
earlier.
tabular data present the total explanatory
each variable in the model, broken down into (1) the direct effect of
of
(2) its effect jointly with each of the other variables, and (3)
the
variable,
its
effect jointly in conjunction with both other variables.
are
attributed
in
which
effects,
results
This
variables.
Instance
first
the
in
double,
to
and
each
of
triple,
the
The joint effects
three
intervening
counting of the compound
to be backed but in the calculation of the total amount of
has
explanation provided by the model.
path coefficient of the arc linking participation and performance is
The
0.060,
which
effect
is
for
positive
of
coefficient
relationship
of 42 percent.
Independent
same
The information
one
on
portion
respectively),
with
performance;
jointly through its
on the attitude variables it accounts for another 15 percent,
effects
total
a
is consistent with Hg.
the single largest explanator, accounting directly for 27 percent of
participation's
positive
This
insignificant.
is
The two attitudes, confidence and motivation, are
another,
as
demonstrated
the arc in the model linking them.
of
and
by
the
insignificant
path
Each accounts for about the
the participation-performance relationship (25 and 23 percent
together
they
account for approximately 48 percent of the
relationship, similar to the amount explained by the information effect.
Budget Slack
It
has
expectancies
prefer
easier
consistent
already
been
found that more participation enhances the reward
attributed to attaining budget, providing a motive for managers to
budgets,
and
boosts the likelihood of budgets' being attained,
with easier budgets.
budget-derived
valences,
which
On the other hand, participation Increases the
is
not
consistent with greater budget slack.
The matter is now examined more closely, using the data in Table 5.
slack Is aeasured by the aaount of effort necessary to be sure of
Budget
attaining
budget.
correlated
positively
In
are
performance.
managerial
with
expected
the
Is negatively correlated with effort, which Is In turn
It
provide a degree of confidence In the
they
directions,
Since these correlations
validity and reliability of the measures being used In the analysis.
aspects
Two
difficulty
in
the
exercise
they
over
and
budget,
trade-off
the
over
the level of goal
between
accepting more
return for a higher level of reward if budget is attained.
related
greater
to
between
rewards,
associated
with
budget
slack
On the other hand, the positive correlation
slack.
can be induced, by the promise of higher
managers
suggests
accept
to
Hence, it does not appear that participation
to effort.
influence on the budget-difflculty/contlngent-reward trade-off
greater
budget
significantly
difficulty; nor are either of these participation measures
goal
of
significantly
leads
not
Is
in budget-setting, or with the degree of influence exercised over
participation
level
slack
Budget
budget-setting.
and
are especially germane to the
are, as would be expected, significantly correlated with participation in
These
the
feel
managers
in
goals
difficxilt
which
are extracted from the overall process, namely the
slack,
influence
of
degree
budget
of
question
budget-setting,
of
budgets
which are expected to require greater than normal
effort.
Participation
budget
of
difficulty,
likely
sure
to
performance;
and greater Influence on the level of
are both positively correlated with the degree of adversity
which can be encountered during the operating period while still
conditions
being
budget-setting,
in
of
attaining
attained,
be
that
budget.
which
is
Thus, participative budgets should be more
borne
there
is
to
say,
level
of
participation
out by the relationship with budget
less Incidence of variances against
is
budget
as
motive
underlying this appears quite clearly to be one of risk reduction rather
the
than avoidance of hard work.
-23-
in
budget-setting
Increases. ^
The
Moderating Variables
investigation
The
effects
the
of
of
moderating
the
variables
is
presented in Tables 6 and 7.3
Table
In
participation
interaction
are
shown.
all
four
which
(&2^
regressions
of
the
managerial
of
moderating
variables
of
performance
(33),
and
the
on
the
moderating variables and participation (34)
the
of
significance
the
with managerial performance is managerial
relationship
moderating
four
with
stronger
is
between
managers
and
with
(consistent
significantly
conditions
participation-performance
the
uncertainty
The only moderating condition
column); as would be expected, lower ability accompanies lower
All
of
asynnetry
the
conditions (first column).
direct
any
relationship
is
each
moderating
performance.-
it
each
>
between
'(second
strength
of
testing
Participation is positively related to managerial performance under
has
ability
each
from
coefficients
t-statistics
the
6
lower
(third
the
column): the
managerial- ability, higher Information
and
Hgfb],
higher
and
superiors,
their
Hgta],
relationship
Influence
Hgtd]
environmental
respectively);
and
weaker with a greater degree of budget-reward contingency (contradicting
Hgtc]).
These
Table
7.
variables
effects
Here,
explored
are
The same method as before is applied,
using
performance
as
three
intervening
variables
variables.
means of the results shown in
by
moderating variables' Interactions with the Intervening
the
analyzed.
are
further
the
but-
instead of
Independent variable in the regression, each of the
is
used in turn with each of the four moderating
Hence, twelve regressions were run; however, only the t-statlstlcs
for the Interaction terms are reported.
In
case
the
of
managerial
confidence
effect
performance.
on
hypothesis.
In
the
lower
and
motivation,
This
case
managerial
of
is
ability,
resulting
consistent
in
with
participation
increases
participation's greater
the reasoning behind the
Information asymmetry, a positive relationship
-24-
with
observed
is
underlying
mechanism
hypothesis
was
motivation.
and
confidence
negative,
even
though
Thus,
while
High budget-reward contingency has a negative, albeit
relationship with all three intervening variables; these combine
moderating
negative
the
relationship.
sight
first
At
results
which
on
on
effect
this
puzzling, somewhat at odds with the
is
was
hypothesis
the
participation-performance
the
based.
Nevertheless, a high
contingency is not precisely the same as either budgetary control
budget-reward
or an evaltiative style which focusses on the budget.
important,
being
and
seems not to be through the incentive effect on which the
based.
insignificant,
previous
effect
a83nBmetry's moderating effect is in the direction hypothesized, the
information
give
with
relationships
insignificant,
to
information
the
Indeed,
it
goes a major step further, placing the operating managers at risk in respect
to
attaining
the
to communication, and also dominated by the budget, diminishing
open
not
thxis
challenges
on
effect
all
contribute
managerial
the
of
Finally,
sense.
In these circumstances, managers may feel defensive, and
budget.
in
intervening
three
a
broader, and more motivating,
of environmental uncertainty, participation's
case
the
in
task
variables
is
positive;
hence,
all three
uncertainty's moderating effect on the participation-performance
to
relationship, not simply, as was hypothesized, the information effect.
Testing for a Company Effect
important question concerns the generalizability of the results, that
An
Is
to
say,
across
the
applying
between
it
whether
they
main
a
managerial
performance
from
their
effectively
companies,
mean
normalizes
removing
'
any
each of the thirteen companies as well as
in
mean-adjusted
procedure
was
used
to test this,
result of the study, namely the positive relationship
managerial
and
participation
them
A
companies.
to
hold
performance.
The
participation
and
scores for the respondents were adjusted by subtracting
values
the
for their respective companies.
origin
of
the
companjr-spedfic
-25-
sets
effect
of
This procedure
observations across the
which
might
exist
in the
correlation coefficients between participation and performance are
The
data.
Indistinguishable
statistically
and the unadjusted (r"0.233).
(r"0.252),
holds
well
as
within,
general! za bi 11 ty
as
across,
sets
two
the
for
of
data,
the
adjusted
Thus, one of the study's main results
giving some confidence in the
companies,
the findings, and also providing justification for using a
of
single pooled sample in the analysis.
SUMMARY AND CONCLUDING DISCUSSION
study's
The
should
limitations
be
borne
in mind when evaluating its
There may, for Instance, be bias aris'^ng in the selection of samples
findings.
of
managers
in each company, and from the self-selection exercised by managers
In
choosing
whether
respond
to
And, despite careful
and the use of a large number of consistency checks across the data,
pretesting
respondents
may
not
have
intended.
Nor
may
the
interpreted
findings
questions in precisely the manner
the
generallzable beyond the sample of the
be
Since the sample is taken from 13 major companies, and one of the main
study.
result
corporate
to
hold
within
suppose
that
the. findings
organizations.
or
small,
But
they
as
corporate orgtmizations.
as
are
across companies, it may be
representative
of large U.S.
certainly cannot be assumed to extend to
organizations,
non- corporate,
to
well
to
shown
is
reasonable
large
the questionnaire.
to
or to other managerial levels in
Finally, causality, direction of influence, and
relationships among variables are all inferred in the study from
sequencing
of
underlying
theory.
Since the data are cross-sectional, they cannot confirm the
causalities proposed in the model.
Despite
management
previous
these
control
findings
performance
following
relationship
qualifications,
systems
and
in
the study contributes to knowledge about
several ways.
propositions
about
It synthesizes and extends many
participation's
relationship
in a managerial context, consolidating them in one study.
the
is
start
made
derived
by
BM,
an
intervening-variables
model
to
Further,
of
the
and tested, and, following Brownell [1982al, the idea
-26-
of
Is deDonstrated and theoretically Integrated vlth the
variables
Boderatlng
aodel.
Intervening-variables
of the prevlotis empirical work In this area
Much
has suffered because It has not been carefully related to underlying theory.
study's llndlngs support the positive nature of participation In the
The
However, the need to view participation aore broadly than
anagerlal
process.
simply
budget-setting
and
In
Participation In budgeting
clear from the data.
Is
in performance evaluation reinforce one another, but the stronger effect on
performance
managerial
appears
from
the
Increased
them
and
how
these
organization,
of
their
organization's
goals
stems
performance
to
managers
participation
In performance
An Important part of participation's positive effect on managerial
evaluation.
assigned
from
arise
to
and
being
and
motivation.
In
turn
Biotlvatlon
are
Independent
of
one
motivation's
role
among
from
confidence
participation-performance
to
overall
the
accomplishing
In
value
greater
participation,
Importance,
relate
priorities
and
derive
to
roles
understanding by managers of the tasks
these
operating
the
and
of
the
tasks,
monitoring.
Informed,
enhancing
of
dimensions; It also enables
goal
better
mission
enhance
performance.
Of
equal
managerial
Confidence and
another, each contributing equally to the
relationship.
Much
attention
has
been
given to
mediating participation's effect on performance, whereas
In
confidence has previously received Uttle attention.
Participation
variances
that
ability
not
of
appear
which,
really
careers
from
are
less frequent, thus Increasing the predict
high
events
the
surprising
The mechanisms underlying this do
greater budget slack, but rather the setting of budgets
entail
to
assuming
In
budget
performance In the organization.
uncontrollable
managers
reinforces the salience In the organization of budgets, so
are
effort,
affecting
sample
since
do
with major companies.
likely
performance
not
they
more
are
appear
all
are
to
be
taken
attained
Into
when
account.
the
The
to be averse to effort, which Is not
senior
managers
pursuing successful
Thus, the assumption of high effort when budgets
-27-
being
are
of
efficiency
contribute to the
This Is not to say
of high effort Is taken entirely on faith.
directly
tied
are
rewards
formal
which
will
and
one,
control system by allowing the focus during the
management
the
assumption
the
that
reasonable
a
goal levels to be on managers' risk preferences.
of
choice
probably
Is
set
effort
to
Is
The extent to
evidence
that
the
management control system monitors effort as well as results against budget.
Within
model
expectancy
the
which
work and attaining budget.
hard
work will lead to attaining budget.
an
which
of previous research.
enhancement
enhances
the
of
These results are consistent with the
In this study, a strong effect of participation
utilities,
attaining
or valences, attributed to the rewards
budget.
This suggests that participation
Increasing managers' awareness of the Importance of
congruence.
goal
budget
the
on
contingent
are
motivation,
It also appears to enhance the expectancy that
bard
is
measure
to
appears to enhance the expectancies of rewards contingent on both
participation
findings
used
Is
the organization, hence causing them to attribute greater value
to
to rewards which stem from budget attainment.
The
In
managers
and
.
considered
budgetary
to
come
from
more
be
control
participation.
In
At
are
designers
mantigement
present
study
positive,
Influenced
the
by
qtilte
which
In
budgetary
control
Is
Both of these would Influence the role of
manager J etl process, and the reaction of managers to
the
participation
of
companies
larger
Important.
any
The
study mqy be more senior than those In the BM study,
present
the
may
they
Is In conflict with the findings of the BM study.
result
last
It
Is
clear
sensitive
to
contextual
rate,
control
systems
the responses elicited by
that
must
a matter which
variables,
bear
In
mind.
While In the
participation's effect on managerial performance Is consistently
strength
personal
of
the
and
relationship
Inter-personal
Is
shown
attributes,
to
by
variables, and by characteristics of the operating environment.
-28-
be significantly
control-system
A
from
number
these
considerable
extent
One concerns the causalities which have been assumed here.
the study.
explore
to
Interesting avenues for further research suggest themselves
of
empirically
control
which
the
would
require
a
over the conditions being examined.
findings
can
be
field
longitudinal
generalized,
sttidy,
To
with
Another concerns the
for
example
to
other
managerial levels and to other, such as non-corporate, types of organization.
-29-'
Footnotes
1.
The intercorrelatlons are as follows:
(2)
(1)
(3)
(4)
(5)
(1) Cost volatility
(2) Cost predictability
0.7663
(3) Price volatility
0.3663
0.3563
(4) Price predictability
0.2943
0.3483
0.7523
(5) Non-price dynamism
0.2003
0.2033
0.073
0.065
(6) Non-price predictability
0.1793
0.2123
o.069
0.1202
2: p<0.05; 3:
0.4453
p<0.01; SB measure - 0.72.
2.
is not the case, however, that enhanced budgetary performance arises solely
It
from setting budgets which are more likely to be attained regardless of the
environmental stringency encountered during the operating period.
After
controlling foT this, participation and budgetary performjuice are still
positively correlated (r
Other variables, such as the
0.232, p<0.01).
strength of motivation to attain the budget, are enhanced by participation,
and these in turn enhance budgetary performance.
3.
Two other moderatiag conditions were tested, but because of the lack of any
strong findings the results are not reported in the body of the paper. These
are (1) ftmctional area of the managerial task, and (2) the mean prevailing
level of participation itself. The findings are briefly described here.
Hayes
proposed that a management control system should reflect
[1977]
different
characteristics of the managerial fimctions.
Following this
suggestion,
the strength of the relationship between participation and
performance
was
compared across manufacturing, marketing, research and
development, and administrative support functions. Only one finding, of quite
weak
significance, emerged, namely that participation's effect is less
pronounced, relative to the other functions,
-1.53,
in manufacturing (t
p<0.10).
Conceivably participation has diminishing returns to performance. To test
this,
two sub-samples were created by splitting the whole sample at the median
value of participation. The slopes of the regressions relating participation
•to
performance
in the lower and higher-participation sub-samples are,
respectively, 0.213 (p<0.01) and 0.il3 (p<0.10). These are consistent with
the proposition of participation's diminishing benefit, but the difference
between the two slopes is not particularly significant.
-30-
Table
1
Correlations Between Participation, the Elements of the Information
and Attitude Effects, and Managerial Performance
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
Participation In;
(1) Budget-setting
(2) Performance
evaluation
.319^
Information Effect;
(3) Role clarity
.2573
.3563
(4) Task clarity
.093^
.3083
.5043
(5) Goal clarity
.1853
.33o3
.4343
.4353
.3143
.i683
.1763
.1953
.2453
Attitude Effect;
(7) Confidence
.1763
.2283
.3533
.36o3
.1793
.083
(8) Motivation
.2523
.2443
.2243
.2283
.1553
.i8o3
.1743
Performance;
(9) Managerial
performance
.1272
.2463
.29l3
.2203
.2843
.105I
.3063
(6) Utility of
monitoring
I:
p<0.10; 2: p<0.05; 3; p<0.01
-31-
.2723
;
Table 2
Correlations Between Participation and the Elements
of the EU Model of Motivation
Utilities
Elements of reward:
1)
2)
3)
4)
5)
6)
7)
8)
9)
10)
11)
12)
13)
14)
13)
16)
17)
Higher pay and benefits in current position
Less acressful and tiring pace of work
Greater feelings of accomplishment
Higher level of respect from boss
Increased prospect of promotion
More frequent special award or recognition
Greater opportunity to set self high standards
Higher Bonus
Greater respect from others with whom you work
Greater opportunity for personal development
Stronger feelings of job security
Greater opportunity for independent action
Increased frequency of receiving compliments
Greater opportunity to set example for others
Able to make more friends at work
Greater opportunity to help others develop
Time at work seeming to pass more rapidly
Averages
Table 3
Correlations Between the Reduced Variables Included
in the Structural Model
(1)
(2)
(3)
(A)
(1) Participation
(2) Information effect
.4453
(3) Managerial confidence
.250^
.28l3
(4) Motivation
.31l3
.2783
.1743
(5) Managerial performance
.2333
.2793
.3063
3:
p<0.01
-33-
.2723
Table 4
A Structural Model Linking Participation and Managerial Performance
Through the Information Effect, Managerial Confidence and Motivation
PARTICIPATION
MANAGERIAL
PERFORMANCE
lo.oeot-
0.4A5
1.141
INFORMATION
EFFECT
MANAGERIAL
CONFIDENCE
10.074
0.222
MOTIVATION
Analysis of the Effects in the Model
Amount
Information effect: directly
jointly with confidence
jointly with motivation
with confidence/motivation
Managerial confidence:
directly
jointly with Information
jointly with motivation
with information/motivation
Motivation:
directly
jointly with information
jointly with confidence
with information/confidence
Elimination of multiple counting
Amount of relationship explained by the model
Unexplained
Table 5
Correlations Between the Variables Used to Analyze
Budget Slack
(1)
(2)
(4)
(3)
(5)
(6)
(7)
(1) Participation in
budget-setting
(2) Influence on
budget difficulty
.3773
(3) Influence on budget
difficulty/reward
trade-off
(4) Budget slack
.1873
.1342
.070
.077
.2123
.2623
.015
.3533
.051
.059
.051
-.21l3
.2853
.1673
.072
-.004
.2773
.005
.1272
.1172
.054
-.058
.040
.2523
-.1683
(5) Stringecy,
(still sure of
making budget)
(6) Effort
-.065
(7) Performance
versus budget
(8) Managerial
performance
2: p<0.05; 3:
p<0.01.
-35-
.i623
Table 6
The Effects of the Four Moderating Variables on the
Participation-performance Relationship
T-statistlcs of the coefficients for:
Participation
Moderating Variable:
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