Description
Referent cog&ions theory predicts that employees who receive unfavorable budgets will have less
negative attitudes toward budgetary decision makers if they participated in the budgetary process than
if they did not participate. Questionnaire data from international managers were analyzed with regression
to test for this predicted interaction between budgetary participation and budgetary outcome favorability.
The results indicated that budgetary participation and budget favorability had the predicted
interactive effect on the managers’ attitudes toward their supervisor and their organization.
Pergamon Accounti ng, Organi rati ons and Soci ety, Vol. 20, No. 7/S, pp. 61 l-618, 1995
Copyright 0 1995 Elsevier Science Ltd
Printed in Great Britain. All rights reserved.
0361-3682/95 $9.50+0.00
0361-3682(95)0000&2
THE INTERACTIVE EFFECT OF BUDGETARY PARTICIPATION AND BUDGET
FAVORABILITY ON ATTITUDES TOWARD BUDGETARY DECISION MAKERS: A
RESEARCH NOTE
NACE MAGNER
Western Kentucky Uni versi ty
ROBERT B. WELKER
Southern I l l i noi s Uni versi ty
and
TERRY L. CAMPBELL
Center for I nternati onal Management and I ndustri al Devel opment
Abstract
Referent cog&ions theory predicts that employees who receive unfavorable budgets will have less
negative attitudes toward budgetary decision makers if they participated in the budgetary process than
if they did not participate. Questionnaire data from international managers were analyzed with regression
to test for this predicted interaction between budgetary participation and budgetary outcome favor-
ability. The results indicated that budgetary participation and budget favorability had the predicted
interactive effect on the managers’ attitudes toward their supervisor and their organization.
Empirical budgeting research has devoted
much attention to examining how employees
react to the opportunity to participate in their
organization’s budgetary process. This work
has indicated that participation can interact
with other aspects of the budgetary environ-
ment in affecting employee attitudes and beha-
vior. Supervisor budget emphasis (Brownell,
1982b; Dunk, 1989), management-by-exception
(Brownell, 1983a), supervisor leadership style
(Brownell, 1983b), and supervisor-subordinate
agreement on evaluation criteria (Dunk, 1990)
are among the budget-related variables that
have been found to have an interactive effect
with budgetary participation.
This paper reports the results of a study that
examined whether budgetary participation
interacts with another aspect of the budgetary
environment, budget favorability, in affecting
employees’ attitudes toward budgetary deci-
sion makers. The study was motivated by theory
and empirical evidence from other research
domains which indicate that employees will
exhibit particularly negative affective reactions
to situations in which (1) they receive un-
favorable decision outcomes and (2) the out-
comes were established through unfair
decision-making procedures. A fair decision-
making procedure is one that conforms with
norms of entitlement held by persons affected
by the decision (Lind & Tyler, 1988, p. 3). This
set of norms has been found t‘o include factors,
such as voice and influence in decision making,
that are closely related to participation. Taken
611
612 N. MAGNER et al
together, this work suggests that employees
who receive unfavorable budgets will have less
negative attitudes toward budgetary decision
makers if they participated in the budgetary
process than if they did not participate.
THEORETICAL AND EMPIRICAL
FOUNDATIONS
An emphasis of early organizational research
was on employee reactions to the favorability
or fairness of organizational decision outcomes
such as pay distributions (see Greenberg (1982),
for a review of this literature). A recurring find-
ing was that employees react negatively to
situations in which they receive unfavorable
outcomes. More recently, studies have indi-
cated that the intensity of employees’ negative
reactions to unfavorable decision outcomes
can be influenced by their perceptions about
the fairness of the procedures by which the
outcomes were established. For example,
Greenberg (1987) found that unfavorable pay
distributions were perceived to be particularly
unfair when they were determined through an
unfair allocation procedure. Cropanzano &
Folger (1989) observed that feelings of unfair
treatment and resentment were particularly
high among persons who received a low level
of rewards established through an unfair pro-
cedure. McFarlin 8z Sweeney (1992) found that
workers expressed particularly low commit-
ment to their organization and held particularly
unfavorable evaluations of their supervisor
when they perceived that both decision out-
comes and decision procedures were unfair.
Recipients of unfavorable outcomes who
perceive that the procedures were unfair are
likely to conceive of more favorable outcomes
that would have occurred if fairer procedures
had been employed. The gap between these
referent outcomes and the actual outcomes is
a source of a “hot” emotional response, resent-
ment, that will become manifest in strong
negative attitudes.
The most frequently studied criterion for
a fair decision-making procedure is voice
(Folger, 1977), or the opportunity to express
one’s views and opinions during decision
making. The importance of voice in promoting
perceptions of a fair procedure has been sup-
ported in a number of organizational decision-
making contexts, including performance
appraisal (Greenberg, 1986) task assignment
(Earley & Lind, 1987) job recruitment (Bies &
Shapiro, 1988), pay allocation (Folger &
Konovsky, 1989), and goal setting (Lind et al.,
1990). In two studies that are particularly rele-
vant to the present paper, Bies & Shapiro
(1988) and Magner et al . (1992) examined
voice as a criterion for a fair budgetary pro-
cess. Both studies indicated that employees
apply voice as a fundamental norm of entitle-
ment in budgetary decision making. Greenberg
& Folger (1983) and Cohen (1985) noted that
the concept of participation in decision making
encompasses voice.
These findings suggest that employees have By definition (e.g. Brownell, 1982c, p. 124)
particularly negative affective reactions to situa- budgetary participation encompasses the con-
tions in which unfavorable decision outcomes cept of influence in the budgetary process.
were arrived at through unfair organizational Influence suggests that employees are afforded
decision-making procedures. Cropanzano & a degree of control over the outcomes of a
Folger (1989) and McFarlin & Sweeney (1992) decision-making process. As a consequence,
argued that this interactive effect of outcomes they are likely to view their budgetary involve-
and procedures is predicted by referent cogni- ment as a means of obtaining a more favorable
tions theory (RCT) (Folger, 1986), the essence budget. Magner et al . (1992) recently sup-
of which is captured in the following sentence: ported the notion that control over the budget
In a situation involving outcomes allocated by a deci-
sion maker, resentment is maximized when people
believe they woul d have obtained better outcomes
if the decision maker had used other procedures
that shoul d have been implemented (Cropanzano SK
Folger, 1989, p. 293).
ATTITUDES TOWARDS BUDGETARY DECISION MAKERS 613
is fundamental to why employees seek voice in
the budgetary process.
In summary, prior research suggests that
employees feel they should be allowed to par-
ticipate in the budgetary process and that they
will receive a more favorable budget if allowed
to participate. Therefore, a situation in which
an employee both receives an unfavorable
budget and has low participation would be
expected to generate the resentment pre-
dicted by RCT and, correspondingly, particu-
larly negative attitudes. To state this proposed
interaction from a different perspective,
employees who receive unfavorable budgets
should have less negative attitudes when they
have participated in the budgetary process than
when they have not participated. Cropanzano
& Folger (1989, p. 298) provided explicit
support for proposing and testing for an inter-
action between budgetary participation and
budget favorability when they stated that “the
RCT framework implies a very general psycho-
logical mechanism that would account for reac-
tions to participation in decision-making with
respect to a variety of decisions . Qhe
absence of participation makes it easier for
people to imagine ways their outcomes might
have been more favorable.”
Under RCT, one way that resentment will
become manifest is in negative attitudes
toward decision makers who can be identified
with the poor outcomes and unfair procedures
(Cropanzano & Folger, 1989). One person who
most employees can readily identify as having a
significant decision-making role in the budget-
ary process is their immediate supervisor, who
has some influence over budget levels and
opportunities for participation (both formal
and informal) within his or her responsibility
center. Employees may also hold other groups
of persons responsible, albeit more indirectly,
for budgetary outcomes and procedures. For
example, many of the officials residing above
the employee’s immediate supervisor in the
organizational hierarchy are likely to be seen
as having a significant role in establishing
budget levels and budgetary procedures such
as participation. The present study included
attitudes toward the immediate supervisor
and toward the organization as criterion vari-
ables to capture the resentment that may arise
when these two groups of budgetary actors are
held culpable for unfavorable budgets and low
levels of budgetary participation.
Thus, we advance the following hypotheses
to test for the proposed interactive effect of
budgetary participation and budget favorability
on employees’ attitudes toward budgetary
decision makers:
Hypotheses. There is an interaction between budget-
ary participation and budget favorability such that
employees who receive unfavorable budgets will have
less negative attitudes toward (Hl) their immediate
supervisor and (H2) their organization when they
have participated in the budgetary process than when
they have not participated.
METHOD
Subjects
Questionnaires were distributed to 44 per-
sons attending a 10 week executive develop-
ment program for international managers
sponsored by a major European university
and to 12 persons who had previously
attended the program. Responses were not
anonymous. Three managers who provided
incomplete responses on items measuring
the predictor variables in the study were
subsequently dropped from the sample.
The 53 subjects comprising the final sample
had a mean age of 39.2 years (SD. = 5.1). The
mean number of employees at the geographic
locations in which the subjects worked was
2081 (S.D. = 6309) and the mean number of
subordinates over which the subjects had for-
mal organizational authority was 135 (SD. =
413). All but two of the subjects were male.
The sample was comprised of persons from
a broad spectrum of national cultures, with
subjects originating from countries in Europe,
Africa, the Middle East, the Far East, and
South America. Subjects also held assorted
job titles - for example, director of client
services, plant manager, manager of electrical
614 N. MAGNER et al.
engineering, support services manager, finance
and portfolio manager, research and develop-
ment manager, vice-president of human
resources - that suggest diversity with
respect to functional area and hierarchical
level within their organizations.
Predictor measures
Budgetary participation was measured with
Milani’s (1975) six-item scale. The scale has
been used frequently in empirical budgeting
research (e.g. Brownell, 1982a,b; Brownell &
Mchmes, 1986; Chenhall & BrownelI, 1988;
Frucot & Shearon, 1991; Dunk, 1993). Internal
reliability coefficients in these prior studies
exceeded the minimum 0.70 considered accep-
table by Nunnally (1978) and a factor analysis
by Brownell (1982a,b) generally supported the
unidimensionality of the scale. Each item was
measured on a seven-point scale (scored l-7)
and the items were summed.
Budget favorability was measured with a
scale comprised of three items adapted from
scales used by Folger & Konovsky (1989) and
Conlon & Ross (1992). The scale items are:
(1) I receive an unfair budget.
(2) I receive an unfavorable budget in light
of my expectations.
(3) My performance is hampered by the
budget I receive.
Subjects responded to each item along a
seven-point scale (scored l-7). All three items
were reverse-scored and summed.
Criterion measures
An attitude toward the immediate supervisor
was measured with Read’s (1962) four-item
interpersonal trust scale. Examples of the scale
items are “Does your supervisor take advantage
of opportunities that come up to further your
interests by his or her actions and decisions? ”
and “How confident do you feel that your
supervisor keeps you fully and frankly
informed about things that might concern
you? ” The interpersonal trust scale has demon-
strated high reliability in studies by Roberts &
O’Reilly (1974) and Folger & Konovsky (1989).
Subjects responded to each item along a seven-
point scale (scored l-7) and the items were
summed.
An attitude toward the organization was
measured with the nine-item short form of
the Mowday et al. (1979) organizational com-
mitment scale, which measures the relative
strength of an employee’s identification with
and involvement in the organization (Porter et
al., 1976). Examples of the scale items are “For
me this is the best of all possible organizations
for which to work”, and “I find that my values
and the organization’s values are very similar.”
Several studies have supported the measure-
ment properties of the short form of the organ-
izational commitment scale (e.g. Price &
Mueller, 1986; Folger & Konovsky, 1989;
Magner et al., 1992). Each item was measured
on a seven-point scale (scored 1-7) and the
items were summed.
RESULTS
Descriptive statistics
Means, standard deviations, Pearson correla-
tions, and alpha internal reliability coefficients
for the variables in the study are reported in
Table 1. The correlations were generally low
to moderate. The scales had acceptable internal
reliabilities.
Participation as a criterion for a fair
budgetary process
The literature suggests that employees apply
participation as a criterion when evaluating the
fairness of a decision-making process. To assess
if this phenomenon occurred in the present
study, budgetary participation was correlated
with the subjects’ responses to the following
item: “A fair decision-making process is used
to set my budget” (seven-point scale, scored
l-7). The variables were significantly corre-
lated (r = 0.32; p 0.36 is significant at p < 0.01.
b Alpha internal reliability coefficients are shown on the diagonal.
TABLE 2. Results of the regression analysis
Criterion variables
Predictor variables Trust in supervisor Organizational commitment
Beta coefficients
Budgetary participation 0.34’ 0.23’
Budget favorability 0.06 0.33”
Participation X favorability -0.29’ -0.28;’
Total adj. R2 0.23” 0.36”’
Note: The beta coefficients are standardized regression coefficients
l p < 0.05.
l *p < 0.01.
l **p < 0.001.
Trust in
Supervisor
25
20
15
10
High
Participation
-
/
Low
Participation
Organizational
Commitment
50
45
40
35
I I I
30
10 15 20
Budget Favorability
Participation
Participation
25 10 15 20
Budget Favorability
25
Fig. 1. Interactive effect of budgetary participation and budget favorability.
616 N. MAGNER et al.
fair decision-making process have been found
to include accuracy of decision-making infor-
mation, consistency across persons and across
time, suppression of decision-maker bias, ethic-
ality, provisions to correct bad decisions, and
decision-maker justification (e.g. Greenberg,
1986; Barrett-Howard & Tyler, 1986; Sheppard
& Lewicki, 1987; Bies & Shapiro, 1988).
Hypothesis testing
The hypotheses were tested with ordinary
least-squares regression analysis. A regression
model was developed for each criterion vari-
able in which budgetary participation, budget
favorability, and their interaction (the product
of budgetary participation and budget favor-
ability) were the predictor variables. Table 2
presents the results of the regression analysis.
The interaction was significant in both the
model of trust in supervisor and the model of
organizational commitment. Furthermore, the
partial derivative of each of these regression
models with respect to budget favorability indi-
cated that although unfavorable budgets were
associated with lower trust in supervisor and
organizational commitment over most values
of budgetary participation, this negative
relationship was attenuated as the level of
budgetary participation increased. We then
dichotomized budgetary participation at its
median and regressed each criterion variable
on budget favorability for both the low and
high participation groups. Figure 1, which
plots the relationship between budget favor-
ability and the criterion variables for each cate-
gory of budgetary participation, shows that the
level of both criterion variables was particularly
low when both budget favorability and budget-
ary participation were low. Taken together, the
results support Hl and H2.
on the question of whether participation
works or not”. Since Brownell’s observation,
budgeting researchers have searched for con-
textual variables that interact with participa-
tion and thereby provide insight into why it is
effective in some situations, and not in others.
The results of the present study indicate that
employees who have received unfavorable
budgets have less negative attitudes toward
budgetary decision makers when they have par-
ticipated in the budgetary process than when
they have not participated. This interactive
effect of participation and budget favorability
suggests an important role of participation in
organizations, for it is inevitable that some
employees will perceive their budget to be un-
favorable - budgets are established to further
attainment of organizational goals, not to fulfill
employee desires concerning what their budget
should be.
DISCUSSION
Identifying factors that explain when partici-
pation works lends insight into why it works
(Murray, 1990, p. 105). Explained within the
context of RCT, the interactive effect of bud-
getary participation and budget favorability
occurs because employees believe they will
receive a more favorable budget if allowed to
participate and, in the face of an unfavorable
budget, will react with resentment toward
budgetary decision makers who failed to imple-
ment participation procedures and thereby pre-
vented them from obtaining a better budget.
Therefore, RCT implies that budgetary influ-
ence is a key concept in explaining why parti-
cipation works to enhance attitudes toward
budgetary decision makers. In short, participa-
tion is viewed by employees as a means of
influencing the budgetary process to get the
budget they want, and employees have more
positive feelings toward decision makers who
afford them this opportunity. Future budgeting
research should investigate the specific role
that influence plays in bringing about salutary
participation effects.
BrownelI (1982c, p. 124) reviewed the bud- Another question that deserves study is why
getary participation literature and concluded participation mitigates the negative feelings
that it “remains fraught with contradiction, toward decision makers commonly associated
overlap and a general lack of conclusiveness with an unfavorable budget. One plausible
ATTITUDES TOWARDS BUDGETARY DECISION MAKERS 617
explanation relates to a perception of en-
hanced decision quality. Greenberg & Folger
(1983, p. 246) stated that the “absence of a
participatory process makes it easier to per-
ceive an allocator’s decision as having been
made without much thought, whereas partici-
pation can contribute to the perception that it
was a considered judgment.” In essence, parti-
cipation promotes the view that the unfavorable
outcome is the best that can be expected under
the circumstances. Greenberg & Folger (1983)
also provided a second possible explanation
that relates to enhanced perceptions of the
sincerity of the position taken by the decision
maker. Participation involves the expression of
views as to what the decision outcome should
be. A decision in opposition to these expressed
views becomes more difficult for the decision
maker to render. Because of this inhibiting con-
dition, persons may be more inclined to believe
that a decision maker who goes against their
wishes is acting in a sincere manner.
The present study is subject to several limita-
tions. The psychological constructs that were
the primary variables in the study were all mea-
sured with a single questionnaire. Measures
of association between such variables are often
inflated because of the common-method
variance bias. Second, the sample was not
random and was comprised solely of persons
who were attending or had attended an inter-
national executive development program. Fac-
tors specific to these subjects may have
affected the results, which would hinder the
extent to which the results can be generalized
to other employee groups. Finally, we have
assumed a certain causal ordering from budget-
ary participation and budget favorability to the
criterion variables, which cannot be proved
with cross-sectional survey data. Although the
results must be interpreted in light of these
limitations, their validity is strengthened by
the fact that they are consistent with theory
and previous empirical evidence.
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doc_391180029.pdf
Referent cog&ions theory predicts that employees who receive unfavorable budgets will have less
negative attitudes toward budgetary decision makers if they participated in the budgetary process than
if they did not participate. Questionnaire data from international managers were analyzed with regression
to test for this predicted interaction between budgetary participation and budgetary outcome favorability.
The results indicated that budgetary participation and budget favorability had the predicted
interactive effect on the managers’ attitudes toward their supervisor and their organization.
Pergamon Accounti ng, Organi rati ons and Soci ety, Vol. 20, No. 7/S, pp. 61 l-618, 1995
Copyright 0 1995 Elsevier Science Ltd
Printed in Great Britain. All rights reserved.
0361-3682/95 $9.50+0.00
0361-3682(95)0000&2
THE INTERACTIVE EFFECT OF BUDGETARY PARTICIPATION AND BUDGET
FAVORABILITY ON ATTITUDES TOWARD BUDGETARY DECISION MAKERS: A
RESEARCH NOTE
NACE MAGNER
Western Kentucky Uni versi ty
ROBERT B. WELKER
Southern I l l i noi s Uni versi ty
and
TERRY L. CAMPBELL
Center for I nternati onal Management and I ndustri al Devel opment
Abstract
Referent cog&ions theory predicts that employees who receive unfavorable budgets will have less
negative attitudes toward budgetary decision makers if they participated in the budgetary process than
if they did not participate. Questionnaire data from international managers were analyzed with regression
to test for this predicted interaction between budgetary participation and budgetary outcome favor-
ability. The results indicated that budgetary participation and budget favorability had the predicted
interactive effect on the managers’ attitudes toward their supervisor and their organization.
Empirical budgeting research has devoted
much attention to examining how employees
react to the opportunity to participate in their
organization’s budgetary process. This work
has indicated that participation can interact
with other aspects of the budgetary environ-
ment in affecting employee attitudes and beha-
vior. Supervisor budget emphasis (Brownell,
1982b; Dunk, 1989), management-by-exception
(Brownell, 1983a), supervisor leadership style
(Brownell, 1983b), and supervisor-subordinate
agreement on evaluation criteria (Dunk, 1990)
are among the budget-related variables that
have been found to have an interactive effect
with budgetary participation.
This paper reports the results of a study that
examined whether budgetary participation
interacts with another aspect of the budgetary
environment, budget favorability, in affecting
employees’ attitudes toward budgetary deci-
sion makers. The study was motivated by theory
and empirical evidence from other research
domains which indicate that employees will
exhibit particularly negative affective reactions
to situations in which (1) they receive un-
favorable decision outcomes and (2) the out-
comes were established through unfair
decision-making procedures. A fair decision-
making procedure is one that conforms with
norms of entitlement held by persons affected
by the decision (Lind & Tyler, 1988, p. 3). This
set of norms has been found t‘o include factors,
such as voice and influence in decision making,
that are closely related to participation. Taken
611
612 N. MAGNER et al
together, this work suggests that employees
who receive unfavorable budgets will have less
negative attitudes toward budgetary decision
makers if they participated in the budgetary
process than if they did not participate.
THEORETICAL AND EMPIRICAL
FOUNDATIONS
An emphasis of early organizational research
was on employee reactions to the favorability
or fairness of organizational decision outcomes
such as pay distributions (see Greenberg (1982),
for a review of this literature). A recurring find-
ing was that employees react negatively to
situations in which they receive unfavorable
outcomes. More recently, studies have indi-
cated that the intensity of employees’ negative
reactions to unfavorable decision outcomes
can be influenced by their perceptions about
the fairness of the procedures by which the
outcomes were established. For example,
Greenberg (1987) found that unfavorable pay
distributions were perceived to be particularly
unfair when they were determined through an
unfair allocation procedure. Cropanzano &
Folger (1989) observed that feelings of unfair
treatment and resentment were particularly
high among persons who received a low level
of rewards established through an unfair pro-
cedure. McFarlin 8z Sweeney (1992) found that
workers expressed particularly low commit-
ment to their organization and held particularly
unfavorable evaluations of their supervisor
when they perceived that both decision out-
comes and decision procedures were unfair.
Recipients of unfavorable outcomes who
perceive that the procedures were unfair are
likely to conceive of more favorable outcomes
that would have occurred if fairer procedures
had been employed. The gap between these
referent outcomes and the actual outcomes is
a source of a “hot” emotional response, resent-
ment, that will become manifest in strong
negative attitudes.
The most frequently studied criterion for
a fair decision-making procedure is voice
(Folger, 1977), or the opportunity to express
one’s views and opinions during decision
making. The importance of voice in promoting
perceptions of a fair procedure has been sup-
ported in a number of organizational decision-
making contexts, including performance
appraisal (Greenberg, 1986) task assignment
(Earley & Lind, 1987) job recruitment (Bies &
Shapiro, 1988), pay allocation (Folger &
Konovsky, 1989), and goal setting (Lind et al.,
1990). In two studies that are particularly rele-
vant to the present paper, Bies & Shapiro
(1988) and Magner et al . (1992) examined
voice as a criterion for a fair budgetary pro-
cess. Both studies indicated that employees
apply voice as a fundamental norm of entitle-
ment in budgetary decision making. Greenberg
& Folger (1983) and Cohen (1985) noted that
the concept of participation in decision making
encompasses voice.
These findings suggest that employees have By definition (e.g. Brownell, 1982c, p. 124)
particularly negative affective reactions to situa- budgetary participation encompasses the con-
tions in which unfavorable decision outcomes cept of influence in the budgetary process.
were arrived at through unfair organizational Influence suggests that employees are afforded
decision-making procedures. Cropanzano & a degree of control over the outcomes of a
Folger (1989) and McFarlin & Sweeney (1992) decision-making process. As a consequence,
argued that this interactive effect of outcomes they are likely to view their budgetary involve-
and procedures is predicted by referent cogni- ment as a means of obtaining a more favorable
tions theory (RCT) (Folger, 1986), the essence budget. Magner et al . (1992) recently sup-
of which is captured in the following sentence: ported the notion that control over the budget
In a situation involving outcomes allocated by a deci-
sion maker, resentment is maximized when people
believe they woul d have obtained better outcomes
if the decision maker had used other procedures
that shoul d have been implemented (Cropanzano SK
Folger, 1989, p. 293).
ATTITUDES TOWARDS BUDGETARY DECISION MAKERS 613
is fundamental to why employees seek voice in
the budgetary process.
In summary, prior research suggests that
employees feel they should be allowed to par-
ticipate in the budgetary process and that they
will receive a more favorable budget if allowed
to participate. Therefore, a situation in which
an employee both receives an unfavorable
budget and has low participation would be
expected to generate the resentment pre-
dicted by RCT and, correspondingly, particu-
larly negative attitudes. To state this proposed
interaction from a different perspective,
employees who receive unfavorable budgets
should have less negative attitudes when they
have participated in the budgetary process than
when they have not participated. Cropanzano
& Folger (1989, p. 298) provided explicit
support for proposing and testing for an inter-
action between budgetary participation and
budget favorability when they stated that “the
RCT framework implies a very general psycho-
logical mechanism that would account for reac-
tions to participation in decision-making with
respect to a variety of decisions . Qhe
absence of participation makes it easier for
people to imagine ways their outcomes might
have been more favorable.”
Under RCT, one way that resentment will
become manifest is in negative attitudes
toward decision makers who can be identified
with the poor outcomes and unfair procedures
(Cropanzano & Folger, 1989). One person who
most employees can readily identify as having a
significant decision-making role in the budget-
ary process is their immediate supervisor, who
has some influence over budget levels and
opportunities for participation (both formal
and informal) within his or her responsibility
center. Employees may also hold other groups
of persons responsible, albeit more indirectly,
for budgetary outcomes and procedures. For
example, many of the officials residing above
the employee’s immediate supervisor in the
organizational hierarchy are likely to be seen
as having a significant role in establishing
budget levels and budgetary procedures such
as participation. The present study included
attitudes toward the immediate supervisor
and toward the organization as criterion vari-
ables to capture the resentment that may arise
when these two groups of budgetary actors are
held culpable for unfavorable budgets and low
levels of budgetary participation.
Thus, we advance the following hypotheses
to test for the proposed interactive effect of
budgetary participation and budget favorability
on employees’ attitudes toward budgetary
decision makers:
Hypotheses. There is an interaction between budget-
ary participation and budget favorability such that
employees who receive unfavorable budgets will have
less negative attitudes toward (Hl) their immediate
supervisor and (H2) their organization when they
have participated in the budgetary process than when
they have not participated.
METHOD
Subjects
Questionnaires were distributed to 44 per-
sons attending a 10 week executive develop-
ment program for international managers
sponsored by a major European university
and to 12 persons who had previously
attended the program. Responses were not
anonymous. Three managers who provided
incomplete responses on items measuring
the predictor variables in the study were
subsequently dropped from the sample.
The 53 subjects comprising the final sample
had a mean age of 39.2 years (SD. = 5.1). The
mean number of employees at the geographic
locations in which the subjects worked was
2081 (S.D. = 6309) and the mean number of
subordinates over which the subjects had for-
mal organizational authority was 135 (SD. =
413). All but two of the subjects were male.
The sample was comprised of persons from
a broad spectrum of national cultures, with
subjects originating from countries in Europe,
Africa, the Middle East, the Far East, and
South America. Subjects also held assorted
job titles - for example, director of client
services, plant manager, manager of electrical
614 N. MAGNER et al.
engineering, support services manager, finance
and portfolio manager, research and develop-
ment manager, vice-president of human
resources - that suggest diversity with
respect to functional area and hierarchical
level within their organizations.
Predictor measures
Budgetary participation was measured with
Milani’s (1975) six-item scale. The scale has
been used frequently in empirical budgeting
research (e.g. Brownell, 1982a,b; Brownell &
Mchmes, 1986; Chenhall & BrownelI, 1988;
Frucot & Shearon, 1991; Dunk, 1993). Internal
reliability coefficients in these prior studies
exceeded the minimum 0.70 considered accep-
table by Nunnally (1978) and a factor analysis
by Brownell (1982a,b) generally supported the
unidimensionality of the scale. Each item was
measured on a seven-point scale (scored l-7)
and the items were summed.
Budget favorability was measured with a
scale comprised of three items adapted from
scales used by Folger & Konovsky (1989) and
Conlon & Ross (1992). The scale items are:
(1) I receive an unfair budget.
(2) I receive an unfavorable budget in light
of my expectations.
(3) My performance is hampered by the
budget I receive.
Subjects responded to each item along a
seven-point scale (scored l-7). All three items
were reverse-scored and summed.
Criterion measures
An attitude toward the immediate supervisor
was measured with Read’s (1962) four-item
interpersonal trust scale. Examples of the scale
items are “Does your supervisor take advantage
of opportunities that come up to further your
interests by his or her actions and decisions? ”
and “How confident do you feel that your
supervisor keeps you fully and frankly
informed about things that might concern
you? ” The interpersonal trust scale has demon-
strated high reliability in studies by Roberts &
O’Reilly (1974) and Folger & Konovsky (1989).
Subjects responded to each item along a seven-
point scale (scored l-7) and the items were
summed.
An attitude toward the organization was
measured with the nine-item short form of
the Mowday et al. (1979) organizational com-
mitment scale, which measures the relative
strength of an employee’s identification with
and involvement in the organization (Porter et
al., 1976). Examples of the scale items are “For
me this is the best of all possible organizations
for which to work”, and “I find that my values
and the organization’s values are very similar.”
Several studies have supported the measure-
ment properties of the short form of the organ-
izational commitment scale (e.g. Price &
Mueller, 1986; Folger & Konovsky, 1989;
Magner et al., 1992). Each item was measured
on a seven-point scale (scored 1-7) and the
items were summed.
RESULTS
Descriptive statistics
Means, standard deviations, Pearson correla-
tions, and alpha internal reliability coefficients
for the variables in the study are reported in
Table 1. The correlations were generally low
to moderate. The scales had acceptable internal
reliabilities.
Participation as a criterion for a fair
budgetary process
The literature suggests that employees apply
participation as a criterion when evaluating the
fairness of a decision-making process. To assess
if this phenomenon occurred in the present
study, budgetary participation was correlated
with the subjects’ responses to the following
item: “A fair decision-making process is used
to set my budget” (seven-point scale, scored
l-7). The variables were significantly corre-
lated (r = 0.32; p 0.36 is significant at p < 0.01.
b Alpha internal reliability coefficients are shown on the diagonal.
TABLE 2. Results of the regression analysis
Criterion variables
Predictor variables Trust in supervisor Organizational commitment
Beta coefficients
Budgetary participation 0.34’ 0.23’
Budget favorability 0.06 0.33”
Participation X favorability -0.29’ -0.28;’
Total adj. R2 0.23” 0.36”’
Note: The beta coefficients are standardized regression coefficients
l p < 0.05.
l *p < 0.01.
l **p < 0.001.
Trust in
Supervisor
25
20
15
10
High
Participation
-
/
Low
Participation
Organizational
Commitment
50
45
40
35
I I I
30
10 15 20
Budget Favorability
Participation
Participation
25 10 15 20
Budget Favorability
25
Fig. 1. Interactive effect of budgetary participation and budget favorability.
616 N. MAGNER et al.
fair decision-making process have been found
to include accuracy of decision-making infor-
mation, consistency across persons and across
time, suppression of decision-maker bias, ethic-
ality, provisions to correct bad decisions, and
decision-maker justification (e.g. Greenberg,
1986; Barrett-Howard & Tyler, 1986; Sheppard
& Lewicki, 1987; Bies & Shapiro, 1988).
Hypothesis testing
The hypotheses were tested with ordinary
least-squares regression analysis. A regression
model was developed for each criterion vari-
able in which budgetary participation, budget
favorability, and their interaction (the product
of budgetary participation and budget favor-
ability) were the predictor variables. Table 2
presents the results of the regression analysis.
The interaction was significant in both the
model of trust in supervisor and the model of
organizational commitment. Furthermore, the
partial derivative of each of these regression
models with respect to budget favorability indi-
cated that although unfavorable budgets were
associated with lower trust in supervisor and
organizational commitment over most values
of budgetary participation, this negative
relationship was attenuated as the level of
budgetary participation increased. We then
dichotomized budgetary participation at its
median and regressed each criterion variable
on budget favorability for both the low and
high participation groups. Figure 1, which
plots the relationship between budget favor-
ability and the criterion variables for each cate-
gory of budgetary participation, shows that the
level of both criterion variables was particularly
low when both budget favorability and budget-
ary participation were low. Taken together, the
results support Hl and H2.
on the question of whether participation
works or not”. Since Brownell’s observation,
budgeting researchers have searched for con-
textual variables that interact with participa-
tion and thereby provide insight into why it is
effective in some situations, and not in others.
The results of the present study indicate that
employees who have received unfavorable
budgets have less negative attitudes toward
budgetary decision makers when they have par-
ticipated in the budgetary process than when
they have not participated. This interactive
effect of participation and budget favorability
suggests an important role of participation in
organizations, for it is inevitable that some
employees will perceive their budget to be un-
favorable - budgets are established to further
attainment of organizational goals, not to fulfill
employee desires concerning what their budget
should be.
DISCUSSION
Identifying factors that explain when partici-
pation works lends insight into why it works
(Murray, 1990, p. 105). Explained within the
context of RCT, the interactive effect of bud-
getary participation and budget favorability
occurs because employees believe they will
receive a more favorable budget if allowed to
participate and, in the face of an unfavorable
budget, will react with resentment toward
budgetary decision makers who failed to imple-
ment participation procedures and thereby pre-
vented them from obtaining a better budget.
Therefore, RCT implies that budgetary influ-
ence is a key concept in explaining why parti-
cipation works to enhance attitudes toward
budgetary decision makers. In short, participa-
tion is viewed by employees as a means of
influencing the budgetary process to get the
budget they want, and employees have more
positive feelings toward decision makers who
afford them this opportunity. Future budgeting
research should investigate the specific role
that influence plays in bringing about salutary
participation effects.
BrownelI (1982c, p. 124) reviewed the bud- Another question that deserves study is why
getary participation literature and concluded participation mitigates the negative feelings
that it “remains fraught with contradiction, toward decision makers commonly associated
overlap and a general lack of conclusiveness with an unfavorable budget. One plausible
ATTITUDES TOWARDS BUDGETARY DECISION MAKERS 617
explanation relates to a perception of en-
hanced decision quality. Greenberg & Folger
(1983, p. 246) stated that the “absence of a
participatory process makes it easier to per-
ceive an allocator’s decision as having been
made without much thought, whereas partici-
pation can contribute to the perception that it
was a considered judgment.” In essence, parti-
cipation promotes the view that the unfavorable
outcome is the best that can be expected under
the circumstances. Greenberg & Folger (1983)
also provided a second possible explanation
that relates to enhanced perceptions of the
sincerity of the position taken by the decision
maker. Participation involves the expression of
views as to what the decision outcome should
be. A decision in opposition to these expressed
views becomes more difficult for the decision
maker to render. Because of this inhibiting con-
dition, persons may be more inclined to believe
that a decision maker who goes against their
wishes is acting in a sincere manner.
The present study is subject to several limita-
tions. The psychological constructs that were
the primary variables in the study were all mea-
sured with a single questionnaire. Measures
of association between such variables are often
inflated because of the common-method
variance bias. Second, the sample was not
random and was comprised solely of persons
who were attending or had attended an inter-
national executive development program. Fac-
tors specific to these subjects may have
affected the results, which would hinder the
extent to which the results can be generalized
to other employee groups. Finally, we have
assumed a certain causal ordering from budget-
ary participation and budget favorability to the
criterion variables, which cannot be proved
with cross-sectional survey data. Although the
results must be interpreted in light of these
limitations, their validity is strengthened by
the fact that they are consistent with theory
and previous empirical evidence.
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