Accounting is an important aspect of management control. Budgets are unarguably the most obvious form of utilising accounting data to monitor and punish or reward strategic business units and consequently employees, regardless of whether they are managers or workers on the shop floor, according to their performance in relation to budgeted targets. “The budget is a financial plan for implementing the various decisions that management has made” (Drury 1997, p. 8). Participation in the formation process of budgets by those ultimately affected is practised in companies with the aim to generate a better-performing workforce. Empirical evidence on the effects of participative budgeting is ambiguous and the literature is fragmented. In this paper, I shall mainly review research on participative budgeting as well as other issues in budgeting and some critical perspectives on budgeting as a means of management control.
Table of Contents
1. Introduction
2. Historical evidence of accounting and management control
3. Behavioural aspects of budgeting
4. Participative budgeting and management accounting control systems
5. Trends and key actors
6. Methodology
7. Critical perspective
8. Gaps in the literature
9. Conclusion
Objectives and Topics
This literature review explores the complex relationship between participative budgeting and employee motivation/performance. It evaluates how budgetary systems function not just as technical control mechanisms, but as behavioral tools that influence organizational dynamics, worker attitudes, and management performance.
- The role of budgetary participation as a management control system.
- Behavioral, social, and political dimensions of standard setting and budgeting.
- The influence of contingent variables such as locus of control, information asymmetry, and organizational commitment.
- A comparative assessment of functionalist research versus critical perspectives in accounting.
- Methodological limitations in current research and the need for longitudinal studies.
Excerpt from the Book
Behavioural aspects of budgeting
Long before the papers on participative budgeting to be discussed later were written researchers started concentrating on the influence budgetary systems have on behaviour and action. In his book, Hopwood (1974) emphasises the need to see the process of standard setting and budgeting in its entirety and respond to it as a complex human and technical problem rather than one standing in technical isolation. ”Budgets are used to motivate members of the organisation by serving as targets and mechanisms for gaining involvement and commitment” (Hopwood 1974, p. 44). Hopwood (1974) realises that budgeting is concerned with human action and the significance of its behavioural, political and social dimensions. He went on to express his amazement at the dominance of a purely technical approach and called for a merger of both technical and behavioural aspects.
In 1955, Argyris looked at the problems organisations faced when introducing participative management by drawing on prior research for a concept of organisation and human personality. In Argyris’ (1955) invented scenario, employees were dependent on a leader. This lead him to question how much participation and democracy this allowed criticising that previous studies had failed to address that question. He concluded that participative management implied a different set of organisational principles and that executive training should thus focus on understanding the effects of basic dependency relationship on employees and how it conflicts with their normal personality needs. This dependency could be reduced by the introduction of participative management.
Summary of Chapters
1. Introduction: Defines the role of accounting in management control and outlines the paper's focus on the fragmented nature of research into participative budgeting.
2. Historical evidence of accounting and management control: Examines ancient and pre-modern practices to demonstrate that accounting systems have long been used to formalize authority and social status.
3. Behavioural aspects of budgeting: Discusses early research by Hopwood and Argyris that shifted the focus from purely technical budgetary approaches to human-centric organizational behavior.
4. Participative budgeting and management accounting control systems: Analyzes the evolution of empirical studies, specifically highlighting the influence of Brownell and Milani on performance measurement and antecedent moderators.
5. Trends and key actors: Highlights the significant academic contributions of scholars like Argyris, Milani, and Brownell in shaping the field of participative budgeting research.
6. Methodology: Critiques the current landscape of research, noting a heavy reliance on quantitative, cross-sectional survey data and a lack of longitudinal approaches.
7. Critical perspective: Explores non-functionalist approaches, particularly the influence of Foucauldian philosophy on accounting and the social implications of budget-based control systems.
8. Gaps in the literature: Identifies the limitations of the dominant unitarist paradigm and argues that a lack of innovation is caused by current research fragmentation and consensus.
9. Conclusion: Summarizes the need for future research to move beyond quantitative, cross-sectional snapshots toward more longitudinal and qualitative investigations.
Keywords
Participative Budgeting, Management Control, Employee Motivation, Accounting Research, Functionalism, Critical Perspective, Budgetary Slack, Performance Evaluation, Locus of Control, Organizational Commitment, Information Asymmetry, Contingency Theory
Frequently Asked Questions
What is the primary focus of this paper?
The paper provides a comprehensive literature review of research regarding participative budgeting and its impact on employee performance and organizational effectiveness.
What are the central thematic fields discussed?
The central themes include behavioral aspects of accounting, the evolution of management control systems, the impact of budget participation on work attitudes, and critical accounting perspectives.
What is the primary goal of the research presented?
The goal is to synthesize existing empirical findings, identify key academic contributors, and highlight the methodological limitations and gaps in the current body of literature.
Which scientific methods are primarily utilized in the reviewed studies?
The reviewed literature is dominated by a quantitative approach, relying heavily on surveys and questionnaires to test hypotheses, while qualitative methods are currently underutilized.
What does the main body of the work cover?
It covers historical accounting evidence, behavioral influences on budgeting, the development of contingency theory in budgeting, and critical social theories applied to organizational control.
Which keywords characterize this paper?
Key terms include participative budgeting, management control, employee motivation, information asymmetry, and organizational behavior.
How does the paper differentiate between diagnostic and interactive budget use?
Diagnostic use refers to traditional performance evaluation against targets, whereas interactive use involves a continual dialogue between management levels to foster organizational learning and adaptation.
What is the significance of Brownell’s contribution to the field?
Brownell is identified as a key actor who developed a unifying framework for research, distinguishing between antecedent and consequence moderators and advocating for a more context-sensitive understanding of participation.
- Quote paper
- Jörg Drischel (Author), 2002, Participative Budgeting and its Effects on Employee Motivation, Munich, GRIN Verlag, https://www.grin.com/document/11533
