A contribution to our understanding of the psychological effects underlying the budgeting process and its outcomes

Budgeting plays an important role in organizations as it is the cornerstone of the majority of management control systems. It refers to both the budget as a set of numbers and the budgeting process, which refers to an interactive process in which future activities and deliverables are translated into quantitative, financial terms. Given its central role in organizations, much research effort has been devoted to budgeting in general and its functioning as a motivation and performance evaluation tool in particular. Despite the vast amount of research, some loose ends remain. How budgeting can exactly motivate employees is still a black box. This dissertation aims to open this black box by clarifying the psychological mechanisms underlying the budgeting process and its outcomes. In particular, we focus on budget participation and budgetary slack. After all, organizations spend large amounts of money in attempts to ‘make their budgeting process work’ and manage the amount of slack created within this process. A better understanding of budget participation’s motivational effects and budgetary slack’s antecedents will be useful for efficient resource allocation. The first study explores how and when budget participation motivates managers to work toward budget attainment. The findings of prior research regarding the relationship between budget participation and budget motivation are inconsistent. We untangle these mixed effects by providing evidence of diverse forms of budget participation and multiple types of budget motivation. We also shed light on the role of basic psychological need satisfaction as the underlying mechanism in the participation-motivation relationship. Moreover, we identify three boundary conditions that add to the complexity of budget participation for motivational purposes: true participation, participation congruence, and strategic alignment. As such, we enrich prior budgeting studies that implicitly ignored the existence of multiple forms of budget participation and types of budget motivation. Given our focus on budgeting as a motivation-tool, it is also important to examine budgetary slack. Inspired by the results from the first study that illustrated the importance of strategy in a budgeting context, we examine in our second study the relationship between participation in strategic planning and budgetary slack. Building on self-determination and organizational commitment theory, we develop a model and gather data through a survey. This study reveals that a higher degree of participation in strategic planning decreases budgetary slack through the full mediation effect of affective organizational commitment. Moreover, budget participation also decreases budgetary slack through the mediating effect of autonomous budget motivation. Taken together, this study illustrates the importance of studying the broader internal organizational planning process when examining budgetary slack. The third study goes another step further and looks at the impact of the external organizational context. In particular, we examine the relationship between perceived environmental uncertainty and budgetary slack. We combine insights from psychology-based (i.e., role theory) and economics-based (i.e., agency theory and information-processing framework) theories to develop our model and gather data through a survey. Our results indicate that managers create budgetary slack as a response to role ambiguity and job-related tension, caused by environmental uncertainty. The psychological variables role ambiguity and job-related tension explain a significantly larger proportion of the variance in budgetary slack than the economics-based explanation which builds on the number of exceptions a manager is confronted with. This study illustrates the importance of individual psychological variables for understanding the budgetary slack process. The three studies in this dissertation show that budgeting, its characteristics, and outcomes are no uniform processes but are deeply embedded in human complexities

Budgetteren en werk-gerelateerde stress

In dit onderzoek bestuderen we de rol van participatief budgetteren in de relatie tussen rolambiguïteit en werk-gerelateerde stress. We analyseren de impact van het niveau van budgetparticipatie op de mate van werk-gerelateerde stress in situaties met hoge rolambiguïteit. De resultaten van de vragenlijst die we afnamen bij 218 managers wijst erop dat werk-gerelateerde stress lager is wanneer managers een hoog gepercipieerd niveau van budgetparticipatie ervaeren dan wanneer deze perceptie laag is. Dit verschil is vooral belangrijk in situaties met een hoge rolambiguïteit, omdat participatief budgetteren daar kan dienen als louterend mechanisme

How participation in the strategy development process impacts managers' creation of budgetary slack

Strategic planning is increasingly recognized as an important part of the broader management control cycle. Disregarding this strong insight, no prior research has explored the impact of the characteristics of the strategy development process on budgeting outcomes. This paper fills this gap by exploring the impact of a participative strategy development process on managers’ creation of budgetary slack through the mediating effect of autonomous motivation and affective organizational commitment. Data obtained from 247 managers are used to test the proposed model. Results from a structural equation model suggest that, on top of the traditional explanatory variables, increased participation in the strategy development process both directly and indirectly, through the sequential path of affective commitment and autonomous motivation, affects budgetary slack creation. These findings have important implications for budgetary slack research and may be an alternative explanation to some problematic findings in the current literature

The impact of participation in strategic planning on managers' creation of budgetary slack: The mediating role of autonomous motivation and affective organisational commitment

This study investigates the impact of participative strategic planning on managers' creation of budgetary slack. Specifically, we draw on self-determination and organisational commitment theory to examine whether and how the degree of managerial participation in strategic planning relates to the creation of budgetary slack. The hypotheses are empirically tested with survey data obtained from 247 managers in a cross-section of West-European organisations. The results from a structural equation model, with controls for budget participation and slack detection, suggest that increased participation in strategic planning leads to lower budgetary slack creation through the suggested path of heightened affective organisational commitment. In addition, the results indicate that budget participation decreases the creation of budgetary slack through the mediating effect of autonomous budget motivation, suggesting that both elements of the organisational planning process are related to the creation of budgetary slack. Our study contributes to the growing research exploring the interface between accounting and strategy by recognizing the importance of participative strategic planning for understanding managers' creation of budgetary slack

Budgetteren en werk-gerelateerde stress. De impact van rolambiguïteit op werk-gerelateerde stress: de rol van participatief budgetteren

In dit onderzoek bestuderen we de rol van participatief budgetteren in de relatie tussen rolambiguïteit en werk-gerelateerde stress. We analyseren de impact van het niveau van budgetparticipatie op de mate van werk-gerelateerde stress in situaties met hoge rolambiguïteit. De resultaten van de vragenlijst die we afnamen bij 218 managers wijst erop dat werk-gerelateerde stress lager is wanneer managers een hoog gepercipieerd niveau van budgetparticipatie ervaren dan wanneer deze perceptie laag is. Dit verschil is vooral belangrijk in situaties met een hoge rolambiguïteit, omdat participatief budgetteren daar kan dienen als louterend mechanisme