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
- Introduction
- Historical evidence of accounting and management control
- Behavioural aspects of budgeting
- Participative budgeting and management accounting control systems
Objectives and Key Themes
This literature review aims to examine the empirical evidence on participative budgeting and its effects on employee motivation. It explores the historical context of accounting and management control, analyzes behavioral aspects of budgeting, and investigates the complexities of participative budgeting within management accounting control systems.
- The historical evolution of accounting and management control practices.
- The behavioral impact of budgetary systems on employee actions and motivation.
- The effectiveness of participative budgeting and its relationship with employee performance and job satisfaction.
- The role of individual and organizational factors in moderating the effects of participative budgeting.
- The complexities and contradictions within existing research on participative budgeting.
Chapter Summaries
Introduction: This introduction establishes the central theme of the literature review: the investigation of participative budgeting and its impact on employee motivation within the broader context of management control. It highlights the ambiguity and fragmentation in existing research, setting the stage for a comprehensive review of the literature. The importance of accounting in management control is highlighted, using Drury's (1997) definition of a budget as a financial plan for implementing management decisions. The paper focuses primarily on research concerning participative budgeting, alongside other issues within budgeting and critical perspectives on budgeting as a management control tool.
Historical evidence of accounting and management control: This section delves into the historical roots of accounting and management control practices. It uses Chan, Lew, and Tong's (2001) analysis of "A Dream of the Red Mansion" to demonstrate sophisticated accounting and management control techniques in 18th-century Chinese family households, showcasing practices such as duty segregation, cash control, budgeting, cost containment, and operational efficiency. The section also incorporates Ezzamel's (1997) findings on rudimentary management accounting, control, and accountability in ancient Egypt, emphasizing the ceremonial and legitimizing aspects of accountability within that historical context. These historical examples provide valuable insights into the evolution of control systems and their adaptation to various social and economic environments. The relevance for modern Western corporations acquiring state-owned enterprises in China is noted.
Behavioural aspects of budgeting: This chapter explores the behavioral dimensions of budgeting, beginning with Hopwood's (1974) emphasis on viewing budgeting as a complex human and technical problem, rather than a purely technical one. Hopwood highlights the motivational role of budgets as targets and mechanisms for engagement and commitment, emphasizing the behavioral, political, and social aspects of budgeting. The section contrasts this holistic perspective with the then-dominant purely technical approach, advocating for a synthesis of technical and behavioral considerations. Argyris's (1955) work is examined, focusing on the problems of introducing participative management and the limitations of previous studies in addressing the impact of dependency relationships on employees' needs and personalities. Argyris suggests that participative management necessitates different organizational principles and executive training that understands this dynamic.
Participative budgeting and management accounting control systems: This section delves into the core research on participative budgeting, starting with Brownell's (1982a) definition of budgetary participation as a process where individuals whose performance is evaluated based on budgeted targets are involved in setting those targets. Brownell's significant contributions to the field throughout the 1980s and 1990s are discussed. The chapter contrasts Brownell's findings with those of Milani (1975), who found no clear link between performance and budgetary participation but did find evidence of improved job and organizational attitudes. The section then moves on to Brownell's (1981, 1982b) research on the role of locus of control as a moderator of the relationship between budgetary participation and performance. Brownell's work highlights the importance of considering the conditions under which participative budgeting is effective, rather than its overall efficacy. The section further explains Brownell's framework for organizing research on participative budgeting, which categorizes variables into cultural, organizational, interpersonal, and individual factors. The significance of this framework lies in its emphasis on understanding the contextual factors that influence the effectiveness of participative budgeting.
Keywords
Participative budgeting, management control, employee motivation, accounting, budgetary participation, locus of control, performance, job satisfaction, organizational behavior, management accounting, historical context, behavioral aspects.
FAQ: Comprehensive Language Preview - Participative Budgeting and Employee Motivation
What is the main focus of this literature review?
This literature review examines the empirical evidence on participative budgeting and its effects on employee motivation. It explores the historical context of accounting and management control, analyzes behavioral aspects of budgeting, and investigates the complexities of participative budgeting within management accounting control systems.
What are the key themes explored in this review?
Key themes include the historical evolution of accounting and management control, the behavioral impact of budgetary systems on employee actions and motivation, the effectiveness of participative budgeting and its relationship with employee performance and job satisfaction, the role of individual and organizational factors in moderating the effects of participative budgeting, and the complexities and contradictions within existing research on participative budgeting.
What historical evidence is considered?
The review delves into the historical roots of accounting and management control, using examples such as sophisticated accounting practices in 18th-century Chinese households (Chan, Lew, and Tong, 2001) and rudimentary management accounting in ancient Egypt (Ezzamel, 1997). This highlights the evolution of control systems and their adaptation to different social and economic environments.
How are behavioral aspects of budgeting addressed?
The review explores the behavioral dimensions of budgeting, emphasizing the motivational role of budgets and the importance of considering both technical and behavioral aspects (Hopwood, 1974). It also examines Argyris's (1955) work on participative management and the impact of dependency relationships on employees.
What is the core research on participative budgeting covered?
The review focuses on Brownell's (1982a, 1981, 1982b) significant contributions to the understanding of budgetary participation, contrasting his findings with those of Milani (1975). It highlights the role of locus of control as a moderator and emphasizes the importance of considering contextual factors influencing the effectiveness of participative budgeting.
What is the definition of participative budgeting used in this review?
Participative budgeting is defined as a process where individuals whose performance is evaluated based on budgeted targets are involved in setting those targets (Brownell, 1982a).
What are the key findings regarding the relationship between participative budgeting and employee outcomes?
The review explores the varied findings in the literature, noting both positive correlations between participative budgeting and employee performance and job satisfaction, and instances where no clear link was found. The importance of considering individual and organizational factors in moderating these relationships is emphasized.
What is the overall conclusion or takeaway from this literature review?
The review aims to provide a comprehensive overview of the research on participative budgeting, highlighting its complexities and the need for a nuanced understanding of its impact on employee motivation within the broader context of management control systems. It emphasizes the importance of considering both the technical and behavioral aspects of budgeting and the influence of various contextual factors.
What are the key words associated with this literature review?
Participative budgeting, management control, employee motivation, accounting, budgetary participation, locus of control, performance, job satisfaction, organizational behavior, management accounting, historical context, behavioral aspects.
What are the chapters included in this preview?
The preview includes an introduction, a chapter on historical evidence of accounting and management control, a chapter on behavioral aspects of budgeting, and a chapter on participative budgeting and management accounting control systems.
- Citar trabajo
- Jörg Drischel (Autor), 2002, Participative Budgeting and its Effects on Employee Motivation, Múnich, GRIN Verlag, https://www.grin.com/document/11533
