Professional Documents
Culture Documents
Fairness As An Antecedent To Participative Budgeting: Examining The Effects of Distributive Justice, Procedural Justice and Referent Cognitions On Satisfaction and Performance
Fairness As An Antecedent To Participative Budgeting: Examining The Effects of Distributive Justice, Procedural Justice and Referent Cognitions On Satisfaction and Performance
Volume Seven
Fall 1995
Fairness as an Antecedent to
Participative Budgeting: Examining
the Effects of Distributive Justice,
Procedural Justice and Referent
Cognitions on Satisfaction and
Performance
Tim M. Lindquist
The University of Northern Iowa
Abstract: Previous research has suggested that more participation (high
process-control) In decision-making is always preferable to less (low
process-control). Some research, however, has stated that any level of partici-
pation less than full decision-control is pseudo-participatioti. Often, no control is
seen as desirable over solely process-control.
This paper tests theories of distributive justice, procedural justice and refer-
ent cognitions in a laboratory experiment. It finds one form of process-control is
a viable form of participation. Subjects allowed only a voice (low process-control)
in setting budgets, experienced greater budget and task satisfaction than sub-
jects allowed no input. This effect occurs even when unattainable (unfair) bud-
gets are received. No effect is found on performance.
Further, this research finds that high process-control {vote for standard) is
effective only when attainable (fair) budgets are achieved. When unattainable
(unfair) budgets are received, subjects with a vote (high process-control) experi-
ence less task and budget satisfaction than individuals with only a voice (low
process-control). Subjects with high process-control (vote) form referent cogni-
tions (i.e., more definitive impressions of what their budgets will be). Subjects in
the voice (low process-control) conditions do not form these referent cognitions.
Thus, subjects in the vote conditions form stronger feelings of dissatisfaction
when unattainable (unfair) budgets are received.
' For comprehensive reviews ofthis research see Brownell (1982a) and Bimberg et al. (1990).
LITERATURE REVIEW
Participative budgeting research has found positive (Cherrington and
Cherrington 1973; Milani 1975; Kenis 1979; Brownell 1982b), negligible
(Brownell 1981, 1982c) and even negative (Bryan and Locke 1967) asso-
ciations between budget participation and employee satisfaction. Moderat-
ing factors found to have a positive effect on satisfaction include locus of
control (Brownell 1982b), role ambiguity (Chenhall and Brownell 1988) and
authoritarian superior/subordinate dyads (Chenhall 1986).
Argyris (1952) predicted improved employee performance through bud-
getEiiy participation. Subsequent findings have supported this contention
(Kenis 1979; Brownell 1982c; Brownell 1985; Brownell and Mclnnes 1986).
Moderating factors found to have a positive influence on performance in-
clude role ambiguity (Chenhall and Brownell 1988), product standardiza-
tion (Brownell and Merchant 1990), and task difficulty (Brownell and Dunk
124 Journal of Management Accounting Research, Fall 1995
Distributive Justice
Distributive justice is a proportionality concept grounded in equity
theory (Adams 1963, 1965; Blau 1964; Homans 1961). In his original for-
mulation of equity theory, Adams described a comparative referent as most
often a different individual (other). However, he suggested a person might
also use him/herself in another situation (self) as a comparative referent.
Thus, in accordance with equity theory, individuals may perceive distribu-
tive justice as the ratio of their outputs (compensation received from a
relationship; e.g., money, comfort or independence) to inputs (things brought
into a relationship; e.g., training, effort or material expenditures). Distribu-
tive justice (or fairness) occurs when inputs and outputs are balanced; in
other words, when this ratio is perceived to equal one.
In participative budgeting, if budget attainability is viewed as the out-
put from a relationship then an individual's ability and effort to achieve
budget can be viewed as inputs. When ability and effort are matched to
budget attainability, distributive justice (fairness) ensues. When effort and
ability are unequal to budget attainability, however, distributive injustice
exists.
Procedural Justice
The theory of procedural justice complements and counters previous
participative decision-making research discussed above. Procedural jus-
tice is complementary because it also recognizes the positive benefits of
allowing employees to participate in decision-making (Thibaut and Walker
1975; Greenberg and Folger 1983; Brett and Goldberg 1983; Lind and Tyler
1988). Proceduraljustice theory suggests a continuum of participation simi-
lar to the Vroom-Yetton (1973) model. The proceduraljustice continuum
ranges from low to high process-control progressing from no input to voice,
vote and finally voice and vote (highest process-control). Complete control
over the decision process is known as choice.
Voice refers to an individual's opportunity to vocally express his/her
opinion regarding a pending outcome and is seen as a form of low
process-control (Lind and Tyler 1988; Leung and Li 1990). The instrumen-
tal theory of procedural justice suggests that individuals given an opportu-
nity to express their views will believe that voice will help them control
126 Journal of Management Accounting Research, Fall 1995
their outcomes (Thibaut and Walker 1978; Conlon 1993). Voice is seen as
fair because it increases the probability of an equitable outcome. Addition-
ally, procedural justice suggests that by emplojang fair (participative)
procedures to determine outcomes, perceptions of fairness toward the out-
comes (distributive justice) will be enheinced. Thus satisfaction and perfor-
mance will increase. This mechanism is known as the "fair process effect"
(Folger 1977). In fact, most fair process effect studies not only show that
proceduraljustice matters but also that it matters as much or more them
the fairness of outcomes (Lind et al. 1990). The non-instrumental theory of
procedural justice proposes that positive enhancements from voice arise
because individuals allowed to express their thoughts feel they are valued,
full-fledged members of the organizational group. Lind and Tyler (1988)
believe individuals are driven by both instrumental and noninstrumentcd
concerns.
Procedural justice counters previous participation research however,
in its failure to recognize low process-control (voice) as a form of
pseudo-participation. In their earliest discussion of procedural justice,
Thibaut and Walker (1978) originally placed primary emphasis on
decision-control, viewing all process-control as an indirect means of exert-
ing decision-control. However, subsequent research has suggested that
process-control is usually more important than decision-control. Addition-
ally, process-control is important even if it is not linked to decision-control
(Lind et al. 1983; Tyler et al. 1985). In the legal arena, Thibaut and Walker
(1975) contend that allowing individual disputants a voice (fair procedure)
will lead to enhancements of satisfaction with judicial decisions even in
cases where the party is ultimately found guilty. In two related field experi-
ments of the Canadian Armed Forces, Lissak (1983) found individuals who
were permitted a chance to express their opinions (voice) experienced an
enhancement in satisfaction with their final performance evaluations and
subsequent transfers even when outcomes were perceived to be unfair.
Kanfer et al. (1987), conducted a laboratory experiment and found the pro-
cedure permitting voice enhanced judgments of satisfaction with subse-
quent performance evaluation relative to no voice, even with a negative
evaluation.
Proceduraljustice consequently proposes that voice alone is not a form
of pseudo-participation but rather a viable form of process-control. Fur-
ther, not only is voice found to have positive effects on satisfaction when
fair outcomes are received but unfair ones as well. Hj^otheses la eind lb
are thus offered:
Hypothesis la
Individuals allowed to participate with a voice in the establishment of
their budgets are more satisfied with budgets received compared to
individuals with similar ability allowed no input, even when budgets
Eire perceived to be unattainable (unfair).
Hypothesis lb
Individuals allowed to participate with a voice in the establishment of
their budgets are more satisfied with their experimental tasks com-
pared to individuals with similar ability allowed no input, even when
budgets are perceived to be unattainable (unfair).
Lindquist ^27
Referent Cognitions
Justice research also counters earlier participative decision-making
studies in its recognition that a higher level of participation is not al-
ways more effective in enhancing satisfaction and performance than a
lower level. Having an opportunity to participate in the standard-setting
process by actually voting for a preferred budget is a form of high
process-control. A vote for a choice of standard is a stronger determi-
nant of procedural justice than a voice, as a vote is a more direct and
certain form of personal control (Brett and Goldberg 1983). Whether
high levels of process-control are effective, however, is contingent upon
whether an individual receives what they perceive to be a fair stan-
dard. When an individual is permitted to vote for his/her preferred per-
formance budget (vote) and the standard received is perceived to be
fair, he/she will be more satisfied and perform better than when only a
voice is provided. Consequently, having both a voice and a vote should
then result in the greatest enhancements of satisfaction and perfor-
128 Journal of Manc^ement Accounting Research, Fall 1995
Experimental Task
The experimental task involved building a toy castie from Loc-Blocs®.^
Each castle required 26 blocks of varied sizes and shapes to complete. A
quality castle needed to match the model castie in size and number of
pieces. In addition, four key pieces needed to match in size and color of
pieces.
Independent Variables
The lab experiment employed a 2 x 2 x 2 full-factorial design. Three
independent, between subjects variables were: (1) distributive justice (re-
ceive attainable (fair) budget, receive unattainable (unfair) budget), (2) pro-
ceduraljustice (voice (low process-control), no voice (noprocess-control)) and
(3) proceduraljustice [vote (highprocess-control), no vote (noprocess-control)).
Distributive justice was operationeilized as the receipt of either attain-
able (fair) or unattainable (unfair) budgets (piece-rate performance stan-
dards).^ An attainable (fair) budget was determined to be one at the mid-
point standard of their achievable range. An unattainable (unfair) budget
was ratcheted up from the midpoint. In the first production run, the mid-
point standard of the attainable range was administered as a budget to
establish a base. In the second production run unattainable budgets were
increased 30 percent above the midpoint of the achievable range. Finally,
in the third run, unfair budgets were ratcheted up 70 percent above the
attainable range.
Procedural justice was operationalized in two ways; voice and vote.
Subjects in the voice (low process-control) conditions were given the op-
portunity to vocalize and express their opinions regarding budgets before
each production run. In order to standardize treatments across subjects,
an oral questionnaire was used to elicit subjects' responses.'' Subjects in
the no voice condition had no such process-control.
^ Previous accounting research has supported this task as one representing a mEinufacturlng
process (Young 1985; Young et al. 1993).
3 Budget difficulty was based on individual perceptions, recognizing that what was difficult
for one subject may not have been difficult for another. In order to ascertain individual
ability, subjects were asked, before each production run, to record a range of production
they f'elt was attainable such as 1.2.3 or 23.24.25. An effort was made to avoid mentioning
reeilistic ranges on which subjects might anchor. Individuals were told this information
was merely for statistical purposes and played no part in the determination of their budget.
•* Please see appendix for an example of the instrument used to administer the voice treatment.
130 Journal of Management Accounting Research, Fall 1995
Dependent Variables
The dependent variables were: (1) budget satisfaction, (2) task satisfac-
tion (both satisfaction measures taken on five-point Likert scales at the
conclusion of the experiment), and (3) performance. Performance was
measured as the actual number of quality units produced across all three
production periods.
Yoking Process
In order to facilitate statistical comparisons, it was necessary to yoke
subjects in the no vote conditions to subjects of equivalent ability in the
vote conditions^. As stated above, a reduced set of 86 subjects was ob-
tained after the yoking procedure. Table 1 below provides a tabulation of
mean performance standards, by condition, for all three production rounds.
Note that vote and no vote subjects are matched in terms of ability in nearly
all production rounds suggesting the yoking procedure was effective. Any
differences in vote/no vote standards are not significantly different
at p < 0.05.
TABLE 1
Budget Means of Yoked Pairs in Production Rounds 1-3
Production Round # 1
Attainable Budget Unattainable Budget
Voice No Voice Voice No Voice
No No No No
Vote Vote Vote Vote Vote1 Vote Vote Vote
4.91 5.00 5.46 5.46 5.33 5.33 5.40 5.40
Production Round #2
Attainable Budget Unattainable Budget
Voice No Voice Voice No Voice
No No No No
Vote Vote Vote Vote Vote Vote Vote Vote
5.64 5.64 5.92 5.92 8.33 8.56 7.60 8.50
Production Round #3
Attainable Budget Unattainable Budget
Voice No Voice Voice No Voice
No No No No
Vote Vote Vote Vote Vote Vote Vote Vote
6.36 6.36 6.15 6.15 11.67 12.22 10.20 12.70
Experimental Procedures
Subjects were asked to sign up for one two-hour block of time that
included twenty minutes of training and three production periods. Two
training periods' production data were eliminated from the study in order
to filter out effects of learning. Subjects were randomly assigned to each of
eight experimental conditions. This resulted in the following eight groups;
(1) Voice/Vote/Attainable Budget, (2) Voice/No Vote/Attainable Budget, (3)
No Voice/Vote/Attainable Budget, (4) No Voice/No Vote/Attainable Budget,
(5) Voice/Vote/Unattainable Budget, (6) Voice/No Vote/Unattainable Bud-
get, (7) No Voice/Vote/Unattainable Budget and (8) No Voice/No Vote/Unat-
tainable Budget Refer to figure 1 below for a detail of experimental condi-
tions.
The entire experiment took one week to complete running from 8:00am
to 7:30 p.m. Monday through Friday. Figure 2 details the sequence of events
in the longest of conditions.
Subjects, approximately five at a time, were greeted by the head ex-
perimenter plajdng the role of the manager and escorted to a seating area
to await production room assignments. Production rooms were completely
sealed off from one another regarding both sight and sound. Thus, sub-
jects were unaware of what their co-workers were experiencing. Each pro-
duction room, in addition to an experimenter playing the role of foreman,
contciined two chairs and a table on which sat a box filled with Loc-Bloc®
pieces of assorted colors and sizes. In all cases, experimenters followed a
written script.'^ Not only did this serve as an external memory aid but it
'' Complete scripts for all conditions are available by contacting the author.
FIGURE 1
Experimental Conditions
FIGURE 2
Timing and Sequence of Procedures in Experiment
Introduction
-Consent
-Demographic Information
Familiarization with Task
-Practice Run
-Incentive Scheme Explanation
Period One:
-Range Attainment Setting I
-Voice I
-Vote I
-Budget Set I
-1st official production run
-Count castles and ready for next run
Period Two:
-Range Attainment Setting II
-Voice II
-Vote II
-Budget Set II
-2nd official production run
-Count castles and ready for next run
Period Three:
-Range Attainment Setting III
-Voice III
-Vote III
-Budget Set III
-3rd official production run
-Count castles and ready for next run
Final Questionnaire
Pajrment and Debriefing
Exit
RESULTS
Demographic Information
Even though subjects were randomly assigned to experimental condi-
tions, an analysis of variance (ANOVA) of demographic data was conducted
to make sure subjects were ex post evenly distributed. Data included age,
gender, major, full-time/part-time work experience and number of account-
ing courses completed. With the exception of gender, there were no signifi-
cant main effects, two-way or three-way interactions. The three-way inter-
action for gender, however, proved significant (Fj g^ = 8.0, p < 0.006). This
significance is the result of condition 7 having seven women and two men
assigned to it. Efforts were made to balance gender assignments but given
scheduling restrictions and yoking effects, a perfect balance was not pos-
sible. Empirical findings in distributive and procedural justice research,
however, suggest there is no basis for expecting males and females to use
different standards of justice (Lerner 1981; Furby 1986). Thus, fmdings
indicate no systematic bias in the experimental results.
Manipulation Checks
Manipulation checks were of five types: envelope manipulation, checks
on independent variables of budget attainability (distributive justice), voice
and vote (proceduraljustice) and finally maintenance of procedural justice
through last production run. Analysis of variance (ANOVA) was conducted
measuring the effect of independent variables (budget attainability, voice
and vote) on manipulation constructs.
Lindquist 135
ity for this two-item scale was quite satisfactory (Cronbach's alpha = 0.82).
An ANOVA of the full model with the composite dependent measure above
was run. A strong main effect for voice is found (Fj 35 = 65.45, p < 0.000;
voice 8.20 vs no voice 5.43).
Investigation of two-way, t-test contrasts indicates the manipulation of
voice is robust across budget attainability conditions; v/a (8.18) vs nv/a
(5.81; t4g = 4.08, p < 0.000) and v/ua (8.22) vs nv/ua (4.95; tgg = 5.71, p <
0.000). Finally, three-way contrasts add further support in the recognition
of voice, in the presence of vote, with the receipt of both attainable and
unattainable budgets; v/vt/a (8.36) vs nv/vt/a (7.31; 1^2 = 1-09, p < 0.050)
and v/vt/ua (8.11) vs nv/vt/ua (6.40; tj^ = 2.58, p < 0.010). Voice is thus
seen to have been recognizable as a means of participation.
Vote as a form of participation, however, is not robust across budget
attainability. Responses to the statement, "My decision of what my stan-
dard should be had a lot to do with what my standard was set at," were
used as a dependent variable in an ANOVA of the full model. A significant
main effect is found for vote (Fj gg = 5.95, p < 0.017; vote 3.09 vs no vote
2.51), however, two-way interaction contrasts provide further information.
Two-way contrasts imply that vote is recognizable as participation when
attainable budgets are received but not with the receipt of unattainable
budgets; vt/a (3.79) vs nvt/a (2.63; t^g = 3.29, p < 0.001) and vt/ua (2.21)
vs nvt/ua (2.37; tgg = -.49, p < 0.314). These results suggest a vote is seen
as a form of participation if a subject receives a preferred (attainable) bud-
get but not with the receipt of a non-preferred (unattainable) budget. It is
important to note these findings do not imply a vote is not a form of par-
ticipation but rather that it is not recognized as participation when un-
wanted budgets are received. This finding sheds important light on the
phenomenon that too much participation can sometimes backfire and be
perceived as pseudo-participation. The fact that subjects do not recognize
a vote as participation when they receive unattainable budgets strongly
suggests they may be viewing this as a form of process-control through
referent-cognitions as pseudo-participation.
Finally, it is important to check whether subjects perceived participa-
tive, procedural justice manipulations as being fair. Subjects were asked
to respond to a brief questionnaire after standards were set in each pro-
duction round which read, 'The way this company goes about setting stan-
dards is:." Responses were scored (5) extremely fair to (1) extremely unfair.
An ANOVA was run on survey responses after the third period's budgets
were set. This period's responses represented a collective perception for
the entire experiment. Support that participation in the form of voice was
perceived as fair is found in the main effect for voice (Fj 35 = 3.75, p <
0.056; voice 3.17 vs no voice 2.85). Three-way contrasts confirm this find-
ing and find voice perceptions of fairness are robust across budget attain-
ability; v/nvt/a (3.45) vs nv/nvt/a (2.69; tja = 2.22, p < 0.019) and v/nvt/
ua (2.56) vs nv/nvt/ua (1.70; tj^ = 1.70, p < 0.050). It seems voice was
perceived as a fair participative aspect of procedural justice.
Voting on the other hand, is only perceived as a fair participative mea-
sure when attainable budgets are achieved. A significant main effect for
vote is found, (F^ 35 = 16.89, p < 0.000; vote 3.37 vs no vote 2.63). Interpre-
tation of the three-way contrasts, however, adds to this finding. Here, vote
Lindquist 137
Tests of Hypotheses
To test all hypotheses, full-factorial models were analyzed separately
with dependent variables of budget satisfaction, task satisfaction and per-
formance. Complete ANOVA results are found in table 2 below. Cell means
are found for all conditions in table 3. Budget satisfaction was measured
with responses to four statements from the exit questionnsiire. Responses
to these four statements were combined into one construct with a
Cronbach's alpha of 0.93. The four statements were, "Overall, I was satis-
fied with the standards under which I worked"; 'The standards I worked
under suited me fine"; "I would have preferred different standards than
what I received" (reversed scored) and "I liked the standards which I re-
ceived." Task satisfaction was measured by responses to four statements.
Responses to these four statements were combined into one construct with
a Cronbach's alpha of 0.84. These four statements were, "Overall, I was
satisfied with this task"; "I would recommend this task to someone else as
one that is satisfying"; "I considered this task to be unpleasant" (reversed
scored) and "I feel pleased about my involvement with this task." Indepen-
dent variables were budget attainability, voice and vote. Evaluation of re-
sults included analysis of main effects, two-way and three-way interac-
tions including contrast analysis.
Hypothesis la
Hypothesis la predicted that subjects allowed to participate with a voice
in the establishment of their budgets would be more satisfied with budgets
received than like individuals allowed no such input, even when unattain-
able budgets were received. The main effect for voice (Fj gg = 6.11, p <
0.016; voice 12.23 vs no voice 10.83) suggests voice, overall, enhances
budget satisfaction. Three-way interaction, t-test contrasts add further
definition to this finding. They support the hypothesis that participation in
the form of voice alone leads to enhancements of budget satisfaction when
attainable budgets are received; nvt/v/a (14.09) vs nvt/nv/a (10.46; tjj =
0.013).
The beneficial effect of voice is even more important when unattainable
budgets are received. Here, subjects permitted a voice are significantly more
satisfied with budgets received over like subjects allowed no such input;
v/ua (9.00) vs nv/ua (7.20; tgg = 2.07, p < 0.023). This enhancement of
budget satisfaction through voice with both attainable and unattainable
138 Journal of Management Accounting Research, Fall 1995
00 f-H
05
X
o CS
O5
d d d
f-H CO
;> CO o
d d f-H
M
00
o o in
d d d
.56
a c::5 o
o CO
w o d
f-H
o 00 o
o CSl
o f-H CO
a "
S d d d
in
in CO 00
od c^ d
f-H
f-H in
in 00 in
CD 05
d d d
U3 O
sc< ••0
o o o
M o I-H
d d d
•<t cs
00
o cs
d d d
in CD in
to .wN 00 CO o
00 f-H
d
u u
<fi in CO
I-H
CN
o O CD
d d d
__, 00 00
I-H 05 I-H
CD d
o in 00
o o o
o
o
d d d
in
CO
o
o in
1
•o
in
4)
^5 ^
to
T3
iS 2 "o
a
u et
V
A cfl
Qu CO
CO CO
Lindquist 139
TABLE 3
Means of Hypotheses: 3-Wa7 Interactions of
Vote X Voice x Budget AttainabiUty
Vote No Vote
On Budget Satisfaction Voice No Voice Voice No Voice
Attainable 15.64 16.77 14.09 10.46
Unattainable 7.67 7.30 10.33 7.10
Vote No Vote
On Task Satisfaction Voice No Voice Voice No Voice
Attainable 13.18 13.00 14.55 11.54
Unattainable 10.33 10.30 14.11 10.90
Vote No Vote
On Performance Voice No Voice Voice No Voice
Attainable 17.82 17.08 17.27 19.31
Unattainable 20.44 21.10 20.33 19.80
Hypothesis lb
Hypothesis lb predicted subjects allowed to participate with a voice in
the establishment of their budgets would have greater task satisfaction
than like individuals allowed no such input, even when unattainable bud-
gets were received. The main effect for voice supports the contention that
overall, voice enhances task satisfaction (Fj g^ = 4.98, p < 0.029; voice 13.13
vs no voice 11.54). Three-way interaction contrasts provide further sup-
port. Here it is seen that having a voice vs no input leads to an enhance-
ment of task satisfaction with both attainable and unattainable budgets;
v/nvt/a (14.55) vs nv/nvt/a (11.54; t22 = 2.01, p < 0.028) and v/nvt/ua
(14.11) vs nv/nvt/ua (10.90; tj^ = 2.00, p < 0.031). The fair process effect
is robust across perceptions of budget attainability. Voice is again seen as
a form of real participation, not pseudo-participation.
Hypothesis Ic
H)rpothesis Ic theorized that individuals allowed to participate with a
voice would have greater experimented production than like individuals
allowed no such input, even when budgets were unattainable. No support
is found for this hypothesis in either the main effects or interactions. It
appears voice, as a form of participation, is not an enhancing aspect of
performance, at least in this experimental task.
Hypothesis 2a
Hypothesis 2a predicts experimental subjects will have greater satis-
faction with attainable budgets when they are provided the highest
process-control (i.e., voice and vote over lesser forms; vote only, voice only
or mute). Three-way interaction contrasts support this hypothesis. It is
140 Journal of Management Accounting Research, Fall 1995
seen that having the highest proeess-control leads to greater budget satis-
faction than having no participation; vt/v/a (15.64) vs nvt/nv/a (10.46;
t22 = 3.86, p < 0.001). Further, having a vote in addition to a voice does
lead to a significant increase in budget satisfaction; vt/v/a (15.64) vs nvt/
v/a (14.09; t2o = 1.41, p < 0.087). Support for the above h5rpothesis is thus
recognized.
Hypothesis 2b
Hypothesis 2b similarly predicts subjects will have the greatest task
satisfaction with attainable budgets when they are provided both voice arid
vote over vote only, voice only or mute. No support is found for this hy-
pothesis. The highest level of process-control does not seem to be an im-
portant factor in task satisfaction in this experimental setting.
Hypothesis 2c
Hypothesis 2c theorizes that voice and vote together wUl lead to a greater
enhancement of performance than lesser forms of participation (vote only,
voice only or mute) with the receipt of attainable budgets. No support is
found for this hypothesis. Performance, since it is multiply determined, is
not explained by the highest level of process-control, at least in this experi-
mental task.
Hypothesis 3a
Hypothesis 3a suggests individuals allowed a voice only will have more
budget satisfaction than individuals offered the highest process-control
(voice and vote), or a vote only, when unattainable budgets are received.
Strong support for this hypothesis is found in the three-way interaction
contrasts. Here, subjects given a voice and vote have significantly less sat-
isfaction with unattainable budgets than those given a voice only; vt/v/ua
(7.67) vs nvt/v/ua (10.33; tjg = -1.89, p < 0.039). Additionally, subjects
given a voice only have greater budget satisfaction than those given a vote
only when unattainable budgets are received; nvt/v/ua (10.33) vs vt/nv/
ua (7.30; tj-, = -2.55, p < 0.011). It appears subjects given a vote are form-
ing referent cognitions of their preferred choices, which when denied, re-
sults in less budget satisfaction than when this preference is not offered. A
vote in this context is seen as a form of pseudo-participation.
Hypothesis 3b
Hypothesis 3b predicts individuals allowed a voice only will have greater
task satisfaction than individuals offered the highest process-control (voice
and vote), or a vote only, when unattainable budgets are received. Strong
support is also found for this hypothesis in the three-way, interaction con-
trasts. Here, subjects with voice only are found to have greater task satis-
faction than those who are given a voice and a vote; nvt/v/ua (14.11) vs
vt/v/ua (10.33; tjg = -2.58, p < 0.010). Additionally, those with a voice only
are found to have greater task satisfaction than those with a vote only;
nvt/v/ua (14.11) vs vt/nv/ua (10.30; t^^ = -3.08, p < 0.004). There is strong
support that subjects are forming referent cognitions regarding their task
satisfaction upon the receipt of unattainable budgets when they have been
permitted a vote.
Lindquist 141
Hypothesis 3c
Hypothesis 3c predicts individuals allowed a voice only v\all have greater
production than individuals offered a voice and vote or vote only, when
unattainable budgets are received. As with the previous hypotheses re-
lated to performance, no significant relationships exist in the data.
DISCUSSION
This paper examines participative budgeting, introducing theories of
distributive justice, procedural justice and referent cognitions to manage-
ment accounting literature. Some accounting research has supported the
position that more participation in setting standards is always better than
less. In fact, this research has proposed that only full budget participation
(that emplojang process and decision-control) is effective. Providing only
process-control is viewed as "pseudo-participation."
Procedural justice theory, however, recognizes that perceptions of fair-
ness regarding the process of decision-making is as important as percep-
tions of fairness regarding the decision-outcome itself. Fair procedures,
even those offering only process-control, lead to enhancements of satisfac-
tion and performance (i.e., fair process effect). Thus, process-control only
is not always "pseudo- participation."
Distributive and procedural justice, along with a theory of referent cog-
nitions, additionally suggest it is notJust the amount of participation that
determines satisfaction and performance levels, it is also the interaction
between the level of participation and perceptions of fairness regarding the
outcome of participation. How an individual reacts to a given level of par-
ticipation is dependent upon whether he/she views the decision outcome
as fair. This occurrence is a reflection of the proposition that when indi-
viduals are provided high levels of process-control they begin to think ref-
erentially, focusing on their decided preference as a referent outcome.
Thus, in cases where a referent outcome (perceived as fair) is received, the
highest form of participation results in the greatest enhancements of satis-
faction and performance. Here, individuals express a preference for a par-
ticular outcome, vote for a given standard level and ultimately receive it.
However, in cases where referent outcomes are not received (unfair stan-
dards), subjects react adversely to high levels of process-control. They be-
gin to think that what should have happened, didn't happen. In the sense
that they own the referent outcome, they react harshly to not receiving it.
Thus, satisfaction levels decrease even though subjects are allowed high
levels of process-control in the decision-making.
A laboratory experiment is reported in this paper. It found that sub-
jects permitted an opportunity to vocalize their feelings (voice; low
process-control) regarding the budget setting process were significantly more
satisfied with budgets received and the task than subjects allowed no in-
put, even when budgets received were perceived to be unfair. This finding
is important and supports procedural justice theory and counters previ-
ous accounting research.
This research also found that in situations where budgets were per-
ceived to be attainable (or fair), individuals allowed both a voice and vote
were significantly more satisfled v^nth budgets received than subjects per-
142 Journal of Management Accounting Research, Fall 1995
APPENDIX A
Oral Questionnaire Used to Assess Voice
Voice Questionneiire
Subject No.
1. How satisfied are you with your present working situation going into the third
production?
Extremely Quite Quite Extremely
satisfied; satisfied; Satisfied; unsatisfied; unsatisfied.
2. How satisfied are you with the procedures used to determine your standards?
Extremely Quite Quite Extremely
satisfied; satisfied; Satisfied; unsatisfied; unsatisfied.
3. How do you feel about the standard under which you worked last period?
Extremely Quite Quite Extremely
satisfied; satisfied; Satisfied; unsatisfied; unsatisfied.
4. What range of standards did you feel were attainable? How attainable do you
think this range is?
Extremely Quite Quite Extremely
attainable; attainable; Attainable; unattainable; unattainable.
5. Are there any factors we have not covered youfeel are important and need to be
discussed?
Lindquist I45
REFERENCES
Adams, J. S. 1963. Toward an understanding of inequity. Journal ofAbnormal and
Social Psychology: 422-436.
. 1965. Inequity in social exchange. In Advances in Experimental Social Psy-
chology, edited by L. Berkowltz, 267-299.
Argyris, C. 1952. The Impact of Budgets on People. New York, NY: The Controller-
ship Foundation.
Arora, B. 1992. Participative management or managed participation—the case of
India. Economic and Industrial Democracy 13: 263-272.
Birnberg, J. G., M. D. Shields, and S. M. Young. 1990. The case for multiple meth-
ods in empirical management accountmg research (with an illustration from
budget setting). Journal of Management Accounting Research (Fall): 33-66.
Blau, P. M. 1964. Exchange and Power in Social Life. New York: Wiley.
Brett, J. M., and S. B. Goldberg. 1983. Mediator-advisors: A new third-party role.
In Research on Negotiations in Organizations, edited by M. Bazerman and R.
Lewicki, 81-90. Greenwich, CT: JAI Press.
Brownell, P. 1981. Participation in budgeting, locus of control and organizational
effectiveness. The Accounting Review 56 (October): 844-860.
. 1982a. Participation in the budgeting process: When it works and when it
doesn't. Journal of Accounting Literature: 124-150.
. 1982b. A field study examination of budgetary participation and locus of
control. The Accounting Review 57 (October): 766-777.
. 1982c. The role of accounting data in performance evaluation, budgetary
participation, cind organizational effectiveness. Journal ofAccounting Research
20 (Spring): 12-27.
. 1985. Budgetary systems and the control of functionally differentiated or-
ganizational activities. Journal of Accounting Research 23 (Autumn): 502-512.
, and A. S. Dunk. 1991. Task uncertainty and its interaction with budgetary
participation and budget emphasis: Some methodological issues and empirical
investigation. Accounting Organizations andSodety 16 (8): 693-703.
, and M. Hirst. 1986. Reliance on accounting information, budgetary pairtici-
pation, and task uncertainty: Tests of a three-way interaction. Journal of Ac-
counting Research 24 (Autumn): 241-249.
, and M. Mclnnes. 1986. Budgetary participation, motivation, and manage-
rial performance. The Accounting Review 61 (October): 587-600.
, and K. A. Merchant. 1990. The budgetary and performance infiuences of
product standardization and msinufacturing process automation. Journal of
Accounting Research 28 (Autumn): 388-397.
Bryan, J. F., and E. A. Locke. 1967. Goal setting as a means of increasing motiva-
tion. Journal of Applied Psychology 51 (3): 274-277.
Chenhall, R. H. 1986. Authoritarianism and participative budgeting: A dyadic analy-
sis. The Accounting Review 61 (April): 263-272.
, and P. Brownell. 1988. The effect of participative budgeting on job satisfac-
tion and performance: Role ambiguity as an intervening variable. Accounting,
Organizations andSodety 13 (3): 225-233.
Cherrington, D. J., and J. O. Cherrington. 1973. Appropriate reinforcement con-
tingencies in the budgeting process. Empirical Research in Accounting Selected
Studies (Supplement): 225-253.
Conlon, D. 1993. Some tests of the self-interest and group-value models of proce-
dural Justice: Evidence from an organizational appeal procedure. Academy of
Management Journal 26 (5): 1109-1124.
Cotton, J. L., D. A. Vollrath, K. L. Froggatt, M. L. Lengnick-Hall, and K. R. Jennings.
1988. Employee participation: Diverse forms and different outcomes. Academy
of Management Review 13 (1): 8-22.
146 Journal of Management Accounting Research, Fall 1995