Goal characteristics, communication and reward systems, and managerial propensity to create budgetary slack

Abstract

This study examines the relationship between a number of goal characteristics and the propensity of divisional managers to create budgetary slack. These goal characteristics are variables in goal clarity and goal difficulty. Managers also consider communication and reward systems -which are significant factors affecting the relationship between goal characteristics and propensity to create budget slack. The communication and reward systems are affected by influencing power of managers, required explanation of budget variance, budgetary feedback, peer relations, and relationship between superiors and subordinates. Using a sample of 108 hotel managers in Macau, the findings indicate that the clear communication and reward systems can result in goal clarity and can help to solve budgeting problems under difficult goal situations. The implications of these findings are discussed in relation to the design of budgeting systems. The need to integrate results and develop frameworks for future research is noted.

Behavioural Factors as Determinants of Effective Budgeting Process in Public Secondary Schools

“…A participative approach to the budgeting process, also known as self-imposed budgeting, allows all levels of employees in an organisation to work together in the production of a budget (Garrison & Noreen, 2003). Selfimposed budgeting has been considered to be the effective method of budget preparation (Yuen, 2004). Participative approach to budgeting allows employees the opportunity in fine-tuning the budget plans for an organisation through exchange of information and eventually influencing the budget outcomes (Subramaniam & Mia, 2001).…”

Creating a Link between HR Department and Budgeting: What do HR Managers Think?

“…Hence, he concluded that it is advisable for the management to change the standards from time to time so that they are achievable some of the time and are marginally beyond the level that is attainable. Yuen (2004) in his research on 108 hotel managers mentioned that difficult goal circumstances can be resolved under clear reward systems. Marginson and Ogden (2005) also found a powerful impact of budgetary goals on the behaviour of the managers.…”

“…Cohen and Karatzimas (2011) noted that budgets go beyond performing the function of planning and controlling for management. Budgets provide a tool that could benefit an organization in developing coordination among its various parts, to measure employees' performance and control them, to motivate personnel and to enhance communication (Fisher et al, 2002;Yuen, 2004;Hansen and van der Stede, 2004;Parker and Kyj, 2006). Human resources department, generally thought of as having duties such as recruitment and selection, training and development, pensions and the like, is also liable for performance related bonuses, information flow and employees' motivation (Cohen and Karatzimas, 2011).…”

The Effect of Innovativeness on the Relationship Between Diversification and Slack

“…Merchant (1985) on the other hand defined budgetary slack as the difference between real and budgeted amount embedded in the budgeting process. Similarly, Yuen (2004Yuen ( , 2006 conceptualized budgetary slack as the building of excess resources in a budget or understating productive capability and thus will make the budget easier to attain.…”

“…Douglas and Wier (2000) claimed that budgetary biasing behavior is the difference between planned performance target and real performance capabilities. Yuen (2004) conceptualized budgetary slack as the extent of resources above the minimum required capicity attached into a budget. Douglas et al (2007) expanded the concept in which they viewed budgetary slack as an ethical issue.…”