Participation in Budgeting, Locus of Control and Organizational Effectiveness: A Field Extension

This study examines the role of the personality variable, locus of control, as a moderator of the relationship between budgetary participation and managerial performance. The results of a laboratory study employing two separate subject groupsundergraduate accounting students and managers from a large manufacturing companyshow a statistically significant interaction between participation and locus of control affecting performance. Budgetary participation was found to have a positive effect on individuals who feel they have a large degree of control over their destiny internalsls" on the locus of control scale), while having a negative effect on those individuals who feel that their destinies are controlled by luck, chance, or fate ("externals" on the locus of control scale). The results are discussed and possible applications in the areas of job redesign and personnel selection and placement are considered. T HE issue of participation in the budgetary process has occupied the attention of researchers in management accounting, perhaps to an extent greater than for any other budget-related variable. The findings from this line of research have been very fruitful in the area of cognitive consequences of participation. In a study of foremen in a large manufacturing company, Milani [1975] showed that participation was positively associated with attitudes toward both job and company and Collins [1978] found a similar association with attitude toward the budgetary system. In the area of job satisfaction, both French et al. [1966] and Cherrington and Cherrington [1973] have reported results which show a positive association with participation. Hofstede [1967] found that participation increased the "internalization" of budgeted goals thereby enhancing motivation, while French et al. [1960] found that participation was positively associated with morale. On the question of behavioral outcomes resulting from participation, in particular that of performance, the evidence is mixed. On the positive side, Argyris [1952] concluded that the key to effective performance is in gaining acceptance of budget goals and that participation plays a central role in accomplishing this. Becker and Green [1962] extended this conclusion by noting the key role of participation in inducing motivation. Bass and Leavitt [1963], employing business managers and supervisors as experimental subjects. found a clear tenThe helpful suggestions of the participants in both the Sloan School Accounting and Control Research Seminar and the New York University Accounting Research Colloquium, together with the comments of the anonymous reviewers, are gratefully acknowledged. Peter Brownell is Assistant Professor of Management Science, Massachusetts Institute of Technology. Manuscript received Februr v I Q980. Revisions receive( June and September 1980. Accepted November 1980.