An empirical study of the effects of budget characteristics and personality variables on budgetary response



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Achieving and maintaining control over organizational subcomponents is a vital concern in many organizations. This dissertation contains the results of a field study made concerning the budgetary control process in organizations. The research problem was to determine and measure the effects of personality and budget characteristics upon the budgetary response of those persons subject to budgets. Since the control problem is necessarily associated with reactions to authority, the authoritarianism/equalitarian personality dichotomy was used as the personality variable in this study. The budgetary dimensions of accuracy, estimate certainty, controllability, and participation were used as the budgetary characteristic variables; and as budgetary response variables, personal budgetary responsiveness, inclination to induce budgetary performance in subordinates, propensity to induce slack in the budget, and propensity to resist the budget were used. Many organizations commit large sums of money and other resources to developing and administering budgets. Consequently, a large amount of effort, both in research and in practice, has been devotee to improving the budgetary process. In the past twenty years, an increasing number of researchers have been advocating increased use of participation in budgeting. Others have advocated the importance of accuracy, estimate uncertainty, and controllability. While usually not studied in a budgeting context, other researchers have investigated the characteristic responses of authoritarians and equalitarians. As a continuation of the work of these researchers, the research reported here was intended to study the interactive effects of budget characteristics and personality on response. Using anonymously completed questionnaires, data were gathered in seven Houston-based firms of varied size, industry, and scope of operations. The questionnaires measured authoritarianism, attitude toward the dimensions, perceived existence (amount) of these dimensions, and budgetary response. The principal hypothesis of this study was that, taken together, personality, attitude toward the dimensions, and dimension perceptions are important predictors of budgetary response. This hypothesis was supported. In addition, the following major conclusicns were also supported: 1. Budget characteristic perceptions are relatively more important to new organization members, vis-a-vis old members, regarding response. 2. Control and participation budget characteristics are positively related to budgetary ego-identification. 3. No significant relationship was observed between tenure, age, and organizational status and response. VJhile it was found that authoritarian and equalitarian budgetary response differed, the stereotypic authoritarian response was not fully observed. It had been expected that authoritarian persons would be more violent in their response to incompatible budget situations. This was not found. Additional personality findings were: 1. Equalitarian persons responded more negatively than authoritarian persons to incompatible budgeting situations. 2. Attitudes toward participative budgeting were more important to equalitarian persons. It was surmized that the stereotypic responses would have been more pronounced had situations of greater budgetary stress been observed. This research has practical implications for current budgetary practice. First, budgets are perceived to be relatively important by the respondents. Secondly, it is important to evaluate dimension attitudes, perceptions, and personality type as they interact in order to implement or manage budgetary systems. In particular, participation should be given consideration. Thirdly, it is particularly important to be aware of new employee budgetary perceptions. Finally, since it was found that the control and participation dimensions were correlated with budgetary ego-identification, joint consideration should be given these dimensions to assure the greatest feelings of personal responsibility on the part of budgetees.