1. Effects of Budgetary Goal Characteristics on Managerial Attitudes and Performance
Author(s): Izzettin Kenis
Source: The Accounting Review, Vol. 54, No. 4 (Oct., 1979), pp. 707-721
Published by: American Accounting Association
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2. THE ACCOUNTING REVIEW
Vol. LIV, No. 4
October 1979
Effects of Budgetary Goal
Characteristicson Managerial
Attitudes and Performance
Izzettin Kenis
ABSTRACT: This study examines some effects of budgetary goal characteristics of
participation, clarity, feedback, evaluation, and difficulty on job-related attitudes (job
satisfaction, job involvement, job tension), budget-related attitudes (attitude towards
budgets, budgetary motivation), and self-rated performance (budgetary performance,
cost efficiency, job performance) for 169 department managers at the plant level who have
budget responsibility. The results show that budgetary participation and budget goal
clarity tend to have positive and significant effects on job-related and budget-related
attitudes of managers. Participation and goal clarity, furthermore, were found to have
significant influence on budgetary performance of managers. High level of budget goal
difficulty was found to have an adverse effect on attitudes and performance of managers.
Effects of budgetary evaluation and feedback on attitudes and performance of managers,
on the other hand, were found to be weak or insignificant.
A BUDGET is not only a financial plan
that sets forth cost and revenue
goals for responsibility centers
within a business firm, but also a device
for control, coordination, communica-
tion, performance evaluation, and moti-
vation. Knowledge of the budgeted goals
(feedforward) and information about the
extent to which those goals have been
achieved (feedback) provides managers a
basis for measuring efficiency, indenti-
fying problems, and controlling costs.
In terms of timing and magnitude,
coordination of various functional activi-
ties in the firm (sales, production, pur-
chasing, cash flows, etc.) is also accom-
plished through the process of budget
preparation and application.
Communication of budgeted goals
downward in an organization informs
members of lower management about
what uppermanagement expects of them;
conversely, upper management learns
about the accomplishments and prob-
lems of lower management through up-
ward-flowing reports comparing bud-
geted goals with actual performance.
Furthermore, budget information helps
upper management to evaluate the per-
formance of lower managers and dis-
tribute rewardsand punishments. In this
context, budgets represent an important
part of the organization's motivational
system designed to improve managerial
attitudes and performance.
The author wishes to thank three anonymous re-
viewers for their valuable comments and suggestions on
earlier drafts of this paper. This research was supported
by a grant from the Research Council of Rutgers Uni-
versity.
Izzettin Kenis is Associate Professor of
Accounting, Rutgers, The State Univer-
sitv of New Jersey, Camden.
ManuscriptreceivedOctober, 1977.
RevisionsreceivedFebruary,July and November, 1978.
Accepted December, 1978.
707

3. 708 TheAccountingReview,October1979
FIGURE 1
A FRAMEWORK OF BUDGETARY RELATIONSHIPS
BudgetaryGoal Characteristics
InternalEnvironmentVariables (Dimensions of BudgetingStyle) End Variables
Job-Related Attitudes
JobSatisfaction
ManagerialPhilosophy JobInvolvement
andLeadershipStyleof BudgetaryParticipation JobTension
UpperLevelManagement BudgetGoalClarity OtherVariables
OrganizationalStructure BudgetaryFeedback
OrganizationalLevel BudgetaryEvaluation
OrganizationSize BudgetGoalDifficulty
OtherVariables
Budget-RelatedAttitudes
AttitudesTowardBudgets
BudgetaryMotivation
OtherVariables
Performance
BudgetaryPerformance
CostEfficiency
JobPerformance
All of these aspects suggest that bud-
gets potentially may be a useful mana-
gerial tool. However, improperly applied
budgets can lead to dysfunctional be-
havior and negative attitudes among
organizational members [Argyris, 1952;
Wallace, 1966; Schiff and Lewin, 1970].
Most of the positive and negative
effects of budgets on the attitudes,
behavior, and performance of lower
managers can be traced to the budgeting
style of upper management. The concept
of budgeting style includes such budge-
tary goal characteristics as participation,
goal clarity, feedback, bugetary evalu-
ation, and goal difficulty. Indeed, upper
management, with the help of the con-
troller and the accounting department,
can influence the amount and form of
participation of lower managers in bud-
get goal setting, the extent of clarity of
budget goals, the frequency and amount
of feedback, the fashion in which budgets
are used in performance evaluation, and
the degree of budget goal difficulty.
Budgeting style in an organization often
reflects the leadership style and mana-
gerial philosophy of upper management
[Argyris, 1952; DeCoster and Fertakis,
1968; Hopwood, 1972]. In addition, such
organizational variablesas structure(cen-
tralized versus decentralized), size, and
level may influence the budgeting style of
upper management [Searfoss and
Monczka, 1973; Bruns and Waterhouse,
1975; Swieringa and Moncur, 1975].
These relationships can be illustrated in a
framework as presented in Figure 1.
This study presents an empirical ex-
amination of some effects of budgetary
goal characteristics (dimensions of bud-
geting style) on job-related attitudes (job
satisfaction, job involvement, job ten-
sion), budget-related attitudes (attitude

4. Kenis 709
toward budgets, budgetary motivation),
and performance (budgetary perfor-
mance, cost efficiency, job performance)
of lower level managers in industry. The
following is a brief review of literature
related to the goal characteristics in-
cluded in the study.
BUDGETARY GOAL CHARACTERISTICS
BudgetaryParticipation
Budgetary participation refers to the
extent to which managers participate in
preparing the budget and influence the
budget goals of their responsibility cen-
ters. Many authors have suggested that
participation in setting budgetary goals
encourages managers to identify with the
goals, accept them more fully, and work
toward theirachievement [Argyris, 1952;
Becker and Green, 1962; Wallace, 1966;
Hanson, 1966; Dunbar, 1971]. Partici-
pation in task-goal setting and decision
making has also been encouraged and
promoted by such behavioral scientists
as McGregor, Likert,Argyris,and Locke.
The results of many empirical studies
havesupported the positive effectsof such
participation on subordinates' attitudes;
with respectto performance,however,the
findings generally have been inconclusive
[Vroom, 1964;Lowin, 1968;Yukl, 1971].
Steers [1976] found positive and signifi-
cant relationships between participation
in task-goal setting and job satisfac-
tion andjob involvement, but no relation-
ship between participation and employee
performance. Many other studies
reported little or no relationship between
subordinates' participation in goal set-
ting and their performance, goal accep-
tance, or goal attainment [French et al.,
1966; Carroll and Tosi, 1970- Latham
and Yukl, 1976; Ivancevich, 1976].
The few budgetary studies in this area
have reported similar results. Milani
[1975], for example, found positive and
significant correlations between partici-
pation in budget setting and attitudes
toward the job and company; but the
relationship between participation and
job performance was very weak. Swier-
inga and Moncur [1975] found higher
need satisfaction among managers who
were consulted on their budgets than
those who were not consulted. Similarly,
Hofstede [1967] reported positive atti-
tudes among subordinates who partici-
pated in budgeting.
Budget Goal Clarity
Budget goal clarity refers to the extent
to which budget goals are stated specifi-
cally and clearly, and are understood by
those who are responsible for meeting
them. Locke [1968] suggested that setting
specific goals is more productive than
not setting goals and urgingemployees to
do the best they can. He claimed that
conscious goals regulate behavior. Am-
biguously stated goals can lead to the
confusion, tension, and dissatisfaction of
employees. Several research studies sup-
port the positive effects of task-goal
clarity and specificity on the goal com-
mitment, goal achievement, and satisfac-
tion of employees [Latham and Yukl,
1975; Steers, 1976; Ivancevich, 1976].
Studies dealing with goal clarity in
budgeting, however, have been lacking.
BudgetaryFeedback
Feedback about the degree to which
budget goals have been achieved is an
important motivational variable. If mem-
bers of an organization do not know the
results of their efforts, they have no
basis for feelings of success or failure and
no incentive for higher performance;
furthermore,they might become dissatis-
fied [Becker and Green, 1962]. The few
empirical studies on the effects of feed-
back on performance, however, give
inconclusive results. Carroll and Tosi
[1970], for example, found feedback to

5. 710 The Accounting Review, October 1979
be positively correlated with self-rated
goal attainment, but not with self-rated
effort level. Steers [1975] and Kim and
Hamner [1976] also reported positive
and significantcorrelations between feed-
back and performance. Studies by Cha-
panis [1964] and by Hackman and
Lawler [1971], on the other hand, failed
to support these findings.
BudgetaryEvaluation
Budgetary evaluation refers to the
extent to which budget variances are
traced back to individual department
heads and used in evaluating their per-
formance. The fashion in which budgets
are used in performance evaluation tend
to influence the behavior, attitudes, and
performance of the participants. A puni-
tive approach, for example, can lead to
lower motivation and negative attitudes;
a supportive approach, on the other
hand, may resultin positive attitudes and
behavior [Welsch, 1976].
Budget Goal Difficulty
Budget goals may range from very
loose and easily attainable to very tight
and unattainable. Easily attainable goals
fail to present a challenge to participants
and, therefore, have little motivational
effect. Very tight and unattainable goals,
on the other hand, lead to feelings of
failure, frustration, lower aspiration lev-
els, and rejection of the goals by the
participants [Becker and Green, 1962;
Dunbar, 1971]. Most budgeting text-
books suggest that for motivational
purposes budgetary goals should be tight
but attainable. Hofstede [1967] stated
that tighter budget goals lead to higher
motivation; beyond a certain limit, how-
ever, tightening budget goals reduces
motivation. Locke [1968] also claimed
that difficult task goals lead to better
performance than easy goals.
Findings of several studies failed to
provide such clear evidence. Carroll and
Tosi [1970], for example, found a posi-
tive and significant correlation between
perceivedtask-goal difficultyof managers
and their self-rated performance.
Blumenfeld and Leidy [1969] also re-
ported that the performance of salesmen
and servicemen who were assigned more
difficult goals was higher than the per-
formance of those who were assigned
easy goals. But results of studies by
Stedry and Kay [1966] and Steers [1975]
failed to support the positive effects of
goal difficulty on motivation and per-
formance.
HYPOTHESES
This study will examine the following
hypotheses:
1. Budgetary participation, budget
goal clarity, and budgetary feed-
back will have a positive effect on
job satisfaction and job involve-
ment, and will decreasejob tension;
budgetary evaluation and budget
goal difficulty, on the other hand,
will have a negative effect on job
satisfaction and job involvement,
and will increasejob tension.
2. Budgetary participation, budget
goal clarity, and budgetary feed-
back will lead to better attitude
toward budgets and higher bud-
getary motivation, whereas bud-
getary evaluation and budget goal
difficulty will lead to negative atti-
tude toward budgets and lower
budgetary motivation.
3. Budgetary participation, budget
goal clarity, and budgetary feed-
back will have a positive effect on
budgetary performance, cost effi-
ciency, and job performance; bud-
getary evaluation and budget goal
difficulty, however, will have a
negative effect on budgetary per-
formance, cost efficiency, and job
performance.

6. Kenis 711
METHOD
The Sample
The sample of the study consisted of
department managers and supervisors of
plants located in the New Jersey-Phila-
delphia area. Twenty-eight plants em-
ploying over 500 persons were asked to
participate in this study, and 19 plants
belonging to 16 manufacturing compa-
nies agreed. Two hundred and ninety-
eight questionnaires were distributed to
department heads in these plants who
were identified by the plant managers
and controllers as having budget re-
sponsibility. The main criteria used for
inclusion in the sample were whether the
manager had a clearly defined responsi-
bility for meeting his budget and whether
variances were computed and reported
to plant management for performance
evaluation. Top plant managers and
assistant managers were excluded from
the sample. Because complete lists of
managerswho met these criteriawere not
made available, a random selection of the
subjects was not possible. Plant manage-
ments determined the participants.
In order to minimize response bias,
the participants were provided with
return envelopes to send the completed
questionnaires directly to the researcher.
A cover letter explaining the purpose of
the study assured the subjects of the
confidentiality of their responses.
Of the 298 questionnaires distributed,
178 were returned, and these yielded 169
usable questionnaires for this analysis (a
56 percent response rate). Sixty-three
percent of the respondents reported
holding college degrees; the remaining
37 percent held high school degrees, and
usually reported some college education.
Sixty-nine percent of the respondents
reported being in their forties or fifties
and 31 percent in their thirties. The
respondents reported that they had been
working an average of 16.8 years for
their present employer and 5.5 years in
their present position. The companies
represented in the sample were in the
food, electronics, fiberglass, kitchen ap-
pliances, and various metal products
industries.
The Measurements
Measurementsof BudgetaryGoalChar-
acteristics. Twenty-six Likert-type ques-
tionnaire items, scored from one to five,
were used to measure the budgetary goal
characteristics. These included 10 items
from the budget-induced pressure ques-
tionnaire [Fertakis, 1967] derived by
Searfoss and Monczka [1973]; 14 items
from the task-goal attributes (participa-
tion, goal clarity, feedback, goal diffi-
culty) questionnaires developed by Steers
[1976], which were reworded to fit the
budgetary goal setting environment; and
two items which appeared to have face
validity.
Factor analysis, using the Statistical
Package for Social Sciences [Nie et al.,
1975], was employed to identify the
patterns of relations among the 26 ques-
tionnaire items. Six factors with eigen-
values greater than one were extracted.
These six factors accounted for 65 per-
cent of the common variance of the 26
items. The initial principal factor matrix
was rotated orthogonally (Varimax) to
reach a final solution. The Varimax-
rotated factor matrix is presented in
Appendix A; the descriptions of the
questionnaire items are presented in
Appendix B.
The names assigned to the factors and
the meaning of higher scores on each
factor are: (1) budgetary participation-
greater participation and influence by
managers in setting their budgetary
goals; (2) budget goal difficulty-higher
budget goal difficultyas perceived by the
managers; (3) budgetaryevaluation, gen-
eral-use of budgets in performance

7. 712 The Accounting Review, October 1979
TABLE 1
CORRELATIONS BETWEEN BUDGETARY GOAL CHARACTERISTICS VARIABLES (INDEPENDENT VARIABLES)
1 2 3 4 5 6
1. Budgetary Participation 1.00 -.008 -.023 -.01 .019 .068
2. Budget Goal Difficulty 1.00 -.002 .04 .05 -.009
3. Budgetary Evaluation-General 1.00 .11 .05 .03
4. Budgetary Evaluation-Punitive 1.00 .06 -.03
5. Budgetary Feedback 1.00 .05
6. Budgetary Goal Clarity 1.00
All correlations not significant at .05 level.
evaluation in general to a higher degree;
(4) budgetary evaluation, punitive
greater use of budgets in performance
evaluation in a punitive fashion; (5)
budgetary feedback greater amount of
feedback about budgetary performance
received by the managers; (6) budget
goal clarity greater clarity of budget
goals and better understanding of the
goals by the managers.
In order to study the effects of these
six budgetary goal characteristics on the
job-related and budget-related attitudes
and performance of managers, standard
factor scores were computed for each
manager on each of the six factors [Nie
et al., 1975]. As the interscale correla-
tions on Table 1 show, the resulting
measurements appear to be relatively
independent; none of the correlations
reached the .05 significance level.
Measurements of Job-Related Atti-
tudes. Job satisfaction was measured by
the Job Descriptive Index (JDI) which is
a combination of five subscales measur-
ing satisfaction with work, supervision,
pay, promotion, and co-workers [Smith
et al., 1969]. Each subscale consists of
positive and negative statements about
an aspect of the job. The respondents
answer either "yes," "undecided," or
"no." A "yes" answer to a positive item
receives a score of 3, "undecided" a score
of 1, and a "no" answer is scored zero.
The negative items are scored in the
opposite fashion. The overall job satis-
faction score for a respondent, which can
range from zero to 216, is obtained by
adding all the scores for the five dimen-
sions. This scale is one of the most
widely used and carefully constructed
measures of job satisfaction in existence
today; it consistently has demonstrated
high reliability and validity.
Job involvement is measured by a six-
item scale developed by Lodahl and
Kejner [1965]. This scale measures the
degree to which individuals identify
psychologically with their jobs and the
importance of thejob to their self-image.
The internal reliability [Cronbach, 1951]
of the scale was computed as .93. Job
tension, which represents tension arising
from psychologically stressful circum-
stances in the job environment, was
measured by nine items chosen from the
job-related tension index developed by
Kahn et al. [1964]. This scale demon-
strated .85 internal reliability. Even
though these three variables correlated
significantly with each other, as many
other studies have demonstrated, they
are considered by behavioral scientists as
independent dimensions of job-related
attitudes.
Measurementsof Budget-Related Atti-
tudes. Attitude toward budgets was mea-
suredby a four-item scale from Swieringa
and Moncur [1975]. The scale, which
demonstrated .77 internal reliability,

8. Kenis 713
TABLE 2
MEANS, STANDARD DEVIATIONS AND INTERCORRELATIONS OF THE ATTITUDE
AND PERFORMANCE (DEPENDENT) VARIABLES
Intercorrelations
n=169 Mean S.D. 1 2 3 4 5 6 7 8
1-Job Satisfaction (0-216) 158.7 29.4 1:00 .21* -.33* .23* .20* .18** .18** .11
2-Job Involvement (1-5) 2.91 .57 1:00 -.04 .18** .17** .12 .07 .14
3-Job Tension (1-5) 2.51 .66 1:00 -.19* -.09 -.28* -.28* -.13
4-Attitude Toward Budgets (1-5) 3.13 .76 1:00 .41* .25* .11 .15
5-Budgetary Motivation (1-5) 3.65 .72 1:00 .16 .04 .14
6-Budgetary Performance (1-7) 5.19 1.11 1:00 .37* .05
7-Cost Efficiency (1-5) 4.07 .67 1:00 .17**
8-Job Performance (1-5) 4.44 .52 1:00
Significant at .01 level.
** Significant at .05 level.
measures the feelings of the participants
about the usefulness of budgeting to
themselves as managers. The three-item
scale used by Hackman and Lawler
[1971] to measure intrinsic motivation
was reworded to fit the budgetary situa-
tion and used here to measure budgetary
motivation. This scale, which demon-
strated an internal reliability of .79,
measures the extent that the participants
feel personal satisfaction and self-esteem
when they achieve their budget goals.
Even though these two variables corre-
lated significantly with each other, factor
analysis of the inter-item correlations
demonstrated that they can be used as
separate dimensions of budget-related
attitudes.
All of the above-mentioned attitude
scales, with the exception of the job
satisfaction scale, were five-point Likert-
type scales scored from one to five. Scores
on all items of each scale were averaged
to arriveat a set of summary scores from
each respondent.
Measurements of Performance Vari-
ables. The self-rated budgetary perfor-
mance was measured by asking the
respondents to indicate on a seven-point
scale how often they have met their
budget goals (have favorable variances).
The responses ranged from never to
always. The respondents were also asked
to rate the cost efficiency of their depart-
ments and their overalljob performance;
both used a five-point scale ranging from
very poor to very good. The means,
standard deviations, and intercorrela-
tions of the dependent attitude and per-
formance variables discussed above are
presented in Table 2.
The hypotheses of the study were
tested by using regression analysis (step-
wise). t-statistics were used to test the
significance level of the regression coeffi-
cients and F-values were used to test
significance level of the overall regres-
sions. R2,which representsthe percentage
of variation of the dependent variables
(attitude and performance) explained by
the six independent variables (budget
goal characteristics), and R2-Change
which shows the contribution of the indi-
vidual independent variables, were com-
puted for each of the eight regressions
(Table 3). t-statistics were also used to
test the significance level of differences
between mean attitude and performance
scores computed for different levels of
goal difficulty (Table 4), and F-values
were used to test the significance level of
the differences between subsample atti-

9. TABLE 3
RELATIONSHIPS BETWEEN BUDGETARY GOAL CHARACTERISTICS (INDEPENDENT VARIABLES) AND
ATTITUDES AND PERFORMANCE OF MANAGERS (DEPENDENT VARIABLES)
IndependentVariables
Budgetary Budgetary
Goal Evaluation Evaluation Goal
Dependent Variables Participation Difficulty -General -Punitive Feedback Clarity
Job Satisfaction Constant
Regression Coefficients 158.78 7.810 -4.602 -2.426 -2.323 7.701 10.579
t value 3.76* 2.11** 1.14 1.02 3.53* 4.97*
R2 change (R2=.28) .07 .02 .007 .005 .05 .13
Adjusted R2=.25
F value= 10.47*
Job Involiement
Regression Coefficients 2.92 .093 .068 .070 .075 .076 .074
t value 2.05** 1.43 1.46 1.51 1.59 1.60
R2 change (R =.09) .026 .010 .012 .010 .015 .017
Adjusted R2=.06
F value = 2.73**
Job Tension
Regression Coefficients 2.51 -.121 .135 .018 .174 -.073 -.318
t value 2.69* 2.83* .39 3.52* 1.54 6.86*
R2 change (R =.34) .03 .03 .00 .054 .01 .215
Adjusted R2=.32
F value= 13.97*
AattitudeTowardBwchtets
Regression Coefficients 3.13 .275 .105 .142 .078 .090 .238
t value 5.16* 1.87 2.54** 1.34 1.61 4.36*
R2 change (R2- .29) .13 .02 .03 .008 .01 .09
Adjusted R2=.26
Fvalue= 10.97*
BudgetaryMotitvation
Regression Coefficients 3.65 .149 .128 .127 .158 .153 .195
t value 2.87* 2.35** 2.33** 2.78* 2.83* 3.67*
R2 change (R2= .25) .04 .025 .025 .05 .04 .07
Adjusted R2= 22
F value = 9.21*
Budgetary Per/brmance
Regression Coefficients 5.20 .374 -.167 .249 -.276 .060 2.70
t value 4.75* 2.02** 3.03* 3.21* .73 3.35*
R2 change (R2=.27) .11 .02 .04 .04 .002 .06
Adjusted R2=.24
Fvalue= 10.07*
Cost Efficiency
Regression Coefficients 4.07 .095 -.063 -.050 -.141 .084 .170
t value 1.83 1.15 .92 2.50** 1.54 3.19*
R2 change (R2=.14) .018 .007 .004 .03 .013 .066
Adjusted R2=.11
F value = 4.34*
Job Performance
Regression Coefficients 4.44 .052 .031 .011 -.106 .000 .078
t value 1.25 .70 .24 2.31** 1.81
R2 change (R2=.06) .008 .003 .000 .03 .000 .02
Adjusted R2=.04
F value = 2.24**
* Significant at .01 level.
** Significant at .05 level.

10. Kenis 715
tude and performance score variances
[Snedecor and Cochran, 1968].
RESULTS
BudgetaryGoal Characteristicsand
Job-Related Attitudes
The regression coefficients testing the
significance of the hypothesized relation-
ships are presented in Table 3. The
results support Hypothesis 1 for the
effects of budgetary participation, feed-
back, and goal clarity onjob satisfaction;
however, the results fail to support the
hypothesized negative effects of bud-
getary evaluation (general and punitive)
and goal difficulty on job satisfaction of
managers. Participation, goal clarity,
and feedback were positively and signifi-
cantly related to job satisfaction
(R2> .05, p<.01, dof.=162).1 The rela-
tionships of budgetary evaluation and
goal difficulty to job satisfaction were in
the expected direction but were not
statistically significant. The combined
influence of the budgetary goal charac-
teristics on job satisfaction of managers,
on the other hand, appeared to be rela-
tively strong (R2=.28, p<.01, d.f.=6,
162).
The results generally fail to support
Hypothesis 1 on job involvement. The
relationships between the individual bud-
getary goal characteristics and job in-
volvement were either weak or insignifi-
cant. Overall, the goal characteristics
explain only a small percentage of the
variation in job involvement (R2=.09,
p<.01, d.f.=6, 162).
On the other hand, a relatively strong
association appeared to exist between
the budgetary goal characteristics as a
whole and job tension (R2=.34, p<.01,
d.f. = 6, 162). Hypothesis 1 on the effects
of the goal characteristics on job tension
is supported in all cases, except for
budgetary evaluation-general and feed-
back. Of the six variables, however,
budget goal clarity emerged as the
strongest predictor of job tension; in
fact, goal clarity alone accounted for 22
percent of the variation in job tension.
The contributions of participation, goal
difficulty, and budgetary evaluation-
punitive in explaining the variance of
job tension, on the other hand, ranged
between three and five percent (p<.01).
Budgetary Goal Characteristicsand Bud-
get-Related Attitudes
The results suggest that budgetary
goal characteristics, taken as a whole,
may play an important role in improving
the attitudes of managerstoward budgets
(R2 = .29,p<.01, d.f. =6, 162). Of the six
goal characteristics, only budgetary par-
ticipation and goal claritywere positively
and significantly related to the managers'
attitudes toward budgets (R2 > .09,
p<.01, d.f.=162). Hypothesis 2, there-
fore, is supported only for the positive
effects of participation and goal clarity
on the attitude toward budgets.
The results also reveal that the goal
characteristics tend to improve the bud-
getary motivation of managers (R2= .25,
p<.01, d.f.=6, 162). The relationships
between budgetary motivation and all
of the individual goal characteristics
variables were positive and, except for
budgetary evaluation-general and goal
difficulty, significant (R2 > .04, p < .01,
d.f. = 162). The results, therefore, sup-
port Hypothesis 2 for the positive effects
of budgetary participation, feedback,
and goal clarityon budgetarymotivation.
Contrary to Hypothesis 2, however, a
positive relationship appeared to exist
between budgetary evaluation-punitive
and budgetary motivation (R2 =.05,
p<.O1, d.f.= 162).
1 In other words, the regression coefficients related to
participation, goal clarity, and feedback were all positive
and significant at .01 level (162 degrees of freedom) and
each of these variables explain at least five percent of the
variation in job satisfaction of managers.

11. 716 The Accounting Review, October 1979
BudgetaryGoal Characteristicsand
Performance
As predicted in Hypothesis 3, bud-
getary participation and goal clarity
were related positively (R2> .06, p < .01,
d.f. = 162), and budgetary evaluation-
punitive was related negatively (R2=.04,
p<.01, d.f.=162) to budgetary perfor-
mance; contrary to the hypothesis, how-
ever, the relationship between budgetary
evaluation-general and budgetary per-
formance appeared to be positive rather
than negative (R2=.04, p<.01, d.f.=
162). Neither feedback nor goal diffi-
culty, on the other hand, were significant
in predicting budgetary performance
scores. The results suggest that the
budgetary goal characteristics, as a
whole, tend to have a relatively strong
influence on budgetary performance of
managers (R2=.27, p< .01, d.f. = 6, 162).
The overall influence of the budgetary
goal characteristics on the self-rated cost
efficiency of managers appears relatively
weak (R2=.14, p<.01, d.f.=6, 162).
Only one goal characteristic,goal clarity,
was found to have a positive and signifi-
cant relationship with cost efficiency
(R2=.066, p <.01, d.f.= 162). Hypothe-
sis 3 is supported by the results only for
the positive effect of goal clarity on cost
efficiency.
The association between the budgetary
goal characteristics andjob performance
appears even weaker (R2 =.06, p<.05,
d.f. = 6, 162). In fact, none of the regres-
sion coefficients reached the .01 signifi-
cance level. Therefore, the results fail to
support Hypothesis 3 for the effects of
the goal characteristics on job perfor-
mance of managers.
Budget Goal Difficulty: A Closer Look
Overall, the relationships between bud-
get goal difficulty, as a continuum, and
the attitude and performance variables
discussed above were found to be very
weak. However, when the trends of mean
scores of the attitude and performance
variables are examined at different levels
of goal difficulty (about right, tight but
attainable, too tight), non-linear relation-
ships seem to exist between budget goal
difficulty and job satisfaction, job ten-
sion, attitude toward budgets, budgetary
motivation, budgetary performance, and
cost efficiency.
The data presented on Table 4 reveal
that while managerswho felt theirbudget
goals were "about right" or "tight but
attainable" reported similar levels of job
satisfaction and job tension, managers
who felt their budget goals were "too
tight" reported significantly lower job
satisfaction (t= 3.19, p <.01, d.f. = 128)
and higher job tension (t=3.35, p<.O1,
d.f. = 128). Similarly, managers who felt
they had "too tight" budget goals re-
ported lower frequency of meeting their
budgets (t=2.52, p<.O1, d.f.=22) and
lower self-rated cost efficiency in their
departments (t= 2.75, p < .01, d.f. = 22)
than those who felt their budget goals
were "tight but attainable" or "about
right." The mean scores of budgetary
motivation and attitude toward budgets
variables, however, increase significantly
(p<.01) and then decline slightly as the
range of goal difficulty increases from
"about right" to "tight but attainable"
to "too tight" levels.
In conclusion, this analysis suggests
that the "too tight" level of budget goal
difficulty has adverse effects on the atti-
tude and budgetary performance of
managers. The "tight but attainable"
range appears to be the optimum level of
budget goal difficulty.
SUMMARYAND DISCUSSION
The results presented above suggest
that variations in the budgeting style of
upper management as reflected in the
budgetarygoal characteristicscan have a

12. Kenis 717
TABLE 4
MEAN SCORES OF ATTITUDE AND PERFORMANCE VARIABLES AT DIFFERENT
LEVELS OF BUDGET GOAL DIFFICULTY
Tight But
About Right Attainable Too Tight Otverall
Difficulty Mean
Score Range (5-Points) 2-3 3-4 4-5
n=39 n= 109 n=21 n= 169
Job Satisfaction (0-216) 160.33 161.58a, 138.90a2 158.68
Job Involvement (1-5) 2.80 2.99 2.86 2.91
Job Tension (1-5) 2.34 2.48b1 2.99b2 2.51
Attitude Toward Budgets (1-5) 2.93c' 3.26c2 2.90c3 3.13
Budgetary Motivation (1-5) 3.4Idl 3.76d2 3.62 3.65
Budgetary Performance (1-7) 5.46 5.27el 4.35e2 5.19
Cost Efficiency (1-5) 4.08 4.18f1 3.55-2 4.07
Job Performance (1-5) 4.36 4.48 4.30 4.44
Note: Significantdifferencesbetween means (resultsarethe same whether ttests based on pooled variance or separate
variances are applied):
p<.OI al vs. a2; bI vs. b2; cI vs. c2;
dl vs. d2; el vs. e2; fl vs. f2.
p <.05 c2 vs. c3.
significant impact on the attitudes and
performance of lower level managers.
The budgetary goal characteristics as a
whole appeared to have relatively strong
influence on such managerial attitude
and performance variables as job satis-
faction, job tension, budgetary moti-
vation, attitude toward budgets, and
self-rated budgetary performance. The
effects of the goal characteristics on job
involvement, cost efficiency, and job
performance, on the other hand, were
found to be relatively weak.
In particular, the findings suggest that
managers react positively and relatively
strongly to increased clarity of budget
goals. Upper level management, with the
help of the accounting department, can
increase job satisfaction, decrease job
tension, and improve budget-related atti-
tudes, budgetary performance, and cost
efficiency of lower level managers signifi-
cantly by increasing the clarity and
specificity of their budget goals. These
results confirm the findings of various
task-goal setting studies with respect to
the positive effects of goal clarity on atti-
tudes and performance [Locke, 1968;
Latham and Yukl, 1975; Steers, 1976;
Ivancevich, 1976].
The results of the study also support
the findingsof many studies conducted in
budget-goal setting environments [Hof-
stede, 1967; Milani, 1975; Swieringa and
Moncur, 1975]aswell astask-goal setting
environments [Locke, 1968; Steers, 1976]
as to the positive effects of participation
in goal setting on the attitudes of partici-
pants. Significant relationships were
found between budgetary participation
and both job-related attitudes (job satis-
faction, job tension) and budget-related
attitudes (budgetary motivation, attitude
toward budgets). Furthermore, the re-
sults reveal that budgetary participation
tends to improve budgetaryperformance
of budgeted managers. However, con-
sistent with Milani's [1975] results, par-
ticipation was unrelated to job perfor-
mance.
Only job satisfaction and budgetary
motivation were found to have signifi-

13. 718 The Accounting Review, October 1979
cant though somewhat weak relation-
ships to budgetary feedback. The results
imply that feedback about the degree of
budget goal achievement is ineffective in
improving performance and only margi-
nally effective in improving the attitudes
of managers. These findings fail to clarify
the mixed results of various studies which
dealt with feedback-attitude-performance
relationships in task-goal setting [Cha-
panis, 1964; Carroll and Tosi, 1970;
Hackman and Lawler, 1971; Steers,
1975; Kim and Hamner, 1976]. Various
mediating variables, such as timeliness
and content of feedback and other en-
vironmental factors might be the cause of
these conflicting findings.
The results related to the effects of
budget goal difficulty,as a continuum, on
the attitudes and performance of man-
agers were also inconclusive; all the
relationships were either weak or insig-
nificant. The positive effects of goal
difficulty reported by Locke [1968],
Blumenfeld and Leidy [1969], and Car-
roll and Tosi [1970] are not supported.
However, further analysis of the data
seems to confirmthe contention that "too
tight" budget goals have negative effects
[Hofstede, 1967; Becker and Green,
1962; Dunbar, 1971]. Managers who
reported having "too tight" budget goals
also reported significantly higher job
tension and lower job satisfaction, bud-
getary performance, and cost efficiency
as compared to those who reported
having "about right" or "tight but
attainable" budget goals. The results
also indicate that "tight but attainable"
is the optimum level for budget goal
difficulty.
Finally, the budgeted managers ap-
peared to react unfavorably to using
budgets in performance evaluation in a
punitive fashion (increasing job tension,
decreasing budgetary performance).
However, this tendency can be dis-
counted because of the apparently weak
relationships between the variables. Bud-
getary evaluation-general also appeared
ineffective.
Taken together, the findings suggest
that upperlevel management may be able
to improve the attitudes and budgetary
performance of lower level budgeted
managers by emphasizing clarity of bud-
get goals, by soliciting participation of
the managers in the determination of
goals, and by stating the goals at a "tight
but attainable" level. Providing feedback
about budgetgoal achievement and using
budgets in performance evaluation seem
to have limitedconsequences.
The findings of this study, however,
should be considered in the light of its
limitations. The scope of the study is
limited by its sample size, organizational
level, and industrial coverage; only mid-
dle management at the plant level in
manufacturing companies was covered.
The results might have been different if
managers from other manufacturing and
service industries and other levels of
management had been included in the
sample. Also, response bias might have
arisen from the self-selection of the re-
spondents. The responses of the non-
respondents might have been different.
Another bias might come from the fact
that performance was self-rated; mea-
surements based on formal performance
reports or evaluations by superiors might
have given different results. The Likert-
type attitude measurements used might
also have produced some response bias.
Finally, no mediating situational vari-
ables were included; personality and
needs of the managers, goal acceptance,
reward expectancy, and some organiza-
tional and environmental variables are
capable of influencing the relationships
studied here.
Therefore, future research in this area
might be directedto studying the relation-

14. Kenis 719
ships presented in this study in other
industries. The influence of managerial,
organizational, and other environmental
variables on budgeting style of manage-
ment should also be investigated, as well
as the influence of mediating variables on
goal characteristics-attitude-performance
relationships.
APPENDIX A
VARIMAX ROTATED FACTOR MATRIX OF BUDGETARY GOAL CHARACTERISTICS ITEMS
Factor Loadings (Rounded)
Commu-
Factors I II III IV V VI nality
I. Participation 1 .88 -.06 -.01 -.11 .06 .14 .82
2 .80 -.07 -.14 -.03 .07 .18 .71
3 .83 -.02 -.10 -.02 .00 .17 .74
4 .53 -.03 .08 .05 .16 .20 .36
5 .65 .04 -.02 -.07 .08 .10 .45
II. Budget Goal 1 -.06 .68 -.06 .08 .12 .02 .49
Difficulty 2 .09 .76 -.02 .08 .09 -.01 .60
3 .12 .70 .15 -.04 .05 -.03 .53
4 .21 .60 - .18 .13 .06 .04 .45
5 -.18 .59 .03 -.12 .14 -.12 .43
III. Budgetary 1 -.15 .04 .75 .30 .14 .04 .71
Evaluation- 2 -.12 .08 .82 .17 .20 .01 .77
General 3 -.18 .13 .67 .19 .19 .05 .58
4 .19 .17 .27 .18 .20 .02 .21
IV. Budgetary 1 .02 -.11 .20 .62 -.15 -.09 .47
Evaluation- 2 -.05 .20 .07 .60 .14 .08 .43
Punitive 3 -.09 .12 .15 .68 -.17 .02 .51
4 -.07 .09 .26 .63 .10 -.06 .49
5 -.06 .08 .17 .67 -.04 -.11 .50
6 .18 .22 .17 .31 .08 .01 .23
V. Budgetary 1 .10 .09 .16 .17 .74 .15 .64
Feedback 2 .09 .13 .16 .12 .84 -.09 .78
3 .06 .17 .13 .16 .58 .19 .44
VI. Budget Goal 1 .37 -.03 .08 -.06 .14 .81 .83
Clarity 2 .28 -.07 .13 -.05 .17 .79 .76
3 .25 .07 .15 .08 .05 .69 .57
Eigenvalue 5.31 4.62 1.94 1.15 .84 .76
Percent of variance 36.36 31.6 13.3 7.9 5.7 5.2
APPENDIX B
QUESTIONNAIRE ITEMS OF THE BUDGETARY GOAL CHARACTERISTICS
I. BudgetaryParticipation
1. I am allowed a high degree of influence in the determination of my budget goals.
2. I really have little voice in the formulation of my budget goals (reverse item).
3. The setting of my budget goals is pretty much under my control.
4. My superior usually asks for my opinions and thoughts when determining my budget goals.
5. My budget is not finalized until I am satisfied with it.
II. Budget Goal Difficulty
1. I should not have too much difficulty in reaching my budget goals. They appear to be fairly easy (reverseitem).
2. My budget goals are quite difficult to attain.

15. 720 TheAccountingReview,October1979
3. My budget goals require a great deal of effort from me to achieve them.
4. It takes a high degree of skill and know-how on my part to attain fully my budget goals.
5. In general, how would you characterize the budgetary goals of your unit? __ too loose; fairly loose;
just right; tight but attainable; to tight.
III. BudgetaryEvaluation-General
1. My superior has mentioned budgets while talking to me about my efficiency as a supervisor.
2. Budget variances in my unit have been mentioned during performance evaluation interviews by my superior.
3. Budget variances in my unit have been mentioned by my superiors as factors in considering me for pay raises.
4. My superior has held me personally accountable for budget variances in my department (unit).
IV. BudgetaryEvaluation-Punitive
1. My superior has been dissatisfied with my explanation of budget variances in my unit.
2. My superior has spoken to me about increasing production to meet budget goals.
3. My superior has expressed dissatisfaction to me about results in my unit (dept.) when the budget has not been
met.
4. Largebudget variances in my unit have brought comments from my superior to the effect that my performance
has been poor.
5. My superior has become angry about budget variances in my unit.
6. I have had to explain to my superior budget items over which I have no control.
V. BudgetaryFeedback
1. I receive a considerable amount of feedback about my achievement concerning my budget goals.
2. I am provided with a great deal of feedback and guidance about my budget variances.
3. My boss lets me know how well I am doing in terms of achieving my budget goals.
VI. Budget Goal Clarity
1. My budget goals are very clear and specific. I know exactly what my budget goals are.
2. I think my budget goals are ambiguous and unclear (reverse item).
3. I understand fully which of my budget goals are more important than others. I have a clear sense of priorities
on these goals.
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