Participative Budgeting and Employee Satisfaction

The relationship between participation in the budgeting process and employee satisfaction and performance has been researched for over twenty years. List and explain the relationship between at least four “individual differences” that have been researched in behavioral accounting as moderating variables for the participation----satisfaction----performance relationships.

The four MV's are; need for achievement, locus of control, leadership style, and reward structure. Need for achievement can influence the relationship between performance and goal level. Someone with a high need for achievement will set higher goals when allowed to participate in the budget process. Locus of control can impact he relationship between performance and goal level. An internally driven person may set harder goals because they believe they can control their own destiny through increased effort. Leadership style influences the level of perceived participation that a subordinate feels. The amount of consideration shown by a leader towards a subordinate has a impact on participation goal linkage. Finally, the reward structure can have a strong link to performance. Truth Inducing Compensation Schemes should be the appropriate approach to mitigate budgetary slack in conjunction with increased budget difficulty for improved performance.