MODERATING ROLE OF ORGANIZATIONAL CULTURE IN THE RELATIONSHIP BETWEEN BUDGET RELATED BEHAVIOUR AND ORGANIZATIONAL PERFORMANCE
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1.1. Background to the study
This research is on Moderating role of organizational culture in the relationship between budget related behavior and organizational performance. The budgeting system is an extremely important component of an overall management control system package. It is an important tool in organizations for directing activities and employees’ effort towards the organization’s common goals (Covaleski, Evans, Luft, & Shields, 2015). Budget not only a financial plan that sets forth cost and revenue goals for organization, but also a device for control, coordination, communication, performance evaluation, and motivation (Joshi, AlMudhaki, & Bresmser, 2016). All of these aspects suggest that budgets potentially may be a useful managerial tool. This effective budget requires reliable estimates of future conditions. When subordinates submit biased estimates to their superiors, budgetary slack is created (Nouri & Parket, 2014). These biased estimates potentially could reduce the effectiveness of budgeting in organizational planning and control (Magner, Johnson, Little, Staley, & Welker, 2006; Waller & William, 2009). Caiden (2010) observes that budgeting is an especially daunting and disorienting task because budget holders constantly contend with financial deficits and the perennial question of how to meet seemingly infinite needs with finite resources. Government owned universities particularly in developing economies like Nigeria are compelled to achieve a balance between external pressures and internal integration in order to achieve their objectives. The reality of scarce resources and unlimited demands reflect economic phenomena that have caught the attention of researchers and managers in all types of organizations.
A budget is a quantitative expression of the monetary inflows and outflows that reveals whether the current operating plan will meet the financial objectives of an organization (Drury, 2000; Garrison & Noreen, 2003; Atkinson, Kaplan & Young, 2004). Apart from having the ability to influence behaviour, (Hope & Fraser, 2003), it has the potency to make or break an organization (Schim & Siegel, 2005); and serves as a useful tool for communicating organizational goals Gillis (2006). It also represents the vision of an organization, and defines how scarce resources are to be utilised (Zierdt 2009). The process by which budgets are established is referred to as budgeting. In general terms, budgeting is a process, which provides managers with the opportunity to carefully match organizational goals with the resources necessary to achieve the goals (Raj 2008). It has been argued that an understanding of the importance of budgeting is the first step in successful planning (DeFiore & DeFiore, 2014; Bibeau, 2011).
Flamhotz (1983) suggests that budgeting should be viewed as a part of a system for achieving organizational control. Providing support for this position, Fink and Perrin (2000) proposed that rather than use budgeting as a weapon of impediment and witch-hunting, it should be used to assist in establishing goals and advancing operating results in organizations. Buck (2004) portrayed organizations as complex adaptive systems, which have several abilities including behaviour modification. In this regard, researchers have emphasized the need to pay attention to the human aspect of budgeting (Covaleski, Evans, Luft & Shields, 2003; Chapman, Hopwood & Shields, 2007; Zastrow & Krist-Ashman, 2009). The human aspect of budgeting focuses on explaining the behaviours exhibited by people in the budget process. In general terms, these behaviours are referred to as budget related behaviours (BRB) [(Hopwood, 1978; Flamholtz, 1983; Wildavsky, 1988; Schim & Seigel 2005; Eker, 2007; Raj, 2008). The nature of budget related behaviour has been observed to be influenced by the desire to achieve organisational goals which depends on attitudes, psychology, experiences, beliefs and values of the individuals involved in the budgeting process (Wildavsky, 1988; McPhee, 2008).
Raj (2008) lends credence to these assertions by stating that the behavioural aspects of budgeting are vital parts of financial management which are required to maintain a balance between markets and financial activities. Thus, the success of a budgeting process in achieving organizational objectives is hinged on the persons required to execute it. These persons tend to be influenced by the organizational culture (OC) in existence (Rafael & Worline, 1999; Subramaniam & Ashkanasy, 2001; Heathfield, 2008). In the views of Allaire and Firsirotu (1984), Schein, (1990); Schroeder, Myrtle & Jack, (2011), the knowledge people in an organization have and share for relating with their organizational environment, form the basis of the organizational culture. Budgets irrespective of their elaborateness are useful tools for communicating organizational objectives (Atkinson, et al. 2004; Castro, 2010), though their implementation may pose a challenge for performance management (Boisvert, 2006). This is because sensitivity to organizational resource environments influences behaviours associated with budgeting (Goddard, 1997). Consequently, the effective use and application of any budget is dependent on the extent to which employees are committed to the ideals of the budgetary process (Raghunandan, Ramgulam & Raghunandan-Mohammed, 2012). Levels of commitment to organizational goals have been observed to be secured by expectations in the form of reward (Giritli, Sertyesilisik & Horman, 2013).
In order to determine whether organizational objectives prescribed in budgets are achieved, it is imperative to appraise performance using suitable criteria (Behn, 2003). Accordingly, performance measurement data as suitable criteria are often used by organizations for financial reporting and resources management (Grifel, 1994). In addition, Anon (2009), suggested that performance measurement is a fundamental building block for Total Quality Management (TQM) and Total Quality Organization (TQO). Universally, performance measurement is used to assess how well someone or something has performed against set objectives or peers and to promote goal congruence (Otely, 1999; Burylo, 2006). Henri (2006) asserted that OC is an everpresent issue that affects virtually every aspect of an organization’s life, including the design and operations of management control systems like budgeting. The stability of budgeting activities has been observed to have a beneficial effect on organizational performance (Jensen, 2003; Johnson, 2005; Anderson & Mortensen 2010). It has also been shown that organizational culture is an important component for properly evaluating organizational performance and extent of achieving predefined objectives (Goddard 1997; Baker, 2002; Aluko, 2003; Lee & Yu, 2004; Shahzad et al., 2012). In view of this, tools for performance measurement have been classified as either traditional or non-traditional (Shaw, 1999; Spencer, Joiner & Salmon, 2009; Meier & O‘Toole, 2010). Traditional tools of performance measurement include returns on capital employed, budgetary control, marginal costing and differential costing approaches. While modern tools of performance measurement include quality management, balanced scorecard, and economic value added (Gupta, 2012).
Owing to the need for a more robust measure of performance, capable of linking operations to company strategies, the balanced scorecard has a relatively high commendation (Kaplan & Norton, 1992). The balanced scorecard combines both financial measures and non-financial measures in a single report, to provide managers with richer and more relevant information about activities they are managing, than is provided by financial measures alone (Cobbold & Lawrie, 2003; Calhoun 2004).
1.2 Statement of Problem
Merchant (2010) observes that it has been difficult to integrate the result of researches on budgeting into real life situations. This according to Amat (2011) is because most of such studies have ignored the social and organizational context in which the budgeting systems operated. The lack of consensus on the proper focus and, approach, as well as unsuitable definitions has not promoted the advancement of budget formation, administration and politicking (Neuby, 2007). This suggests the need to understand budgeting within the context of organizational life. Organizational culture is an important aspect of organizational life that has been observed to have a significant impact on work behaviours, practices and ultimately efficiency of an organization (Furnham & Gunter, 2013).
However, as Sejjaaka (2010) notes, that despite the observed ability of OC to influence work behaviours and practices, there is 9 paucity of empirical work, relating OC to accounting information systems including budgeting. There had been earlier calls for the enrichment of management accounting literature to include human relationships (Ahmed, 2002; Roselender & Hart, 2003). Such calls persisted as Anderson and Lillis (2011) observes that management accounting literature have provided limited understanding of how organizational culture influence resources management and control systems such as budgeting. Agitations have therefore persisted on the need to enrich researches in management accounting control systems like budgeting to include human relationships, leadership, motivation and organizational culture (Carneys, 2010).
Studies on motivation in relation to budgeting have consistently focused on how budgeting motivates performance (Brownell, 1983; Zainuddin & Isa, 2011). In addition many of such studies have given more concern to extrinsic motivators. In particular many of these studies were based on relationships in profit-oriented organizations. These studies have neglected the possible relationship between organizational culture and motivation. Based on the superior argument for intrinsic motivation (Armajani, 2009), there is a need to examine the association among organizational culture, intrinsic motivation and budget related behaviour of budget holders in public sector organizations.
1.3 Research Objectives
The generating objectives is to examining the moderating role of organizational culture on the relationship between budget related behaviour, intrinsic motivation and performance of staffs of selected SMEs in Abuja Metropolis. The specific Objectives are:
- To determine the effect of Budget Related Behaviour (BRB) on the performance of Staffs of selected SMEs in Abuja Metropolis.
- To examine the effect of Intrinsic motivation on moderating the effect of organization culture on individual BRB.
- To determine whether organizational culture moderates the relationship between budget related behaviour and performance of Staffs of selected SMEs in Abuja Metropolis.
1.4 Research Questions
- Does Budget Related Behaviour (BRB) affect the performance of Staffs of selected SMEs in Abuja Metropolis?
- Does Intrinsic motivation moderate the effect of organization culture on individual BRB?
- Does organizational culture moderate the relationship between BRB and performance of Staffs of selected SMEs in Abuja Metropolis?
1.5 Research hypothesis
Ho1; Budget related behaviour does not significantly affect the performance of staffs of selected SMEs in Abuja Metropolis
Ho2; Intrinsic motivation does not moderate the effect of organizational culture on individual BRB
Ho3; Organizational culture does not moderate the relationship between BRB and performance of staff of selected SMEs in Abuja Metropolis.
1.6 Significance of the Study
The rationale for this study is hinged on the view of Kaplan (1983) that studies in managerial accounting will be more applicable when budgeting processes expose accurately the complex conditions confronting today‘s organizations. This study is conducted at a period in time where there is clamour for researches in management accounting to be inter-disciplinary and multi-theoretically inclined. This approach provides a more robust perspective for understanding human aspect of management accounting control systems like budgeting. The focus of this study is essential for improving performance of organizations
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