Leadership and Informational Influences on Group Decision Making in a Participative Budgeting Context: A Laboratory Experiment
Daroca, Frank Peter, Jr.
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Permalink
https://hdl.handle.net/2142/68275
Description
Title
Leadership and Informational Influences on Group Decision Making in a Participative Budgeting Context: A Laboratory Experiment
Author(s)
Daroca, Frank Peter, Jr.
Issue Date
1981
Department of Study
Accountancy
Discipline
Accountancy
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Business Administration, Accounting
Language
eng
Abstract
The setting of organizational goals is considered a key aspect of the managerial function. Budgets have been used to successfully reduce strategic goals to an operational level. Particularly, participative budgeting has been advocated as a co-optive technique to enhance congruity between organizational goals and employee personal goals thereby increasing employee motivation.
The prime objective of a budgeting system is the development of a coordinated plan which takes into consideration the interface between organizational subsystems and the ultimate synthesis of these subsystems in moving the organization toward its goals. The critical issue is whether the concomitant goals of motivation and coordination are attainable when participative budgets are developed in a subsystematic environment.
A large body of research suggests that these two goals may be incompatible because the processes at play in socio-group decision making (which may enhance motivation) may not lead to budgets that facilitate coordination. Instead of decisions that integrate subsystematic interdependencies, groups may polarize in their decisions. That is, group responses may be more extreme in the same direction as the average of pregroup individual responses. Hence, the participative process that is supposed to increase motivation may generate decisions that are opposed to the goal of subsystem coordination.
The group polarization (GP) phenomenon has been most strongly and consistently supported by the theories of social comparison and informational influence. These theories were synthesized and used to develop a theoretical model for predicting the behavior of certain groups involved in a participative budgeting task in a laboratory experiment. Since GP is more prevalent in decisions involving relatively unconstrained environments, this study used two discretionary costs in a manufacturing firm, research and development (R&D) and marketing (MKT), to determine if GP might exist in this setting.
In an accounting context, the theoretical model suggested that leadership and information were the most critical variables warranting examination. These were manipulated by providing individuals (who were termed leaders) with exclusive information. To avoid the possibility of confounding effects, leadership was manipulated with the expectation that it would dampen rather than augment GP. To operationalize the research, university undergraduates majoring in engineering and science (as surrogates for actual R&D types) or advertising and marketing (as surrogates for actual MKT types) were used in three-person groups to formulate budgets for proposed expenditures in these areas. Half of the groups were homogeneous in nature (equally divided between all-R&D and all-MKT types), while the other half were heterogeneous (equally divided between predominantly-R&D or predominantly-MKT types). Additionally, each of the group types were equally divided between leaderless groups (without additional information) and groups with leaders. Observations were made of individual (pre-group), group, and post-group decisions on the dependent variable, percentags of funds allocated to R&D.
Analysis of variance and nonparametric statistics were used to test hypotheses involving the direction and strength of polarization and the variances of responses. Effects were as hypothesized in most cases.
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