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Theories of distributive justice, procedural justice and referent cognitions are tested in a
laboratory experiment. It finds one form of process-control is a viable form of participation.
Subjects allowed only a voice in setting budgets experienced greater budget and task
satisfaction than subjects allowed no input. This effect occurs even when unattainable
budgets are received. No effect is found on performance. Research also found that high
process-control is effective only when attainable budgets are achieved. When unattainable
budgets are received, subjects with a vote experience less task and budget satisfaction than
individuals with only a voice. Subjects with high process-control form referent cognitions.
Subjects in the voice conditions do not form these referent cognitions. Thus, subjects in the
vote conditions form stronger feelings of dissatisfaction when unattainable budgets are

Nearly two decades of management accounting research have resulted in equivocal findings
on the consequences of participative budgeting. Participative budgeting has been found to
have positive, negligible and even negative effects on satisfaction and performance.[1]
Shields and Young (1993) argue that results might be improved if researchers focused on
participation's antecedents as well as its consequences. This paper tests one antecedent of
participation (i.e., perceptions of justice) in three forms; distributive justice, procedural
justice and referent cognitions. It examines the mechanisms in which rules of justice are
applied by individuals when standards are set under varied levels of participation. It considers
consequences of participation (i.e., satisfaction and performance) as well as one of its
antecedents (i.e., perceptions of justice).

Previous research has suggested that more participation in decision-making is always
preferable to less (Vroom and Yetton 1973; Locke and Schweiger 1979). In fact, some
research has even suggested that anything less than full decision-control of budgets is
pseudo-participation (Pasewark and Welker 1990). Employees providing input only into the
process of budget setting (process-control) without actual decision-control are said to feel
manipulated because their input may be ignored. In this context, no participation is better
than any form of process-control without decision-control.

The differences in the effectiveness of various forms of participative budgeting raise
questions about the mechanisms through which participation may operate (Cotton et al.
1988). This paper proposes that perceptions of distributive justice (fairness of standards) and
procedural justice (fairness of procedures used to develop standards) differ depending on the
level of participation allowed an individual in setting performance standards. These
perceptions of justice offset the levels of satisfaction and performance obtained with
increased participation. This research finds that subjects allowed a voice (low process-
control) only in setting budgets experienced greater budget and task satisfaction than subjects
allowed no input when attainable (fair) budgets were received. This effect is robust even
when unattainable (unfair) budgets are received. However, a high level of process-control
(vote) is found to be effective only when attainable (fair) budgets are received. When
unattainable (unfair) budgets are received, subjects allowed a high level of process-control
(vote) experience less task and budget satisfaction than individuals with low process-control
(voice). No effects are found on performance.

Shields and Young (1993) point out that the majority of this research has focused only on testing whether participation affects consequences such as motivation. an employer obtains necessary information from the subordinate and then makes a decision which may (or may not) reflect the subordinate's influence. the results. Brownell 1982c: Brownell 1985. Subsequent findings have supported this contention (Kenis 1979. Moderating factors found to have a positive influence on performance include role ambiguity (Chenhall and Brownell 1988). . These hypotheses are examined using a laboratory study. Brownell and Hirst 1986). At the midpoint. Then. an employer makes decisions him/herself for an employee. Then. has suggested these participation/performance linkages are weak or unclear (Milani 1975. satisfaction and performance. relevant participative budgeting literature is reviewed. Finally. Argyris (1952) predicted improved employee performance through budgetary participation. autocratic end. This paper proposes that an antecedent to participative budgeting is a desire to maintain justice in incentive-based compensation control systems. consequences of enhanced employee participation will include increased satisfaction with the budget. however. Kenis 1979.In the section below. Bryan and Locke 1967. At a higher point superior and subordinate jointly analyze the problem and arrive at a mutually agreeable solution. limitations of the study and directions for future research are presented. the highest participation employees are permitted to make their own decisions (decision-control). a framework encompassing consequential and antecedent aspects of participation is developed together with testable hypotheses. and task difficulty (Brownell and Dunk 1991). 1982c) and even negative (Bryan and Locke 1967) associations between budget participation and employee satisfaction. They propose that in order for research to make progress towards increasing an understanding of participative budgeting. product standardization (Brownell and Merchant 1990). role ambiguity (Chenhall and Brownell 1988) and authoritarian superior/subordinate dyads (Chenhall 1986). job satisfaction and performance. Brownell 1982b). As stated above. Milani 1975. Further. Moderating factors found to have a positive effect on satisfaction include locus of control (Brownell 1982b). Brownell and McInnes 1986). Joy and Witt (1992) suggest managers are responsible for maintaining fairness in the workplace. Increased participation is said to have a positive effect on satisfaction and performance. Other research. negligible (Brownell 1981. The premise is that employers will seek increased employee participation in the development of incentive-based compensation control systems in order to introduce fairness into the budgetary process. LITERATURE REVIEW Participative budgeting research has found positive (Cherrington and Cherrington 1973. At the low participation. it should first focus on explaining participative budgeting's antecedents. with available information. Finally. Brownell 1981). the analysis should link that explanation to related consequences. The Vroom-Yetton model (1973) posited a continuum of participation for an individual problem- solving situation. Participation in the budget process has also been shown to have a negative effect on performance (Stedry 1960. Tyler (1989) notes it is well established that employees care about justice of allocation and decision-making procedures.

. Ultimately process-control without decision-control is a viable form of participation which can enhance satisfaction and performance and is not always a form of pseudo-participation. Procedural Justice The theory of procedural justice complements and counters previous participative decision- making research discussed above. In his original formulation of equity theory. however. he adds. A review of relevant justice literature is next offered with development of testable hypotheses.S. individuals may perceive distributive justice as the ratio of their outputs (compensation received from a relationship. in a direct application of the Vroom-Yetton model. Procedural justice is complementary because it also recognizes the positive benefits of allowing employees to participate in decision-making . support a general rule recommending only the highest level of participation (decision-control) to ensure success of participative budgeting. training. He cites programs such as quality circles in Japan and quality of work life programs in the U. the mechanisms of participative budgeting operate through complex perceptions of justice concerning not only the level of difficulty of standards received (distributive justice) but the amount of participation (process-control) in the development of standards (procedural justice) as well. if budget attainability is viewed as the output from a relationship then an individual's ability and effort to achieve budget can be viewed as inputs.Other models of participation exist with similar components suggesting that more participation in decision-making is always preferable to less (Locke and Schweiger 1979). e. In some cases. 1965.g. The contention of this paper is twofold. effort or material expenditures). Arora (1992) notes it is only real participation that is effective. When decision- control does not exist. He defines real participation as a situation where an employee has power in determining the outcome of a decision. Pasewark and Welker (1990). In participative budgeting. When effort and ability are unequal to budget attainability. occurs when workers have less input and are only made to feel they are participating. Some research has interpreted these models such that in order for participative budgeting to actually exist. distributive injustice exists. distributive justice (fairness) ensues. in accordance with equity theory. Arora concludes that pseudo-participation results in employee frustration and a feeling of powerlessness or failure. an employee must be able to choose his/her own standard. Thus.. when this ratio is perceived to equal one. When ability and effort are matched to budget attainability. First. Additionally. Adams described a comparative referent as most often a different individual (other). Distributive Justice Distributive justice is a proportionality concept grounded in equity theory (Adams 1963. Distributive justice or fairness) occurs when inputs and outputs are balanced. Also more participation versus less is not always desirable. not pseudo-participation. the resultant condition is often termed pseudo-participation and the associated benefits of participative budgeting are not expected to materialize. Pseudo-participation.g. e. referent cognitions can result in less participation in budget setting resulting in the greatest enhancement of satisfaction and performance. he suggested a person might also use him/herself in another situation (self) as a comparative referent. Blau 1964: Homans 1961). as forms of pseudo-participation. Hyclak (1987) suggests that participative decision-making programs which offer an employee a voice mechanism (process-control) without any decision-control are a form of pseudo-participation. in other words. money. comfort or independence) to inputs (things brought into a relationship. However.

Conlon 1993). Procedural justice consequently proposes that voice alone is not a form of pseudo- participation but rather a viable form of process-control. Lissak (1983) found individuals who were permitted a chance to express their opinions (voice) experienced an enhancement in satisfaction with their final performance evaluations and subsequent transfers even when outcomes were perceived to be unfair. not only is voice found to have positive effects on satisfaction when fair outcomes are received but unfair ones as well. Kanfer et al. vote and finally voice and vote (highest process-control. 1990). . Procedural justice theory suggests a continuum of participation similar to the Vroom-Yetton (1973) model. most fair process effect studies not only show that procedural justice matters but also that it matters as much or more than the fairness of outcomes (Lind et al. The instrumental theory of procedural justice suggests that individuals given an opportunity to express their views will believe that voice will help them control their outcomes (Thibaut and Walker 1978. perceptions of fairness toward the outcomes (distributive justice) will be enhanced. even when budgets are perceived to be unattainable (unfair). Leung and Li 1990). Voice refers to an individual's opportunity to vocally express his/her opinion regarding a pending outcome and is seen as a form of low process-control (Lind and Tyler 1988. 1985). subsequent research has suggested that process-control is usually more important than decision-control. in its failure to recognize low process-control (voice) as a form of pseudo-participation. procedural justice suggests that by employing fair (participative) procedures to determine outcomes. In their earliest discussion of procedural justice. even with a negative evaluation. Brett and Goldberg 1983. process-control is important even if it is not linked to decision-control (Lind et al. In two related field experiments of the Canadian Armed Forces. This mechanism is known as the "fair process effect" (Folger 1977). However. Tyler et al. Voice is seen as fair because it increases the probability of an equitable outcome. viewing all process-control as an indirect means of exerting decision- control. Procedural justice counters previous participation research however. The procedural justice continuum ranges from low to high process-control progressing from no input to voice. Thibaut and Walker (1975) contend that allowing individual disputants a voice (fair procedure) will lead to enhancements of satisfaction with judicial decisions even in cases where the party is ultimately found guilty. conducted a laboratory experiment and found the procedure permitting voice enhanced judgments of satisfaction with subsequent performance evaluation relative to no voice. Hypotheses 1a and 1b are thus offered: Hypothesis 1a Individuals allowed to participate with a voice in the establishment of their budgets are more satisfied with budgets received compared to individuals with similar ability allowed no input. 1983. Thibaut and Walker (1978) originally placed primary emphasis on decision-control. Lind and Tyler 1988). Additionally. Thus satisfaction and performance will increase. (1987). Complete control over the decision process is known as choice. Greenberg and Folger 1983.(Thibaut and Walker 1975. The non-instrumental theory of procedural justice proposes that positive enhancements from voice arise because individuals allowed to express their thoughts feel they are valued. Lind and Tyler (1988) believe individuals are driven by both instrumental and noninstrumental concerns. In the legal arena. Additionally. full-fledged members of the organizational group. Further. In fact.

Earley (1984) found that goal-setting procedures high in procedural justice (voice) led to enhanced performance. Consequently. (1990) found experimental subjects allowed a chance to express opinions regarding the task and performance standards (voice) outperformed subjects allowed no input in constructing simulated course schedules. Whether high levels of process-control are effective. as a vote is a more direct and certain form of personal control (Brett and Goldberg 1983). Given these findings hypothesis 1c is also offered: Hypothesis 1c Individuals allowed to participate with a voice in the establishment of their budgets will have greater production in an experimental task than individuals with similar ability allowed no input. is contingent upon whether an individual receives what they perceive to be a fair standard. Having an opportunity to participate in the standard-setting process by actually voting for a preferred budget is a form of high process-control.g. This fair treatment is likely to signify to employees that the organization values and cares about their well being. benefits them.. Eisenberger et al. From a social-exchange perspective.Hypothesis 1b Individuals allowed to participate with a voice in the establishment of their budgets are more satisfied with their experimental tasks compared to individuals with similar ability allowed no input. he/she will be more satisfied and perform better than when only a voice is provided. in some instances. Nonetheless. even when budgets are perceived to be unattainable (unfair). Referent Cognitions Justice research also counters earlier participative decision-making studies in its recognition that a higher level of participation is not always more effective in enhancing satisfaction and performance than a lower level. voice) will have a simple effect on it. When an individual is permitted to vote for his/her preferred performance budget (vote) and the standard received is perceived to be fair. in both lab and field experiments. allowed to express their opinions about task and procedure options given them. however. This finding suggests that voice had a positive effect on performance even in instances where subjects knew the input had no influence on the standard they received. an enhancement of performance has been found when outcomes are determined with fair procedures. performed better than subjects allowed no input. A vote for a choice of standard is a stronger determinant of procedural justice than a voice. (1990) suggest employees believe that positive action by the organization. Lind et al. this support results in employee reciprocation in the form of higher job performance. having both a voice and a vote should then result in the greatest enhancements . Lind and Tyler 1988). Organizational researchers have long recognized that the relation between performance and attitudinal variables is far from straightforward (Locke 1976. also found enhancement of performance with voice. This performance enhancement was robust whether the voice was provided before or after the actual performance standard was established. completing an in-basket simulation. even when budgets are perceived to be unattainable (unfair). such as allowing an individuals a voice in standard setting. When an individual's performance is contingent upon many variables it is unlikely that any one attitudinal variable (e. Earley and Lind (1987). Subjects.

1983). or no input. Their thoughts focus on the fact that what happened is not what ought to have happened. However. subjects with a vote (high process-control) feel closer to their preferred standard than subjects with only a voice (low process-control). in an experimental task. Consequently. they are apt to feel resentful.. when a subject with a vote receives a standard perceived to be unfair then satisfaction and performance decrements are expected to appear. when attainable (fair) budgets are received. their frame of reference for evaluation consists of mental comparisons to what might have been instead. or no input. or no input. the psychologically closer they feel they were to that referent outcome (what ought to have happened). This resentment increases. Hypothesis 2b Individuals allowed both a voice and a vote will have greater experimental task satisfaction than individuals with similar ability allowed a vote only. than individuals with similar ability allowed a vote only.of satisfaction and performance (highest process-control) when budgets received are perceived to be fair. Thus. Hypotheses 2a-c are thus offered: Hypothesis 2a Individuals allowed both a voice and a vote will be more satisfied with their budgets than individuals with similar ability allowed a vote only. feeling resentful. voice only. voice only. voice only. when unattainable budgets are received. Hypothesis 3b Individuals allowed only a voice will have more experimental task satisfaction than individuals with similar ability offered a voice and vote or a vote only. The conceptual basis for RCT is grounded in Kahneman and Tversky's (1982) description of the simulation heuristic. Then. Hypothesis 3c . If individuals do not get what they think they deserve. RCT.e. when attainable (fair) budgets are received. when attainable (fair) budgets are received. Hypothesis 2c Individuals allowed both a voice and a vote will have greater production. Empirical support for a referent cognitions viewpoint is found in the organizational psychology literature (Folger et al. referent cognitions theory. (Folger 1986)). when unattainable budgets are received. It is based on the premise that individuals react and think referentially. This phenomenon is explained by a theory complimentary to equity theory (i. these last hypotheses are offered in relation to participative budgeting: Hypothesis 3a Individuals allowed only a voice will be more satisfied with their budgets than individuals with similar ability offered a voice and vote or a vote only.

Distributive justice was operationalized as the receipt of either attainable (fair) or unattainable (unfair) budgets (piece-rate performance standards). when unattainable budgets are received. In order to standardize treatments across subjects. no vote (no process-control)). An unattainable (unfair) budget was ratcheted up from the midpoint. Experimental Task The experimental task involved building a toy castle from Loc-Blocs(R). Independent Variables The lab experiment employed a 2 x 2 x 2 full-factorial design. between subjects variables were: (1) distributive justice (receive attainable (fair) budget. In the second production run unattainable budgets were increased 30 percent above the midpoint of the achievable range.26 years. in the third run. EXPERIMENTAL DESIGN AND METHOD Subjects One hundred-eleven full-time undergraduate students volunteered to participate in the experiment. Subjects in the voice (low process-control) conditions were given the opportunity to vocalize and express their opinions regarding budgets before each production run. Total full-time mean work experience for participants was 1. Of the reduced set. Subjects were financially compensated for their participation. A quality castle needed to match the model castle in size and number of pieces.[3] An attainable (fair) budget was determined to be one at the midpoint standard of their achievable range. In addition. than individuals with similar ability offered a voice and vote or a vote only.00 for about two hours of participation. Procedural justice was operationalized in two ways. Three independent. in an experimental task. Average pay per subject was approximately $10. A vote is recognized as a representation of high process-control in procedural justice literature (Sheppard 1984).Individuals allowed only a voice will have greater production.84 years while the average part-time work experience was 4. no voice (no process-control) and (3) procedural justice (vote (high process-control). an oral questionnaire was used to elicit subjects' responses. Subjects were told management was very interested in what their preference for budget was and would like them to select their own . unfair budgets were ratcheted up 70 percent above the attainable range. the mean age was 21.[2] Each castle required 26 blocks of varied sizes and shapes to complete. (2) procedural justice (voice (low process-control). The operationalization of high process-control (vote) allowed subjects to vote for their preferred budget. Finally. Forty-three men and forty-three women made up the sample. the midpoint standard of the attainable range was administered as a budget to establish a base.[4] Subjects in the no voice condition had no such process-control. voice and vote. four key pieces needed to match in size and color of pieces. receive unattainable (unfair) budget). In the first production run. The technique of yoking is discussed below. A reduced set of 86 subjects was obtained after a necessary yoking of subjects took place.6 years.

management would compromise and ask the subject to complete a standard 30 percent above preference. As stated above. a reduced set of 86 subjects was obtained after the yoking procedure. Any differences in vote/no vote standards are not significantly different at p < O. Performance was measured as the actual number of quality units produced across all three production periods. by condition. Subjects voted for their preferred standard (which was always within their attainable range) and before production round one received a standard within their attainable range as previously mentioned. Individuals were paid according to the following scheme in equation (1): Y = $. for all three production rounds.40 per quality unit on a piece-rate basis. They were also told that as much as management wanted to completely abide by their desires.40 (A) . Dependent Variables The dependent variables were: (1) budget satisfaction. however.40 A. it was necessary to yoke subjects in the no vote conditions to subjects of equivalent ability in the vote conditions[5].40 per unit resulted in enough financial payoff to warrant interest and effort[6]. Before the third production subjects received a standard 70 percent above their preferred choice in period one that was compromised down from management's original 85% increase. Yoking Process In order to facilitate statistical comparisons.standard. they had to keep production requirements in mind. The lower a standard a subject requested the lower a standard they actually received.05. Finally. They were told management originally desired them to complete a standard 45 percent above their preferred choice. thus final approval of the budget resided with management.S where: Y is individual pay per production run S is the performance budget and A is actual performance of the individual . Table 1 below provides a tabulation of mean performance standards.$. Truth-Inducing Incentive Scheme Individuals were paid $. Pre-testing determined a piece-rate of $. Subjects in the no vote condition had no such process-control. subjects in the highest process-control conditions were able to vote for their preference of standard as well as vocalize their feelings about the budgetary process. (Table 1 omitted) Note that vote and no vote subjects are matched in terms of ability in nearly all production rounds suggesting the yoking procedure was effective. Before the second production round subjects again voted for preferred standard and received a standard 30 percent above their preference. (2) task satisfaction (both satisfaction measures taken on five-point Likert scales at the conclusion of the experiment) and (3) performance.

40 10 . subjects were unaware of what their co-workers were experiencing. Production rooms were completely sealed off from one another regarding both sight and sound. were greeted by the head experimenter playing the role of the manager and escorted to a seating area to await production room assignments.$. Thus. the more compensation they can earn as long as they do not deviate from the budget. (6) Voice/No Vote/ Unattainable Budget. Young et al.20.8 = $3.40 times the absolute difference between A and S.40(8) . Experimenters underwent approximately two hours of training before the experiment began.e.8 = $1. Subjects were randomly assigned to each of eight experimental conditions. Two training periods' production data were eliminated from the study in order to filter out effects of learning. Following a count of quality castles.. truth inducing). contained two chairs and a table on which sat a box filled with Loc-Bloc(R) pieces of assorted colors and sizes. with no penalty. an additional ten minute practice production period took place. (Figure 2 omitted) Subjects. if actual individual production. Thus. then compensation is reduced by $.40(10) . Refer to figure 1 below for a detail of experimental conditions.60. Each production room.This incentive scheme was chosen because it motivates individuals to attain their budgets or face financial penalty. if the individual produced beyond budget. (5) Voice/ Vote/ Unattainable Budget. After room assignments. it motivates individuals to express as high a budget as they feel is attainable in order to maximize their financial reward as it does not reward any production beyond the standard amount (i. In addition. (4) No Voice/No Vote/Attainable Budget. the higher castle production an individual can attain. to 7:30 p.20. approximately five at a time. (2) Voice/No Vote/Attainable Budget.80 penalty for failing to meet budget.40(6) . experimenters followed a written script. if A is greater than the individual budget. For instance. with each subject being financially . they would receive no additional compensation. After reading the scenario. This resulted in the following eight groups: (1) Voice/Vote/Attainable Budget. the foreman gave each subject a one page scenario describing the task at hand. in addition to an experimenter playing the role of foreman. In all cases. S. (7) No Voice/Vote/Unattainable Budget and (8) No Voice/No Vote/Unattainable Budget. if an individual's budget were 8 and he/she completed only 6 castles.m. Likewise. subjects were provided ten minutes to complete a familiarization construction period. Experimental Procedures Subjects were asked to sign up for one two-hour block of time that included twenty minutes of training and three production periods. Y = $.40 6 . say 10. is less than the individual standard.40 8 .$. Y = $. compensation is again reduced by the absolute difference between A and S and a subject makes the same compensation as if they had only performed up to budget. Had the subject reached standard they would have received. Previous accounting research has found this incentive scheme to have strong motivational properties (Young 1985. 1993). A. Monday through Friday. compensation would be calculated as follows: Y = $.m.$.[7] Not only did this serve as an external memory aid but it also maintained consistency across experimenters and controlled for researcher expectancy effects (Rosenthal 1966). The entire experiment took one week to complete running from 8:00 a.8 = $3. (3) No Voice/Vote/Attainable Budget. Conversely. This balance results in an $. For example. Figure 2 details the sequence of events in the longest of conditions. S.

however. Dependent upon condition assignment. however. major. an analysis of variance (ANOVA) of demographic data was conducted to make sure subjects were ex post evenly distributed. The three-way interaction for gender. Furby 1986). This significance is the result of condition 7 having seven women and two men assigned to it. Some subjects were given a voice before performance budgets were set. to the statement "The way performance standards are set around here is fair. This was done to acquaint the subject with the custom of being paid for performance and for motivational purposes (Young 1985). there were no significant main effects. voice and vote (procedural justice) and .0. Manipulation Checks Manipulation checks were of five types: envelope manipulation. was given before each production run to ascertain what each individual perceived his/her attainable range to be. two-way or three-way interactions. discussed previously. He/she would then write down the experimentally correct (yoked) budget given him/her by the manager and place it in a new. experimental procedures varied for subjects beyond this point. The envelope manipulation was devised to keep subjects in no voice and no vote conditions from perceiving they had input.compensated $. The second questionnaire was administered immediately following the setting of performance standards and before production in each round. the experimenter would report the subject's attainable range to the manager. The first questionnaire. Thus. Upon returning to the room. asking subjects to respond. p < 0. each experimenter carried a very visible packet of envelopes with them in which the subjects were told the performance standards to be used in each production period were recorded. Data included age. the experimenter would open the envelope. With the exception of gender. Once out of the room. RESULTS Demographic Information Even though subjects were randomly assigned to experimental conditions. sealed envelope. on a five-point Likert scale." Its purpose was to access the maintenance of procedural justice across multiple periods of the experiment. Additionally. suggest there is no basis for expecting males and females to use different standards of justice (Lerner 1981. in these conditions. Thus. some subjects were permitted to vote for preference of their performance budgets (vote) while others weren't. Recall that all subjects were required to complete a brief standard attainability questionnaire at the onset of each production round. with the manager. gender. proved significant (F sub 1. Common to all production runs was the administration of two very brief questionnaires.40 for each castle produced irrespective of the truth-inducing incentive scheme. Empirical findings in distributive and procedural justice research.85 = 8. findings indicate no systematic bias in the experimental results. checks on independent variables of budget attainability (distributive justice). After the subject privately wrote down their attainable range of standards the experimenter would leave the room briefly in the guise of getting the manager to begin production. Efforts were made to balance gender assignments but given scheduling restrictions and yoking effects. full-time/part-time work experience and number of accounting courses completed. others were not.006). A count of quality castles by the foreman ended this second practice production. report the budget and production would begin. a perfect balance was not possible.

20.85 = 3.80) and vote(vt) (F sub 1. Subjects responded to the statement. t sub 44 = 5.000) and a/nvt (3.58).finally maintenance of procedural justice through last production run.33) vs ua/nvt (2. p < 0. Subjects receiving attainable (fair) budgets. p < 0. voice and vote) on manipulation constructs.00. attainable (fair) 1. moderate or tight. It seems subjects in the no process-control conditions did not perceive the declaration of their attainable production ranges as input.53. v/vt/a (4. p < 0.58. supports these findings for both attainable(a) and unattainable budgets(ua).38. To test the efficacy of this manipulation subjects responded to a statement in the final questionnaire: "My preference for standard had nothing to do with what my standards were set at.000.85 = 18.04. An ANOVA showed a highly significant main effect for budget attainability (F sub 1.000. in your opinion were the standards you were working under easy.84 vs unattainable (unfair) 2.001) and v/ vt/ua (2.00) vs nv/nvt/a (2. "I didn't have a chance to tell the foreman how I felt.79.034). Manipulation checks were conducted to determine whether voice and vote were viewed as participation (procedural justice). attainable (fair) 3. The envelope manipulation was designed to insure that subjects in the no voice and no vote conditions did not perceive they had input into their standards.85 = 87. This question was reverse scored thus higher means are found for the procedural justice conditions.37. p < O. would most likely prefer them. t sub 17 = 1. a/vt (4. Distributive justice is recognized regardless of the manipulation of voice.37. Analysis of variance (ANOVA) was conducted measuring the effect of independent variables (budget attainability.57.38. t sub 22 = 3. p < 0.085." All manipulation checks were scored on a five-point Likert scale.78) vs nv/nvt/ua (2. moderate or tight?" Answers were coded (1) easy. p < O.000.00.88.OO1) and a/nv (3. In a further check. These results suggest attainable budgets were preferred and mostly likely viewed as fair while unattainable were not preferred and were likely viewed as unfair.08) vs ua/vt (2. was checked to determine whether budgets received were perceived as easy. Analysis of three-way interaction.71 vs unattainable (unfair) 2.038). t sub 38 = 3. Subjects were asked to respond to a question in the final survey which read. t-test contrasts. a/v (3.15.85 = 42. An ANOVA indicated a highly significant main effect for budget attainability (F sub 1. (2) moderate or (3) tight.84).58). "I was able to vocalize my feelings" while the second. "I would take the standards I worked under over alternative ones.86) vs ua/v (3. p < 0. Responses to two separate statements were summed to measure differences in opinion regarding the amount of voice permitted subjects. Distributive justice.000). The first statement read. A significant main effect is found for both voice(v) (F sub 1. This procedure was scored (5) strongly agree to (1) strongly disagree. Distributive justice is additionally recognized regardless of the manipulation of vote." Scale reliability for this two- . represented as budget attainability.90. p < 0. "Overall.22 vs no voice 2. t41 = 7. t sub 41 = 1. p < 0. being reversed scored stated.55. Further support is found in analysis of two-way interaction. vote 3. t-test contrasts. It appears subjects were perceiving budgets received to be attainable or unattainable.58) vs ua/nv (2. Recall that equity theory suggests subjects receiving unattainable budgets would perceive such to be unfair and would mostly likely show a non-preference for such budgets." Statements were scored (5) strongly agree to (1) strongly disagree. p < 0. preference for such attainable vs unattainable budgets was conducted. voice 3. however.49 vs no vote 2.

p < 0. t sub 36 = -.40. p < 0. in the presence of vote. These results suggest a vote is seen as a form of participation if a subject receives a preferred (attainable) budget but not with the receipt of a non-preferred (unattainable) budget. however. t-test contrasts indicates the manipulation of voice is robust across budget attainability conditions.45) vs nv/nvt/a (2.45. 10) vs nvt/nv/ ua (1. p < 0.31. However.37 vs no vote 2. voice 8. Finally.000).019) and v/nvt/ ua (2. vt/nv/a (4. t sub 24 = 5. p < 0. is not robust across budget attainability.85 = 16.70. v/vt/a (8. t sub 22 = 1. It is important to note these findings do not imply a vote is not a form of participation but rather that it is not recognized as participation when unwanted budgets are received. Here.95: t sub 36 = 5.89.050). An ANOVA was run on survey responses after the third period's budgets were set. "The way this company goes about setting standards is:. vote 3.000). t sub 18 = . voice 3.43).87.49.item scale was quite satisfactory (Cronbach's alpha = 0. it is important to check whether subjects perceived participative. t sub 17 = 2. when unattainable budgets are received this significance dissipates: vt/nv/ua (2.200). This finding suggests the reason a vote is seen as a form of pseudo-participation when .000. p < 0. v/a (8. A strong main effect for voice is found (F sub 1.58. p < 0. v/nvt/a (3.000) and v/ua (8.OO1) and vt/ua (2.18) vs nv/a (5. P < 0.37.85 = 5. two-way interaction contrasts provide further information.36) vs nv/vt/a (7.0101.22) vs nv/ua (4.017. It seems voice was perceived as a fair participative aspect of procedural justice. Investigation of two-way.314).70. vote is recognized as fair when attainable budgets are received.69: t sub 22 = 2.71.056. p < O. t sub 46 = 4.85). Three-way contrasts confirm this finding and find voice perceptions of fairness are robust across budget attainability. "My decision of what my standard should be had a lot to do with what my standard was set at.79) vs nvt/a (2.21) vs nvt/ua (2. This finding sheds important light on the phenomenon that too much participation can sometimes backfire and be perceived as pseudo-participation.63. t sub 17 = 1. Vote as a form of participation. The fact that subjects do not recognize a vote as participation when they receive unattainable budgets strongly suggests they may be viewing this as a form of process-control through referent-cognitions as pseudo-participation.70. however. (F sub 1. p < O. Interpretation of the three-way contrasts. p < 0.95.17 vs no voice 2.09. A significant main effect for vote is found. Two-way contrasts imply that vote is recognizable as participation when attainable budgets are received but not with the receipt of unattainable budgets.81.20 vs no voice 5.11) vs nv/vt/ua (6. A significant main effect is found for vote (F sub 1. adds to this finding.75.21. Finally.82).51). p < O. p < 0. Voting on the other hand. is only perceived as a fair participative measure when attainable budgets are achieved.69. Subjects were asked to respond to a brief questionnaire after standards were set in each production round which read. vt/a (3." were used as a dependent variable in an ANOVA of the full model. with the receipt of both attainable and unattainable budgets.000. procedural justice manipulations as being fair." Responses were scored (5) extremely fair to (1) extremely unfair. vote 3. Responses to the statement. three-way contrasts add further support in the recognition of voice.08.29. however.63).22. t sub 46 = 3.85 = 3.56) vs nv/nvt/ua (1. This period's responses represented a collective perception for the entire experiment. p < 0.09 vs no vote 2.46) vs nvt/nv/a (2. Voice is thus seen to have been recognizable as a means of participation.050) and v/vt/ua (8. Support that participation in the form of voice was perceived as fair is found in the main effect for voice (F sub 1. p < 0. An ANOVA of the full model with the composite dependent measure above was run.85 = 65.

voice . voice enhances task satisfaction (F sub 1.09) vs nvt/nv/a (10. Here. Responses to these four statements were combined into one construct with a Cronbach's alpha of 0. "Overall." Independent variables were budget attainability. t-test contrasts add further definition to this finding. even when unattainable budgets were received. There is no indication that voice is seen as a detrimental form of pseudo-participation. voice and vote. Evaluation of results included analysis of main effects. p < 0.98.85 = 4.016. when like subjects are given a higher form of process-control (vote) and an unattainable budget is received. The interesting point to note is that when subjects are allowed a lower form of process-control (voice) they view such a procedure as fair even if they receive unattainable budgets.(table 2 omitted) Cell means are found for all conditions in table 3. This enhancement of budget satisfaction through voice with both attainable and unattainable budgets is important and is known as the fair process effect. subjects permitted a voice are significantly more satisfied with budgets received over like subjects allowed no such input. This finding provides important new knowledge towards the understanding of pseudo-participation.20.07. I was satisfied with this task". The main effect for voice (F sub 1. overall. Tests of Hypotheses To test all hypotheses. "I considered this task to be unpleasant" (reversed scored) and "I feel pleased about my involvement with this task. I was satisfied with the standards under which I worked". Responses to these four statements were combined into one construct with a Cronbach's alpha of 0. even when unattainable budgets were received.84. enhances budget satisfaction. (table 3 omitted) Budget satisfaction was measured with responses to four statements from the exit questionnaire. p < 0. task satisfaction and performance. two-way and three-way interactions including contrast analysis. "I would have preferred different standards than what I received" (reversed scored) and "I liked the standards which I received.11.00) vs nv/ua (7.023). Hypothesis 1a Hypothesis 1a predicted that subjects allowed to participate with a voice in the establishment of their budgets would be more satisfied with budgets received than like individuals allowed no such input. v/ua (9. Three-way interaction. 'The standards I worked under suited me fine". Hypothesis 1b Hypothesis 1b predicted subjects allowed to participate with a voice in the establishment of their budgets would have greater task satisfaction than like individuals allowed no such input.46." Task satisfaction was measured by responses to four statements.85 = 6. However. full-factorial models were analyzed separately with dependent variables of budget satisfaction.) The beneficial effect of voice is even more important when unattainable budgets are received. p < 0.23 vs no voice 10.83) suggests voice. "I would recommend this task to someone else as one that is satisfying". t sub 22 = 0.029.unattainable budgets are received is because the process is not viewed as fair. they do not view this form of participation as fair. "Overall. The four statements were. t sub 36 = 2.93. voice 12. These four statements were. Complete ANOVA results are found in table 2 below. They support the hypothesis that participation in the form of voice alone leads to enhancements of budget satisfaction when attainable budgets are received. nvt/v/a (14.013. The main effect for voice supports the contention that overall.

46.13. not pseudo-participation. voice only or mute.OO1). No support is found for this hypothesis. Performance. v/nvt/a (14. Three-way interaction contrasts provide further support. Hypothesis 2b Hypothesis 2b similarly predicts subjects will have the greatest task satisfaction with attainable budgets when they are provided both voice and vote over vote only. t sub 22 = 2. t sub 16 = -1.89. No support is found for this hypothesis in either the main effects or interactions.67) vs nvt/v/ua (10. Here. p < O.33. at least in this experimental task.90. It is seen that having the highest process-control leads to greater budget satisfaction than having no participation: vt/v/a (15. Hypothesis 3a Hypothesis 3a suggests individuals allowed a voice only will have more budget satisfaction than individuals offered the highest process-control (voice and vote). Strong support for this hypothesis is found in the three- way interaction contrasts.13 vs no voice 11. subjects given a voice and vote have significantly less satisfaction with unattainable budgets than those given a voice only. since it is multiply determined.039). The highest level of process-control does not seem to be an important factor in task satisfaction in this experimental setting. having a vote in addition to a voice does lead to a significant increase in budget satisfaction: vt/v/a (15. t sub 22 = 3. Hypothesis 2a Hypothesis 2a predicts experimental subjects will have greater satisfaction with attainable budgets when they are provided the highest process-control (i. Additionally. Further.00.54.e. No support is found for this hypothesis.11) vs nv/nvt/ua (10. vt/v/ua (7. p < 0. Here it is seen that having a voice vs no input leads to an enhancement of task satisfaction with both attainable and unattainable budgets.86. at least in this experimental task. Hypothesis 1c Hypothesis 1c theorized that individuals allowed to participate with a voice would have greater experimental production than like individuals allowed no such input. The fair process effect is robust across perceptions of budget attainability.64) vs nvt/ v/a (14.087). p < O. Hypothesis 2c Hypothesis 2c theorizes that voice and vote together will lead to a greater enhancement of performance than lesser forms of participation (vote only.64) vs nvt/nv/a (10. t sub 17 = 2. Support for the above hypothesis is thus recognized. as a form of participation. t sub 20 = 1.09. is not explained by the highest level of process-control. when unattainable budgets are received. voice and vote over lesser forms.028) and v/nvt/ua (14. voice only or mute). p < 0. is not an enhancing aspect of performance. Voice is again seen as a form of real participation. voice only or mute) with the receipt of attainable budgets. even when budgets were unattainable. Three-way interaction contrasts support this hypothesis. or a vote only.41. p < 0.54). vote only. subjects given a voice only have greater budget satisfaction than those given a vote only when unattainable budgets are .55) vs nv/nvt/a (11.01. It appears voice.031)..

t sub 17 = -3. procedural justice and referent cognitions to management accounting literature. even those offering only process-control. Some accounting research has supported the position that more participation in setting standards is always better than less. process-control only is not always "pseudo. additionally suggest it is not just the amount of participation that determines satisfaction and performance levels. Thus. recognizes that perceptions of fairness regarding the process of decision-making is as important as perceptions of fairness regarding the decision- outcome itself. no significant relationships exist in the data. As with the previous hypotheses related to performance. it is also the interaction between the level of participation and perceptions of fairness regarding the outcome of participation. p < 0. which when denied. Providing only process-control is viewed as "pseudo-participation. focusing on their decided preference as a referent outcome.004). Here. nvt/v/ua (14.. There is strong support that subjects are forming referent cognitions regarding their task satisfaction upon the receipt of unattainable budgets when they have been permitted a vote." Procedural justice theory.30. results in less budget satisfaction than when this preference is not offered.e. when unattainable budgets are received. Strong support is also found for this hypothesis in the three-way.participation.30.11) vs vt/nv/ua (10.33: t sub 16 = -2. p < O. DISCUSSION This paper examines participative budgeting. p < 0. nvt/v/ua (14. those with a voice only are found to have greater task satisfaction than those with a vote only. or a vote only. this research has proposed that only full budget participation (that employing process and decision-control) is effective.011)." Distributive and procedural justice. nvt/v/ua (10. It appears subjects given a vote are forming referent cognitions of their preferred choices. Hypothesis 3c Hypothesis 3c predicts individuals allowed a voice only will have greater production than individuals offered a voice and vote or vote only. Thus. Fair procedures.55.08. however.010). This occurrence is a reflection of the proposition that when individuals are provided high levels of process-control they begin to think referentially. in cases where a referent outcome (perceived as fair) is received.received. introducing theories of distributive justice.11) vs vt/v/ua (10. interaction contrasts. How an individual reacts to a given level of participation is dependent upon whether he/she views the decision outcome as fair. In fact. t sub 17 = -2. the highest form of participation results in the greatest enhancements of satisfaction and . Additionally. lead to enhancements of satisfaction and performance (i. subjects with voice only are found to have greater task satisfaction than those who are given a voice and a vote.33) vs vt/nv/ ua (7. along with a theory of referent cognitions. fair process effect). when unattainable budgets are received. A vote in this context is seen as a form of pseudo-participation. Hypothesis 3b Hypothesis 3b predicts individuals allowed a voice only will have greater task satisfaction than individuals offered the highest process-control (voice and vote).55.

such as the one in this experiment. satisfaction levels decrease even though subjects are allowed high levels of process-control in the decision-making. Thus. less costly form of participation (voice) is more likely to prove effective. Rather. however. subjects react adversely to high levels of process-control. the use of college students as surrogates for manufacturing workers appears appropriate. They begin to think that what should have happened. however.performance. Here. This study. Thus. Here. nor is that its intent. is not without its limitations. significantly more satisfied with budgets received than individuals offered a voice only. individuals given a voice only. being multiply determined. strong consideration needs to be given to management's ability to meet employees actual preferences. Finally. It must be recognized that a laboratory setting. In the sense that they own the referent outcome. It found that subjects permitted an opportunity to vocalize their feelings (voice: low process-control) regarding the budget setting process were significantly more satisfied with budgets received and the task than subjects allowed no input. Thus in establishing a participatory budget system. the above relationship changes. However. internal validity is sought to test theories of human behavior in a controlled environment. This finding is important and supports procedural justice theory and counters previous accounting research. individuals allowed both a voice and vote were significantly more satisfied with budgets received than subjects permitted no participative input. If. is not explained by the variables in this model. When perceptually unattainable (unfair) budgets are received. even when budgets received were perceived to be unfair. they react harshly to not receiving it. in cases where referent outcomes are not received (unfair standards). have found positive effects for procedural justice and performance (Earley and Lind 1987). Ramifications for these findings exist. This research also found that in situations where budgets were perceived to be attainable (or fair). . were significantly more satisfied with budgets than individuals given a vote only or a vote and voice. A laboratory experiment is reported in this paper. tight budgets must be administered by a firm then it is crucial to note that high level forms of participation can result in satisfaction decrements. First. vote for a given standard level and ultimately receive it. Likewise. subjects with a voice only were significantly more satisfied with the task than individuals offered a vote only or vote and voice. however. Highest process-control individuals were not. It appears that performance. It appears when attainable budgets are received that a low level of participation (voice) achieves the same positive enhancement of budget and task satisfaction as a higher level (vote). didn't happen. of course. Further research is necessary to explain these effects. however. Other researchers. Thus merely allowing employees an opportunity to vent their frustrations can have a positive impact on the firm. If such desires cannot be met then a more moderate. individuals express a preference for a particular outcome. this research supports no hypotheses relating to justice and performance. is not replicating a real-world manufacturing setting. questions of external validity exist for all laboratory studies.

however. A logical extension of this research is to the field.g. The problem is that issues of justice and fairness. This research could begin to address the important issue of learned helplessness (Martinko and Gardner 1982). financial budgets). are quite complicated in workplace settings. It is possible the behavioral reactions to justice/injustice in this paper might be different with other representations of budgets (e. research examining employee reactions to participation where budget injustice has already taken place would be an appealing and viable extension of this research. It is important to begin to test these hypotheses in a real-world setting. Further laboratory study could address when procedural justice perceptions break down in the face of distributive injustice. this study does not provide unambiguous support for this contention. It is possible this expression of feelings (voice) may also increase satisfaction when individuals don't have this belief. It was not the intention of this research to conduct such a test.Second. on perceptions of justice. The findings in this paper call for a reevaluation of participative budgeting research in management accounting. it would be interesting to research the durability of the fair process enhancement effect of voice in the face of in justice. in some cultures (e. the budget in this study is specifically operationalized as a piece-rate performance standard.g. 1993). would be permitted in the field. Finally. Previous research has found culturally specific differences in the effect of distributive and procedural justice on levels of satisfaction. of budget attainability from the effects of the incentive system. however. It would additionally be interesting to conduct a laboratory experiment which would separate out the effects.. Specifically. Finally. . It would be highly unlikely that manipulations. This could begin to address the importance of budget attainability itself over financial payoffs.e. the positive enhancements in satisfaction which arise from voice in this study are probably instrumental in nature (i. Through a recognition of the desire for fairness in the workplace as an antecedent of participative budgeting. Analysis and synthesis of previous budgetary research needs to be conducted with a recognition that most of this work focused only on the consequences of participative budgeting and not its antecedents. Therefore. which most likely would be related to aspiration level or budget attainability from extrinsic motivations which would be tied to financial compensation from the incentive system. especially dealing with individuals' compensation. they arise because individuals believe this expression will change their superiors' behavior in setting the standard). Asian) procedural justice fair process effects have not been found (Leung and Lind 1986). such as those presented in this paper. [2] Previous accounting research has supported this task as one representing a manufacturing process (Young 1985: Young et al. it would be interesting to test these theories of justice in an international arena.. [1] For comprehensive reviews of this research see Brownell (1982a) and Bimberg et al. we can gain new knowledge and move forward toward a better understanding of the entire budgetary process. a study could be developed to separate intrinsic motivations. (1990). Also.

these numbers matched perfectly in all three periods.00.25.9. This was done in an effort to match subjects by ability.2. per subject.24. Forty-six percent matched perfectly in at least two periods and 100 percent matched perfectly in at least one period. [5] For example. An effort was made to avoid mentioning realistic ranges on which subjects might anchor.10) or (10.e. This amount approximated an average wage available for experimental subjects in the local market. a subject in a like no vote condition was assigned a 5. if a vote subject's range was 8. for a person of average ability. [4] Please see appendix for an example of the instrument used to administer the voice treatment. Individuals were told this information was merely for statistical purposes and played no part in the determination of their budget. before each production run.12). [7] Complete scripts for all conditions are available by contacting the author.10 it was considered a match to a no vote subject with a range of (7. for the two-hour experimental period. matched subjects would both have to consider standards as either attainable (fair) or unattainable (unfair).3 or 23. recognizing that what was difficult for one subject may not have been difficult for another. In order to ascertain individual ability. [6] The $. (8. Thus it was further necessary to match individuals on preferability of budgets (i.9). to record a range of production they felt was attainable such as 1.11. subjects were asked. Pre-test subjects confirmed this piece-rate amount was motivating.8. In 12 percent of cases..g. This was accomplished by matching on at least one number of each individual's attainable range (e. if a subject in a vote condition requested a standard of 5.40 per unit represented a per unit compensation that would approximate a payoff of around $10.[3] Budget difficulty was based on individual perceptions. .9.