JMAR

Volume Seven
Fall 1995

Fairness as an Antecedent to
Participative Budgeting: Examining
the Effects of Distributive Justice,
Procedural Justice and Referent
Cognitions on Satisfaction and
Performance
Tim M. Lindquist
The University of Northern Iowa
Abstract: Previous research has suggested that more participation (high
process-control) In decision-making is always preferable to less (low
process-control). Some research, however, has stated that any level of partici-
pation less than full decision-control is pseudo-participatioti. Often, no control is
seen as desirable over solely process-control.
This paper tests theories of distributive justice, procedural justice and refer-
ent cognitions in a laboratory experiment. It finds one form of process-control is
a viable form of participation. Subjects allowed only a voice (low process-control)
in setting budgets, experienced greater budget and task satisfaction than sub-
jects allowed no input. This effect occurs even when unattainable (unfair) bud-
gets are received. No effect is found on performance.
Further, this research finds that high process-control {vote for standard) is
effective only when attainable (fair) budgets are achieved. When unattainable
(unfair) budgets are received, subjects with a vote (high process-control) experi-
ence less task and budget satisfaction than individuals with only a voice (low
process-control). Subjects with high process-control (vote) form referent cogni-
tions (i.e., more definitive impressions of what their budgets will be). Subjects in
the voice (low process-control) conditions do not form these referent cognitions.
Thus, subjects in the vote conditions form stronger feelings of dissatisfaction
when unattainable (unfair) budgets are received.

Nearly two decades of management accounting research have resulted

in equivocal findings on the consequences of participative budgeting. Par-
ticipative budgeting has been found to have positive, negligible and even
negative effects on satisfaction and performance.^ 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, proceduraljustice and referent cognitions. It examines

' For comprehensive reviews ofthis research see Brownell (1982a) and Bimberg et al. (1990).

/ would like to thank the College of Business, University of Colorado-Boulderfor their

financial support of this research. In particular I thank S. Mark Young, Barry Lewis,
FYank Selto, Jon Davis. Reid Hastie, Sarah Bonner and other participants in the ac-
counting workshops at The University of Colorado at Boulder. I would also like to
thank Joan Luft for helpful comments on an earlier draft of this paper. Additional
thanks go to Carol Lindquist and Debra Garelickfor their research assistance.
Lindquist ^23

the mechanisms in which rules of justice are applied by individuals when

standards are set under varied levels of participation. It considers conse-
quences 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 Sehweiger 1979). In fact, some research has even suggested that any-
thing less than full decision-control of budgets is pseudo-participation
(Pasewark and Welker 1990). Employees providing input only into the pro-
cess of budget setting (process-control) without actual decision-control are
said to feel manipulated because their input may be ignored. In this con-
text, 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 partici-
pation may operate (Cotton et al. 1988). This paper proposes that percep-
tions 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 stan-
dards. These perceptions of justice offset the levels of satisfaction and per-
formance obtained with increased participation. This research finds that
subjects allowed a voice (low process-control) only in setting budgets expe-
rienced greater budget and task satisfaction than subjects allowed no in-
put 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.
In the section below, relevant participative budgeting literature is reviewed.
Then, a framework encompassing consequenticd and antecedent aspects of
participation is developed together with testable hypotheses. These hypoth-
eses are examined using a laboratory study. Finally, the results, limitations
of the study and directions for future research are presented.

LITERATURE REVIEW
Participative budgeting research has found positive (Cherrington and
Cherrington 1973; Milani 1975; Kenis 1979; Brownell 1982b), negligible
(Brownell 1981, 1982c) and even negative (Bryan and Locke 1967) asso-
ciations between budget participation and employee satisfaction. Moderat-
ing factors found to have a positive effect on satisfaction include locus of
control (Brownell 1982b), role ambiguity (Chenhall and Brownell 1988) and
authoritarian superior/subordinate dyads (Chenhall 1986).
Argyris (1952) predicted improved employee performance through bud-
getEiiy participation. Subsequent findings have supported this contention
(Kenis 1979; Brownell 1982c; Brownell 1985; Brownell and Mclnnes 1986).
Moderating factors found to have a positive influence on performance in-
clude role ambiguity (Chenhall and Brownell 1988), product standardiza-
tion (Brownell and Merchant 1990), and task difficulty (Brownell and Dunk
124 Journal of Management Accounting Research, Fall 1995

1991). Other research, however, has suggested these participation/perfor-

mance linkages are weak or unclear (Milani 1975; Brownell and Hirst 1986).
Participation in the budget process has also been shown to have a negative
effect on performance (Stedry 1960; Bryan and Locke 1967; Brownell 1981).
As stated above. Shields and Young (1993) point out that the majority
of this research has focused only on testing whether participation affects
consequences such as motivation, satisfaction and performance. They pro-
pose that in order for research to make progress towards increasing an
understanding of participative budgeting, it should first focus on explain-
ing participative budgeting's antecedents. Then, the analysis should link
that explanation to related consequences.
This paper proposes that an antecedent to participative budgeting is a
desire to maintain justice in incentive-based compensation control sys-
tems. Tyler (1989) notes it is well established that employees care about
justice of allocation and decision-making procedures. Joy and Witt (1992)
suggest managers are responsible for maintaining fairness in the work-
place. The premise is that employers will seek increased eniployee partici-
pation in the development of incentive-based compensation control sys-
tems in order to introduce fairness into the budgetary process. Further,
consequences of enhanced employee participation will include increased
satisfaction with the budget, job satisfaction and performance.
Increased participation is said to have a positive effect on satisfaction
and performance. The Vroom-Yetton model (1973) posited a continuum of
participation for an individual problem-solving situation. At the low par-
ticipation, autocratic end, an employer makes decisions him/herself for an
employee, with available information. At the midpoint, an employer ob-
tains necessary information from the subordinate and then makes a deci-
sion which may (or may not) reflect the subordinate's influence. At a higher
point superior and subordinate jointly analyze the problem and arrive at a
mutually agreeable solution. Finally, the highest participation employees
are permitted to make their own decisions (decision-control).
Other models of participation exist with similar components suggest-
ing that more participation in decision-making is always preferable to less
(Locke and Sehweiger 1979). Some research has interpreted these models
such that in order for participative budgeting to actually exist, an employee
must be able to choose his/her own standard. When decision-control does
not exist, the resultant condition is often termed pseudo-participation and
the associated benefits of participative budgeting are not expected to ma-
terialize. Pasewark and Welker (1990), in a direct application of the Vroom-
Yetton model, support a general rule recommending only the highest level
of participation (decision-control) to ensure success of participative bud-
geting. Arora (1992) notes it is only real participation that is effective, not
pseudo-participation. He defines real participation as a situation where an
employee has power in determining the outcome of a decision.
Pseudo-participation, he adds, occurs when workers have less input and
are only made to feel they are participating. Arora concludes that
pseudo-participation results in employee frustration and a feeling of pow-
erlessness or failure. Additionally, Hyclak (1987) suggests that participa-
tive decision-making programs which offer an employee a voice mecha-
nism (process-control) without any decision-control are a form of pseudo-
 Lindquist

participation. He cites programs such as quality circles in Japan and qual-

ity of work life programs in the U.S. as forms of pseudo-participation.
The contention of this paper is twofold. First, the mechanisms of par-
ticipative budgeting operate through complex perceptions of justice con-
cerning not only the level of difficulty of standards received (distributive
justice) but the amount of participation (process-control) in the develop-
ment of standards (proceduraljustice) as well. Ultimately process-control
without decision-control is a viable form of participation which can en-
hance satisfaction and performance and is not always a form of
pseudo-participation. Also more participation versus less is not always
desirable. In some cases, referent cognitions can result in less participa-
tion in budget setting resulting in the greatest enhancement of satisfaction
and performance. A review of relevant justice literature is next offered with
development of testable hypotheses.

Distributive Justice
Distributive justice is a proportionality concept grounded in equity
theory (Adams 1963, 1965; Blau 1964; Homans 1961). In his original for-
mulation of equity theory, Adams described a comparative referent as most
often a different individual (other). However, he suggested a person might
also use him/herself in another situation (self) as a comparative referent.
Thus, in accordance with equity theory, individuals may perceive distribu-
tive justice as the ratio of their outputs (compensation received from a
relationship; e.g., money, comfort or independence) to inputs (things brought
into a relationship; e.g., training, effort or material expenditures). Distribu-
tive justice (or fairness) occurs when inputs and outputs are balanced; in
other words, when this ratio is perceived to equal one.
In participative budgeting, if budget attainability is viewed as the out-
put from a relationship then an individual's ability and effort to achieve
budget can be viewed as inputs. When ability and effort are matched to
budget attainability, distributive justice (fairness) ensues. When effort and
ability are unequal to budget attainability, however, distributive injustice
exists.
Procedural Justice
The theory of procedural justice complements and counters previous
participative decision-making research discussed above. Procedural jus-
tice is complementary because it also recognizes the positive benefits of
allowing employees to participate in decision-making (Thibaut and Walker
1975; Greenberg and Folger 1983; Brett and Goldberg 1983; Lind and Tyler
1988). Proceduraljustice theory suggests a continuum of participation simi-
lar to the Vroom-Yetton (1973) model. The proceduraljustice continuum
ranges from low to high process-control progressing from no input to voice,
vote and finally voice and vote (highest process-control). Complete control
over the decision process is known as choice.
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; Leung and Li 1990). The instrumen-
tal theory of procedural justice suggests that individuals given an opportu-
nity to express their views will believe that voice will help them control
126 Journal of Management Accounting Research, Fall 1995

their outcomes (Thibaut and Walker 1978; Conlon 1993). Voice is seen as
fair because it increases the probability of an equitable outcome. Addition-
ally, procedural justice suggests that by emplojang fair (participative)
procedures to determine outcomes, perceptions of fairness toward the out-
comes (distributive justice) will be enheinced. Thus satisfaction and perfor-
mance will increase. This mechanism is known as the "fair process effect"
(Folger 1977). In fact, most fair process effect studies not only show that
proceduraljustice matters but also that it matters as much or more them
the fairness of outcomes (Lind et al. 1990). 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,
full-fledged members of the organizational group. Lind and Tyler (1988)
believe individuals are driven by both instrumental and noninstrumentcd
concerns.
Procedural justice counters previous participation research however,
in its failure to recognize low process-control (voice) as a form of
pseudo-participation. In their earliest discussion of procedural justice,
Thibaut and Walker (1978) originally placed primary emphasis on
decision-control, viewing all process-control as an indirect means of exert-
ing decision-control. However, subsequent research has suggested that
process-control is usually more important than decision-control. Addition-
ally, process-control is important even if it is not linked to decision-control
(Lind et al. 1983; Tyler et al. 1985). In the legal arena, 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. In two related field experi-
ments of the Canadian Armed Forces, 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.
Kanfer et al. (1987), conducted a laboratory experiment and found the pro-
cedure permitting voice enhanced judgments of satisfaction with subse-
quent performance evaluation relative to no voice, even with a negative
evaluation.
Proceduraljustice consequently proposes that voice alone is not a form
of pseudo-participation but rather a viable form of process-control. Fur-
ther, not only is voice found to have positive effects on satisfaction when
fair outcomes are received but unfair ones as well. Hj^otheses la eind lb
are thus offered:
Hypothesis la
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, even when budgets
Eire perceived to be unattainable (unfair).
Hypothesis lb
Individuals allowed to participate with a voice in the establishment of
their budgets are more satisfied with their experimental tasks com-
pared to individuals with similar ability allowed no input, even when
budgets are perceived to be unattainable (unfair).
Lindquist ^27

Organizational researchers have long recognized that the relation be-

tween performance and attitudinal variables is far from straightforward
(Locke 1976; Lind and Tyler 1988). When an individual's performance is
contingent upon many variables it is unlikely that any one attitudinal vari-
able (e.g., voice) will have a simple effect on it. Nonetheless, in some in-
stances, an enhancement of performance has been found when outcomes
are determined with fair procedures.
Eisenberger et al. (1990) suggest employees believe that positive action
by the organization, such as allowing an individuals a voice in standard
setting, benefits them. This fair treatment is likely to signify to employees
that the organization values and cares about their well being. From a
social-exchange perspective, this support results in employee reciproca-
tion in the form of higher job performance. Earley (1984) found that
goal-setting procedures high in procedural justice (voice) led to enhanced
performance. Earley and Lind (1987), in both lab and field experiments,
also found enhancement of performance with voice. Subjects, completing
an in-basket simulation, allowed to express their opinions about task and
procedure options given them, performed better than subjects allowed no
input. Lind et al. (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. This performance enhancement was robust whether the voice
was provided before or after the actual performance standard was estab-
lished. This finding suggests that voice had a positive effect on perfor-
mance even in instances where subjects knew the input had no influence
on the standard they received. Given these findings hypothesis Ic is also
offered:
Hypothesis Ic
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, 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 al-
ways more effective in enhancing satisfaction and performance than a
lower level. Having an opportunity to participate in the standard-setting
process by actually voting for a preferred budget is a form of high
process-control. A vote for a choice of standard is a stronger determi-
nant of procedural justice than a voice, as a vote is a more direct and
certain form of personal control (Brett and Goldberg 1983). Whether
high levels of process-control are effective, however, is contingent upon
whether an individual receives what they perceive to be a fair stan-
dard. When an individual is permitted to vote for his/her preferred per-
formance budget (vote) and the standard received is perceived to be
fair, he/she will be more satisfied and perform better than when only a
voice is provided. Consequently, having both a voice and a vote should
then result in the greatest enhancements of satisfaction and perfor-
128 Journal of Manc^ement Accounting Research, Fall 1995

mance (highest process-control) when budgets received are perceived

to be fair. 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,
voice only, or no input, when attainable (fair) budgets are received.
Hypothesis 2b
Individuals allowed both a voice and a vote will have greater experi-
mental task satisfaction than individuals with similar ability allowed a
vote only, voice only, or no input, when attainable (fair) budgets are
received.
Hypothesis 2c
Individuals allowed both a voice and a vote will have greater produc-
tion, in an experimental task, than individuals with similar ability al-
lowed a vote only, voice only, or no input, when attainable (fair) bud-
gets are received.
However, when a subject with a vote receives a standard perceived to
be uri/dir then satisfaction and performance decrements are expected to
appear. This phenomenon is explained by a theory complimentary to eq-
uity theory (i.e., referent cognitions theory; RCT, (Folger 1986)). The con-
ceptual basis for RCT is grounded in Kahneman and Tversky's (1982) de-
scription of the simulation heuristic. It is based on the premise that indi-
viduals react and think referentially. If individuals do not get what they
think they deserve, they are apt to feel resentful. Their thoughts focus on
the fact that what happened is not what ought to have happened. Then,
feeling resentful, their frame of reference for evaluation consists of mental
comparisons to what might have been instead. This resentment increases,
the psychologically closer they feel they were to that referent outcome (what
ought to have happened). Thus, subjects with a vote (high process-control)
feel closer to their preferred standard than subjects with only a voice (low
process-control). Empirical support for a referent cognitions viewpoint is
found in the organizational psychology literature (Folger et al. 1983). Con-
sequently, these last hypotheses are offered in relation to participative bud-
geting:
H3rpothesis 3a
Individuals allowed only a voice will be more satisfled with their bud-
gets than individuals with similar ability offered a voice and vote or a
vote only, when unattainable budgets are received.
Hypothesis 3b
Individuals allowed only a voice will have more experimental task sat-
isfaction than individuals with similar ability offered a voice and vote
or a vote only, when unattainable budgets are received.
Hypothesis 3c
Individuals allowed only a voice will have greater production, in an
experimental task, than individuals with similar ability offered a voice
and vote or a vote only, when unattainable budgets are received.
Lindquist 129

EXPERIMENTAL DESIGN AND METHOD

Subjects
One hundred-eleven full-time undergraduate students volunteered to
participate in the experiment. A reduced set of 86 subjects was obtained
after a necessary yoking of subjects took place. The technique of yoking is
discussed below. Of the reduced set, the mean age was 21.6 years.
Forty-three men and forty-three women made up the sample. Total full-time
mean work experience for participants was 1.84 years while the average
part-time work experience was 4.26 years. Subjects were financially com-
pensated for their participation. Average pay per subject was approximately
$10.00 for about two hours of participation.

Experimental Task
The experimental task involved building a toy castie from Loc-Blocs®.^
Each castle required 26 blocks of varied sizes and shapes to complete. A
quality castle needed to match the model castie in size and number of
pieces. In addition, four key pieces needed to match in size and color of
pieces.

Independent Variables
The lab experiment employed a 2 x 2 x 2 full-factorial design. Three
independent, between subjects variables were: (1) distributive justice (re-
ceive attainable (fair) budget, receive unattainable (unfair) budget), (2) pro-
ceduraljustice (voice (low process-control), no voice (noprocess-control)) and
(3) proceduraljustice [vote (highprocess-control), no vote (noprocess-control)).
Distributive justice was operationeilized as the receipt of either attain-
able (fair) or unattainable (unfair) budgets (piece-rate performance stan-
dards).^ An attainable (fair) budget was determined to be one at the mid-
point standard of their achievable range. An unattainable (unfair) budget
was ratcheted up from the midpoint. In the first production run, the mid-
point standard of the attainable range was administered as a budget to
establish a base. In the second production run unattainable budgets were
increased 30 percent above the midpoint of the achievable range. Finally,
in the third run, unfair budgets were ratcheted up 70 percent above the
attainable range.
Procedural justice was operationalized in two ways; voice and vote.
Subjects in the voice (low process-control) conditions were given the op-
portunity to vocalize and express their opinions regarding budgets before
each production run. In order to standardize treatments across subjects,
an oral questionnaire was used to elicit subjects' responses.'' Subjects in
the no voice condition had no such process-control.

^ Previous accounting research has supported this task as one representing a mEinufacturlng
process (Young 1985; Young et al. 1993).
3 Budget difficulty was based on individual perceptions, recognizing that what was difficult
for one subject may not have been difficult for another. In order to ascertain individual
ability, subjects were asked, before each production run, to record a range of production
they f'elt was attainable such as 1.2.3 or 23.24.25. An effort was made to avoid mentioning
reeilistic ranges on which subjects might anchor. Individuals were told this information
was merely for statistical purposes and played no part in the determination of their budget.
•* Please see appendix for an example of the instrument used to administer the voice treatment.
130 Journal of Management Accounting Research, Fall 1995

The operationalization of high process-control (vote) allowed subjects

to vote for their preferred budget. A vote is recognized as a representation
of high process-control in proceduraljustice literature (Sheppard 1984).
Subjects were told management was very interested in what tiieir prefer-
ence for budget was and would like them to select their own standard.
They were also told that as much as management wanted to completely
abide by their desires, they had to keep production requirements in mind,
thus final approval of the budget resided with management. Subjects voted
for their preferred standard (which was always within their attainable range)
and before production round one received a standard within their attain-
able range as previously mentioned. The lower a standard a subject re-
quested the lower a standard they actually received. Before the second
production round subjects again voted for preferred standard and received
a standard 30 percent above their preference. They were told management
originally desired them to complete a standard 45 percent above their pre-
ferred choice, however, management would compromise and ask the sub-
ject to complete a standard 30 percent above preference. Before the third
production subjects received a standard 70 percent above their preferred
choice in period one that was compromised down from management's origi-
nal 85% increase. Subjects in the no vote condition had no such
process-control. Finally, 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.

Dependent Variables
The dependent variables were: (1) budget satisfaction, (2) task satisfac-
tion (both satisfaction measures taken on five-point Likert scales at the
conclusion of the experiment), and (3) performance. Performance was
measured as the actual number of quality units produced across all three
production periods.

Yoking Process
In order to facilitate statistical comparisons, it was necessary to yoke
subjects in the no vote conditions to subjects of equivalent ability in the
vote conditions^. As stated above, a reduced set of 86 subjects was ob-
tained after the yoking procedure. Table 1 below provides a tabulation of
mean performance standards, by condition, for all three production rounds.
Note that vote and no vote subjects are matched in terms of ability in nearly
all production rounds suggesting the yoking procedure was effective. Any
differences in vote/no vote standards are not significantly different
at p < 0.05.

^ For example, if a subject in a vote condition requested a standard of 5. a subject in a like

no vote condition was assigned a 5. This was done in an effort to match subjects by ability.
Thus it was further necessary to match individuals on preferability of budgets (i.e. matched
subjects would both have to consider standards as either attainable (fair) or unattainable
(unfair). This was accomplished by matching on at least one number of each individual's
attainable range (e.g.. if a vote subject's range was 8.9.10 it was considered a match to a no
vote subject with a range of (7.8.9). (8.9.10) or (10.11.12). In 12 percent of cases, these
numbers matched perfectly in all three periods. Forty-six percent matched perfectly in at
least two periods and 100 percent matched perfectly in at least one period.
Lindquist 131

TABLE 1
Budget Means of Yoked Pairs in Production Rounds 1-3

Production Round # 1
Attainable Budget Unattainable Budget
Voice No Voice Voice No Voice
No No No No
Vote Vote Vote Vote Vote1 Vote Vote Vote
4.91 5.00 5.46 5.46 5.33 5.33 5.40 5.40
Production Round #2
Attainable Budget Unattainable Budget
Voice No Voice Voice No Voice
No No No No
Vote Vote Vote Vote Vote Vote Vote Vote
5.64 5.64 5.92 5.92 8.33 8.56 7.60 8.50
Production Round #3
Attainable Budget Unattainable Budget
Voice No Voice Voice No Voice
No No No No
Vote Vote Vote Vote Vote Vote Vote Vote
6.36 6.36 6.15 6.15 11.67 12.22 10.20 12.70

Truth-Inducing Incentive Scheme

Individuals were paid $.40 per quality unit on a piece-rate basis.
Pre-testing determined a piece-rate of $.40 per unit resulted in enough
financial payoff to warrant interest and effort^. Individuals were paid ac-
cording to the following scheme in equation (1):
Y = $.40 (A) - $.40 | A - S |
where:
Y is individual pay per production run
S is the performance budget and
A is actual performance of the individual
This incentive scheme was chosen because it motivates individuals to
attain their budgets or face financial penalty. In addition, it motivates indi-
viduals 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 be-
yond the standard amount (i.e., truth inducing). For instance, if actual in-
dividual production. A, is less than the individual standard, S, then com-
pensation is reduced by $.40 times the absolute difference between A and
S. Conversely, if A is greater than the individual budget, S, compensation
The $.40 per unit represented a per unit compensation that would approximate a payoff of
around $10.00. per subject, for the two-hour experimental period, for a person of average
ability. This amount approximated an average wage available for experimental subjects in
the local market. Pre-test subjects confirmed this piece-rate amount was motivating.
132 Journal of Managenwnt Accounting Research, Fall 1995

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.
For example, if an individual's budget were 8 and he/she completed
only 6 castles, compensation would be calculated as follows: Y = $.40(6) -
$.401 6 - 81 = $1.60. This balance results in an $.80 penalty for failing to
meet budget. Had the subject reached standard they would have received;
Y = $.40(8) - $.401 8 - 8 I = $3.20, with no penalty. Likewise, if the indi-
vidual produced beyond budget, say 10, they would receive no additional
compensation; Y = $.40(10) - $.40110 - 81 = $3.20. Thus, the higher castle
production an individual can attain, the more compensation they can earn
as long as they do not deviate from the budget. Previous accounting re-
search has found this incentive scheme to have strong motivational prop-
erties (Young 1985; Young et al. 1993).

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. Two
training periods' production data were eliminated from the study in order
to filter out effects of learning. Subjects were randomly assigned to each of
eight experimental conditions. This resulted in the following eight groups;
(1) Voice/Vote/Attainable Budget, (2) Voice/No Vote/Attainable Budget, (3)
No Voice/Vote/Attainable Budget, (4) No Voice/No Vote/Attainable Budget,
(5) Voice/Vote/Unattainable Budget, (6) Voice/No Vote/Unattainable Bud-
get, (7) No Voice/Vote/Unattainable Budget and (8) No Voice/No Vote/Unat-
tainable Budget Refer to figure 1 below for a detail of experimental condi-
tions.
The entire experiment took one week to complete running from 8:00am
to 7:30 p.m. Monday through Friday. Figure 2 details the sequence of events
in the longest of conditions.
Subjects, approximately five at a time, were greeted by the head ex-
perimenter plajdng the role of the manager and escorted to a seating area
to await production room assignments. Production rooms were completely
sealed off from one another regarding both sight and sound. Thus, sub-
jects were unaware of what their co-workers were experiencing. Each pro-
duction room, in addition to an experimenter playing the role of foreman,
contciined two chairs and a table on which sat a box filled with Loc-Bloc®
pieces of assorted colors and sizes. In all cases, experimenters followed a
written script.'^ Not only did this serve as an external memory aid but it

'' Complete scripts for all conditions are available by contacting the author.

FIGURE 1
Experimental Conditions

Attainable Budget Unattainable Budget

Voice No Voice Voice No Voice
(1) (2) (3) (4) (5) (6) (7) (8)
No No No No
Vote Vote Vote Vote Vote Vote Vote Vote
Lindquist 133

FIGURE 2
Timing and Sequence of Procedures in Experiment
Introduction
-Consent
-Demographic Information
Familiarization with Task
-Practice Run
-Incentive Scheme Explanation
Period One:
-Range Attainment Setting I
-Voice I
-Vote I
-Budget Set I
-1st official production run
-Count castles and ready for next run
Period Two:
-Range Attainment Setting II
-Voice II
-Vote II
-Budget Set II
-2nd official production run
-Count castles and ready for next run
Period Three:
-Range Attainment Setting III
-Voice III
-Vote III
-Budget Set III
-3rd official production run
-Count castles and ready for next run
Final Questionnaire
Pajrment and Debriefing
Exit

also maintained consistency across experimenters and controlled for re-

searcher expectancy effects (Rosenthal 1966). Experimenters underwent
approximately two hours of training before the experiment began.
After room assignments, the foreman gave each subject a one page
scenario describing the task at hand. After reading the scenario, subjects
were provided ten minutes to complete a familiarization construction pe-
riod. Following a count of quality castles, an additional ten minute prac-
tice production period took place, with each subject being financially com-
pensated $.40 for each castle produced irrespective of the truth-inducing
incentive scheme. This was done to acquaint the subject with the custom
of being paid for performance and for motivational purposes (Young 1985).
A count of quality castles by the foreman ended this second practice pro-
duction. Dependent upon condition assignment, experimental procedures
varied for subjects beyond this point. Some subjects were given a voice
before performance budgets were set, others were not. Additionally, some
134 Journal of Management Accounting Research, Fall 1995

subjects were permitted to vote for preference of their performance bud-

gets (vote) while others weren't.
The envelope manipulation was devised to keep subjects in no voice
and no vote conditions from perceiving they had input. Recall that all sub-
jects were required to complete a brief standard attainability questionnaire
at the onset of each production round. Thus, in these conditions, 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 pro-
duction period were recorded. 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. Once out of the
room, the experimenter would report the subject's attainable range to the
manager. He/she would then write down the experimentally correct [yoked)
budget given him/her by the manager and place it in a new, sealed enve-
lope. Upon returning to the room, with the manager, the experimenter would
open the envelope, report the budget and production would begin.
Common to all production runs was the administration of two very
brief questionnaires. The first questionnaire, discussed previously, was given
before each production run to ascertain what each individual perceived
his/her attainable range to be. The second questionnaire was adminis-
tered immediately following the setting of performance standards and be-
fore production in each round, asking subjects to respond, on a five-point
Likert scale, to the statement "The way performance standards are set
around here is fair." Its purpose was to access the maintenance of proce-
dural justice across multiple periods of the experiment.

RESULTS
Demographic Information
Even though subjects were randomly assigned to experimental condi-
tions, an analysis of variance (ANOVA) of demographic data was conducted
to make sure subjects were ex post evenly distributed. Data included age,
gender, major, full-time/part-time work experience and number of account-
ing courses completed. With the exception of gender, there were no signifi-
cant main effects, two-way or three-way interactions. The three-way inter-
action for gender, however, proved significant (Fj g^ = 8.0, p < 0.006). This
significance is the result of condition 7 having seven women and two men
assigned to it. Efforts were made to balance gender assignments but given
scheduling restrictions and yoking effects, a perfect balance was not pos-
sible. Empirical findings in distributive and procedural justice research,
however, suggest there is no basis for expecting males and females to use
different standards of justice (Lerner 1981; Furby 1986). Thus, fmdings
indicate no systematic bias in the experimental results.
Manipulation Checks
Manipulation checks were of five types: envelope manipulation, checks
on independent variables of budget attainability (distributive justice), voice
and vote (proceduraljustice) and finally maintenance of procedural justice
through last production run. Analysis of variance (ANOVA) was conducted
measuring the effect of independent variables (budget attainability, voice
and vote) on manipulation constructs.
Lindquist 135

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. 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." All manipulation checks
were scored on a five-point Likert scale. This procedure was scored (5)
strongly agree to (1) strongly disagree. This question was reverse scored
thus higher means are found for the proceduraljustice conditions.
A significant main effect is found for both voice(v) (Fj gg = 3.04, p <
0.085; voice 3.22 vs no voice 2.80) and vote(vt) (Fj gg = 18.37, p < 0.000;
vote 3.49 vs no vote 2.58). Analysis of three-way interaction, t-test con-
trasts, supports these fmdings for both attainable(a) and unattainable
budgets(ua); v / v t / a (4.00) vs n v / n v t / a (2.38; t^^ = 3.55, p < 0.001) and v /
v t / u a (2.78) vs n v / n v t / u a (2.00; tj^ = 1.90, p < 0.038). It seems subjects in
the no process-control conditions did not perceive the declaration of their
attainable production ranges as input.
Distributive justice, represented as budget attainability, was checked
to determine whether budgets received were perceived as easy, moderate
or tight. Subjects were asked to respond to a question in the fmal survey
which read, "Overall, in your opinion were the standards you were working
under easy, moderate or tight?" Answers were coded (1) easy, (2) moderate
or (3) tight. An ANOVA indicated a highly significant main effect for budget
attainability (Fj 35 = 87.57, p < 0.000; attainable (fair) 1.84 vs unattainable
(unfair) 2.84). It appears subjects were perceiving budgets received to be
attainable or unattainable.
In a further check, preference for such attainable vs unattainable bud-
gets was conducted. Subjects responded to the statement, "I would take
the standards I worked under over alternative ones." Statements were scored
(5) strongly agree to (1) strongly disagree. Recall that equity theory sug-
gests subjects receiving unattainable budgets would perceive such to be
unfair and would mostly likely show a non-preference for such budgets.
Subjects receiving attainable (fair) budgets, however, would most likely prefer
them.
An ANOVA showed a highly significant main effect for budget attain-
ability (FJ 35 = 42.53, p < 0.000; attainable (fair) 3.71 vs unattainable (un-
fair) 2.58). Further support is found in analysis of two-way interaction,
t-test contrasts. Distributive justice is recognized regardless of the ma-
nipulation of voice; a/v (3.86) vs u a / v (3.00; tgg = 3.38, p < 0.001) and a/
nv (3.58) vs u a / n v (2.20; t^^ = 5.15, p < 0.000). Distributive justice is addi-
tionally recognized regardless of the manipulation of vote; a/vt (4.08) vs
u a / v t (2.37; t^j = 7.58, p < 0.000) and a/nvt (3.33) vs u a / n v t (2.79; t^j =
1.88, p < 0.034). These results suggest attainable budgets were preferred
and mostly likely viewed as fair while unattainable were not preferred and
were likely viewed as unfair.
Manipulation checks were conducted to determine whether voice and
vote were viewed as participation (procedural justice). Responses to two
separate statements were summed to measure differences in opinion re-
garding the amount of voice permitted subjects. The first statement read,
"I was able to vocalize my feelings" while the second, being reversed scored
stated, "I didn't have a chance to tell the foreman how I felt." Scale reliabil-
136 Journal of Management Accounting ResearcK Fall 1995

ity for this two-item scale was quite satisfactory (Cronbach's alpha = 0.82).
An ANOVA of the full model with the composite dependent measure above
was run. A strong main effect for voice is found (Fj 35 = 65.45, p < 0.000;
voice 8.20 vs no voice 5.43).
Investigation of two-way, t-test contrasts indicates the manipulation of
voice is robust across budget attainability conditions; v/a (8.18) vs nv/a
(5.81; t4g = 4.08, p < 0.000) and v/ua (8.22) vs nv/ua (4.95; tgg = 5.71, p <
0.000). Finally, three-way contrasts add further support in the recognition
of voice, in the presence of vote, with the receipt of both attainable and
unattainable budgets; v/vt/a (8.36) vs nv/vt/a (7.31; 1^2 = 1-09, p < 0.050)
and v/vt/ua (8.11) vs nv/vt/ua (6.40; tj^ = 2.58, p < 0.010). Voice is thus
seen to have been recognizable as a means of participation.
Vote as a form of participation, however, is not robust across budget
attainability. Responses to the statement, "My decision of what my stan-
dard should be had a lot to do with what my standard was set at," were
used as a dependent variable in an ANOVA of the full model. A significant
main effect is found for vote (Fj gg = 5.95, p < 0.017; vote 3.09 vs no vote
2.51), however, two-way interaction contrasts provide further information.
Two-way contrasts imply that vote is recognizable as participation when
attainable budgets are received but not with the receipt of unattainable
budgets; vt/a (3.79) vs nvt/a (2.63; t^g = 3.29, p < 0.001) and vt/ua (2.21)
vs nvt/ua (2.37; tgg = -.49, p < 0.314). These results suggest a vote is seen
as a form of participation if a subject receives a preferred (attainable) bud-
get but not with the receipt of a non-preferred (unattainable) budget. It is
important to note these findings do not imply a vote is not a form of par-
ticipation but rather that it is not recognized as participation when un-
wanted budgets are received. This finding sheds important light on the
phenomenon that too much participation can sometimes backfire and be
perceived as pseudo-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.
Finally, it is important to check whether subjects perceived participa-
tive, procedural justice manipulations as being fair. Subjects were asked
to respond to a brief questionnaire after standards were set in each pro-
duction round which read, 'The way this company goes about setting stan-
dards is:." Responses were scored (5) extremely fair to (1) extremely unfair.
An ANOVA was run on survey responses after the third period's budgets
were set. This period's responses represented a collective perception for
the entire experiment. Support that participation in the form of voice was
perceived as fair is found in the main effect for voice (Fj 35 = 3.75, p <
0.056; voice 3.17 vs no voice 2.85). Three-way contrasts confirm this find-
ing and find voice perceptions of fairness are robust across budget attain-
ability; v/nvt/a (3.45) vs nv/nvt/a (2.69; tja = 2.22, p < 0.019) and v/nvt/
ua (2.56) vs nv/nvt/ua (1.70; tj^ = 1.70, p < 0.050). It seems voice was
perceived as a fair participative aspect of procedural justice.
Voting on the other hand, is only perceived as a fair participative mea-
sure when attainable budgets are achieved. A significant main effect for
vote is found, (F^ 35 = 16.89, p < 0.000; vote 3.37 vs no vote 2.63). Interpre-
tation of the three-way contrasts, however, adds to this finding. Here, vote
Lindquist 137

is recognized as fair when attainable budgets are received; vt/nv/a (4.46)

vs nvt/nv/a (2.69; t24 = 5.21, p < 0.000). However, when unattainable bud-
gets are received this significance dissipates; vt/nv/ua (2.10) vs nvt/nv/
ua (1.70; ti3 = .87, p < 0.200). This finding suggests the reason a vote is
seen as a form of pseudo-participation when unattainable budgets are re-
ceived is because the process is not viewed as fair. 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 bud-
gets. However, when like subjects are given a higher form of process-control
(vote) and an unattainable budget is received, they do not view this form of
participation as fair. This finding provides important new knowledge to-
wards the understanding of pseudo-participation.

Tests of Hypotheses
To test all hypotheses, full-factorial models were analyzed separately
with dependent variables of budget satisfaction, task satisfaction and per-
formance. Complete ANOVA results are found in table 2 below. Cell means
are found for all conditions in table 3. Budget satisfaction was measured
with responses to four statements from the exit questionnsiire. Responses
to these four statements were combined into one construct with a
Cronbach's alpha of 0.93. The four statements were, "Overall, I was satis-
fied with the standards under which I worked"; 'The standards I worked
under suited me fine"; "I would have preferred different standards than
what I received" (reversed scored) and "I liked the standards which I re-
ceived." Task satisfaction was measured by responses to four statements.
Responses to these four statements were combined into one construct with
a Cronbach's alpha of 0.84. These four statements were, "Overall, I was
satisfied with this task"; "I would recommend this task to someone else as
one that is satisfying"; "I considered this task to be unpleasant" (reversed
scored) and "I feel pleased about my involvement with this task." Indepen-
dent variables were budget attainability, voice and vote. Evaluation of re-
sults included analysis of main effects, two-way and three-way interac-
tions including contrast analysis.

Hypothesis la
Hypothesis la 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, even when unattain-
able budgets were received. The main effect for voice (Fj gg = 6.11, p <
0.016; voice 12.23 vs no voice 10.83) suggests voice, overall, enhances
budget satisfaction. Three-way interaction, t-test contrasts add further
definition to this finding. 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 (14.09) vs nvt/nv/a (10.46; tjj =
0.013).
The beneficial effect of voice is even more important when unattainable
budgets are received. Here, subjects permitted a voice are significantly more
satisfied with budgets received over like subjects allowed no such input;
v/ua (9.00) vs nv/ua (7.20; tgg = 2.07, p < 0.023). This enhancement of
budget satisfaction through voice with both attainable and unattainable
138 Journal of Management Accounting Research, Fall 1995

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Lindquist 139

TABLE 3
Means of Hypotheses: 3-Wa7 Interactions of
Vote X Voice x Budget AttainabiUty

Vote No Vote
On Budget Satisfaction Voice No Voice Voice No Voice
Attainable 15.64 16.77 14.09 10.46
Unattainable 7.67 7.30 10.33 7.10
Vote No Vote
On Task Satisfaction Voice No Voice Voice No Voice
Attainable 13.18 13.00 14.55 11.54
Unattainable 10.33 10.30 14.11 10.90
Vote No Vote
On Performance Voice No Voice Voice No Voice
Attainable 17.82 17.08 17.27 19.31
Unattainable 20.44 21.10 20.33 19.80

budgets is important and is known as the fair process effect. There is no

indication that voice is seen as a detrimental form of psuedo-participation.

Hypothesis lb
Hypothesis lb 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, even when unattainable bud-
gets were received. The main effect for voice supports the contention that
overall, voice enhances task satisfaction (Fj g^ = 4.98, p < 0.029; voice 13.13
vs no voice 11.54). Three-way interaction contrasts provide further sup-
port. Here it is seen that having a voice vs no input leads to an enhance-
ment of task satisfaction with both attainable and unattainable budgets;
v/nvt/a (14.55) vs nv/nvt/a (11.54; t22 = 2.01, p < 0.028) and v/nvt/ua
(14.11) vs nv/nvt/ua (10.90; tj^ = 2.00, p < 0.031). The fair process effect
is robust across perceptions of budget attainability. Voice is again seen as
a form of real participation, not pseudo-participation.

Hypothesis Ic
H)rpothesis Ic theorized that individuals allowed to participate with a
voice would have greater experimented production than like individuals
allowed no such input, even when budgets were unattainable. No support
is found for this hypothesis in either the main effects or interactions. It
appears voice, as a form of participation, is not an enhancing aspect of
performance, at least in this experimental task.

Hypothesis 2a
Hypothesis 2a predicts experimental subjects will have greater satis-
faction with attainable budgets when they are provided the highest
process-control (i.e., voice and vote over lesser forms; vote only, voice only
or mute). Three-way interaction contrasts support this hypothesis. It is
140 Journal of Management Accounting Research, Fall 1995

seen that having the highest proeess-control leads to greater budget satis-
faction than having no participation; vt/v/a (15.64) vs nvt/nv/a (10.46;
t22 = 3.86, p < 0.001). Further, having a vote in addition to a voice does
lead to a significant increase in budget satisfaction; vt/v/a (15.64) vs nvt/
v/a (14.09; t2o = 1.41, p < 0.087). Support for the above h5rpothesis is thus
recognized.

Hypothesis 2b
Hypothesis 2b similarly predicts subjects will have the greatest task
satisfaction with attainable budgets when they are provided both voice arid
vote over vote only, voice only or mute. No support is found for this hy-
pothesis. The highest level of process-control does not seem to be an im-
portant factor in task satisfaction in this experimental setting.

Hypothesis 2c
Hypothesis 2c theorizes that voice and vote together wUl lead to a greater
enhancement of performance than lesser forms of participation (vote only,
voice only or mute) with the receipt of attainable budgets. No support is
found for this hypothesis. Performance, since it is multiply determined, is
not explained by the highest level of process-control, at least in this experi-
mental task.

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), or a vote only, when unattainable budgets are received.
Strong support for this hypothesis is found in the three-way interaction
contrasts. Here, subjects given a voice and vote have significantly less sat-
isfaction with unattainable budgets than those given a voice only; vt/v/ua
(7.67) vs nvt/v/ua (10.33; tjg = -1.89, p < 0.039). Additionally, subjects
given a voice only have greater budget satisfaction than those given a vote
only when unattainable budgets are received; nvt/v/ua (10.33) vs vt/nv/
ua (7.30; tj-, = -2.55, p < 0.011). It appears subjects given a vote are form-
ing referent cognitions of their preferred choices, which when denied, re-
sults in less budget satisfaction than when this preference is not offered. 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), or a vote only, when unattainable budgets are received. Strong
support is also found for this hypothesis in the three-way, interaction con-
trasts. Here, subjects with voice only are found to have greater task satis-
faction than those who are given a voice and a vote; nvt/v/ua (14.11) vs
vt/v/ua (10.33; tjg = -2.58, p < 0.010). Additionally, those with a voice only
are found to have greater task satisfaction than those with a vote only;
nvt/v/ua (14.11) vs vt/nv/ua (10.30; t^^ = -3.08, p < 0.004). 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.
Lindquist 141

Hypothesis 3c
Hypothesis 3c predicts individuals allowed a voice only v\all have greater
production than individuals offered a voice and vote or vote only, when
unattainable budgets are received. As with the previous hypotheses re-
lated to performance, no significant relationships exist in the data.

DISCUSSION
This paper examines participative budgeting, introducing theories of
distributive justice, procedural justice and referent cognitions to manage-
ment accounting literature. Some accounting research has supported the
position that more participation in setting standards is always better than
less. In fact, this research has proposed that only full budget participation
(that emplojang process and decision-control) is effective. Providing only
process-control is viewed as "pseudo-participation."
Procedural justice theory, however, recognizes that perceptions of fair-
ness regarding the process of decision-making is as important as percep-
tions of fairness regarding the decision-outcome itself. Fair procedures,
even those offering only process-control, lead to enhancements of satisfac-
tion and performance (i.e., fair process effect). Thus, process-control only
is not always "pseudo- participation."
Distributive and procedural justice, along with a theory of referent cog-
nitions, additionally suggest it is notJust the amount of participation that
determines satisfaction and performance levels, it is also the interaction
between the level of participation and perceptions of fairness regarding the
outcome of participation. How an individual reacts to a given level of par-
ticipation is dependent upon whether he/she views the decision outcome
as fair. This occurrence is a reflection of the proposition that when indi-
viduals are provided high levels of process-control they begin to think ref-
erentially, focusing on their decided preference as a referent outcome.
Thus, in cases where a referent outcome (perceived as fair) is received, the
highest form of participation results in the greatest enhancements of satis-
faction and performance. Here, individuals express a preference for a par-
ticular outcome, vote for a given standard level and ultimately receive it.
However, in cases where referent outcomes are not received (unfair stan-
dards), subjects react adversely to high levels of process-control. They be-
gin to think that what should have happened, didn't happen. In the sense
that they own the referent outcome, they react harshly to not receiving it.
Thus, satisfaction levels decrease even though subjects are allowed high
levels of process-control in the decision-making.
A laboratory experiment is reported in this paper. It found that sub-
jects 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 in-
put, even when budgets received were perceived to be unfair. This finding
is important and supports procedural justice theory and counters previ-
ous accounting research.
This research also found that in situations where budgets were per-
ceived to be attainable (or fair), individuals allowed both a voice and vote
were significantly more satisfled v^nth budgets received than subjects per-
142 Journal of Management Accounting Research, Fall 1995

mitted no participative input. Highest process-control individuals were not,

however, significantly more satisfied with budgets received than individu-
als offered a voice only.
When perceptually unattainable (unfair) budgets are received, however,
the above relationship changes. Here, individuals given a voice only, were
significantly more satisfied with budgets than individuals given a vote only
or a vote and voice. Likewise, subjects with a voice only were significantly
more satisfied with the task than individuals offered a vote only or vote
and voice. Finally, this research supports no hypotheses relating to justice
and performance. It appears that performance, being multiply determined,
is not explained by the variables in this model. Other researchers, how-
ever, have found positive effects for procedural justice and performance
(Earley and Lind 1987). Further research is necessary to explain these
effects.
Ramifications for these findings exist. It appears when attainable bud-
gets are received that a low level of participation (voice) achieves the same
positive enhancement of budget and task satisfaction as a higher level (vote).
Thus merely allowing employees an opportunity to vent their frustrations
can have a positive impact on the firm. If, however, 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. Thus in establishing a
participatory budget system, strong consideration needs to be given to
management's ability to meet employees actual preferences. If such de-
sires cannot be met then a more moderate, less costly form of participation
(voice) is more likely to prove effective.
This study, of course, is not without its limitations. First, questions of
external validity exist for all laboratory studies. It must be recognized that
a laboratory setting, such as the one in this experiment, is not replicating
a real-world manufacturing setting, nor is that its intent. Rather, internal
validity is sought to test theories of human behavior in a controlled envi-
ronment. Thus, the use of college students as surrogates for manufactur-
ing workers appears appropriate.
Second, the positive enhancements in satisfaction which arise from
voice in this study are probably instrumental in nature (i.e., they arise
because individuals believe this expression will change their superiors'
behavior in setting the standard). It is possible this expression of feelings
(voice) may also increase satisfaction when individuals don't have this be-
lief, however, this study does not provide unambiguous support for this
contention.
Finally, the budget in this study is specificcilly operationalized as a
piece-rate performance standard. It is possible the behavioral reactions to
justice/injustice in this paper might be different with other representa-
tions of budgets (e.g. financial budgets).
A logical extension of this research is to the field. It is important to
begin to test these hypotheses in a real-world setting. The problem is that
issues of justice and fairness, especially dealing with individuals' compen-
sation, are quite complicated in workplace settings. It would be highly un-
likely that manipulations, such as those presented in this paper, would be
permitted in the field. Therefore, research examining employee reactions
Lindquist I43

to participation where budget injustice has already taken place would be

an appealing eind viable extension of this research.
Also, It would be interesting to research the durability of the fair pro-
cess enhancement effect of voice in the face of injustice. Further labora-
tory study could address when procedural justice perceptions break down
in the face of distributive injustice. This research could begin to address
the important issue of learned helplessness (Martinko and Gardner 1982).
It would additionally be interesting to conduct a laboratory experiment
which would separate out the effects, on perceptions of justice, of budget
attainability from the effects of the incentive system. It was not the inten-
tion of this research to conduct such a test; however, a study could be
developed to separate intrinsic motivations, which most likely would be
related to aspiration level or budget attainability from extrinsic motiva-
tions which would be tied to financial compensation from the incentive
system. This could begin to address the importance of budget attainability
itself over financial payoffs.
Finally, it would be interesting to test these theories of justice in an
international arena. Previous research has found culturally specific differ-
ences in the effect of distributive and procedural justice on levels of satis-
faction. Specifically, in some cultures (e.g., Asian) procedural justice/air
process effects have not been found (Leung and Lind 1986).
The findings in this paper call for a reevaluation of participative bud-
geting research in management accounting. Analysis and synthesis of pre-
vious budgetary research needs to be conducted with a recognition that
most of this work focused only on the consequences of participative bud-
geting and not its antecedents. Through a recognition of the desire for fair-
ness in the workplace as an antecedent of participative budgeting, we can
gain new knowledge and move forward toward a better understanding of
the entire budgetary process.
144 Journal of Management Accounting Research, Fall 1995

APPENDIX A
Oral Questionnaire Used to Assess Voice
Voice Questionneiire
Subject No.

1. How satisfied are you with your present working situation going into the third
production?
Extremely Quite Quite Extremely
satisfied; satisfied; Satisfied; unsatisfied; unsatisfied.

2. How satisfied are you with the procedures used to determine your standards?
Extremely Quite Quite Extremely
satisfied; satisfied; Satisfied; unsatisfied; unsatisfied.

3. How do you feel about the standard under which you worked last period?
Extremely Quite Quite Extremely
satisfied; satisfied; Satisfied; unsatisfied; unsatisfied.

4. What range of standards did you feel were attainable? How attainable do you
think this range is?
Extremely Quite Quite Extremely
attainable; attainable; Attainable; unattainable; unattainable.

5. Are there any factors we have not covered youfeel are important and need to be
discussed?
Lindquist I45

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