PARTICIPATION IN BUDGETARY DECISION MAKING,TASK DIFFICULTY,LOCUS OF CONTROL,AND EMPLOYEE BEHAVIOR: AN EMPIRICAL STUDY*

This study investigates the relationship between participation in budgetary decision making and attitude (toward job and employer), taking into account the effects of task difficulty and locus of control on participation and attitude. Managers from two companies participated in the study. Attitude was found to be related positively to participation and negatively to task difficulty. Implications of the results are discusses.     

THE INVESTIGATION OF COST VARIANCES: A FUZZY SET THEORY APPROACH*

In a standard costing system, deviations (variances) of actual cost from standard cost should be investigated in order to help management identify the causes of the variances and who is responsible for them before corrective actions are taken. In reality, however, actual cost rarely equals standard cost and so many variances occur that it is impractical and uneconomical to investigate all of them. These two conflicting factors—the necessity of investigating cost variances and the impracticality of investigating all the variances—present management with the problem of deciding which variances to investigate. In this paper a model, based on fuzzy set theory, for the cost-variance investigation is proposed and applied to an actual investigation problem faced by a manufacturing company.     

Compensation Schemes,Skill Level,and Task Performance: An Experimental Examination*

The effect of budget-based incentive compensation schemes is a fundamental issue in developing and implementing organizational control systems. This study investigates the effect of alternative compensation schemes on performance and satisfaction. A theoretical model outlining the primary relationships is formulated and related hypotheses specified. The hypotheses reflect an integration of agency theory and organization behavior research. Across-group and within-group effects are investigated using both single-period and multiperiod analyses. A laboratory study involving 40 subjects is undertaken and the findings provide insights into the individual and group effects of alternative compensation schemes and the dynamics of changing Compensation schemes on productivity and satisfaction. Specifically, a relationship is found between compensation schemes and performance. The effect on performance is independent of the compensation scheme's perceived fairness. Satisfaction is a function of the congruence between the preferred scheme and the implemented scheme.     

EFFECTS OF BUDGETARY CONTROL DESIGN ON MANAGEMENT DECISIONS: SOME EMPIRICAL EVIDENCE*

An examination of budgetary slack behavior reveals that managerial characteristics and the economic environment may contribute to the failure of budgetary control systems. Large management-controlled firms that operate in industries with high barriers to entry behave as if they allocate more slack resources when compared with owner-controlled firms of similar size and market power. The results confirm that accounting operating-income numbers reflect manifestations of slack behavior in the budgetary process. Management-controlled firms in particular seem to act as if they fail to release and redistribute slack resources. It is concluded that budgetary slack behavior points to failures in the organization design that may lead to inefficient allocation of resources and to inferior profit performance.     

The Representation and Impact of Information System Reliability on Cost Variance Decisions*

Management does not directly observe cost variance processes from the production system; instead, management depends on a report from the cost variance information system as to whether a process is in control or out of control. Unfortunately, cost variance information systems are not always perfectly reliable. Accordingly, this paper extends the cost variance analysis model to include reliability of the cost variance information system. Reliability is introduced by distinguishing between the report from the information system and the actual cost variance. Although previous cost variance models do not include reliability, management is still likely to be aware of the lack of reliability in cost variance systems. To account for this lack of reliability, management is likely to use any of a number of heuristics. This paper demonstrates that ad hoc heuristics are unlikely to result in the same solutions suggested by the analytic model. In addition, it is shown analytically that not including reliability in cost variance models can lead to examining variances that do not require investigation and not examining variances that do require investigation.     

Concepts,Theory, and Techniques INFLATION,MAINTENANCE OF CAPITAL,AND THE IRR MODEL OF CAPITAL BUDGETING*

Businesses operating under inflationary conditions need capital-budgeting models that help them judge the adequacy of returns on their investments and also allow them to keep capital intact by considering the erosive effects of inflation. The model proposed in this paper computes a modified internal rate of return (IRR); if cash inflows from a project are divided between earnings and recovery of capital, total recovery equals that amount which the capital-budgeting concept adopted by the business specifies (such as the original investment in constant dollars or its replacement cost). Under this model, a project should be accepted only if this computed rate equals or exceeds a hurdle rate that consists of the inflation-free rate of return plus the effect of inflation on such a return. Other modifications to the IRR model suggested in the literature do not completely satisfy the objective of capital budgeting under inflationary conditions.     

INFLUENCE OF POWER BASES IN ORGANIZATIONAL DECISION MAKING: A CONTINGENCY MODEL*

The relative influence of four power bases was investigated in four decision-making contexts using data from forty successfully implemented decisions. The analysis suggests that position power decreases in influence while resource power and political power increase in influence as decision contexts vary from less to more uncertainty. Expert power derives its influence when organizational uncertainty is low and when technical uncertainty is reduced, whereas political power thrives when organizational uncertainty is high and when technical uncertainty remains high. Indexing the influence of power bases provides greater understanding of decision processes than the sociological or social-psychological approaches of studying participation.     

STRUCTURE,ENVIRONMENT, AND ORGANIZATIONAL GOVERNANCE IN MANUFACTURING*

The paper compares theories of organizational governance that explain delegation in decision making in terms of administrative rationality on the parts of top corporate officials with theories that emphasize lower-level actors mobilizing resources to gain control over organizational outcomes. These two alternative theories are developed and extended to apply to the relationship between manufacturing plants and parent companies. A general model is introduced to compare these theories which includes characteristics of parent companies and site environments, site resources, and delegation. The model is then tested on a sample of manufacturing plants.     

INFLATION,MAINTENANCE OF CAPITAL,AND THE IRR MODEL: AN APPRAISAL AND ALTERNATIVE

Capital budgeting under inflationary conditions presents some additional implementation problems when computing the internal rate of return. This paper reviews an earlier proposal made in this journal and concludes that it has some technical deficiencies. Further, it does not have the flexibility needed to be congruent with a wide variety of concepts of capital maintenance and asset evaluation. An algorithm is developed that will permit the user to make a variety of assumptions and then solve for the IRR that is consistent with those assumptions.     

SOCIAL LEARNING THEORY AND THE IMPLEMENTATION OF PRODUCTION INNOVATION*

In a study of the implementation of production innovation using a social learning theory focus, four organizations were monitored with a real-time study design. The following propositions were strongly supported: (1) During the initial implementation period (3–4 months), the stress felt by personnel in new user organizations was significantly higher (p < .01) than for organizations previously experienced with technology; (2) Firms experienced with the new technology obtain early success when compared with inexperienced firms (p < .01). Moderate support was found for the proposition that new users rely heavily on original equipment manufacturers for demonstration to acquire new skills, but gradually models within the user organization emerge as the dominant influence. The proposition that new users have significantly higher imitation scores than users experienced with the technology was only weakly supported. No substantive or significant changes in the attitudes of users toward the innovation were found during the first three to four months of the implementation period. These and other results suggest that longitudinal studies of this type ought to be carried out over periods in excess of 2 1/2 years. Implications for the management of change are presented.     

PERFORMANCE DIFFERENCES IN THE USE OF GRAPHIC AND TABULAR DISPLAYS OF MULTIVARIATE DATA

It has been suggested that graphically displayed multivariate data help decision makers better understand information they are called on to analyze. This study compares judgments made from one recently suggested multivariate display technique with judgments made from traditional tabular displas of financial figures. Significant differences in task performance are found to be related both to differences in the stimulus sets and to individual differences among the subjects. Our results suggest that the relative contribution of graphic displays to decision making may vary considerably from situation to situation.     

DUAL-METRIC MEASUREMENT OF THE IMPACT OF COMPLEXITY ON DECISION QUALITY*

Both sophisticated and unsophisticated subjects were provided either a simple or a complex cue set at random on which to base decisions. A dual-metric approach that consisted of measuring interrater consistency and cross-item variance for each subject category was used to compare the decision quality of the subjects. Although complexity and decision quality were inversely related, the sophisticated subjects performed relatively better using the complex cue set; the unsophisticated subjects performed better using the simple cue set. These findings support the notion that decision-maker and task compatibility are important to the assessment of decision quality.     

MODELING MANAGERS' EFFORT-LEVEL DECISIONS FOR A WITHIN-PERSONS EXAMINATION OF EXPECTANCY THEORY IN A BUDGET SETTING

Ronen and Livingstone [42] have proposed that expectancy theory can provide a unifying framework for accounting research aimed at the motivational impact of budgets on managers. Unfortunately, researchers attempting to use this approach have employed an inappropriate across-persons methodology. This paper uses the decision modeling approach we recently developed [48] to provide a within-persons examination of Vroom's force model in a budget setting. An examination of two hypotheses questions the belief expressed in the budget literature to the effect that the use of currently attainable cost standards results in a cost budget with unique motivating characteristics. Strengths of this research are the use of the within-persons approach and the use of an innovative measure of motivational force.     

CORPORATE DISTINCTIVE COMPETENCE AND PERFORMANCE: EFFECTS OF PERCEIVED ENVIRONMENTAL UNCERTAINTY (PEU), SIZE,AND TECHNOLOGY

The relationships of specific distinctive competencies to performance were examined for firm size, type of production system, and level of perceived environmental uncertainty (PEU). The size and dominant production system used by a firm were found to have main moderating effects on those relationships although PEU by itself did not. However, PEU did interact with size and production system to moderate those relationships.     

A NOTE ON THE RELATIONSHIPS AMONG FINENESS,GARBLING, AND SUFFICIENCY FOR THE COMPARISON OF INFORMATION SYSTEMS*

Choice among competing information systems is an important problem for both the providers and users of information. When the attributes of the decision makers and decision problems for which information is produced are unknown or heterogeneous, it is difficult to choose among alternative information sources. Three criteria for such comparisons of information systems are available in the theory of information economics. These criteria may be distinguished by the differing restrictions that they impose on the generality of the studies in which they are used. This note explicates the relationships among these criteria and discusses the various limitations that they impose on generality.     

DESIGNING HIGH-CONTACT SERVICE SYSTEMS: APPLICATION TO BRANCHES OF A SAVINGS AND LOAN*

The customer-contact model represents one of the few conceptually based approaches for designing service systems. This paper develops that concept further for high-contact systems, relative to efficiency and effectiveness notions. Four design features (contact technologies, contact training, data bases, and contact roles) are developed and a simple design methodology (built around the four design features) is presented. A demonstration of the design methodology is provided through its applications to branches of a savings and loan. Areas for additional theoretical and practical refinement of the model and the desirability of multidisciplinary research are discussed.     

A CANONICAL ANALYSIS OF MANAGERIAL-ENVIRONMENTAL RELATIONSHIPS: IMPLICATIONS FOR METHODOLOGY AND POLICY*

The present study uses canonical analysis to examine the contingency model of organizations in the nursing home field. Data on environmental pressures and managerial practices relevant to the decision-making process are analyzed. Results support the theory that managerial practices are contingent on environmental pressures. The implications of these results for health-care decision makers and for future assessments of managerial-environmental relationships are discussed.     

MATHEMATICAL FORMULATION OF THE TASK SEGREGATION PROBLEM IN INTERNAL CONTROL SYSTEM DESIGN*

Segregation of tasks is an important factor in the determination of internal control system reliability. In assigning tasks within an organization, the impact on internal control system reliability must be considered. This paper uses reliability modeling as the basis of a method for formulating the design problem. Formulation of the problem in this manner facilitates development of a knowledge base for auditors' judgments and the use of such knowledge in the design problem. It is demonstrated that under certain conditions the problem can be solved easily. This is useful not only in task assignment but also in manpower decisions. New concepts such as reliability degradation and a task combination matrix are introduced in developing the formulation.     

THE IMPACT OF EXTREME OBSERVATIONS ON SIMPLE FORECASTING METHODS*

In general linear modeling, an alternative to the method of least squares (LS) is the least absolute deviations (LAD) procedure. Although LS is more widely used, the LAD approach yields better estimates in the presence of outliers. In this paper, we examine the performance of LAD estimators for the parameters of the first-order autoregressive model in the presence of outliers. A simulation study compared these estimates with those given by LS. The general conclusion is that LAD does not deal successfully with additive outliers. A simple procedure is proposed which allows exception reporting when outliers occur.