ERIC EJ1141085: Participative Budgeting, Budget Evaluation, and Organizational Trust in Post-Secondary Educational Institutions in Canada

2012·0.33 MB·English

by  ERIC

Participative Budgeting,
Budget Evaluation, and
Organizational Trust in
Post-Secondary Educational Institutions in Canada
Cynthia V. Simmons
Associate Professor
Accounting Area, Haskayne School of Business
University of Calgary
Calgary, Alberta Canada
ABSTRACT
The purpose of this research was to investigate the relationship between a participative budgeting
system, the attitudes toward the budget, and levels of organizational trust held by administrators
in post-secondary institutions. A 50-item questionnaire was distributed to college and university
administrators across Canada. A series of regression analyses were carried out to determine the
relationships between the variables of interest. Perceived levels of participation in developing the
operational budget were found to be positively related to budget usefulness, overall budget grade,
and organizational trust levels. Participation was found to be negatively related to the perceived
levels of budget gaming taking place.
This study provides confirmatory evidence of the positive benefits of a participative approach to
budget development in a post-secondary environment. The usefulness of the budgeting process as a
management tool to convey information, to give voice and context to membership within the orga-
nization, and to build organizational trust is supported.
Keywords: Participative Budgeting, Organizational Trust, Higher Education, Organizational
Context of Accounting
“budgetary fairness works – namely, by enhancing trust…”
(Staley and Magner, 2007)
INTRODUCTION regarding financial flows. It provides a medium
for increased understanding and communication
Budgeting, the development of a financial plan
of the strategic aspects confronting the organi-
showing planned revenues and expenditures, is
zation including allocation of resources, chang-
a common management practice within colleges
ing product lines, and the current and projected
and universities. In the last decade the focus on
demands for its products/services. In addition,
budgeting and how it relates to more accurate
a budget can provide a framework for judging
cost determination and performance incentives
performance. A recent survey of North Ameri-
has received increased attention as post-second-
can for profit companies found 79% of sample
ary institutions across the globe deal with strains
respondents used budgets for control and 94% of
on funding (see the ies National Center for Edu-
these had no plan to abandon this practice (Lib-
cation Statistics; Blumenstyk, 2010; Goetzmann
by and Lindsay, 2010). In response to financial
et al., 2010 for information on university fund- pressures colleges and universities have changed
ing levels). Supporters of budgeting argue that
the way they produce and use budgets, increasing
there are a number of benefits to this practice. A
their focus on cost control and the application
budget quantifies an organization’s expectations
of formula-based costing approaches (Thomas,
Journal of Academic Administration in Higher Education 41
Cynthia V. Simmons
2000) as well as the use of incentive based bud- This study focuses on Canadian college and uni-
geting systems (Priest et al.,2002). versity administrator’s views of the budget pro-
cess at their institutions. It asks them for their
Colleges and universities are complex institu-
level of perceived involvement in setting the bud-
tions however and their missions include mul-
get—participation, their views on the degree that
tiple objectives. In these institutions the estima-
the budget helps predict the financial impact of
tion of costs, the allocation of resources, and the
changing circumstances—usefulness, their views
monitoring of performance can be influenced
on the level of manipulation that takes place in
by factors whose goals are not strictly efficient
determining the resource allocations and perfor-
financial practice. Studies have shown resource
mance standards–gaming, and the overall value
allocation processes and models to be histori-
they give to the budget process—in the form of
cally and culturally situated within the context
a grade. They are also asked a series of questions
of each university, with the models in use being
that provide a measure of their level of organi-
more a matter of internal fit than of best practice
zational trust. The results of the study indicate
(Goddard and Ooi, 1998; Jarzabkowski, 2002).
there is a relationship between the way the bud-
Empirical findings indicate that the existence of
geting process is carried out at their institution,
models in universities provided a sense of objec-
their perceived value of the budget, and their
tivity, but that the strong collegial culture proved
level of organizational trust.
unwilling to accept a strongly centralized orga-
nization of the resources allocation processes
(Jones, 1994; Scapens et al., 1994). And although LITERATURE REVIEW
the use of computer-based models for planning
is seen as being more transparent, knowledge of
Budgets
how universities allocate resources appears to be
largely restricted to those involved in the pro- Accounting textbooks define a budget as a for-
cess (Angluin and Scapens, 2000). Even formula mal, quantitative expression of an organization’s
based approaches to resource/cost allocation strategic plans (see Horngren et al., 2012). The
have been found to be influenced by patterns of budget process translates “qualitative mission
micro-political activity, the influence of sub-unit statements and corporate strategies into action
power, and the priorities and preferences of key plans, link(ing) the short term with the long
individuals (Thomas, 2000). Clearly political, so- term, bring(ing) together managers from differ-
cial, and group effects influence the development ent hierarchical levels and from different func-
and utilization of budgets in a university context. tional areas, and at the same time provid(ing)
continuity by the sheer regularity of the process”
In this politically charged environment, the bud-
(Umapathy, 1987, pg. xxii). A budget translates
get and the process of its development may influ-
an institution’s plan into priorities (Whalen,
ence or be influenced by the level of organization-
2002). Complications can arise however from
al trust held by participants in the process. Trust
a long list of considerations: when organization
can be thought of as expectations regarding “the
goals are not clear or are conflicting; when there
future contingent actions of others” (Sztompk,
is a lack of agreement regarding priorities; when
1999). Trust in a business context, is the expecta-
there is inconsistency between stated priorities
tion that the other party will be honest, consid-
and subsequent resource allocations; when the
erate, accountable and transparent (Tapsocott,
methods for achieving outcomes are unclear;
2003). Trust is seen to provide an advantage to an
when there are limited resources; or when indi-
organization. It leads to more effective communi-
viduals determining resource allocations and/
cation, increased co-operation, and a diminished
or performance benchmarks have a conflict of
resistance to change. Given the unique nature of
interest. In other words, the nature of complex
the university—their knowledge based outcomes
organizations such as universities can result in a
and politically charged environment—together
budget that is a reflection of these complexities as
with their increased focus on cost structure and
opposed to strict economic considerations.
control, the relationship between budgeting
practices and organizational trust is worthy of The budget, together with the process used to
further investigation. create it, can be seen to be something far differ-
42 Fall 2012 (Volume 8 Issue 2)
Participative Budgeting, Budget Evaluation, and Organizational Trust in Post-Secondary Institutions in Canada
ent than a rational statement of resource alloca- cess of setting the budget—can lead to improved
tion based on agreed upon strategic goals. In one individual and organizational performance. A
example, the budget can be seen to be the prod- review of the empirical literature has, however,
uct of a negotiation exercise (Wildavsky, 1984). shown inconsistent results (Shield and Young,
Given a finite level of resources, a commitment 1993). In their review of participative budgeting
of resources to a specific unit or activity within literature Shields and Shields (1998) attribute
an organization necessitates that other units or these inconsistent results in part to the inade-
activities will do with less. The planning aspect quate recognition of antecedents of participative
of the budget process can thus be viewed as less budgeting. Building on this, Libby (1999) looked
a division of resources to achieve an agreed upon at the impact of voice and explanation and found
result, and more of a political exercise where that the inclusion of both led to significant per-
competing organizational interests vie for rec- formance improvements. Voice is defined as the
ognition and support. The budget projections ability of subordinates to be involved in a deci-
can also be affected by budget gaming (Jensen, sion process by communicating their views to
2003), where resource allocations are set at lev- their superiors (Leventhal, 1980). Explanation is
els designed to force increased efficiencies (low), defined as a causal account or justification pro-
or resource needs requested at levels designed to vided by the superior when the outcome of the
allow for slack (high). In neither case would the decision process is not affected by the subordi-
budget figure be an amount representing actual nates’ communication preferences (Bies, 1987).
need. This “gaming” of the budget is especially In other words, performance went up when par-
problematic when budget values are used as part ticipants felt they were listened to or, when their
of an organization’s performance evaluation/ recommendations could not be implemented,
control system. Going back as far as the 1950’s they were given an explanation as to why. These
(Argyris, 1952) it has been shown that the value are characteristics of human interaction that can
of budgets to the function of an organization is build trust.
related to managements leadership style in the
development and utilization of this tool.
Trust
As institutions of higher learning whose focus
Levels of trust, together with perceptions of ac-
is on teaching, research, and service, resource
countability and power have been found to influ-
distribution decisions within universities can be
ence budgetary practice (Goddard, 2004). Trust
subject to a high level of political influence. The
can occur between individuals or between indi-
goals of research and teaching are understood,
viduals and groups. It is recognized as an impor-
but the exactness of what is to be learned is not
tant factor in determining organizational success,
agreed upon nor is the relationship between ef-
organizational stability and the well-being of em-
fort (resources) and outcome determinable. Rep-
ployees (Albrecht and Travaglione, 2003; Cook
utation plays a key role, allowing for the impact
and Wall, 1980; Shaw, 1997; Kramer and Tyler,
of authority, power and influence in the develop-
1996). High levels of trust between senior man-
ment of goals and the distribution of resources.
agement and employees strengthen an organiza-
Social attributes such as the non-profit character
tion’s ability to remain competitive (Davis et al.,
of the universities goals (Gross, 1968), strong at-
2000). This competitive advantage is assumed to
tachments to traditional academic values (Pat-
come about from the reduced transactions costs
erson, 2003; Lapsley and Miller, 2004), and the
(Cummings and Bromiley, 1996), more effective
unique nature of contemporary academic work
communication, increased co-operation among
as both a public service and creative knowledge
organization members and diminished resistance
work (Deem, 2004), support the unique nature
to change (Kramer, 1999)—factors important in
of the university as an organization. It is this
a university as well as business context. In terms
uniqueness that can make the allocation and
of budgeting, it has been argued that trust be-
evaluation of resource usage especially problem-
tween the resource allocation process members
atic.
plays an important role since it facilitates better
It has been argued that the use of participative management of the process and supports struc-
budgeting—involving subordinates in the pro- tures of accountability between participants
Journal of Academic Administration in Higher Education 43
Cynthia V. Simmons
(Manochin, 2008). In his investigation of local HYPOTHESES
governments, Goddard (2004) found that orga-
This study set out to investigate three main hy-
nizations characterized by a high degree of trust
potheses. The first is that there will be a positive
had open participative budget processes. The
relationship between an individual’s perceived
converse also being true with “distrustful” or-
level of participation in setting the budget at their
ganizations adopting closed budgetary practices.
college/university and the overall value (grade)
In universities where resource pressures are high;
that they give to the budgeting process at their
where tradition, micro-political activity, and dif-
institution. Participation in setting the budget
ferential sub-unit power exists; and where there
would increase an individual’s understanding of
is limited knowledge of resource allocation prac-
the process, it would help them understand the
tices; an understanding of the relationship be-
constraints facing the institution, and it would
tween an administrator’s level of organizational
give them a voice. This increased understanding
trust and their views and perception of the bud-
and increased opportunity to exercise influence
get could lead to improved functionality.
should increase an individual’s perception of the
Researchers have defined trust in a number of value of the budget process.
ways (Dietz and Hartog, 2006). Mayer et al.
Hypothesis 1A considers how useful individu-
(1995) characterized trust as a willingness to be
als find the budget when needing to determine
vulnerable. Cook and Wall refer to trust as the
the financial impact of different event scenarios.
extent to which one is willing to ascribe good
Given that participation in setting the budget
intentions to and have confidence in the words
increases an individuals understanding of the
and actions of other people (1980). Albrecht and
process, the resources available, and the factors
Travaglione define trust in senior management
that influence their distribution, it is hypoth-
as “an employee’s willingness to act on the ba-
esized that there will be a significant positive re-
sis of the words, actions, and decisions of senior
lationship between budgetary participation and
management under conditions of uncertainty or
budget usefulness. It is expected that perceived
risk” (2003, pg 78). The definition of trust used
budget usefulness will be positively related to the
in this study is the one articulated by Cummings
grade assigned the budget.
and Bromiley (1996). Trust being a belief that
“another individual or group (a) makes good- The second hypothesis is that there will be a neg-
faith efforts to behave in accordance with any ative relationship between the level of perceived
commitments both explicit or implicit, (b) is budget participation and the level of perceived
honest in whatever negotiations preceded such budget gaming. Budget gaming, where organi-
commitments, and (c) does not take excessive ad- zational personnel develop budget information
vantage of another even when the opportunity is based not on true expectations of availability
available” (pg 303). This definition of trust was and need, but rather on an amount designed to
designed specifically to address three assertions improve apparent performance against budget,
underlying transaction cost economics, where ac- is considered a significant drawback to participa-
tors are said to “lie in negotiations, cheat on deals tion. If budget levels and targets are set exclusive-
if it is profitable to do so, and exploit opportuni- ly by higher-level personnel, lower-level personnel
ties for renegotiation to their utmost” (pg. 303). would not have the opportunity to inflate their
Given the use of budgets as an instrument for re- stated needs and costs and gaming cannot take
source allocations and performance evaluations, place. Gaming can also be understood to occur,
together with its multiplicity of understood however, when higher-level personnel manipu-
definitions, selecting an approach to trust specifi- late the budget in order to drive down costs over
cally designed to address prominent assumptions the short term or to move resources into areas
underlying management practice was deemed that benefit upper management. With increased
appropriate. The Instrument subsequently devel- participation, all personnel should have a clearer
oped set out to specifically measure each of the understanding of the budgeting process as well as
three components of their definition, assessing the needs and resources available in the organiza-
both how individuals felt (their affective state) tion. The increased transparency brought on by
and thought (their cognitive state) about each. participation should reduce the perception that
44 Fall 2012 (Volume 8 Issue 2)
Participative Budgeting, Budget Evaluation, and Organizational Trust in Post-Secondary Institutions in Canada
others are, or have the opportunity to, game the was determined by a series of 7-point likert style
system. questions where subjects were asked their level
of agreement or disagreement with questions on
The third hypothesis is that there will be a posi-
levels of inflated costs, understated revenues, and
tive relationship between an individual’s per-
the propensity of individuals to use the budget to
ceived level of participation in setting the bud-
promote their own unique interests. Associated
get at their college/university and their level of
with the questions on budgeting and the budget
organizational trust. Expanding the number
process, additional information was collected
and level of individuals included in determining
on the manner in which costs were and should
the activities and priorities of the institution, as
be determined and allocated across the different
well as the level of resources required to carry out
functional units of their various institutions, and
these activities, would indicate a more open and
the value of this cost information to their deci-
transparent approach to managing the working
sion-making. The overall budget evaluation mea-
of the organization. This increased interaction
sure (Grade) was based on that developed by Lib-
resulting from the participation, the openness
by & Lindsay, 2010. It asks individuals to assign
and transparency of upper level administration,
an overall grade to the budgeting system/process
together with an increased voice from lower lev-
at their institution considering time spent, over-
els in the organization should increase individu-
all effectiveness and any dysfunctional behavior
als’ views regarding the good efforts and honesty
it might cause. Individual trust levels were de-
of others in the organization, i.e. their level of
termined using a modified version of the Cum-
trust in these others.
mings and Bromiley short-form organizational
trust inventory (1996). The entire questionnaire
METHOD took between 15-20 minutes to complete.
A 50-item questionnaire was developed and dis-
tributed electronically using the Qualtrics web SAMPLE
survey tool. The survey was based on preliminary
A stratified sample of nine hundred and thirty-
research, where the author carried out a series of
two college/university administrators from sixty-
semi-structured interviews with a small sample
five post-secondary institutions was selected. The
(12) of university administrative personnel across
institutions varied in size and included Colleges,
Canada. The preliminary research found a rela-
Primarily Undergraduate Universities, Com-
tionship between the way budgets are developed,
prehensive Universities, and Medical/Doctoral
the individual’s assessment of these budgets, and
Universities. Individuals were drawn from each
their level of organizational trust.
of three tiers of administration. The tiers were
The current study’s survey questionnaire asked defined as: 1- Subject Level Department/Area
subjects to identify the type of institution they Heads; 2- Faculty/School level Deans, Assistant/
worked at (College or Primary, Comprehensive, Associate Deans, and Financial Services Direc-
or Medical/Doctoral University); the Province tors, and 3—University level Provosts, Assistant/
the institution was located in, the Faculty/or Associate Vice Presidents, and Program Level
Area they worked, and the highest administra- Directors. These selected participants should
tive job title they had held. Participation was de- all have familiarity developing and/or working
termined by asking participants to indicated on within a budget as part of their administrative
a 7-point scale their level of agreement/disagree- responsibilities. At the smaller institutions all in-
ment with statements designed to determine the dividuals working in a specific tier may have been
degree that budgets were set exclusively by central selected. For larger institutions having more than
administration as opposed to an iterative process 5 individuals working in each tier, participants
were both lower and upper levels of administra- within each tier were selected at random.
tion contributed equally. Usefulness was deter-
mined by asked for their agreement with the
RESPONDANT DEMOGRAPHICS
statement that the budget was a useful tool in de-
termining the financial impact of different event One hundred and seventy usable responses to
scenarios—for what if analysis. Gaming too the survey were obtained–a response rate of 18%.
Journal of Academic Administration in Higher Education 45
Cynthia V. Simmons
Some respondents failed to answer all of the
Table 1
questions on the survey, in these instances their
Provinces Responses
responses are excluded from the relevant analy-
Alberta 20
sis. Individuals responded from every Province
British Columbia 28
in Canada with the largest number coming from
Ontario (79). As no individual identifying infor- Manitoba 7
mation was collected, respondents were asked to New Brunswick 7
identify the type of Post-secondary institution Newfoundland & Labrador 1
they worked at, as well as their administrative
Nova Scotia 12
job title. The most frequent type of post-second-
Ontario 79
ary institution of respondents were those from
Prince Edward Island 3
Comprehensive Universities (73) and the most
common administrative job title given was in the Quebec 7
category of Provost, Vice President or Assistant/ Saskatchewan 6
Associate V.P. (65). In some instances parts of the Institutional Type Responses
questionnaire were left blank. More detailed in-
College 19
formation regarding the administrative level, in-
Primarily Undergraduate Univ. 45
stitutional type work at, and Provincial location
Comprehensive University 73
is provided in Table 1.
Medical/Doctoral University 33
Administrative Role Responses
FINDINGS
Academic Dept/Area Head 31
Dean, Asst/Assoc Dean 60
Participation
Faculty level Director 2
To solicit their views on the level of budgetary Provost, Vice Pres., Asst/Assoc VP 65
participation at their institutions, participants
University level Director 9
were asked to indicated their level of agreement
Other 3
with two statements:
P1) the operating budget at my college/uni- Budget Usefulness
versity is largely set by upper level ad-
ministration, and Budget usefulness was determined by asking the
P2) the operating budget at my college/uni- respondents to indicated their agreement, on a
versity is set through an iterative process seven point scale, with the statement: “I find my
with both lower and upper level admin- unit’s operating budget to be a useful tool in de-
istrative units contributing more or less termining the financial impact of different event
equally. scenarios, i.e. it is useful for ‘what if’ analysis.”
The mean score of 4.19 indicates that on aver-
They indicated their level of agreement on a 7
age the respondents neither agreed nor disagreed
point scale ranging from strongly disagree to
with this statement. (See Table 2)
strongly agree. P1 was reversed scored and P1
and P2 were added together to derive a participa- Budget Gaming
tion index. Scores could range from 2 for agree-
The perceived level of budget gaming carried out
ment that the budget was set Centrally to 14 for
at the participants’ institution was determined
agreement that the budget was set in a participa-
by constructing an index of responses to four
tive manner. An average score of 6.16 indicates a
statements. As with the budgetary participa-
sight tendency toward centralize budget setting
tion measure, respondents were asked to indicate
process (See Table 2)
their level of agreement on a 7 point Likert-type
scale. The statements were:
46 Fall 2012 (Volume 8 Issue 2)
Participative Budgeting, Budget Evaluation, and Organizational Trust in Post-Secondary Institutions in Canada
Table 2
Descriptive Statistics for Measures
Minimum Maximum Mean Std. Dev.
Participation 2 14 6.16 2.78
Trust 24 83 58.33 12.897
Budget Grade 1 (F) 13 (A+) 8.22 (B-) 2.773
Budget Gaming 5 26 15.39 4.11
Budget Usefulness 1 7 4.19 1.72
G1) during our budgeting process it is ex- Trust
pected that operating units will in-
Individual trust levels were determined using
flate their projected costs,
a modified version of the Cummings and Bro-
G2) during our budgeting process it is ex- miley short-form organizational trust inventory
pected that central administration (1996)—see Appendix A. Subject were asked to
will understate their projected rev- indicate their level of agreement/disagreement
enues, with the statements on a 7-point scale. Slight
editorial modifications to the questionnaire were
G3) the budgeting process at my institu-
made to have it fit the academic setting. The
tion is designed to provide a validat-
short-form (12-item) questionnaire was selected
ing mechanism for the incremental
because it provided a parsimonious measure with
reduction of expenditures, and
almost identical explanatory power to their long-
G4) individuals at my college/university form (62 item) inventory (item to factor corre-
use the budgeting process to pro- lation of .522 vs. .530 for the long-form), giving
mote their own unique interests. room and time for other measures.
The mean score of 15.39 indicates that on average An index measure was developed by reverse scor-
overall respondents neither agreed nor disagreed ing questions 4, 5, 6, 10, and 12 and then adding
that budgeting gaming was occurring at their in- the items together. An average (mean) trust score
stitution. (See Table 2) of 58.33 was determined from the responses, in-
dicating an overall positive, albeit sight, level of
Budget Grade organizational trust. (See Table 2)
The overall budget evaluation measure (Grade)
Administrative Level
was based on that developed by Libby & Lind-
say, 2010. It asks individuals to assign an overall An ANOVA was carried out to determine if
grade to the budgeting system/process at their there was a significant difference in perceived
institution considering time spent, overall effec- budgetary participation, levels of organizational
tiveness and any dysfunctional behavior it might trust, the budget grade, budget usefulness, and
cause. The grade indicator in Qualtrics allowed the perceived level of budget gaming between
the respondent to choose a grade ranging from administrative groups. It is reasonable to assume
an F (which would be given a value of 1) through that individuals at different administrative levels
D-, D, D+, C-, C, C+, B-, B, B+, A-, A, and A+ within university will have different views on the
(which would be given a value of 13). The grades practices and functioning of the organization.
assigned by participants to their institution’s Their level of knowledge regarding the budgetary
budgeting process ranged from a 1 (F) to a 13 practices and their level of influence in setting the
(A+) with the average grade assigned being an budget and influencing the culture of the institu-
8.22 (B-). (See Table 2) tion is likely to rise as an individual moves up the
organizational hierarchy. It is hypothesized that
the perceived level of budgetary participation
Journal of Academic Administration in Higher Education 47
Cynthia V. Simmons
will be significantly related to organizational Participation and Budget Usefulness
trust, the budget grade, budget usefulness, and
As shown in Table 4, multiple linear regression
the perceived level of budget gaming that is tak-
found that the perceived level of participation
ing place. Since three levels of university admin-
is significantly related to the usefulness of the
istration were surveyed, it is important to con-
budget when determining the impact of differ-
sider the impact of administrative level. Table 3
ent event scenarios. Participation showed a stan-
shows the results of this analysis indicating that
dardized coefficient of .303, with a t of 3.621 and
in fact administrative level is significantly related
a significance level of .000. The level of adminis-
to all the variables of interest with the exception
tration held by the individual was not related to
of Budget Usefulness.
their responses concerning the usefulness of the
budget.
Table 3
ANOVA of Measures of Interest by
Administrative Type Participation and Budget Gaming
F Sig.
As described earlier, budget gaming has been pre-
Participation 7.902 .001 sented in the literature as a downside to increased
budgetary participation. Individuals when given
Trust 5.883 .003
a voice to influence the flow of resources or the
Budget Grade 10.829 .000
standards used to evaluate their performance are
Budget Gaming 7.703 .001 expected to try and set a budget that will benefit
them individually and not necessarily that of the
Budget Usefulness 1.814 .167
organization as a whole. I hypothesized however
that the positive benefits of budgetary participa-
Participation and Budget Grade tion—the improved understanding of the bud-
get process and increased level of trust between
The first hypothesis stated that there would be a
members of the organization—will be such that
positive relationship between an individual’s per-
the perception that others are “gaming the pro-
ceived level of participation in setting the budget
cess” will decrease with increased participation.
at their college/university and the overall value
The impact being that there will be a negative
(grade) that they give to the budgeting process at
relationship between perceived level budgetary
their institution. Linear regression analysis was
participation and the perceived level of budget
carried out with budget grade as the dependent
gaming. With Gaming as the dependent vari-
variable and participation as the independent.
able, regression was used once again to determine
The results indicated a significant positive rela-
the direction and significance of budgetary par-
tionship between these two measures (t 3.739, sig
ticipation. A significant negative relationship was
of .000) supporting the hypothesis.
found. The higher the level of perceived partici-
Because administrative type was determined to pation in the budget process, the lower the level
be significantly related to the constructs of inter- gaming that was perceived to take place. The
est, an additional analysis was carried out to de- standardized coefficient was -.253, with a t of
termine if level of perceived budgetary participa- -3.153, and a significance level of .002. With the
tion would remain a significant determent of the addition of administrative level as an explanatory
grade assigned the budget when administrative variable the standardized coefficient of perceived
level was added as an additional explanatory vari- participation dropped to -.194 with a t of -2.332
able. The results of the multiple regression indi- and a significance level of .021. The administra-
cated that both participation and administrative tive level standardized coefficient was -.189, with
level were positively related to the budget grade. a t of -2.278, and a significance of .024. So, as with
Participation showed a standardized coefficient the earlier findings, while administrative level of
of .239, with a t of 2.783, sig .006 and admin- the respondents is related to their perceived level
istrative level a standardized coefficient of .292 of budget gaming (the higher the administrative
with a t of 3.409, and significance of .001. level the less budget gaming is seen to exist in the
system), those respondents who perceived a more
48 Fall 2012 (Volume 8 Issue 2)
Participative Budgeting, Budget Evaluation, and Organizational Trust in Post-Secondary Institutions in Canada
Table 4
Results of Multiple Linear Regression
Dependent Independent Standardized
t Sig.
Variable Variables Coefficients
Participation .239 2.783 .006
Budget Grade
Admin. level .292 3.409 .001
Participation .303 3.621 .000
Budget
Usefulness Admin. level .033 0.397 .692
Participation -.194 -2.332 .021
Budget Gaming
Admin. level -.189 -2.278 .024
Participation .202 2.483 .014
Organizational
Trust Admin. level .268 3.294 .001
participative budget process at their institution the budget setting process as being set through
also perceived a lower level of budget gaming tak- an iterative process with both lower and upper
ing place. administrative units contributing more or less
equally (a participative approach), considered the
budget process to be more effective, they found
Participation and Organizational Trust
the budget more useful, they felt that less gaming
The second hypothesis stated that there would (manipulation of the numbers to optimize per-
be a positive relationship between an individual’s sonal/individual unit performance) took place,
perceived level of participation in setting the and scored higher on their level of organizational
budget at their college/university and their level trust. The differences in the scores on these mea-
of organizational trust. Multiple linear regres- sures were significantly different than those who
sion was once again used to test the relationship indicated that the operating budget was non-par-
between participation and organizational trust ticipative, i.e. predominately set by upper admin-
with administrative level added as an additional istration.
explanatory variable. As in the case of the Budget
A participative budgeting system allows individ-
Grade, participation and was found to be posi-
uals working in various levels of administration
tively related to Organizational Trust supporting
to have more input into resource distribution
the hypothesis. With the addition of administra-
decisions. They have a voice in these decisions.
tive level as an additional explanatory variable,
They also have a level of knowledge on the nature
participation remained significantly and posi-
of the budgeting process at their School—the
tively related to Trust. Participation showed a
way the system works, the categories and level
standardized coefficient of .202, t of 2.483, and
of demand on the resources. As a result of their
sig. of .014 and administrative level a coefficient
involvement and increased knowledge they have
of .268, a t of 3.294, and sig. of .001.
a greater understanding of the reasons why spe-
cific desired resource distributions may not be
CONCLUSION forthcoming. This increased voice and under-
standing can also occur as a result of moving
The results of this survey of academic adminis-
up the hierarchy of university administration
trators in Colleges and Universities across Can-
from Department Head, to Dean, to Provost for
ada indicate that there is a strong relationship
example. Because individuals at various levels
between these individuals’ views of the participa-
within the university administrative hierarchy
tive nature of the budget process on their cam-
took the survey, it was important to control for
pus and their attitudes toward the budget and
administrative level when looking at the impact
the broader organization. Individuals who saw
Journal of Academic Administration in Higher Education 49
Cynthia V. Simmons
of participation on the measures of interest. The is higher. These results should not be surprising
survey data was analyzed using multiple linear re- when you consider that the university faculty
gression with both participation and administra- and administration are highly educated knowl-
tive level included as independent variables. The edge workers who have chosen to work in orga-
administrative level of the individual was in fact nizations that have a history of collegial gover-
found to be significantly related to their evalua- nance. These individuals are smart, well trained
tion of the budget process (the grade assigned), people who are accustomed to having a voice and
the measure of gaming taking place (a negative who search out explanations when they are not
relationship), and their level of organizational forthcoming. And yet this survey found an aver-
trust, but the level of perceived budgetary par- age participation score of 6.16 out of a possible
ticipation remained a significant explanatory fac- 14. This would indicate that more respondents
tor as well. Interestingly, while participation was viewed the budget at their institution as being
significantly related to the perceived usefulness set by central administration as opposed to being
of the budget for carrying out what if analysis, the result of a participative/interactive process
administrative level was not. This would imply across various administrative levels.
that those who worked at setting the budget were
A university budget is more than a statement of
able to use it for determining the impact of vari-
resource allocations by operating area. It func-
ous situational scenarios, independent of their
tions as a communications medium—a vehicle
administrative level.
by which the goals, objectives, and constraints of
participating agents are made clear. The broader
DISCUSSION AND LIMITATIONS the true participation in the budget process, the
more voices are heard and the deeper the under-
Earlier preliminary research on the relationship
standing of the conflicting demands on the insti-
between budget participation and organizational
tution and the necessary compromises that must
trust in Canadian Universities (Simmons, 2012)
be taken. The budgeting process is considered to
found that university administrators possessing
be more effective and the level of organizational
a higher level of organizational trust were those
trust is higher. Institutions who fail to imple-
who felt their views on the budget were heard
ment this practice are limiting the usefulness of
and considered, who saw a correspondence be-
the budget as a management tool.
tween the stated goal of the institution and the
subsequent resource allocations, and who had The findings of this study indicate that individu-
available to them useful financial information. als who perceive the budgeting process at their
Those who did not witness this approach to uni- institution to be participative in nature find the
versity budgeting had low levels of organizational budget to be more useful, give the budget a high-
trust. This preliminary research was conducted er overall grade, believe that less budget gaming is
using semi-structured interviews with 12 senior taking place, and indicate a higher level of orga-
administrators across Canada and was limited nizational trust. These relationships are all signif-
by the small number of individuals interviewed. icant and independent of the influence of the ad-
This current survey based research was designed ministrative level of the individual respondents.
to address the limitations of the previous study While we are confident that these relationships
by expanding the number of individuals whose exist, the study is limited in that it measures the
views could be considered, strengthening our variables over a brief (one month) period of time
confidence in the determined relationship. This and the direction of causality cannot be verified.
study confirms and strengthens those earlier Our confidence in the directionality of these re-
findings. lationships would increase by conducting long-
term case research in organizations considering
Colleges and Universities who utilize a more
the adoption of a participative budgeting ap-
participative approach to resource allocation de-
proach. In this case based approach measures of
cisions benefit from this approach. The budget
organizational trust, budget grade, gaming, and
itself is seen to be more useful and effective, there
budget usefulness could all be measured before
is perceived to be less manipulation of the num-
the adoption of a participative system and again
bers, and the overall level of organizational trust
over a number of periods post adoption. Signifi-
50 Fall 2012 (Volume 8 Issue 2)