The Effect on Managerial Attitude and performance


Budget is not only a financial plan that sets forth cost and revenue goals for responsibility centers within a business firm, but also a device for control, coordination, communication, performance evaluation, and motivation. According to Hanson (1966) budgets were extremely useful in assisting management to fulfill its functions of planning, coordinating and con-trolling enterprise activities. Knowledge of the budgetary setting behavior and information about the extent to which those goals have been achieved, provides head of departments a basis for measuring efficiency, indentifying problems and controlling costs.

Communication of budgeted goals downward in an organization informs members of lower management about what upper management expects of them; conversely, upper management learns about the accomplishments and problems of lower management through up-ward-flowing reports (Kenis, 1979). Furthermore, budget information helps upper management to evaluate the performance of lower managers and distribute rewards and punishments. In this context, budgets represent an important part of the organization's motivational system designed to improve managerial attitudes and performance.

1.2 Problem Statement

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Generally, the budget potential may be a useful managerial tool for the organizational. However, improperly applied budgets can lead to dysfunctional behavior and negative attitudes among organizational members [Argyris, 1952; Wallace, 1966; Schiff and Lewin, 1970]. A formal budget is essential to every organization. In Hamdan Tahir Library, Universiti Sains Malaysia (USM) the requirements to advance library services are considered, but the budget estimate does not survive the various stages of approval. Budgets are usually highly scrutinized and reviewed and there is always a reduction before their final approval. Therefore, the inadequacy of the library budget is a worry from the beginning of the budget's implementation.

According to Kenis (1979), most of the positive and negative effects of budgets on the attitudes, behavior, and performance of staffs can be traced to the budgeting setting behavior of management. The concept of budgeting setting behavior includes such budgetary goal characteristics as participation, goal clarity, feedback, budgetary evaluation, and goal difficulty. Thus, this research is conducted to examine the effects of budgetary setting on job related attitudes (job satisfaction, involvement, tension, etc), budget related attitudes (attitudes toward budgets, budgetary motivation, etc) and self rated performance (budgetary performance, cost efficiency, etc) for unit staffs at the Hamdan Tahir Library Universiti Sains Malaysia (USM), who have budget responsibility.

1.3 Research Questions

What is the process of budgetary setting in Hamdan Tahir Library Universiti Sains Malaysia (USM)?

How the level of budgetary setting behaviors in library USM does influence these factors: job related attitudes, budget related attitudes and self rated performance?

1.4 Research Objectives

To identify the process of budgetary setting in Hamdan Tahir Library Universiti Sains Malaysia (USM).

To examine the effects of budgetary setting behaviors on job related attitudes, budget related attitudes and self rated performance at library USM.



2.1 Budgets (USM)

In Nigerian universities, libraries derive funds from government allocations, endowment funds, library fees, gifts, and other miscellaneous sources such as the sale of duplicate materials, fines and photocopying. Library revenues and expenditures are systematically divided into two categories: capital and recurrent budgets. These are defined as follows: 1) Capital budget: this budget is for the long-term acquisition of fixed assets such as a building, library automation or extensive research equipment. A capital budget is usually in place for a period of five years. 2) Recurrent budget: this budget is for staff salaries, books, supplies and

2.2 Budgetary Process/Procedures (USM)

Emojorho (2004), said that, in academic libraries, the budgetary procedure starts with the bursar who sends out a notice to the librarian asking for preliminary budget estimates. When the librarian gets this notice, he and the various section heads of the library meet and draw up the budget estimate which is then sent to the bursar. According to Ifidon (1999), the bursar integrates and collates the various estimates from the various departments. The estimates are then channelled through, and defended, at the following six levels:

(1) Library committee: the librarian presents and explains his budget estimate.

(2) Development and Estimate Committees: the librarian defends his budget estimate.

(3) Finance and General Purposes Committee.

(4) The University Council.

(5) The National University Commission/ Commission of Higher Education.

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(6) Ministry of Finance and Education Development - through the Ministry of Education.

Budget negotiations require committee or board meetings with the person or persons to whom the librarian or vice chancellor/bursar reports. The university librarian is not usually present at the last four stages. At those levels, the library budget forms part of the university budget and the vice chancellor and bursar process and defend the total budget estimate. The primary purpose of a library budget is to improve planning. A good budget program forces management to focus attention on particular operational and financial problems in advance and to plan effectively for them. In constructing a budget, the library's objectives are carefully considered and the library's departmental needs and functions are addressed.

2.3 Budgetary Setting Behaviors

Budgetary Participation

Budgetary participation refers to the extent to which managers participate in preparing the budget and influence the budget goals of their responsibility cen-ters. Many authors have suggested that participation in setting budgetary goals encourages managers to identify with the goals, accept them more fully, and work toward their achievement [Argyris, 1952; Becker and Green, 1962; Wallace, 1966; Hanson, 1966; Dunbar, 1971]. Partici-pation in task-goal setting and decision making has also been encouraged and promoted by such behavioral scientists as McGregor, Likert, Argyris, and Locke. The results of many empirical studies have supported the positive effects of such participation on subordinates' attitudes; with respect to performance, however, the findings generally have been inconclusive [Vroom, 1964; Lowin, 1968; Yukl, 1971 ]. Steers [1976] found positive and signifi-cant relationships between participation in task-goal setting and job satisfac-tion and job involvement, but no relation-ship between participation and employee performance. Many other studies reported little or no relationship between subordinates' participation in goal set-ting and their performance, goal accep-tance, or goal attainment [French et al., 1966; Carroll and Tosi, 1970- Latham and Yukl, 1976; Ivancevich, 1976]. The few budgetary studies in this area have reported similar results. Milani [1975], for example, found positive and significant correlations between partici-pation in budget setting and attitudes toward the job and company; but the relationship between participation and job performance was very weak. Swier-inga and Moncur [1975] found higher need satisfaction among managers who were consulted on their budgets than those who were not consulted. Similarly, Hofstede [1967] reported positive atti-tudes among subordinates who partici-pated in budgeting.

Budget Goal Clarity

Budget goal clarity refers to the extent to which budget goals are stated specifi-cally and clearly, and are understood by those who are responsible for meeting them. Locke [1968] suggested that setting specific goals is more productive than not setting goals and urging employees to do the best they can. He claimed that conscious goals regulate behavior. Am-biguously stated goals can lead to the confusion, tension, and dissatisfaction of employees. Several research studies sup-port the positive effects of task-goal clarity and specificity on the goal com-mitment, goal achievement, and satisfac-tion of employees [Latham and Yukl, 1975; Steers, 1976; Ivancevich, 1976]. Studies dealing with goal clarity in budgeting, however, have been lacking.

Budgetary Feedback

Feedback about the degree to which budget goals have been achieved is an important motivational variable. If mem-bers of an organization do not know the results of their efforts, they have no basis for feelings of success or failure and no incentive for higher performance; furthermore, they might become dissatis-fied [Becker and Green, 1962]. The few empirical studies on the effects of feed-back on performance, however, give inconclusive results. Carroll and Tosi [1970], for example, found feedback to be positively correlated with self-rated goal attainment, but not with self-rated effort level. Steers [1975] and Kim and Hamner [1976] also reported positive and significant correlations between feed-back and performance. Studies by Cha-panis [1964] and by Hackman and Lawler [1971], on the other hand, failed to support these findings.

Budgetary Evaluation

Budgetary evaluation refers to the extent to which budget variances are traced back to individual department heads and used in evaluating their per-formance. The fashion in which budgets are used in performance evaluation tend to influence the behavior, attitudes, and performance of the participants. A puni-tive approach, for example, can lead to lower motivation and negative attitudes; a supportive approach, on the other hand, may result in positive attitudes and behavior [Welsch, 1976].

Budget Goal Difficulty

Budget goals may range from very loose and easily attainable to very tight and unattainable. Easily attainable goals fail to present a challenge to participants and, therefore, have little motivational effect. Very tight and unattainable goals, on the other hand, lead to feelings of failure, frustration, lower aspiration lev-els, and rejection of the goals by the participants [Becker and Green, 1962; Dunbar, 1971]. Most budgeting text-books suggest that for motivational purposes budgetary goals should be tight but attainable. Hofstede [1967] stated that tighter budget goals lead to higher motivation; beyond a certain limit, how-ever, tightening budget goals reduces motivation. Locke [1968] also claimed that difficult task goals lead to better performance than easy goals. Findings of several studies failed to provide such clear evidence. Carroll and Tosi [1970], for example, found a posi-tive and significant correlation between perceived task-goal difficulty of managers and their self-rated performance. Blumenfeld and Leidy [1969] also re-ported that the performance of salesmen and servicemen who were assigned more difficult goals was higher than the per-formance of those who were assigned easy goals. But results of studies by Stedry and Kay [1966] and Steers [1975] failed to support the positive effects of goal difficulty on motivation and per-formance.

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2.4 Managerial Attitude and Performance

Three behavioral variables which have been dealt with in the literature are ex-plored in detail in this study: (1) per-formance, (2) attitude toward the job, and (3) attitude toward the company. The performance variable receives the most attention since it appears as a crucial variable in almost all studies. The job and company attitude variables are examined because of their important roles in the literature as intervening variables which are used to explain differing levels of per-formance.


In a survey article, Sales (1966) indi-cates that it is commonly assumed that employees will perform at higher levels in a participatory situation. The reasoning for the assumption is found in the higher "reinforcing value of work performed" in the participatory setting (1966, p. 276). Sales states: "It is a basic tenet of experi-mental psychology that high levels of per-formance will obtain in situations in which the reinforcement is large, whereas low performance levels will occur in those in which the reinforcement is small" (1966, p.276). Becker and Green feel that a "successful program of participation can result in greater expenditure of effort on the part of employees to reach goals specified in the budget" (1962, p. 399). Several levels of aspiration studies are cited to support their contention. Reports on activities at Harwood Corp-oration (Coch and French, 1948), Lincoln Electric Company (Stedry, 1967), and Non-Linear Systems (Kuriloff, 1963) em-phasize "greater" and "more effective" performance. In each instance, participa-tion plays a very important part in the results. Nonetheless, some findings conflict with the higher performance results mentioned above. The Morse and Reimer (1956) study is noteworthy since the nonpartici-pation group outperformed the participa-tion group. Bryan and Locke's (1967) lab findings plus the related empirical support (Blumenfeld and Leidy, 1969) conclude that nonparticipation by employees will yield better performance. Hence, the expected or anticipated performance benefit from participation is both supported and challenged. However, exploration of performance differences with participation and nonparticipation in budget-setting as the major variables has not had sufficient empirical testing.

Attitude Toward the Job

There are claims that participation gen-erates a better attitude toward one's job. Hanson (1966) feels that the act of becom-ing involved in budget creation enables the members of the organization to associ-ate more closely with the budget goals. Lowin suggests that the activities involved in a participatory situation should "con-tribute to the internalization of organiza-tional goals" (1968, p. 76). On the other hand, Cotter (1964) rejects the hypothesis that participating foremen will experience better job attitudes than foremen who do not participate. Bryan and Locke (1967) report better attitudes toward the task in a nonparticipation situation. In most instances, attitude toward the job is offered as an intervening factor which leads to or effects better perform-ance. The contrast between participation's expected effect on attitude toward the job and the actual results is typical of the mixed pattern offered by the literature. Thus, the relationship of budget participa-tion and job attitude should be tested.

Attitude Toward the Company

A second attitude difference described by proponents of participation is an im-proved or better attitude toward the company. Argyris (1952) touches on this when he indicates that heavy emphasis is placed on department performance rather than company performance by nonparticipating foremen. Argyris (1952) states that budgets set under participatory conditions would broaden the scope of the foremen's concern. Hanson (1966) supports this train of thought in asserting that participation will develop employee identification with all organizational goals. A study of teach-ers reports that those in participatory set-tings display a very favorable attitude toward their school system (Hornstein et. al., 1968). An important reason for examining this variable is the belief that a good attitude toward the company will lead to a more effective overall performance for the or-ganization. However, few studies directly discuss an employee's attitude toward the company. An important question has not been examined sufficiently in this area, namely: Does foreman participation or nonparticipation in budget setting relate to differences in attitude displayed toward the company?




This study will examine the following hypotheses:

1. Budgetary participation, budget goal clarity, and budgetary feed-back will have a positive effect on job satisfaction and job involve-ment, and will decrease job tension; budgetary evaluation and budget goal difficulty, on the other hand, will have a negative effect on job satisfaction and job involvement, and will increase job tension.

2. Budgetary participation, budget goal clarity, and budgetary feed-back will lead to better attitude toward budgets and higher bud-getary motivation, whereas bud-getary evaluation and budget goal difficulty will lead to negative atti-tude toward budgets and lower budgetary motivation.

3. Budgetary participation, budget goal clarity, and budgetary feed-back will have a positive effect on budgetary performance, cost effi-ciency, and job performance; bud-getary evaluation and budget goal difficulty, however, will have a negative effect on budgetary per-formance, cost efficiency, and job performance.

3.3 Sample

The sample of the study consisted of unit managers of the Hamdan Tahir Library located in the USM, Penang.


For this study, the methods of questionnaire and interview have been chosen as the reporting medium, which will be collected through primary data. Otherwise, to enhance data accuracy, data collected from one sources will be verified by reference to other sources whenever this is possible.

3.5 Measurements

Budgetary Setting Behaviors

For measurement of budgetary setting, twenty-six likert-type questionnaire items, scored from one to five will used to measure the budgetary setting and Statistical Package for Social Sciences will be used for factor analysis (Nie et al., 1975).

Twenty-six Likert-type ques-tionnaire items, scored from one to five, were used to measure the budgetary goal characteristics. These included 10 items from the budget-induced pressure ques-tionnaire [Fertakis, 1967] derived by Searfoss and Monczka [1973]; 14 items from the task-goal attributes (participa-tion, goal clarity, feedback, goal diffi-culty) questionnaires developed by Steers [1976], which were reworded to fit the budgetary goal setting environment; and two items which appeared to have face validity. Factor analysis, using the Statistical Package for Social Sciences [Nie et al., 1975], was employed to identify the patterns of relations among the 26 ques-tionnaire items. Six factors with eigen-values greater than one were extracted. These six factors accounted for 65 per-cent of the common variance of the 26 items. The initial principal factor matrix was rotated orthogonally (Varimax) to reach a final solution. The Varimax-rotated factor matrix is presented in Appendix A; the descriptions of the questionnaire items are presented in Appendix B. The names assigned to the factors and the meaning of higher scores on each factor are: (1) budgetary participation-greater participation and influence by managers in setting their budgetary goals; (2) budget goal difficulty-higher budget goal difficulty as perceived by the managers; (3) budgetary evaluation, gen-eral-use of budgets in performance evaluation in general to a higher degree; (4) budgetary evaluation, punitive greater use of budgets in performance evaluation in a punitive fashion; (5) budgetary feedback greater amount of feedback about budgetary performance received by the managers; (6) budget goal clarity greater clarity of budget goals and better understanding of the goals by the managers. In order to study the effects of these six budgetary goal characteristics on the job-related and budget-related attitudes and performance of managers, standard factor scores were computed for each manager on each of the six factors [Nie et al., 1975]. As the interscale correla-tions on Table 1 show, the resulting measurements appear to be relatively independent; none of the correlations reached the .05 significance level.

Managerial Attitude and Performance:

Job-Related Attitudes

Job satisfaction was measured by the Job Descriptive Index (JDI) which is a combination of five subscales measur-ing satisfaction with work, supervision, pay, promotion, and co-workers [Smith et al., 1969]. Each subscale consists of positive and negative statements about an aspect of the job. The respondents answer either "yes," "undecided," or "no." A "yes" answer to a positive item receives a score of 3, "undecided" a score of 1, and a "no" answer is scored zero. The negative items are scored in the opposite fashion. The overall job satis-faction score for a respondent, which can range from zero to 216, is obtained by adding all the scores for the five dimen-sions. This scale is one of the most widely used and carefully constructed measures of job satisfaction in existence today; it consistently has demonstrated high reliability and validity. Job involvement is measured by a six-item scale developed by Lodahl and Kejner [1965]. This scale measures the degree to which individuals identify psychologically with their jobs and the importance of the job to their self-image. The internal reliability [Cronbach, 1951] of the scale was computed as .93. Job tension, which represents tension arising from psychologically stressful circum-stances in the job environment, was measured by nine items chosen from the job-related tension index developed by Kahn et al. [1964]. This scale demon-strated .85 internal reliability. Even though these three variables correlated significantly with each other, as many other studies have demonstrated, they are considered by behavioral scientists as independent dimensions of job-related attitudes.

Budget-Related Attitudes

Attitude toward budgets was mea-sured by a four-item scale from Swieringa and Moncur [1975]. The scale, which demonstrated .77 internal reliability, measures the feelings of the participants about the usefulness of budgeting to themselves as managers. The three-item scale used by Hackman and Lawler [1971] to measure intrinsic motivation was reworded to fit the budgetary situa-tion and used here to measure budgetary motivation. This scale, which demon-strated an internal reliability of .79, measures the extent that the participants feel personal satisfaction and self-esteem when they achieve their budget goals. Even though these two variables corre-lated significantly with each other, factor analysis of the inter-item correlations demonstrated that they can be used as separate dimensions of budget-related attitudes. All of the above-mentioned attitude scales, with the exception of the job satisfaction scale, were five-point Likert-type scales scored from one to five. Scores on all items of each scale were averaged to arrive at a set of summary scores from each respondent.


The self-rated budgetary perfor-mance was measured by asking the respondents to indicate on a seven-point scale how often they have met their budget goals (have favorable variances). The responses ranged from never to always. The respondents were also asked to rate the cost efficiency of their depart-ments and their overall job performance; both used a five-point scale ranging from very poor to very good. The means, standard deviations, and intercorrela-tions of the dependent attitude and per-formance variables discussed above are presented in Table 2.