THE IMPACT OF PARTICIPATION IN BUDGETING ON WORK MOTIVATION: A STUDY OF NIGERIAN BREWERIES PLC, GUINNESS PLC AND UNIVERSITY OF NIGERIA, NSUKKA

ABSTRACT

The main objective of this study therefore is to examine the impact of participation in budgeting on work motivation in Nigerian organizations. To achieve this, staff of  Nigerian  Breweries  plc,  Guinness  plc  and  UNN  were  selected  to  provide primary   data   required.   Primary   data   was   collected   through   the   use   of questionnaires and oral interview. The researcher also used secondary data which was obtained from various documents and publications, textbooks, internet and journals. He also used tables to record data collected for easy identification and understanding. With the help of chi-square ( X2) and simple percentage method, the researcher found out that, the adoption of participative budgeting in these organizations have a great influence on workers  moral;    Employees  are more challenged with participatory budget when goals are not achieved than when imposed budget system is practiced; Performance increases when employees are motivated. However, the adoption of participative budgeting system by these organizations does not mean all is completely well with participatory budgeting method. It has some problems such as budget padding, lack of active cooperation, too  much  participation  and  discussion  can  lead  to  vacillation  and  delay.  To appreciate the uses of participative budget as a tool for motivating employees and enhancing performance in Nigerian organizations, problem areas were formulated and investigated to help draw conclusions and recommendations were made on how organizations in Nigeria can apply the concept of participatory budgeting system in enhancing motivation which eventually lead to increase performances to ensure that organizational objectives are achieved.

CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND TO THE STUDY

In every organization, establishment of goals is an essential pre-requisite of the planning process. All the three components of the economy (public sector, private  sector  and  individuals)  need  to  plan  for  their  future.  They  need  an instrument like budget that will assist them to effectively and efficiently achieve their set goals. Finance, time, materials, men and other resources need to be budgeted for in view of the fact that they are scarce in every sector of the economy.

The Institute of Cost and Management Accountants (ICMA) defined budget as “a plan quantified in monetary terms, prepared and approved prior to a defined period of time, usually showing planned incomes to be generated/or expenditures to be incurred during that period, and the capital to be employed to attain a given objective”. Budget could also be defined as an exercise in communication by which   the   expectations   of   management   about   levels   of   performances   of subordinates are communicated to the subordinates. For the future plan(s) to be effectively achieved there is need for managers and subordinates as well as other employees to participate in the preparation of budgets especially when it is discovered that the desired outcome is not being achieved.

In many organizations, it has been observed that goals are not attained due to lack of participation of superiors and subordinates managers, and other key personnel  in  the  budgeting  process.  Budget  can  be  used  by  management  to motivate managers and other employees. If managers participate in the planning process, they are likely to be more committed towards achieving the set objectives and goals. In other words, participation in budgeting can be a useful device for influencing managerial behaviour and motivating managers to perform in line with the overall goals of the organization. As the result of this, the research work on the topic “The impact of participation in budgeting on work motivation: study of Nigerian Breweries Plc, Guinness Plc, and UNN” is determine to see the effects of involving budgetees in the preparation of budget on work motivation towards achieving organizational objectives.

Generally, organizational goals and objectives are achieved by getting things done through people. Therefore, organizations can attain the set standards by encouraging both superior and subordinates’ participation in the formulation and implementation  of the  budgetary system.  Since  budget  estimates  represent  the summation  of  the  various  views  gathered  from  each  responsible  operating manager, their participation in the formulation of budget system must be total. There should be no pseudo participation to counter production.

The  purpose  of  budgeting  is  to  motivate  employees  and  to  co-ordinate efforts. When employees are motivated, they exert more effort towards achieving the task or goals set. Hence, participation in budgeting leads to motivation, and to better attitudes and improved performance.

1.2     STATEMENT OF THE PROBLEM

In as much as participation in budgeting has been advocated by many writers as a means of motivation, making task or job more challenging and giving individuals a greater sense of belonging and responsibility, it is still a problem in today’s competitive business environment.

Participatory budgeting system can be very effective in an organization if properly applied, failure to motivate workforce can create some problems such as:

       Budget padding

         When people involved in the budgeting process disagree in significant and irreconcilable ways, the process of participation can accentuate those differences thereby leading to de-motivation of workers.

         Lack of confidence: Managers that lack confidence are likely to find that participation in budgeting can only serve to increase their feeling of stress and tension due to uncertainty.

         In  congruence  between  the  level  of  participation  and  job  difficulty, performance will not be high when the amount of participation is disproportionate to the level of job difficulty.

         Lack of active cooperation among workforce: Budgetees may also use the opportunity to affect their budgets in ways that may not always be in the best interest of the organization, they may also distort information by claiming that they are not as efficient or effective at what they do as they appear, thereby attempting to lower management expectations of their performances. Therefore,  this  research  seeks  to  address  the  problems  of  participatory

budgeting  method  highlighted  above  as  regard  having  a  strong  influence  on workers moral with respect to employees’ motivation to enhance high performance thereby ensuring that organizational objectives are achieved.

1.3      OBJECTIVES OF THE STUDY

The  main  objective  of  this  research  work  is  to  examine  the  effect  of participation in budgeting on work motivation, hence other objectives include:

i.        To  find  out  whether  employees  are  more  challenged  with  participatory budget when goals are not achieved than when imposed budget system is practiced.

ii.       To find out whether performance increases when employees are motivated.

iii.     To establish whether participatory budgeting system helps organizations to achieve their set goals.

1.4     RESEARCH QUESTIONS

The purpose of this work has necessitated for certain questions to be asked which serves as a yardstick towards successfully proffering solutions to the problems highlighted above. The following questions are hereby posed;

i.        Does participatory budgeting method have a strong positive influence on workers moral?

ii.       Does employees’ motivation enhance high performance?

iii.     Does participatory budgeting method by organizations has a significant and positive effect on market power and profitability?

1.5     RESEARCH HYPOTHESES

Ho:   Participatory budgeting method has no strong positive influence on workers morale.

H1:   Participatory  Budgeting  method  by  organizations  has  a  strong  positive influence on workers morale.

Ho:   Employees motivation has no positive effect on organisation’s operating performance.

H1:   Employees  motivation  has  positive  effect  on  organisation’s  operating performance.

Ho:   Participatory budgeting method by organization does not have a significant and positive effect on market power and profitability.

H1:   Participatory  Budgeting  method  by  organization  have  a  significant  and positive effect on market power and profitability.

1.6     SIGNIFICANCE OF THE STUDY

The  research  into  participation  in  budgeting  can  be  appreciated  in  the following ways:

i)       To help management appreciate the impact of participation in budgeting on work motivation.

ii)      The various views of workers will help the top management to adjust the budget on important areas that enhance profit maximization.

iii)      To the workers, the study will help them to understand the process of budgeting  and  see  participatory  budgeting   method  as  a  form  of motivation to them. With this, the problem of budget padding will no longer be experienced in the organisations.

iv)     It  will  contribute  to  the  enrichment  of  the  literature  on  participatory budgeting and work motivation.

v)      It  will  throw  more  light  on  the  relationship  between  participatory budgeting method and work motivation.

1.7     SCOPE AND LIMITATION OF STUDY

This research work centered on the impact of participation in budgeting on work motivation in organization. The researcher’s aim is to find out the impact of participation in budgeting on work motivation in organizations. Owing to the fact that there are several organizations around the world, it will be burdensome to study many organizations; therefore Nigerian Breweries Plc, Ama; Guinness Plc, Benin City; and University of Nigeria Nsukka are selected as sample to cover all the sectors of the economy.

The range of data to be used for this study is limited from 2006 to 2010. This is to enable the researcher access the most current information on the issue under consideration.

1.8     DEFINITION OF TERMS

Budget:  A budget is defined as a plan quantified in monetary terms, prepared and approved prior to a defined period of time, usually showing planned incomes to be generated and/or expenditures to be incurred during the period, and the capital to be employed to attain a given objective.

Participation: The act of taking part in an event or activity.

Budgeting:  Motivation is a set of forces that initiate behaviour and determine its form, direction, intensity and duration. In  other words, motivation  is  a  set  of activities that induce or encourage the workers to put in their best efforts towards the attainment of the goals of the organization.

Work:   This is also refers to as job or task, it is to do something that involves physical or mental efforts especially as part of job.

Budgettess:   These are individuals who contribute in the formulation and implementation of budget.

Budgeting  padding:     This  means  overestimating  cost  and  underestimating revenue.

Subordinate:   A person who has a position with less authority and power than somebody else in an organization.

Superior:  A person of higher rank, status or position in an organization.

Profit: The advantage that you get from doing something.

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