A
PROJECT REPORT
ON
“Budget Goal Commitment and Budget Participation on Employee Performance”
Summer Project Report
Submitted
In the partial fulfillment of the Degree of
Master of Business Administration
Semester-II
By
Nandolia Kais 13044311041
Under the Guidance of:
Prof. Abhishek Parekh
Submitted To:
V. M. Patel Institute of Management,
Ganpat University,
Kherva.
21th August, 2014
CERTIFICATE BY THE GUIDE
This is to certify that the contents of this report entitled “Budget Goal Commitment and
Budget Participation On Employee Performance” by Nandolia Kais Roll no. 13044311041
submitted to V. M. Patel Institute of Management for the Award of Master of Business
Administration (MBA Sem-II) is original research work carried out by him/her/them under my
supervision.
This report has not been submitted either partly or fully to any other University or Institute for
award of any degree or diploma.
Prof. Abhishek Parekh,
V. M. Patel Institute of Management,
Ganpat University.
Kherva.
Date :
Place :
CERTIFICATE BY THE MENTOR
This is to certify that the contents of this report entitled “Budget Goal Commitment and
Budget Participation On Employee Performance” by Nandolia Kais Roll no. 13044311041
submitted to V. M. Patel Institute of Management for the Award of Master of Business
Administration (MBA Sem-II) is original research work carried out by him/her under my
mentoring. I, hereby certify the authenticity of the data and facts mentioned in the report.
This report has not been submitted either partly or fully to any other University or Institute for
award of any degree or diploma.
Shahin Nandolia,
Chief Executive,
Nandolia Organic Chemicals Pvt. Ltd.
(This page must have Organizational seal stamp)
CANDIDATE STATEMENT
I hereby declare that the work incorporated in this report entitled “Budget Goal Commitment
and Budget Participation On Employee Performance” in partial fulfillment of the
requirements for the award of Master of Business Administration (Semester II) is the outcome of
original study undertaken by me/us and it has not been submitted earlier to any other University
or Institution for the award of any Degree or Diploma.
Nandolia Kais
Date :
Place :
PREFACE
M.B.A. Program is a study of management. As I am student of M.B.A. Program so from
practical point of view it becomes necessary to do training in industry in industrial training plays
vital role for the student of M.B.A.
As per university, it is must for the student of MBA. Sem. II, to prepare report on practical study
by visiting a particular industry to acquire practical as well as theoretical knowledge pertaining
to that industry in different aspects about its internal environment.
I am passed to place our project report on “NOCPL” I have visited the company for training and
based on that I had prepared our project report. This project is comprehensive work and covers
all the function of management.
It is an opportunity for me to know how the industrial affairs are running. I am able to develop
my internal strength by the industrial training. By this I know that to run business it not an easy
work. I need some practical knowledge, experience as well as the theoretical Knowledge.
My main focus and study was on “Budget Goal Commitment and Budget Participation On
Employee Performance On NOCPL” I have put up my best efforts and enumerated every
possible information after observing the activities carried over there, to make this report a
satisfactory report. It was a great opportunity and memorable experience interacting with people
working there, collecting information regarding their job and acquiring knowledge.
Lastly, I have tried my best level to prepare the best informative report.
ACKNOWLEDGEMENT
It was a great opportunity for me to get Summer Training with a financial organization like
“Budget Goal Commitment and Budget Participation On Employee Performance On
NOCPL”
I am very glad to present this report before you all whose works and ideas have been so helpful
in working out on this project report. As I carried our way towards the completion of this project,
I had many people involved directly or indirectly and all guiding me, directing and motivating
me towards attaining my goal.
A work is never a work of an individual. We owe a sense of gratitude to the intelligence and co-
operation of those people who had been so easy to let us understand what we needed from time
to time for completion of this exclusive project.
I feel grateful to the Ganpat University, who make the summer internship compulsory for each
and every student, and for that I wish to express my best regards and deep sense of gratitude
towards the university. Secondary, I would like to thank the management and the faculty of my
VMPIM.
I would like to express gratitude to Dr. Mahendra Sharma (Head, Department of management)
and my project guide to Prof. Abhishek Parekh for giving such opportunity and their guidance
and help in preparation of this report. I express my gratitude to Mr Shahin Nandolia (Chief
Executive).
Last but not the least; I am grateful to my parents For supporting me.
Nandolia Kais
INDEX OF CONTENT
Preface ………………………………………………………………………………. I
Acknowledgement ………………………………………………………………….. II
Index of content …………………………………………………………………….. III
Index of Table ………………………………………………………………………. IV
SR NO. PARTICULAR PAGE No
1 INTRODUCTION 8
2 COMPANY OVERVIEW 12
3 LITERATURE REVIEW 22
4 RESEARCH METHODOLOGY 30
5 DATA ANALYSIS AND INTERPRETATION 36
6 DISCUSSION, CONCLUSIONS &
RECOMMENDATION
42
7 BIBLIOGRAPHY 46
8 ANNEXURE 54
CHAPTER 1
INTRODUCTION
RESEARCH: INTRODUCTION
1.1 Background to the Study:-
Budgeting is a crucial exercise without which a firm or business cannot achieve much (Yuen,
2007). It is a process of compiling budgets and subsequently adhering to them as closely as
possible (Maitland, 2000). It’s a management tool that can be employed by a firm to process
information and make reports to management for planning and control .
Budgeting participation is a process whereby subordinates are given opportunities to get
involved in and have influence on the budget setting process (Yuen, 2007). Through
participation in budgeting, subordinates develop mental and emotional feelings that provide them
with an ownership of budget goals (Owen, 1987). The act of participation increases a
subordinate’s trust, sense of control, and ego-involvement with the organisation, which then
jointly cause less resistance to change and more acceptance of, and commitment to, the budget
goals (Shields & Shields, 1998). Thus, budget participation exerts a motivational effect on the
subordinates which enhances their budget goal commitment.
Charpentier (1998) also argues that budget participation influences employee performance. This
is because when subordinates participate in the budgeting process, they are induced into
accepting and committing to budget goals and in the process improving their performance. Dann
(1991) argues that there is a significant relationship between budgeting participation and
employee performance in the Company. This is because in the Company, performance is
measured through provision of a high quality service to meet customer needs and this depends
largely on superior-subordinate relationships and their active participation in budgeting (Deming,
1989).
In many Medium Scale Company’s there is pseudo participation of employees in the budget
process. Every financial year, many employees at the lower levels in Company’s find
themselves operating in the limitations of the budget to which themselves, or even their
immediate supervisors didn’t determine. Such budgets usually have set targets for the
achievements of the year which require the subordinates’ increased input. Unfortunately, these
budgets lack the input on the additional demands that such new targets may pose to the
subordinates. Due to this, subordinates don’t feel the sense of commitment to the budget which
later inhibits their execution of duties due to lack of goal commitment (Personal Communication,
January 19, 2008). However, most authors claim that if budgets are made without participation
by the lower management and their supervisors, they become dysfunctional due to the
employee’s lack of commitment to their goals (Lin & Chang, 2005).
Budget goal commitment is the determination to try for a budget goal and the persistence in
pursuing it over time (Locke et al, 1981). Highly committed subordinates in terms of their budget
goals are motivated to interact with their superiors and peers who can provide insight into their
work environments, performance goals, task strategies and other issues that have an important
impact on their performance. If an individual becomes committed to a given goal, it will
influence the individual’s subsequent actions, and consequently the individual’s performance
level.
Local news papers have on several instances exposed the effect of lack of budget participation,
on goal commitment and employee performance of major Company’s in this country (New
Vision, 29 April 2006). The news paper reported that interviews with the immediate supervisors
of low level employees in this Company revealed that the employees were unhappy with the way
they were given additional tasks without increment in pay. That each year, this Company’s
budgets show additional income from new services to be offered by the Company but without an
increase in the number of staff. Immediate supervisors to the support staff said that they find it
hard to assign additional duties to their subordinates who are already overloaded. They are not
involved in the budgeting process and therefore find no avenue to raise the implications of
increase in workload without increase in pay on the performance of support staff.
1.2 Conceptual frame work:-
Figure 1: Relationship between Budgeting Participation, Goal Commitment, and Employee
Performance
Source: Adapted with modification from; Chong, Kar Ming,(2002) It is argued that the act of
participation in the budgeting process serves as a function by inducing subordinates to accept and
commit to their budget goals (Verbeeten, 2008).
Thus budget participation serves as a motivational function by providing an opportunity for
subordinates to get involved in and have influence on the budget setting, which consequently
increases their budget goal commitment. It follows that the motivational role of the budget
participation will increase subordinate’s budget goal commitment.
Therefore once subordinates are committed to their budget goal, this will motivate and encourage
them to be creative and more pro-active in their performance.
Budget Participation
Goal commitment
Employee Performance
CHAPTER-2
COMPANY OVERVIEW
2.1 Company overview:
About Nandolia Organic Chemicals Pvt. Ltd.
Nandolia Organic Chemicals Private Ltd is a reputed industry in the manufacturing and
supplying of industrial chemicals, organic chemical, in organic chemical; fine chemicals,
intermediate, aroma chemicals, industrial dyes, industrial pigments, fine aromatic chemicals in
India. The vast experience has earned the company a prestigious position in its business field and
its products are well received in the market.
Quality assurance is perhaps the most critical and demanding parameter in the chemical industry.
Our strict in-house quality monitoring facilities makes it possible for us to achieve the most
stringent and exacting standards for producing the best high quality chemicals for our demanding
customers. Attached to the plant is a fully fledged, well equipped laboratory to ensure quality
consistency of products.
We are a private limited company incorporated in January 1998. The project has been promoted
by the entrepreneurs having a sound and excellent track record. Backed by high resourcefulness,
they have set up a plant which is of international standards. The plant boasts of the most
advanced technology and latest machinery for manufacturing of fine Aromatic Chemicals
located at G.I.D.C. Panoli, Dist. Bharuch, and Gujarat, India.
We are well established for the past two decades, the promoters have excelled in the Technical,
Marketing and Administrative aspects of the trade, which is gained through existing plants at
Ankleshwar G.I.D.C. and Vapi G.I.D.C. (Gujarat, India). The products are exported in bulk
quantities to the U.S.A. and European countries from these plants. The promoters enjoy a very
good reputation in the local as well as export market for their quality consistency and service.
Chemicals are substances, which are extensively used in the fabrication and as additives in a
number of products ranging from soaps to food products to medicines. Nandolia Organic
Chemicals Pvt. Ltd., established in the year 1998, has, under the able leadership of its
directors Mr. Yakub V. Nandolia and Mr. Haroon H. Nandolia, carved a niche for itself in
the chemical industry.
We are an eminent manufacturer, exporter and supplier of a wide range of chemicals and
intermediates. Our product catalog encapsulates Intermediates for API, Drug Intermediates,
Organic Chemicals, Inorganic Chemicals, Fine Chemicals, Aroma Chemicals, among
others.
Fabricated using the finest grade raw materials, our products have found huge acceptance by a
spectrum of industries. The requisite safety standards and safe working procedures are
thoroughly implemented in our day to day operations. We always make a conscious effort to
competitively price the products and deliver them to the clients well within the stipulated
timeframe.
Company Turnover
Turnover in F.Y. 2007-08: Rs. 420.00 Million
o Exports (Included in above): Rs. 170.00 Million
Business Turnover F.Y. 2007-08
o Local Turnover: Rs.250 Millions
o Export Turnover: Rs.170 Millions.
2.2 Products:
Nandolia Organic Chemicals Pvt. Ltd. is engaged as a manufacturer, exporter and supplier of the
following array of products:
Intermediates for API: Para Methoxy Phenyl Acetic Acid, Para Methoxy Phenyl
Acetonitrile, Para Methoxy Phenyl Acetone, CIS (+) Hydroxy Lactum, etc.
Drug Intermediates
Organic Chemicals: Para Anisic Aldehyde, Para Cyesyl Methyl Ether, Para Anisic
Alcohol, Para Anisic Acid, etc.
Inorganic Chemicals: Manganese Sulphate Monohydrate, Sodium Sulphate, etc.
Fine Chemicals
Aroma Chemicals.
Production Capacity:
Para Anisic Aldehyde- Capacity 1500 MT
Para Cresyl Methyl Ether- Capacity 200MT
Para Anisic Alcohol- Capacity 800 MT
Para Anisic Acid- Capacity 60 MT
Manganese Sulphate Monohydrate- Capacity 4000MT
Para Methoxy Phenyl Acetic Acid- Capacity 25 MT
Para Methoxy Phenyl Acetonitrile- Capacity 25 MT
Para Methoxy Phenyl Acetone- Capacity 50 MT
CIS (+) Hydroxy Lactum- Capacity 60 MT
Sodium Sulphate- Capacity 500 MT.
2.3 Policies & Services:
Quality:
Quality is given prime importance at Nandolia Organic Chemicals Pvt. Ltd., and is upheld under
all circumstances. All international quality parameters are adhered to at all levels; right from the
purchase of raw materials to the delivery of the products.
The final produce is checked in-house by an experienced team of quality analysts. Only those
products meeting the requisite standards and parameters are then allowed to be dispatched for
sale. Quality Assurance is perhaps the most critical and demanding parameter in the chemical
industry. Our strict in-house quality monitoring facilities makes it possible for us to achieve the
most stringent and exacting standards for producing the best high quality chemicals for our
demanding customers. Attached to the plant is a full fledged, well equipped laboratory to ensure
quality consistency of products.
Infrastructural Facilities:
Nandolia Organic Chemicals Pvt. Ltd. has an infrastructural base, which is unparalleled in the
industry. Our analytic infrastructure includes HPLC, Polarimeter, G.C., Melting Point Apparatus,
Karlfischer Colorimeter, etc. to carry out a smooth production of goods. The machines used are
fully automatic and require minimum human interference. These machines are upgraded from
time to time to keep them at with the changing technological needs.
Safety Policy:
As a socially responsible firm, we are committed to safety, health and environment. We make
sure that the working environment within our premises is extremely safe for our employees and
the employees are on a regular basis imparted safety training. Safety audits, and inspections are
also a regular feature with us. We also strictly abide by the environment safety guidelines laid
down by the government, and in our own small way help in environment protection.
ENVIRONMENT:
Working in tandem with nature is an extremely important human duty. When man defies nature
the result are borne by the generations to come. Keeping this very important environment
friendly attitude and human welfare at heart we have our own ETP comprising of primary,
secondary and tertiary treatments. All liquid and solid wastes are disposed off in an
environmentally and legally acceptable manner, as directed by the pollution control board.
Purpose
We are committed to significantly enhance value for our Stakeholders by:
Fostering a spirit of continuous learning and innovation,
Adopting the developments in science and technology,
Providing high quality products and services, thus becoming the most preferred partner,
Having people who practise Values and high standard of behaviour,
Seeking sustained, dynamic growth and securing long term success,
Taking responsible care of the surrounding environment and
Improving the quality of life of the communities we operate in.
Values
The name NOCPL is a unique asset, which amongst others, represents a rich heritage of Values.
In an environment where change is a way of life, continuity of Values is fundamental to us. We
have therefore formalised key Values and are committed to institutionalise them. We will seek to
create an environment where in these Values are consistently practised and nurtured and ensure
that they are not compromised to realise short-term gains.
Integrity...
Integrity means working with honesty, following the
highest standards of professionalism. Integrity is
when our decisions and actions remain consistent
with our thoughts and words, written or spoken.
Understanding...
How well we work with others depends on our
ways to connect and this in turn is based on our
level of Understanding of human relationships.
Understanding does not mean that we accept
poor performance, but that we do it the right way.
Understanding is the external manifestation of
internal realisation.
Unity...
Unity means working together and taking advantage
of synergy while harnessing unique abilities of each
of us to achieve a larger goal. Unity is the realisation
that though we may work in different areas, we are
finally interconnected and that interdependence is a
higher order of living than independence. Though we
may be many, we share a common purpose.
Responsibility...
Responsibility means delivering value and taking
ownership of actions. Responsibility must also give
us the realisation that what is good for the business
must be in the overall good. In essence, we must
work with the spirit of trusteeship not only for the
Shareholders, but also for the other Stakeholders.
What comes to us must be returned many times
over.
Excellence...
Excellence is a drive that is more from inside than
outside; it is about us seeking to continuously
improve and develop an eye for innovation even in
day to day work. Excellence is about excelling in
everything we do and not giving up. Excellence is
also a journey, not simply a destination in itself.
2.4 Profile & Contacts:
Company Profile
Business Type Exporter , Manufacturer , Supplier
Export Percentage 50%
Import Value Rs. 15 crore
No of Staff 110
Year of
Establishment
1998
Export Markets USA, UK, Israel, Germany, Australia, Italy, China and Taiwan
OEM Service
Provided
No
Monthly 400 tonnes
Production
Capacity
Memberships CHEMEXCIL (Basic Chemicals, Pharmaceuticals & Cosmetics
Export Promotion Council, Set up by Ministry of Commerce,
Government of India)
Product Range Intermediates for API: Para Methoxy Phenyl Acetic Acid, Para
Methoxy Phenyl Acetonitrile, Para Methoxy Phenyl Acetone, CIS (+)
Hydroxy Lactum, etc.
Drug Intermediates
Organic Chemicals: Para Anisic Aldehyde, Para Cyesyl Methyl
Ether, Para Anisic Alcohol, Para Anisic Acid, etc.
Inorganic Chemicals: Manganese Sulphate Monohydrate, Sodium
Sulphate, etc.
Fine Chemicals
Aroma Chemicals.
Bankers HDFC BANK, ICICI BANK, CITY BANK, DENA BANK.
Contacts:
Mr. Yakub Nandolia
Cell No: +91-9820156232
Email Id: [email protected]
Mr. Haroon Nandolia
Cell No: +91-9820124166, +91-9324612260
Email Id: [email protected]
Office:
107, Abba Residency,
Opp. Jogeshwari Railway Station , Jogeshwari West,
Mumbai - 400102.
Tel: +91 22 26795968 / 26795969
Fax: +91 22 26795963
Chepter-3
Review of Literature
Introduction
Budgeting is the process of efficiently allocating an organization’s available financial resources
to its units, activities and investments. The budgeting process includes a review of the prior
period’s financial results, projections for sales, operating expenses whether fixed, variable or
semi-variable, as well as financing expenses, examination of proposals for capital expenditures,
and means of rolling up and rationalizing figures from different functional departments to ensure
they meet company-wide profit expectations (Blumentritt 2006). Budgeting is used to monitor
the performance of managers and employees.
Budgets are critical part of the effective running of an institution, since it accomplishes many
tasks. According to Linn (2007), a budget is not only a means of planning for various revenue
streams, a control mechanism for an administration to keep from spending too much a procedure
for controlling its units, a process to coordinate the many activities that an institution undertakes,
and a way to communicate to all stakeholders a summarization of the activities that the various
units will undertake, but it is also a technique for setting the organization’s priorities by
allocating scarce resources to those activities that officials deem to be the most important and
rationing it to those areas deemed less vital.
According to the Certified Management Accountant Review (1994), a budget is a quantitative
planning tool, that helps translate the objectives set out in the plan into financial terms and shows
where the money will be got from and how it will be spend in order to achieve the set objectives
in the plan. A budget is an objective measure of the financial underpinnings of operations that
controls the financial health of the organization (Seer 2000). A budget facilitates planning and
resource allocation. According to Drury (1992), it is a plan of action for the future periods of the
organization. Lucy (1996) adds that it is a quantitative expression of a plan of action prepared in
advance of the period to which it relates.
According to Kavulya (2006), Budgeting involves the process of identifying, costing and
allocating revenue to the resources and activities that allow the objectives of the organization to
be achieved. Essential preliminaries established before effective budgeting include: preparation
of an organizational chart which shows the functional responsibilities of each member of the
management team; establishment of budget centers; establishment of adequate accounting record
to facilitate the recording and analysis of transactions in the organization; establishment of
budget committees; budget timetable to enable timely flow of information; and the budget
manual which shows budgetary procedures including budget centers and timetables
(Balunywa(2005). Over the course of the fiscal year that is being reviewed, reforecast and
reallocated, the aim is to make the best use of the available financial resources (Seer, 2000).
According to Lega and Vendramini (2008), Budgeting is a management control tool. The
average budgeting process is composed of five distinct phases, which include budgeting
guidelines that represent the starting point and the boundaries of the budgeting process; budget
preparation; budget negotiation where managers develop a meeting of the minds so that
resources are allocated accordingly; budget review where targets are tweaked during the
budgeting year to adjust to new, emerging conditions; budget assessment where accountable
centers are assessed to check if targets have been met. Leading scholars suggest that this phase
is not considered merely the end point of the process but should be starting base of the following
year’s budget.
Budgeting Participation
Budgeting is a method for financial control which involves the planning and use of a budget. A
budget expresses the expectations of a company presented in economic terms for a future time
period (Reid, 2002). The roles of the budget among others include; determining the requirement
for funds to service the needs of scheduled activities during a defined period, estimating the cost
of a set of activities and subsequently determining which ones will be undertaken within the
capacity of the resources available, controlling the business through the allocation of business
funds to different activities, and making adjustment in the allocation of funds between activities
during the planned time period (Cusworth et al., 1993).
Participation is a process that can be used for planning and goal setting when there is
environmental uncertainty, for motivating subordinates when there is task uncertainty, and for
coordinating interdependence when there is task interdependence (Lin & Chang, 2005).
Participation in budgeting yields benefits through a great exchange of information, better
coordination of activities and development of team spirit (Mai, 1988). From the above
introduction a definition of budgeting participation can now be given.
Budget participation has been defined differently by many researchers. For instance according to
Becker and Green (1970) it is “a process of joint decision making by two or more parties in
which the decision has future effects on those making them.” Parkinson and Taggar (2000)
define it as “a process in which a manager is involved with, and has influence on, the
determination of his or her budget.” Brownell (1982) defines it as the process of involving
subordinates in influencing various elements of budgets.
According to Hopwood (1973), budget participation is measured from the following factors; the
ability for the subordinates to influence the design of the budget, to what extent the superior
manager contacts the subordinates, How easy it is for the subordinates to propose alterations in
the budget process, To what extent the subordinates participate in the budget’s follow-up phase.
Nouri and Parker (1998) argue that allowing subordinates to participate in the budget setting
process may result in them disclosing of “private information” which would result in more
realistic plans and more accurate budgets. Subordinates have better information about the level
of budgetary support required to perform the subordinate’s task than do the superiors.
Participatory budget allows subordinates to incorporate this information into the budget.
Priddy (2007) argue that with consultation, leaders generate energy to re-craft budgeting and
resource allocation, through the discussion of these processes and conversations on how to align
them with reward systems, committee structures, hiring and screening, academic and master
planning.
Budgeting Participation and Goal Commitment
Accounting literature indicates the importance of participation in budget setting. It states that the
participation of middle and lower level managers in the budgeting process can have beneficial
effects in at least two ways. First, the process of participation reduces information asymmetry in
the organization, theory enabling top management to gain insight into issues about which lower
level managers have specialized knowledge.
Second, the process of participation may bring about a greater commitment by lower managers
to carry out the budget plan in and “meet the budget” (Gordon,1988). Specific and attainable
goals lead to higher levels of performance if the goals are accepted by individuals. Goals provide
motivational effect through their impact on the direction, amplitude (effort) and duration
(persistence) of action. Individual’s goal can be viewed as the performance level that an
individual seeks to attain (Locke, 1981).
Acts of participation in the budgeting process provides subordinates the opportunity to get
involved in and have influence on the budget setting process. Furthermore, it is suggested that
budget participation also serves an informational function whereby subordinates can gather,
exchange, and disseminate job-relevant information to facilitate their decision-making process
and to communicate their private information to organizational decision makers (Nouri & Parker,
1998).
Charpentier (1998) argues that budget participation enhances subordinates’ budget goal
commitment. Budget goal commitment is defined in this study as the determination to try for a
budget goal and the persistence in pursuing it over time (Locke et al.1981).The opportunity to
participate allows subordinates to exert their opinions and influences, and as a consequence,
increase their feeling of control and involvement over the budgets.
Such feeling will increase their commitment to their budget goals. This viewpoint is consistent
and supported by Shields and Shields,(1998) who argue that the act of participation increases “a
subordinate’s trust, sense of control, and ego-involvement with the organization, which then
jointly cause less resistance to change and more acceptance of, and commitment to, the budget
decision”. Thus far, it has been suggested that budget participation serves as a motivational
function by providing an opportunity for subordinates to get involve in and have influence on the
budget setting, consequently increases their budget goal commitment. It follows that the
motivational role of budget participation will increase subordinates' budget goal commitment.
The importance of subordinates' budget participation as a means of improving performance has
been studied extensively in the behavioral accounting literature (Brownell & McInnes 1986;
Mia, 1989; Kren 1992; Magner et a1. 1996; Nouri &Parker 1998; Yuen, 2007). It is argued that
the act of participation in the budgeting process serves as a function by inducing subordinates to
accept and commit to their budget goals (Maurer & Lippstreu, 2008). Furthermore, it is
suggested that budget participation also serves an informational function whereby subordinates
can gather, exchange, and disseminate job-relevant information to facilitate their decision-
making process and to communicate their private information to organizational decision makers
(Lins & Changa, 2005)
Budgeting Participation and Employee Performance
The importance of subordinates' budget participation as a means of improving performance has
been studied extensively in the behavioral accounting literature (Nouri and Parker 1998). It is
argued that the act of participation in the budgeting process serves as a function by inducing
subordinates to accept and commit to their budget goals (Merchant 1981). Furthermore, it is
suggested that budget participation also serves an informational function whereby subordinates
can gather, exchange, and disseminate job-relevant information to facilitate their decision-
making process and to communicate their private information to organizational decision makers
(Topper, 2007).
The empirical studies that examined the informational role of budget participation have, in
general, produced consistent and fairly well established results (Magner, 1996). However, the
empirical evidence on the motivational role of budget participation on performance has been
mixed (Murray 1990), for a comprehensive theoretical discussion). Parkinson and Taggar (2000)
for example, have relied on expectancy theory to examine the relationship of budget participation
to motivation and performance.
Their results are in conflict with those of earlier studies (Merchant 1981) that found a positive
association between budget participation and motivation. Parkinson and Taggar (2000) were
unable to verify the intervening role of motivation using an expectancy theory framework.
A possible explanation for the inconclusive results of Parkinson and Taggar (2000) and other
studies on the motivational role of budget participation on performance could be due to
inadequate theoretical framework adopted by those studies. Parkinson and Taggar (2000)
acknowledged "expectancy models have sometimes shown a rather weak relationship to effort
and performance, raising question about their validity in empirical use." Thus, further research
may rely on an alternative motivation theory, such as goal-setting theory, to examine the budget
participation-performance linkage (Murray 1990).
Managers’ Participation in budgeting has a number of positive behavioural outcomes, such as
reduced stress, improved motivation and job commitment, and enhanced performance
Conversely, managers’ inadequate Participation in budgeting may cause dysfunctional behavior,
which may lead to anxiety, stress and low performance (Reid, 2002).
Goal Commitment and Employee Performance
Locke (1981) goal-setting theory argues that an individual’s goal can be viewed as the
performance level that an individual seeks to attain. If an individual becomes committed to a
given goal, it will influence the individual’s subsequent actions, and consequently the
individual’s performance level. We propose that once a subordinate is committed to his or her
budget goals, he or she will increase his or her effort to achieve those goals.
Lin & Chang (2005) argued that highly committed subordinates in terms of their budget goals, is
motivated to interact with their superiors and peers who can provide insight into their work
environments, performance goals, task strategies and other issues that have an important impact
on their performance”. Researchers have found different results concerning the effects of goal
commitment on the performance of the subordinates. Most studies have found a clearly positive
relationship between goal commitment and performance. Some have found a negative
relationship while other studies have not found any relationship at all. Mostly, a positive
relationship have been found.
Budget participation makes the subordinate to a greater extent feel responsible for the
organization’s goals because it internalizes the goals. This then lead to a situation whereby the
employee will improve on his/her performance in order to satisfy the set goals. A reduced budget
participation gives deteriorated feed-back information, which diminishes the realism. According
to Woodford and Maes (2002) this disadvantage is so important that the total effect of reduced
budget participation is a deteriorating performance.
Previous organizational behaviorists indicate that affective organizational Commitment benefits
employees’ performance. According to Randall,(1990) and Riketta, (2002).When managers are
highly committed to an organization, they will accept organizational goals and involved more
effort to attain the goals and then improve their performance.
CHAPTER 4
RESEARCH METHODOLOGY
Objectives of the Study:-
(i) To investigate the level of employee participation in the budgeting process in the NOCPL
Company.
(ii) To examine the relationship between budgeting participation and goal commitment in the
NOCPL Company.
(iii) To establish the relationship between goal commitment and employee performance in the
NOCPL Company.
Purpose of the Study:-
The purpose of the study is to examine the effects of budgeting participation and goal
commitment on employee performance in the NOCPL Company.
Research Questions:-
(i) What is the level of employee participation in the budgeting process in the Nandolia Organic
Chemicals Pvt. Ltd?
(ii) What is the relationship between budgeting participation and goal commitment in the
Nandolia Organic Chemicals Pvt. Ltd?
(iii) What is the relationship between goal commitment and employee performance in Nandolia
Organic Chemicals Pvt. Ltd?
Scope of Study :-
Geographical Scope: The study was conducted in the Nandolia Organic Chemicals Pvt. Ltd. This
is because this is the district with the highest number of Company’s.
Subject Scope: The study was limited to budgeting participation, goal commitment and
employee performance. In this study budgeting participation means a process by which a budget
is developed through joint decision making by top management and operating personnel, Budget
goal commitment means individuals develop mental and emotional feelings that provide them
with an ownership of budget goals, Employee performance means that quantified (numeric)
goals and enumerated (listed) tasks are accomplished.
Significance of the study:-
The findings of the study will be useful to the Company employees, management of the NOCPL
Company association, and researchers in the following ways:
(i) The Company employees and owners will be enlightened about the appropriate budgeting
procedures. This will help them understand the importance of budgeting participation to the
performance of their Company.
(ii) NOCPL Company’s association management will be provided with information on how to
improve Company performance through participatory budgeting.
(iii) The findings from the study will also add on the existing knowledge on budgeting and
performance in Company.
Statement of the Problem:-
Although budgeting is crucial to the operations of organizations, in many Medium scale
Company’s there is hardly any participation of the employees in the setting of their budgets.
This affects the employees’ commitment to the budget goals and lack of participation in
budgeting is likely to reduce job commitment which may perhaps lead to reduced employee
performance.
Research Design:-
I was focused on Descriptive Research design. The study employed the quantitative research
methodology. This methodology was suitable because of the need to generalise the findings to all
in NOCPL Company.
Target Population:-
The target population of Nandolia Organic Chemicals Pvt. Ltd, employee, and different kind of
level like top, middle, bottom levels employee.
Sample size and Sampling Design:-
The total of 4 units of Nandolia Organic Chemicals Pvt. Ltd. was selected using stratified
sampling where respondents were classified based on management level (top, middle, bottom).
In my project used simple random sampling.
Sample Sizes:-
In my project I taken 82 respondents in NOCPL, out of 82 respondents, 10 from top level, 62
middle level, and 10 from bottom level.
Sources of data Collection
Primary data:-
The study undertaken there to be mainly based on the primary data collecting the questionnaire
and interview.
Secondary data:-
The research work also collecting secondary data use the from Internet, websites, magazine,
research papers etc.
Sampling unit:-
Sampling units are those employee who work in NOCPL.
Approach:-
We have used survey approach for collection of primary data.
Measured used of Scale:-
In this research I has used the liked scale questionnaire which are file by the respondent and
gathered information relevant to this research study.
Data Collection Instruments:-
Data was collected using a Close ended Questionnaire. It presented a series of statements for which the respondents were asked to indicate their degree of agreement or disagreement by use of Scales.
Hypothesis of the Study:-
Null hypothesis and Alternative hypothesis. We start with the Null hypothesis. The Null
hypothesis is claim of “No relationship.” The opposing hypothesis is the alternative
hypothesis. The alternative hypothesis is a claim of “a relationship.” And is the hypothesis
the researcher obtain hopes to bolster.
H0(1) : There is no significance Relationship between goal commitment and employee
performance in the NOCPL Company.
H1(1): There is significance Relationship between goal commitment and employee performance
in the NOCPL Company.
H0(2): There is no significance Relationship between budget participation and employee
performance in the NOCPL Company.
H1(2): There is significance Relationship between budget participation and employee
performance in the NOCPL Company.
Measurement of Variables:- (Employee Performance – Dependent Variable) , (Goal
Commitment and Budget Participation – Independent Variables)
Budget Participation: This was measured using an instrument developed by Milani (1975). The
instrument has a 5-point Likert-scale .A respondent’s overall score for this variable was the
average of the score for the items in the instrument. A reliability check of the instrument for the
study revealed a Cronbach alpha of 0.602, which shows that the measure is reliable.
Budget goal commitment: Budget goal commitment was measured by a 5-point Likert-type scale
instrument developed by Hollenbeck et al., (1989). The scale ranges from SD=Strongly
Disagree, D=Disagree, NS=Not sure, A=Agree, SA=Strongly Agree. A reliability check of the
instrument for the study revealed a Cronbach alpha of 0.636, which shows that the measure is
reliable.
Employee performance: This was measured using a questionnaire designed from a combination
of items modified from Mahoney, Jerdee and Carroll (1963). The instrument designed had a
scale ranging from SD=Strongly Disagree, D=Disagree, NS=Not sure, A=Agree, SA=Strongly
Agree. The instrument has a 5-point Likert-scale. And revealed a Cronbach alpha of 0.657 was
obtained when tested.
Reliability Analysis:-
Cronbach’s coefficient Alpha measures the extent to which the scale items co here with each
other. The Cronbach’s Alpha for the All scale is 0.616, showing that the scale was reliable.
Data Analysis Part:-
The data is analyses on the basis of SPSS software by using mathematical techniques. The
technique that we will be using is,
1. Primary data analyzed through Regression. It includes mathematical methods.
2. Secondary data analyzed by interpretation.
Chapter 5
Data Analysis & Interpretation
5.1 Frequency:-
GENDER
Frequency Percent Valid Percent Cumulative
Percent
Valid
MALE 68 82.9 82.9 82.9
FEMALE 14 17.1 17.1 100.0
Total 82 100.0 100.0
AGE
Frequency Percent Valid Percent Cumulative
Percent
Valid BELOW 3O Y 60 73.2 73.2 73.2
30-40 6 7.3 7.3 80.5
41-50 13 15.9 15.9 96.3
51-60 3 3.7 3.7 100.0
Total 82 100.0 100.0
QULIFICATION
Frequency Percent Valid Percent Cumulative
Percent
Valid
DIPLOMA 3 3.7 3.7 3.7
Bachelors Degree 4 4.9 4.9 8.5
Post graduation 58 70.7 70.7 79.3
Professional 17 20.7 20.7 100.0
Total 82 100.0 100.0
5.2 Reliability Test:-
Reliability is the consistency of a set of measuring instruments, often used to describe a test. The
internal consistency reliability of survey instruments is a measure of reliability of different
survey items intended to measure the same characteristic. A reliable measuring instrument is one
which gives you the same measurements when you repeatedly measure the same unchanged
objects or events. We shall briefly discuss here methods of estimating an instrument’s reliability.
The theory underlying this discussion is that which is sometimes called “classical measurement
theory”. The foundations for this theory were developed by Charles spearman.
Test retest reliability
Alternative form reliability
Internal consistency reliability
Split half reliability
Coefficient alpha
Cronbach's Alpha
Cronbach's Alpha is a
measure of internal
consistency, that is, how closely
related a set of items are as a group. It is considered to be a measure of scale reliability. A
"high" value for alpha does not imply that the measure is undimensional. If, in addition to
measuring internal consistency, you wish to provide evidence that the scale in question is
undimensional, additional analyses can be performed. Exploratory factor analysis is one method
of checking dimensionality. Technically speaking, Cronbach's alpha is not a statistical test - it is
a coefficient of reliability. Note that a reliability coefficient of .70 or higher is considered
"acceptable" in most social science research situations.
Table: 5.2 All Variables
Interpretation:-
Reliability Statistics
Cronbach's Alpha N of Items
.616 18
Here the reliability of the study is 0.616. The reliability is the more than 0.5, so the more reliable
of the study.
5.3 Regression Test:-
The table 5.3.1 shows that R2 in linear regression it's proportion of variance explained by
independent variable in the model. Accordingly it's found that the model explain that R2 is 08.8
percent variance in the dependent variable. The adjusted R-square of the model indicates 06.4
percent variation in NOCPL Company that can be explained by the regression model.
Table 5.3.1
Model Summary
Model R R Square Adjusted R
Square
Std. Error of the
Estimate
1 .296a .088 .064 .63245
From the table 5.3.2, it is found that the model is statistically significant at 5% level of
significant. The table output from the F-test shows that the value is 3.791. The p value is 0.027,
which is significant in the ANOVA table, so the null hypothesis is rejected.
This table indicates that the regression model predicts the dependent variable significantly well.
This indicates the statistical significance of the regression model that was run. Here, p < 0.0005,
which is less than 0.05, and indicates that, overall, the regression model statistically significantly
predicts the outcome variable.
Table 5.3.2
ANOVAa
Model Sum of Squares Df Mean Square F Sig.
1
Regression 3.033 2 1.516 3.791 .027b
Residual 31.599 79 .400
Total 34.632 81
The table 5.3.3 indicates the coefficient of the regression equation. From the table Accordingly
Budget Participation and Goal Committement are found to be non- significant (p<0.05).
Table 5.3.3
Coefficientsa
Model Unstandardized Coefficients Standardized
Coefficients
t Sig.
B Std. Error Beta
1 (Constant) 3.910 .413 9.473 .000
Goal -.196 .103 -.205 -1.906 .060
Budget -.226 .121 -.201 -1.868 .065
Here the significance value of individual variables are Goal (t=-1.906; p=0.060) is not
significance, Budget (t=-1.868; p=0.065). As we know Significance value must be <0.05 so can
say there is a relationship between Dependent variable and Independent Variables.
Here there is no relationship between Goal and Budget because their sig. value is Greater than
0.05.
CHAPTER 6
DISCUSSION
CONCLUSIONS
RECOMMENDATION
6.0 Introduction
This chapter presents a discussion and summary of the findings based on the objectives and
results from the study, conclusions drawn and recommendations.
6.1 To Investigate the Level of Employee Participation in the Budgeting participation in the
NOCPL Company.
There is a no significant relationship between budgeting participation and Employee
Performance in the NOCPL (p<0.65).The lower the level of budgeting participation the lower the
level of Employee Performance.
The study’s results suggest that there is average level of budgeting participation in Company.
The participation of middle and lower level managers in the budgeting process can have
beneficial effects in at least two ways. First, the process of participation reduces information
asymmetry in the organization, theory enabling top management to gain insight into issues about
which lower level managers have specialized knowledge. Second, the process of participation
may bring about a greater commitment by lower managers to carry out the budget plan in and
“meet the budget”.
6.2 To establish the Relationship between Goal Commitment and Employee Performance in the
NOCPL Company.
The results provided a no significantly relationship between goal commitment and employee
performance. This Finding suggests that individuals who are more committed to the budgetary
goal also tend to have higher self-evaluated performance in their respective duties.
6.3 Conclusion
The major findings of this study show that Budgeting participation alone dose not significantly
influence Employee performance (B=-.226, t=-1.868, p<0.65). Employee performance is
attributed to both budgeting participation and goal commitment, how ever it has been evident
that Goal commitment significantly predicts Employee performance in Company (B=-.196, t=-
1.906, p<0.60) .Therefore if employees are committed to the organizational budget goal they are
likely to register high level of performance.
This finding suggests that, whether an individual perceives that there is congruence between the
need for participation and the degree of participation allowed, this perception does not affect
his/her self-rated performance. Overall, the results of this study indicate that only Goal
commitment have a no significantly relationship with Employee performance.
In addition, Budgeting participation is found to have a no significantly association with the
Employee Performance and then a committed Employee will register high performance. These
results give management a basis for trying to develop a set of characteristics that will eventually
be conducive to improved Employee performance in a budgeting setting.
6.4 Recommendations
The study recommends that management should frequently involve staff when coming up with
the budget. This is because when employees participate in the budgeting process they get
committed to there organizational budget goal and hence a committed employee will register
high level of performance.
6.5 Suggested Areas for further Research
It would also be interesting to expand this study to workers in other units.
In addition, there is need to study additional factors in a budgeting setting that influence
performance, goal commitment. For example, it would be interesting to study the effect of
workplace cooperation, the opportunity for advancement, tension in the workplace, incentives,
and the ability to disagree with superiors and its impact on those variables.
6.6 Limitations of the Study
The researcher encountered the following problems:- Some of the respondents never completed
filling in the questionnaires. Incomplete questionnaires were disqualified at analysis stage.
Time may have also been a limiting factor. Participants may have felt rushed to complete the
survey.
CHAPTER 7
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BOOK:
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Software Use:
SPSS.v16
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WEBSITES:
http://www.nandoliachemicals.com
http://nandoliachemicals.b2b.sulekha.com/
http://search.proquest.com/docview/203296881?accountid=39452
CHAPTER 8
ANNEXURE
RESEARCH QUESTIONNAIRE
Dear Sir/Madam,
I am student of V.M.Patel Institute of Management has designed this questionnaire strictly for
academic purposes. You are kindly requested to answer it as truthfully as possible. It is meant to
establish “Budget Goal Commitment and Budget Participation on Employee Performance”.
All responses will be given utmost confidentiality. I would appreciate if you could spend your
valuable time and provide me required data. Your comments and suggestions will further add
value to our research work. I assure you that the data provided by you will be strictly used for
academic purpose only and will be kept confidential. Your answers will not be disclosed to any
one and there is no need to write your unit no: - on the questionnaire.
Section A: General Information:-
Unit No:-……………………………………………………………………….
The following questions relate to your background and experience. Please answer the following
questions in the appropriate spaces.
Please tick your age group?
(a)Below 30y’rs (b) 30-40 (c) 41-50 (d) 51-60 (e) 61-70
What is your gender? (Tick appropriate) 0
(a) Male (b) Female
What is your highest qualification? ......................................................................
(a) Certificate (b) Diploma (c) Bachelors Degree
(d) Post graduate (e) Professional.
Section B: Budgeting Participation:-
The following statements are designed to obtain your perceptions about budgeting participation
in your Company. Use the scale below tick in the space against the question. SD=Strongly
Disagree, D=Disagree, NS=Not sure, A=Agree, SA=Strongly Agree.
S/N STATEMENT SD D NS A SA
1 Budgeting information on quality is shared
with all staff.
2 Budgeting information on price is shared with
all staff.
3 My job includes my input regarding budgetary
activities.
4 Review and verification of the budget are done
with all section heads.
5 Budgeting information freely flow from top to
bottom and vice visa
6 Superiors and subordinates prepare the budget
together.
7 Regular departmental meetings take place on
budgetary issues
Section C: Goal Comittement:-
The statements below are designed to understand your feelings about the goal comittement in
your Company. The following statements can be answered using a Five point Likert scale with
the categories being: 1=strongly Disagree, 2=Disagree, 3=Neutral, 4=Agree, and 5=Strongly
Agree. Please choose the number that best represents your response.
S/N STATEMENT 1 2 3 4 5
1 I really care about the fate of this Company’s
budget goals.
2 I am proud to tell others that I am part of this
Company budget goals
3 I feel a sense of “ownership” for this Company
budget goal.
4 I don’t express publicly, my private views about
the Company’s goals
5 This Company’s budget goal really inspires the
very best in me.
6 I am extremely glad that I chose this Company to
work for because of its budget goals.
Section D: Employee Performance:-
The following statements are designed to obtain your perceptions about Employee performance
in your Company. Use the scale below tick in the space against the question. SD=Strongly
Disagree, D=Disagree, NS=Not sure, A=Agree, SA=Strongly Agree
S/N STATEMENT SD D NS A SA
1 Employees here help others to do their jobs better.
2 The work environment promotes hard work.
3 Employees willingly stand in for colleagues who are
absent in addition to their own duties.
4 Employees protect organisational property.
5 Employees normally give advance notice if unable to
work.
THANK YOU
