THE EFFECT OF PERCEIVED ENVIRONMENTAL UNCERTAINTY ON THE RELATIONSHIP BETWEEN BUDGETARY PARTICIPATION AND PERFORMANCE: A CASE STUDY ON NGO THE NATURE CONSERVANCY-INDONESIA MARINE PROGRAM.
1
2
3
THE EFFECT OF PERCEIVED ENVIRONMENTAL UNCERTAINTY ON THE
RELATIONSHIP BETWEEN BUDGETARY PARTICIPATION AND
PERFORMANCE: A CASE STUDY ON NGO THE NATURE CONSERVANCYINDONESIA MARINE PROGRAM
A.A.Ayu Putri Mirayanti D.
Ni Luh Supadmi
I Made Karya Utama
Abstract
Previous research papers have announced that budgetary participation is one of
the many variables affecting performance on organizations. Many others, unfortunately,
have not produced consistent supporting results. The drawn theory about the effect of
budgetary participation on performance is still unclear to this day.
This paper supports the thought that the inconsistent research output is due to the
failure to recognize that participation impacted upon performance in an indirect way.
One of the ways suggested is through moderating variables. The most frequent variable
that affects an NGO is contingency variable. This paper brought up a contingency
variable, perceived environmental uncertainty, as the moderating variable.
The result of this research is consistent with some similar attempts on
understanding the effect of budgetary participation on performance. Budgetary
participation variable in this case studyhave a significant effect upon performance,
perceived environmental uncertainty is a significant moderating factor of the relationship
between budgetary participation and performance at The Nature Conservancy –
Indonesia Marine Program.
Keywords: Budgetary participation, Perceived environmental uncertainty, Performance,
NGO
Introduction
4
The uncertain nature of current economy and business drives entities, both profit
and non-profit, to be highly effective and efficient. Succeeding the competition means
organizations need to increase their performance and accountability. One of the ways to
elevate performance and accountability is the use of budget as a management tool
Participation in budgeting helps organization to yield all functions of a budget.
These functions include planning tool, control platform, and evaluation standard.
Involving the lower level manager and workers in setting a budget canaid organizations
to set realistic goals.Realistic goals are important to create effective plans, reliable control
platform, and measurable evaluation standard. Realistic goals are also significant in
stabilizing performance by reducing the possibilities of slack.
Participatory budgeting has always been an enthusiastic fieldto be researched as it
involves behavioral factors that affect performance. Through the various previous
researches, there has been no consistent empirical proof of the participatory budgeting
influence upon performance. The bipolar difference in research results has failed to
support a strong theory regarding participatory role in changing performance.
Kenis (1979)has found that participatory budgeting has positive and significant
effect on performance. Similar findings also discovered by Brownell (1981), Brownell
(1982), Brownell &McInnes (1986), and Murray (1990). These researchers have done
their research in profit oriented environment, and have all found that the higher
participation level in budgeting usually lead to higher performance.
In contrast,Milani (1975) has found a rather inconsistent almost insignificant
relationship between participatory budgeting and performance.Yukl& Latham (1978),
Latham et. al (1982), and Brownell &Hirst (1986) have also found similar insignificant
5
results. Hirst (1987),in his attempt to replicate Brownell‟s (1982) research methodology,
has failed to discover the same result.Kren (1992), who used information availability and
environmental volatility as intervening variables between participatory budgeting and
performance, also has failed to find a significant result.
The lack of result trend found throughout the researches causes researchers to
look for the reason for this inconsistency. Murray (1990) has dedicated his research to
finding the intervening and moderating variables that affect participatory budgeting
impact on performance. Dunk &Lysons (1997) also support the thought that research
result inconsistency was a result of another outsider factor. The most frequently pointed
factor to affect relationship between participatory budgeting and performance is
contingency factor.
Contingency is closely related with organization‟s external environment. The
environment, in which a non-profit organization exists, is a dynamic and constantly
changing existence. This dynamic scene is a source of uncertainty. Dunk &Lysons (1997)
have found that when an organization exists in a complex and rather volatile
environment, the judgments of its operators will be affected. This includes judgment in
undertaking budgetary decisions. Participation in budgetary decision is expected to
reduce the level of uncertainty felt by organization operators. This finding indicates that
uncertainty, whichperceived by organization‟s operators, is one of the factors that can
influence the relationship between participatory budgeting and performance.
Hypothesis
6
Milani (1975) mentions that a budgetary system cannot exist without human
resource that operates it. When budgetary participation is present while setting the
organizational goals, operators of the organization will experience internalization or
acceptance process. Internalization of organizational goal may lead to motivation and
ultimately increase in performance (Murtanto&Hapsari, 2006). This further proof that
participatory budgeting is essential to shift operators‟ focus upon the participative goal
that has been set(Murray, 1990; Brownell, 1981; Milani, 1975). Thus, the first hypothesis
of this research is:
H1: Participatory budgeting affects performance.
Many researches have been dedicated in explaining the lack of consistency
explaining the relationship between participatory budgeting and performance. Most
suspicions fall upon contingency factors as an outside affecter behind this inconsistency.
Perceived environmental uncertainty is one of contingency variables that affect every
organization faced with its changing environment (Duncan &Moores, 1989). Perceived
environmental uncertainty also alleged as the real factor affecting budgetary decisionmaking because the actual uncertainty is immeasurable (Downey dkk, 1975). Thus, the
second hypothesis of this research is:
H2: Perceived environmental uncertainty affects relationship between budgetary
participation and performance
Data and Methodology
Researches on participatory budgeting and performance almost always use profitoriented entity as their research subject. The increasing influence of non-profit
7
organization, especially Non Governmental Organization (NGO), has made this research
attempts to better understand the impact of participatory budgeting upon performanceat
The Nature Conservancy – Indonesia Marine Program (TNC-IMP). The organization‟s
primary office in JalanPengembak no. 2, Sanur, Denpasar, Bali, Indonesia.
The data for this research is gathered throughquestionnaires, which target TNCIMP‟s employee based on four criteria: 1) respondent must be an employee who has
passed his/her three month probation period; 2) respondent must be an employee who has
a job description that is directly related to the organization programmatic budget; 3)
respondent must be an employee who is involved in budgetary process; and 4) respondent
must be an employee who hold one of the four level of structural tier (director, manager,
coordinator, officer). From these criteria, 40 employees were suitable for becoming
respondents out of the 61 total employees.
Questionnaires were adapted from Milani (1975), Duncan (1972), and Mahoney
inPasoloran (2002).Some adjustments were made to the questions dimension and
structure used, since they were previously intended for profit-oriented entities. The
measurement scale used for the questions is the four Likert Scale. Research instruments
will be tested using reliability and validity tests, while the hypothesis will be analyzed
using both linear regression and moderated regression analysis. The model used within
this research can be found in Figure A.
Figure A Research model
PER
PAR
PEU
8
Explanation:
PAR
= Budgetary Participation
PER
= Performance
PEU
= Perceived Environmental Uncertainty
Results and Discussion
This section will provide the findings regarding the respond rate and respondent
characteristics, which are important in determining validity of a case study. Online survey
tools were used to spread the questionnaire among the chosen potential respondent. Out
of the 40 survey links sent, only 38 return with answers. From the 38 answered
questionnaire, only 35 were usable because the other 3 were incompletely submitted. This
means the survey usable respond rate is 87.5 percent. The high usable respond rate may
be caused by author‟s direct involvement as an employee of TNC-IMP, and thus
elevating response control significantly.
Complete respondent characteristics can be found in Appendix 1. According to
Appendix 1, 42.86 percent of respondents have been working at TNC-IMPfor 2-4 years.
This means that most of TNC-IMP‟s employees have sufficient organizational and workrelated knowledge to fit into the organization. On the other hand, 45.86 percent of the
employees have just been in their current position for less than a year. This means though
many of them are long-serving employee, most have just been given a new position and
in the process of adjusting to their new workload.
Most of the respondents come from the coordinator level and without supervisory
responsibility, with both achieving 42.85 percent.This means that the survey data is
dominated by views from those whose authority upon budgetary decision is minimal.
Despite the dominance of front-liners, the participation of senior and upper managers on
this survey is highly appreciable.
9
Instruments and Data Tests
This section reports on the tests used to measure instruments‟ validity and
reliability, and also data eligibility to be regressed. The first test is validity test for the
questionnaire used in this research. The validity test is done through conducting Pearson
Correlation test with the help of SPSS software.According to the result of Table A below,
all instruments used to measure each variable are valid as they all have Pearson
Correlation result higher than 0.3 and p value less than 0.05.
Table A Validity test
The second test is reliability test, which also used to test questionnaire as the
research instrument. Counting the Cronbach Alpha of each instrument does the reliability
test in this research. Based on Table B, all instrument in this research is reliable as the
produce Cronbach Alpha higher than 0.7.
Table B Reliability test
Based on normality test, the data used in this research is normally distributed
based on the p value produced from K-S one sample test. The p value produced, 0.399, is
far higher than 0.05. Since the instruments and data have passed each eligibility test, they
are empirically proven suitable to be used in this research.
10
Hypothesis Tests
This section delivers the results on each methodology used to test hypothesis that
exist in this research. The first hypothesis is tested using linear regression inputted into
Equation 1 in Table C. Meanwhile, the second hypothesis is tested using Moderated
Regression Analysis (MRA). MRA requires three equations to be inputted according to
Ghozali (2011), but only focuses on the third (Equation 3) for determining moderating
variable.
Table C Hypothesis test
Equation 1 (PER=α+βPAR+ε)
PER
= 8.839 + 0.697PAR
Std. Error
=
(0.096)
t
=
(7.226)
p value
=
(0.000)
2
Adjusted R
= 0.601
df
=
F
=
33
52.215
Equation 2 (PER=α+βPAR+βPEU+ε)
PER
= 32.076 + 0.328PAR - 0.519PEU
Std. Error
=
(0.118)
(0.124)
t
=
(2.776)
(-4.200)
p value
=
(0.009)
(0.000)
2
Adjusted R
= 0.735
df
=
32
F
=
48.087
PER
Std. Error
t
p value
Adjusted R2
Equation 3 (PER=α+βPAR+βPEU+βPARPEU+ε)
= 54.814 + 0.591PAR - 1.176PEU + 0.028PARPEU
=
(0.259)
(0.200)
(0.007)
=
(2.282)
(-5.879)
(3.836)
=
(0.030)
(0.000)
(0.001)
= 0.814
df
=
31
F
=
50.701
The result of the first equation reveals that budgetary participation has a positive
and significant effect upon performance at TNC-IMP. This is supported by the positive
11
coefficient produced (0.697) and the p value of 0.000, which is less than 0.05. This result
means that the first hypothesis is supported by the data in this research.
The regression result of the third equation reveals that perceived environmental
uncertainty has a direct negative and significant effect on performance. This is showed by
the negative coefficient (-1.176) and p value less than 0.05. The regression result also
reveals that interaction between perceived environmental uncertainty and budgetary
participation can positively and significantly impact performance at TNC-IMP. This is
showed by the positive coefficient (0.028) and p value less than 0.05 or 5 percent. This
means that perceived environmental uncertainty is a moderating variable that strengthen
relationship between budgetary participation and performance.
Beside those results, Adjusted R2has increased from equation to equation.
Equation 3 produces the highest Adjusted R2, 0.814. This means that 81.14 percent of
performance variances at TNC-IMP can be explained by budgetary participation,
perceived environmental uncertainty and the interaction of both.This result supports the
second hypothesis in this research thatperceived environmental uncertainty affects
relationship between budgetary participation and performance.
Conclusion
This paper hypothesizes thatbudgetary participation affects performance, and that
perceived environmental uncertainty affects relationship between budgetary performance
and performance. Through a series of tests and analysis, this paper has found
theempirical evidence that supports those hypotheses. Budgetary participation positively
affects performance. This means higher participation level on budgetary decision-making
12
will lead to higher performance in a certain limit. This finding support the findings of
Rinarti and Renyowijoyo (2007) and Nor (2007) that have found the similar positive and
significant effect of budgetary participation on performance.
In an NGO such as TNC-IMP, environment is an important existence that cannot
be lightly counted in its budgetary decision-making. This paper has found evidence that
when an environment is highly volatile and uncertain; the elevating level of participatory
budgeting is necessary to balance out the employee performance. This finding differs
from that of Rinarti&Renyowijoyo (2007) which did not find any evidence of significant
effect of perceived environmental uncertainty upon performance. This finding supports
the research done by Kren (1992), which has found that increasing level of participation
in budgeting is necessary to maintain the level of performance when faced with a highly
uncertain environment.
This research has some limitation beside that this is a case study. In a case study
such as this paper, general conclusion is hard to be drawn as the data only represent one
organization. The number of respondents able to participate is also low due to the nature
of this research location and subject. Future development of theories and empirical
studies regarding perceived environmental uncertainty, budgetary participation, and
performance of NGOs should include various organization and hetero sample to be closer
in withdrawing general conclusion and even a theory.
This research was started and conducted by an employee of the organization who
did not pass the sampling criteria nor was included. Although precautions have been
made to prevent biased data, there will be impacts, however small,based on assumptions
and interactions of each respondent towards the researcher. Future research should avoid
13
this bias possibility by being an „outsider‟ of the organization. This will also provide a
more independent and impartial judgment among respondents.
14
List of Reference
Brownell, P. 1981. "Participation in Budgeting, Locus of Control and
Organization Effectiveness", The Accounting Review, LVI(4), 844-860.
________. 1982. "A Field Study Examination of Budgetary Participation and
Locus of Control", The Accounting Review, LVII(4), 766-777
________ andHirst, M. 1986. "Reliance on Accounting Information, Budgetary
Participation, and Task Uncertainty: Tests of a Three-Way Interaction",
Journal of Accounting Research, 24(2), 241-249.
________ andMcInnes, M. 1986. "Budgetary Participation, Motivation, and
Managerial Performance", The Accounting Review, LXI(4), 587-600.
Downey, H. K., Hellriegel, D., and Slocum, J. W. 1975. "Environmental
Uncertainty: The Construct and Its Application", Administrative Science
Quarterly, Vol. 20, 613-629.
Duncan, K. and Moores, K. 1989. "Residual Analysis: A Better Methodology for
Contingency Studies in Management Accounting", JMAR, Vol. One Fall,
89-103.
Duncan, R. B. 1972."Characteristics of Organizational Environment and
Perceived Environment Uncertainty", Administrative Science Quarterly,
313-327.
Dunk, A. S. and Lysons, A. F. 1997. "An Analysis of Departmental Effectiveness,
Participative Budgetary Control Processes and Enviromental
Dimensionality Within The Competing Values Framework: A Public
Sector Study", Financial Accountability & Management, 13(1), 1-15.
Ghozali, I. 2011. AplikasiAnalisis Multivariate dengan Program IBM SPSS
19.Semarang:BadanPenerbitUniversitasDiponegoro.
Hirst, M. K. 1987."Some Further Evidence on the Effects of Budget Use and
Budget Participation on Managerial Performance", Australian Journal of
Management, 12(1), 49-56.
Kenis, I. 1979. "Effects of Budgetary Goal Characteristics on Managerial
Attitudes and Performance", The Accounting Review, LIV(4), 707-721.
Kren, L. 1992. "Budgetary Participation and Managerial Performance: The Impact
of Information and Enviromental Volatility", The Accounting Review,
67(3), 511-526.
15
Latham, G. P., Steele, T. P., and Saari, L. M. 1982. "The Effects of Participation
and Goal Difficulty on Performance", Personnel Psychology, 35, 677-686.
Milani, K. 1975. "The Relationship of Participation in Budget-Setting to Industrial
Supervisor Performance and Attitudes: A Field Study", The Accounting
Review, April, 274-284.
Murray, D. 1990. "The Performance Effects of Participative Budgeting: An
Integration of intervening and Moderating Variables", Behavioral
Research in Accounting, 2, 104-123.
MurtantodanHapsari,
W.
A.
2006."PengaruhPartisipasiPenyusunanAnggaranTerhadapKinerjaManajeri
aldenganDesentralisasidanKarakteristikSistemInformasiAkuntansiManaje
mensebagaiVariabel Moderating", JurnalBisnisdanAkuntansi, 8(1), 1-18.
Nor,
W. 2007."Desentralisasidan Gaya KepemimpinansebagaiVariabel
Moderating
dalamHubunganantaraPartisipasiPenyusunanAnggarandanKinerjaManajeri
al", SNA X, Juli, 1-27.
Pasoloran, O. 2002. “Pengaruh Perceived Environmental Uncertainty (PEU)
terhadapHubunganantaraKarakteristikSasaranPenganggarandenganKinerja
Manajerial”,
Tesis,
Magister
Akuntansi
Program
PascasarjanaUniversitasDiponegoro Semarang.
Rinarti,
D.
danRenyowijoyo,
M.
2007."PengaruhKetidakpastianLingkungandanBudayaOrganisasiTerhadap
PartisipasiPenganggarandankinerjaManajerial",
JurnalBisnisdanAkuntansi, 9(2), 124-135.
Yukl, G. A. and Latham, G. P. 1978. "Interrelationships Among Employee
Participation, Individual Differences, Goal Difficulty, Goal Acceptance,
Goal Instrumentality, and Performance", Personnel Psychology, 31, 305323.
16
17
Appendix 1: Respondent Characteristics
18
Appendix 2: Descriptive Statistics
19
Appendix 3: Normality Test Result
One-Sample Kolmogorov-Smirnov Test
N
Normal Parametersa,b
Most Extreme Differences
Mean
Std. Deviation
Absolute
Positive
Negative
Kolmogorov-Smirnov Z
Asymp. Sig. (2-tailed)
a. Test distribution is Normal.
b. Calculated from data.
20
Unstandardized
Residual
35
0E-7
2,09166047
.151
.082
-.151
.896
.399
Appendix 4: Regression Result
Model
1
2
3
Variables Entered/Removeda
Variables Entered
Variables
Removed
PARb
PEUb
PARPEUb
Method
. Enter
. Enter
. Enter
a. Dependent Variable: PER
b. All requested variables entered.
Model
R
Model Summary
R Square Adjusted R Square
1
.783a
.613
b
2
.866
.750
c
3
.911
.831
a. Predictors: (Constant), PAR
b. Predictors: (Constant), PAR, PEU
c. Predictors: (Constant), PAR, PEU, PARPEU
Model
Sum of
Squares
Std. Error of the
Estimate
.601
.735
.814
ANOVAa
df
Mean Square
Regression
699.858
1
1
Residual
442.314
33
Total
1142.171
34
Regression
857.017
2
2
Residual
285.154
32
Total
1142.171
34
Regression
948.798
3
3
Residual
193.373
31
Total
1142.171
34
a. Dependent Variable: PER
b. Predictors: (Constant), PAR
c. Predictors: (Constant), PAR, PEU
d. Predictors: (Constant), PAR, PEU, PARPEU
21
3.66107
2.98514
2.49757
F
Sig.
699.858
13.403
52.215
.000b
428.509
8.911
48.087
.000c
316.266
6.238
50.701
.000d
Appendix 4: Regression Result (continued)
Coefficientsa
Unstandardized
Standardized
Coefficients
Coefficients
Model
B
1
2
3
Std. Error
8.389
2.599
PAR
(Constant)
PAR
PEU
(Constant)
PAR
.697
32.076
.328
-.519
54.814
.591
.096
6.025
.118
.124
7.782
.259
.368
-.557
PEU
PARPEU
-1.176
.028
.200
.007
22
Sig.
Beta
(Constant)
a. Dependent Variable: PER
t
3.228
.003
.664
7.226
5.324
2.776
-4.200
7.044
2.282
.000
.000
.009
.000
.000
.030
-1.260
.747
-5.879
3.836
.000
.001
.783
2
3
THE EFFECT OF PERCEIVED ENVIRONMENTAL UNCERTAINTY ON THE
RELATIONSHIP BETWEEN BUDGETARY PARTICIPATION AND
PERFORMANCE: A CASE STUDY ON NGO THE NATURE CONSERVANCYINDONESIA MARINE PROGRAM
A.A.Ayu Putri Mirayanti D.
Ni Luh Supadmi
I Made Karya Utama
Abstract
Previous research papers have announced that budgetary participation is one of
the many variables affecting performance on organizations. Many others, unfortunately,
have not produced consistent supporting results. The drawn theory about the effect of
budgetary participation on performance is still unclear to this day.
This paper supports the thought that the inconsistent research output is due to the
failure to recognize that participation impacted upon performance in an indirect way.
One of the ways suggested is through moderating variables. The most frequent variable
that affects an NGO is contingency variable. This paper brought up a contingency
variable, perceived environmental uncertainty, as the moderating variable.
The result of this research is consistent with some similar attempts on
understanding the effect of budgetary participation on performance. Budgetary
participation variable in this case studyhave a significant effect upon performance,
perceived environmental uncertainty is a significant moderating factor of the relationship
between budgetary participation and performance at The Nature Conservancy –
Indonesia Marine Program.
Keywords: Budgetary participation, Perceived environmental uncertainty, Performance,
NGO
Introduction
4
The uncertain nature of current economy and business drives entities, both profit
and non-profit, to be highly effective and efficient. Succeeding the competition means
organizations need to increase their performance and accountability. One of the ways to
elevate performance and accountability is the use of budget as a management tool
Participation in budgeting helps organization to yield all functions of a budget.
These functions include planning tool, control platform, and evaluation standard.
Involving the lower level manager and workers in setting a budget canaid organizations
to set realistic goals.Realistic goals are important to create effective plans, reliable control
platform, and measurable evaluation standard. Realistic goals are also significant in
stabilizing performance by reducing the possibilities of slack.
Participatory budgeting has always been an enthusiastic fieldto be researched as it
involves behavioral factors that affect performance. Through the various previous
researches, there has been no consistent empirical proof of the participatory budgeting
influence upon performance. The bipolar difference in research results has failed to
support a strong theory regarding participatory role in changing performance.
Kenis (1979)has found that participatory budgeting has positive and significant
effect on performance. Similar findings also discovered by Brownell (1981), Brownell
(1982), Brownell &McInnes (1986), and Murray (1990). These researchers have done
their research in profit oriented environment, and have all found that the higher
participation level in budgeting usually lead to higher performance.
In contrast,Milani (1975) has found a rather inconsistent almost insignificant
relationship between participatory budgeting and performance.Yukl& Latham (1978),
Latham et. al (1982), and Brownell &Hirst (1986) have also found similar insignificant
5
results. Hirst (1987),in his attempt to replicate Brownell‟s (1982) research methodology,
has failed to discover the same result.Kren (1992), who used information availability and
environmental volatility as intervening variables between participatory budgeting and
performance, also has failed to find a significant result.
The lack of result trend found throughout the researches causes researchers to
look for the reason for this inconsistency. Murray (1990) has dedicated his research to
finding the intervening and moderating variables that affect participatory budgeting
impact on performance. Dunk &Lysons (1997) also support the thought that research
result inconsistency was a result of another outsider factor. The most frequently pointed
factor to affect relationship between participatory budgeting and performance is
contingency factor.
Contingency is closely related with organization‟s external environment. The
environment, in which a non-profit organization exists, is a dynamic and constantly
changing existence. This dynamic scene is a source of uncertainty. Dunk &Lysons (1997)
have found that when an organization exists in a complex and rather volatile
environment, the judgments of its operators will be affected. This includes judgment in
undertaking budgetary decisions. Participation in budgetary decision is expected to
reduce the level of uncertainty felt by organization operators. This finding indicates that
uncertainty, whichperceived by organization‟s operators, is one of the factors that can
influence the relationship between participatory budgeting and performance.
Hypothesis
6
Milani (1975) mentions that a budgetary system cannot exist without human
resource that operates it. When budgetary participation is present while setting the
organizational goals, operators of the organization will experience internalization or
acceptance process. Internalization of organizational goal may lead to motivation and
ultimately increase in performance (Murtanto&Hapsari, 2006). This further proof that
participatory budgeting is essential to shift operators‟ focus upon the participative goal
that has been set(Murray, 1990; Brownell, 1981; Milani, 1975). Thus, the first hypothesis
of this research is:
H1: Participatory budgeting affects performance.
Many researches have been dedicated in explaining the lack of consistency
explaining the relationship between participatory budgeting and performance. Most
suspicions fall upon contingency factors as an outside affecter behind this inconsistency.
Perceived environmental uncertainty is one of contingency variables that affect every
organization faced with its changing environment (Duncan &Moores, 1989). Perceived
environmental uncertainty also alleged as the real factor affecting budgetary decisionmaking because the actual uncertainty is immeasurable (Downey dkk, 1975). Thus, the
second hypothesis of this research is:
H2: Perceived environmental uncertainty affects relationship between budgetary
participation and performance
Data and Methodology
Researches on participatory budgeting and performance almost always use profitoriented entity as their research subject. The increasing influence of non-profit
7
organization, especially Non Governmental Organization (NGO), has made this research
attempts to better understand the impact of participatory budgeting upon performanceat
The Nature Conservancy – Indonesia Marine Program (TNC-IMP). The organization‟s
primary office in JalanPengembak no. 2, Sanur, Denpasar, Bali, Indonesia.
The data for this research is gathered throughquestionnaires, which target TNCIMP‟s employee based on four criteria: 1) respondent must be an employee who has
passed his/her three month probation period; 2) respondent must be an employee who has
a job description that is directly related to the organization programmatic budget; 3)
respondent must be an employee who is involved in budgetary process; and 4) respondent
must be an employee who hold one of the four level of structural tier (director, manager,
coordinator, officer). From these criteria, 40 employees were suitable for becoming
respondents out of the 61 total employees.
Questionnaires were adapted from Milani (1975), Duncan (1972), and Mahoney
inPasoloran (2002).Some adjustments were made to the questions dimension and
structure used, since they were previously intended for profit-oriented entities. The
measurement scale used for the questions is the four Likert Scale. Research instruments
will be tested using reliability and validity tests, while the hypothesis will be analyzed
using both linear regression and moderated regression analysis. The model used within
this research can be found in Figure A.
Figure A Research model
PER
PAR
PEU
8
Explanation:
PAR
= Budgetary Participation
PER
= Performance
PEU
= Perceived Environmental Uncertainty
Results and Discussion
This section will provide the findings regarding the respond rate and respondent
characteristics, which are important in determining validity of a case study. Online survey
tools were used to spread the questionnaire among the chosen potential respondent. Out
of the 40 survey links sent, only 38 return with answers. From the 38 answered
questionnaire, only 35 were usable because the other 3 were incompletely submitted. This
means the survey usable respond rate is 87.5 percent. The high usable respond rate may
be caused by author‟s direct involvement as an employee of TNC-IMP, and thus
elevating response control significantly.
Complete respondent characteristics can be found in Appendix 1. According to
Appendix 1, 42.86 percent of respondents have been working at TNC-IMPfor 2-4 years.
This means that most of TNC-IMP‟s employees have sufficient organizational and workrelated knowledge to fit into the organization. On the other hand, 45.86 percent of the
employees have just been in their current position for less than a year. This means though
many of them are long-serving employee, most have just been given a new position and
in the process of adjusting to their new workload.
Most of the respondents come from the coordinator level and without supervisory
responsibility, with both achieving 42.85 percent.This means that the survey data is
dominated by views from those whose authority upon budgetary decision is minimal.
Despite the dominance of front-liners, the participation of senior and upper managers on
this survey is highly appreciable.
9
Instruments and Data Tests
This section reports on the tests used to measure instruments‟ validity and
reliability, and also data eligibility to be regressed. The first test is validity test for the
questionnaire used in this research. The validity test is done through conducting Pearson
Correlation test with the help of SPSS software.According to the result of Table A below,
all instruments used to measure each variable are valid as they all have Pearson
Correlation result higher than 0.3 and p value less than 0.05.
Table A Validity test
The second test is reliability test, which also used to test questionnaire as the
research instrument. Counting the Cronbach Alpha of each instrument does the reliability
test in this research. Based on Table B, all instrument in this research is reliable as the
produce Cronbach Alpha higher than 0.7.
Table B Reliability test
Based on normality test, the data used in this research is normally distributed
based on the p value produced from K-S one sample test. The p value produced, 0.399, is
far higher than 0.05. Since the instruments and data have passed each eligibility test, they
are empirically proven suitable to be used in this research.
10
Hypothesis Tests
This section delivers the results on each methodology used to test hypothesis that
exist in this research. The first hypothesis is tested using linear regression inputted into
Equation 1 in Table C. Meanwhile, the second hypothesis is tested using Moderated
Regression Analysis (MRA). MRA requires three equations to be inputted according to
Ghozali (2011), but only focuses on the third (Equation 3) for determining moderating
variable.
Table C Hypothesis test
Equation 1 (PER=α+βPAR+ε)
PER
= 8.839 + 0.697PAR
Std. Error
=
(0.096)
t
=
(7.226)
p value
=
(0.000)
2
Adjusted R
= 0.601
df
=
F
=
33
52.215
Equation 2 (PER=α+βPAR+βPEU+ε)
PER
= 32.076 + 0.328PAR - 0.519PEU
Std. Error
=
(0.118)
(0.124)
t
=
(2.776)
(-4.200)
p value
=
(0.009)
(0.000)
2
Adjusted R
= 0.735
df
=
32
F
=
48.087
PER
Std. Error
t
p value
Adjusted R2
Equation 3 (PER=α+βPAR+βPEU+βPARPEU+ε)
= 54.814 + 0.591PAR - 1.176PEU + 0.028PARPEU
=
(0.259)
(0.200)
(0.007)
=
(2.282)
(-5.879)
(3.836)
=
(0.030)
(0.000)
(0.001)
= 0.814
df
=
31
F
=
50.701
The result of the first equation reveals that budgetary participation has a positive
and significant effect upon performance at TNC-IMP. This is supported by the positive
11
coefficient produced (0.697) and the p value of 0.000, which is less than 0.05. This result
means that the first hypothesis is supported by the data in this research.
The regression result of the third equation reveals that perceived environmental
uncertainty has a direct negative and significant effect on performance. This is showed by
the negative coefficient (-1.176) and p value less than 0.05. The regression result also
reveals that interaction between perceived environmental uncertainty and budgetary
participation can positively and significantly impact performance at TNC-IMP. This is
showed by the positive coefficient (0.028) and p value less than 0.05 or 5 percent. This
means that perceived environmental uncertainty is a moderating variable that strengthen
relationship between budgetary participation and performance.
Beside those results, Adjusted R2has increased from equation to equation.
Equation 3 produces the highest Adjusted R2, 0.814. This means that 81.14 percent of
performance variances at TNC-IMP can be explained by budgetary participation,
perceived environmental uncertainty and the interaction of both.This result supports the
second hypothesis in this research thatperceived environmental uncertainty affects
relationship between budgetary participation and performance.
Conclusion
This paper hypothesizes thatbudgetary participation affects performance, and that
perceived environmental uncertainty affects relationship between budgetary performance
and performance. Through a series of tests and analysis, this paper has found
theempirical evidence that supports those hypotheses. Budgetary participation positively
affects performance. This means higher participation level on budgetary decision-making
12
will lead to higher performance in a certain limit. This finding support the findings of
Rinarti and Renyowijoyo (2007) and Nor (2007) that have found the similar positive and
significant effect of budgetary participation on performance.
In an NGO such as TNC-IMP, environment is an important existence that cannot
be lightly counted in its budgetary decision-making. This paper has found evidence that
when an environment is highly volatile and uncertain; the elevating level of participatory
budgeting is necessary to balance out the employee performance. This finding differs
from that of Rinarti&Renyowijoyo (2007) which did not find any evidence of significant
effect of perceived environmental uncertainty upon performance. This finding supports
the research done by Kren (1992), which has found that increasing level of participation
in budgeting is necessary to maintain the level of performance when faced with a highly
uncertain environment.
This research has some limitation beside that this is a case study. In a case study
such as this paper, general conclusion is hard to be drawn as the data only represent one
organization. The number of respondents able to participate is also low due to the nature
of this research location and subject. Future development of theories and empirical
studies regarding perceived environmental uncertainty, budgetary participation, and
performance of NGOs should include various organization and hetero sample to be closer
in withdrawing general conclusion and even a theory.
This research was started and conducted by an employee of the organization who
did not pass the sampling criteria nor was included. Although precautions have been
made to prevent biased data, there will be impacts, however small,based on assumptions
and interactions of each respondent towards the researcher. Future research should avoid
13
this bias possibility by being an „outsider‟ of the organization. This will also provide a
more independent and impartial judgment among respondents.
14
List of Reference
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Organization Effectiveness", The Accounting Review, LVI(4), 844-860.
________. 1982. "A Field Study Examination of Budgetary Participation and
Locus of Control", The Accounting Review, LVII(4), 766-777
________ andHirst, M. 1986. "Reliance on Accounting Information, Budgetary
Participation, and Task Uncertainty: Tests of a Three-Way Interaction",
Journal of Accounting Research, 24(2), 241-249.
________ andMcInnes, M. 1986. "Budgetary Participation, Motivation, and
Managerial Performance", The Accounting Review, LXI(4), 587-600.
Downey, H. K., Hellriegel, D., and Slocum, J. W. 1975. "Environmental
Uncertainty: The Construct and Its Application", Administrative Science
Quarterly, Vol. 20, 613-629.
Duncan, K. and Moores, K. 1989. "Residual Analysis: A Better Methodology for
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89-103.
Duncan, R. B. 1972."Characteristics of Organizational Environment and
Perceived Environment Uncertainty", Administrative Science Quarterly,
313-327.
Dunk, A. S. and Lysons, A. F. 1997. "An Analysis of Departmental Effectiveness,
Participative Budgetary Control Processes and Enviromental
Dimensionality Within The Competing Values Framework: A Public
Sector Study", Financial Accountability & Management, 13(1), 1-15.
Ghozali, I. 2011. AplikasiAnalisis Multivariate dengan Program IBM SPSS
19.Semarang:BadanPenerbitUniversitasDiponegoro.
Hirst, M. K. 1987."Some Further Evidence on the Effects of Budget Use and
Budget Participation on Managerial Performance", Australian Journal of
Management, 12(1), 49-56.
Kenis, I. 1979. "Effects of Budgetary Goal Characteristics on Managerial
Attitudes and Performance", The Accounting Review, LIV(4), 707-721.
Kren, L. 1992. "Budgetary Participation and Managerial Performance: The Impact
of Information and Enviromental Volatility", The Accounting Review,
67(3), 511-526.
15
Latham, G. P., Steele, T. P., and Saari, L. M. 1982. "The Effects of Participation
and Goal Difficulty on Performance", Personnel Psychology, 35, 677-686.
Milani, K. 1975. "The Relationship of Participation in Budget-Setting to Industrial
Supervisor Performance and Attitudes: A Field Study", The Accounting
Review, April, 274-284.
Murray, D. 1990. "The Performance Effects of Participative Budgeting: An
Integration of intervening and Moderating Variables", Behavioral
Research in Accounting, 2, 104-123.
MurtantodanHapsari,
W.
A.
2006."PengaruhPartisipasiPenyusunanAnggaranTerhadapKinerjaManajeri
aldenganDesentralisasidanKarakteristikSistemInformasiAkuntansiManaje
mensebagaiVariabel Moderating", JurnalBisnisdanAkuntansi, 8(1), 1-18.
Nor,
W. 2007."Desentralisasidan Gaya KepemimpinansebagaiVariabel
Moderating
dalamHubunganantaraPartisipasiPenyusunanAnggarandanKinerjaManajeri
al", SNA X, Juli, 1-27.
Pasoloran, O. 2002. “Pengaruh Perceived Environmental Uncertainty (PEU)
terhadapHubunganantaraKarakteristikSasaranPenganggarandenganKinerja
Manajerial”,
Tesis,
Magister
Akuntansi
Program
PascasarjanaUniversitasDiponegoro Semarang.
Rinarti,
D.
danRenyowijoyo,
M.
2007."PengaruhKetidakpastianLingkungandanBudayaOrganisasiTerhadap
PartisipasiPenganggarandankinerjaManajerial",
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16
17
Appendix 1: Respondent Characteristics
18
Appendix 2: Descriptive Statistics
19
Appendix 3: Normality Test Result
One-Sample Kolmogorov-Smirnov Test
N
Normal Parametersa,b
Most Extreme Differences
Mean
Std. Deviation
Absolute
Positive
Negative
Kolmogorov-Smirnov Z
Asymp. Sig. (2-tailed)
a. Test distribution is Normal.
b. Calculated from data.
20
Unstandardized
Residual
35
0E-7
2,09166047
.151
.082
-.151
.896
.399
Appendix 4: Regression Result
Model
1
2
3
Variables Entered/Removeda
Variables Entered
Variables
Removed
PARb
PEUb
PARPEUb
Method
. Enter
. Enter
. Enter
a. Dependent Variable: PER
b. All requested variables entered.
Model
R
Model Summary
R Square Adjusted R Square
1
.783a
.613
b
2
.866
.750
c
3
.911
.831
a. Predictors: (Constant), PAR
b. Predictors: (Constant), PAR, PEU
c. Predictors: (Constant), PAR, PEU, PARPEU
Model
Sum of
Squares
Std. Error of the
Estimate
.601
.735
.814
ANOVAa
df
Mean Square
Regression
699.858
1
1
Residual
442.314
33
Total
1142.171
34
Regression
857.017
2
2
Residual
285.154
32
Total
1142.171
34
Regression
948.798
3
3
Residual
193.373
31
Total
1142.171
34
a. Dependent Variable: PER
b. Predictors: (Constant), PAR
c. Predictors: (Constant), PAR, PEU
d. Predictors: (Constant), PAR, PEU, PARPEU
21
3.66107
2.98514
2.49757
F
Sig.
699.858
13.403
52.215
.000b
428.509
8.911
48.087
.000c
316.266
6.238
50.701
.000d
Appendix 4: Regression Result (continued)
Coefficientsa
Unstandardized
Standardized
Coefficients
Coefficients
Model
B
1
2
3
Std. Error
8.389
2.599
PAR
(Constant)
PAR
PEU
(Constant)
PAR
.697
32.076
.328
-.519
54.814
.591
.096
6.025
.118
.124
7.782
.259
.368
-.557
PEU
PARPEU
-1.176
.028
.200
.007
22
Sig.
Beta
(Constant)
a. Dependent Variable: PER
t
3.228
.003
.664
7.226
5.324
2.776
-4.200
7.044
2.282
.000
.000
.009
.000
.000
.030
-1.260
.747
-5.879
3.836
.000
.001
.783