Participative Budgeting, Employee Motivation and Budgetary Slack in Private Sector in Indonesia

Abstract

This research was conducted to evaluate and analyze budgeting practices in the private sector, especially in the banking sector. This study analyzes the relationship between employee involvement in the budgeting process and budgetary slack practices through employee motivation. Participatory budgeting can make employees more motivated because employees will feel needed and their opinions are heard. As a result, employees reduce or eliminate dysfunctional behavior, namely budgetary slack. The data collection technique used was a questionnaire. The questionnaire was filled out by supervisors or managers at banks in Bandung. Questionnaires that can be processed are 33 questionnaires. The data analysis technique used is Structural Equation Modeling-PLS (SmartPLS 3.0). Hypothesis testing results indicated that the two research hypotheses can be accepted..

The Mediating Role of Employee Motivation in The Relationship Between Budget Participation and Budgetary Slack

“…When employees are actively engaged in planning, implementing budgets, and making budget decisions, their motivation tends to increase (Pratama, 2020). Research by Carolina (2020) and Giusti, Kustono, & Effendi (2018) indicates a positive correlation between employee motivation and budget participation with higher levels of budget participation leading to greater employee motivation. High motivation, in turn, leads employees to desire greater involvement in the budgeting process.…”

“…The theory underlying the relationship, as discussed by Carolina (2020) and Rentor & Carolina's research (2020), suggests that employee motivation plays a significant role in how employees use the budget within an organization. Highly motivated employees are more likely to use the budget to advance the organization's goals.…”

“…The application of budget participation in the budgeting process can have both positive and negative impacts. Positive behavior that arises from budget participation when preparing budgets can motivate managers or employees by making budgets the basis and increasing performance achievements (Carolina, 2020). The motivation that arises in each manager will encourage managers to take a full part or contribute in planning activities both as a plan maker, implementation, and evaluation of the plan or budget prepared.…”

“…The motivation that arises in each manager will encourage managers to take a full part or contribute in planning activities both as a plan maker, implementation, and evaluation of the plan or budget prepared. Carolina (2020), budget participation increases employee motivation so the higher the budget participation, the greater the increase in employee motivation.…”

“…Consequently, motivation cannot be considered a moderating variable. In contrast, Carolina (2020) introduced employee motivation as an intervening variable between budget participation and budgetary slacks. The results indicated that employee motivation had a negative effect on budgetary slacks and a positive effect on budget participation.…”