Fairness as an Antecedent to Participative Budgeting: Examining the Effects of Distributive Justice, Procedural Justice and Referent Cognitions on Satisfaction and Performance.

Abstract Previous research has suggested that more participation (high process-control) in decision-making is always preferable to less (low process-control). Some research, however, has stated that any level of participation less than full decision-control is pseudo-participation. Often, no control is seen as desirable over solely process-control. This paper tests theories of distributive justice, procedural justice and referent cognitions in a laboratory experiment. It finds one form of process-control is a viable form of participation. Subjects allowed only a voice (low process-control) in setting budgets, experienced greater budget and task satisfaction than subjects allowed no input. This effect occurs even when unattainable (unfair) budgets are received. No effect is found on performance. Further, this research finds that high process-control (vote for standard) is effective only when attainable (fair) budgets are achieved. When unattainable (unfair) budgets are received, subjects with a vote (high process-control) experience less task and budget satisfaction than individuals with only a voice (low process-control). Subjects with high process-control (vote) form referent cognitions (i.e., more definitive impressions of what their budgets will be). Subjects in the voice (low process-control) conditions do not form these referent cognitions. Thus, subjects in the vote conditions form stronger feelings of dissatisfaction when unattainable (unfair) budgets are received.