Evaluative Use of Budgets, Task Variability and Propensities to Create Budgetary Slack : An Empirical Investigation

The extant literature contains conflicting findings on the relation between the evaluative use of budgets and budgetary slack propensities. Task variability is proposed as an important contingency influencing that relationship. Australian data indicate that for managers facing low task variability, the evaluative use of budgets is positively related to their propensities to create budgetary slack. However, for managers facing high task variability, the relation was found to be inverse. An explanation for the results is that managers of highly variable tasks may be more accepting of budgets as appropriate evaluation measures. Instead of seeking to introduce slack into budgets, their rational response may be to accept tight budgetary control as a factor contributing to long-term rewards and career advancement. High evaluative use of budgets may therefore play a positive role in communicating organizational budgetary expectations and in increasing goal convergence among managers facing high task variability