The Roles of Organizational Politics and Procedural Fairness in the Relationship between Performance Evaluation Systems and Budget Gaming Behavior

SeTin SeTin, Roy Sembel, Yvonne Augustine Sudibyo, Ari Purwanti
(Submitted 14 June 2019)
(Published 6 October 2022)


This study investigates the relationship between performance evaluation systems and budget gaming behavior. Specifically, it examines the mediating role of organizational politics and procedural fairness. Data collection was conducted by a questionnaire survey of managers of go-public manufacturing companies in Indonesia. Based on a sample of 128 responses, the partial least squares results indicate that general political behavior, the politics of pay and promotion policies, and procedural fairness significantly mediate the non-financial measures and budget gaming relationship. In contrast, the results indicate that the mediating effects of organizational politics and procedural fairness on the relationship between relative performance measures and budget gaming behavior are generally insignificant. This study supports the goal setting theory and the organizational justice theory, and contributes to the management control system literature by recognizing the importance of performance evaluation systems, the importance of understanding political behavior and the perception of fairness to overcome budget gaming behavior. This study provides assurance that organizations can reduce budget gaming behavior through using non-financial measures or incentives.


performance evaluation, budget gaming, politics, fairness

Full Text: PDF

DOI: 10.22146/gamaijb.46605


Agritansia, P. P., and M. Sholihin. 2011. The attitudinal and behavioral effects of nonfinancial measures. Gadjah Mada International Journal of Business 13 (3): 267-286.

Baerdemaeker, J. D. UGent. and W. UGent. Bruggeman. 2015. The impact of participation in strategic planning on managers' creation of budgetary slack: The mediating role of autonomous motivation and affective organizational Commitment. Management Accounting Research 29: 1-12.

Bart, C. K. 1989. Budgeting gamesmanship. The Academy of Management Executive 2 (4): 285-294.

Beugre, C. D., and P. R. Liverpool. 2006. Politics as Determinant of Fairness Perceptions in Organizations. In Handbook of Organizational Politics, edited by E. Vigoda-Gadot, and A. Drory, 122_135. Cheltenham, U.K.: Edward Elgar Publishing.

Butterfield, R., C. Edwards, and J. Woodall. 2005. The new public management and managerial roles: The case of the police sergeant. British Journal of Management 16 (4): 329-341.

Cardos, I. R. 2014. New trends in budgeting – A literature review, SEA - Practical Application of Science. Fundația Română Pentru Inteligența Afacerii, Editorial Department 4: 483-490.

Chen, D., S. Liang, and P. Zhu. 2012. Relative performance evaluation and executive compensation: Evidence from Chinese Listed Companies. China Journal of Accounting Research 5 (2): 127-144.

Chia, D. P. S., C. M Lau, and S. L. C. Tan. 2014. The relationships between performance measures and employee outcomes: The Mediating roles of procedural fairness and trust, in Davila, A., Epstein, M. J., and Manzoni, J.F.(ed.). Performance measurement and management control: Behavioral implications and human actions. Studies in Managerial and Financial Accounting 28: 203 – 232.

Chong, V. K., & Strauss, R. 2017. Participative budgeting: The effects of budget emphasis, information asymmetry, and procedural justice on slack – Additional evidence. Asia-Pacific Management Accounting Journal 12 (1): 182-220.

Collins, F., P. Munter, and W. Finn Don. 1987. The budgeting games people play. The Accounting Review 62 (1): 29-49.

Colquitt, J. A., D. E. Conlon., M. J Wesson., C. O. L. H. Porter, and K. Y. Ng. 2001. Justice at the millennium: A meta analytic review of 25 years of organizational research. Journal of Applied Psychology 86 (3): 425–445.

Covaleski, M. A., J. H. Evans III., L. Joan, and M. D. Shields. 2006. Budgeting research: Three theoretical perspectives and criteria for selective integration. Handbooks of Management Accounting Research 2: 587-624.

Daumoser, C., M. Sohn, and B. Hirsch. 2018. Honesty in budgeting: A review of budgetary slack. Journal of Management Control 29 (2): 115-159.

Davis, S., F. T. DeZoort, and L. S. Kopp. 2006. The effect of obedience pressure and perceived responsibility on management accountants' creation of budgetary slack. Behavioral Research in Accounting 18 (1): 19-35.

Gibbons, R, and K. J. Murphy. 1990. Relative performance evaluation for chief executive officers. Industrial and Labor Relations Review 43 (3): 308-518.

Gong, G., L. Y. Li, and J. Y. Shin. 2011. Relative performance evaluation and related peer groups in executive compensation contracts. Accounting Review 86 (3): 1007-1043.

Greenberg, J. 1987. A Taxonomy of Organizational Justice Theories. The Academy of Management Review 12 (1): 9-22.

Hair, J., M. Sarstedt., C. Ringle, and J. Mena. 2012. An assessment of the use of partial least squares, structural equation modelling in marketing research. Journal of the academy of marketing science 40 (3): 414-433.

Hansen, S.C., D.T. Otley, and W. A. Van der Stede. 2003. Practice Developments in Budgeting: An Overview and Research Perspective. Journal of Management Accounting Research 15: 95-116.

Hartmann, F. G. H, and V. S. Maas. 2010. Why business unit controllers create budget slack: Involvement in management, social pressure, and Machiavellianism. Behavioral Research in Accounting 22 (2): 27–49.

He, J. Q, and C. M. Lau. 2012. Does the reliance on nonfinancial measures for performance evaluation enhance managers’ perceptions of procedural fairness? In performance measurement and management control: Global issues. Studies in Managerial and Financial Accounting 25, 363–388.

Hochwarter, W., R. Kolodinsky., L. Witt., A. Hall., G. Ferris, and M. Kacmar. 2006. Competing Perspectives on the Role of Understanding in the Politics Perceptions-Job Performance Relationship: A Test of the Antidote Versus Distraction Hypotheses. In Handbook of Organizational - Politics, edited by E. Vigoda Gadot, and A. Drory, 271-285. Cheltenham, U.K. Edward Elgar Publishing.

Hopwood, A. l972. An empirical study of the role of accounting data in performance evaluation. Journal of Accounting Research 47: 156-182.

Hoque, Z., L. Mia, and M. Alam. 2001. Market competition, computer-aided manufacturing and use of multiple performance measures: An empirical study. British Accounting Review 33 (1): 23-45.

Huang, C. L. and M. L. Chen. 2010. Playing devious games, budget‐emphasis in performance evaluation, and attitudes towards the budgetary process. Management Decision 48 (6): 940-951.

Jensen, M. C. 2003. Paying people to lie: The truth about the budgeting process. European Financial Management 9 (3): 379–406.

Kacmar, K. M, and D. S. Carlson. 1997. Further validation of the perceptions of political scale (POPS): A multiple-sample investigation. Journal of Management 23 (5): 627-658.

Kaplan, R. S, and D. P. Norton. 1996. The Balanced Scorecard: Translated Strategy into Action. Boston, MA: Harvard Business School Press.

Kaya, N., S. Aydin, and O. Ayhan. 2016. The effects of organizational politics on perceived organizational justice and intention to leave. American Journal of Industrial and Business Management 6, 249-258.

Kenno, S. A., C. M. Lau, and B. J Sainty. 2018. In search of a theory of budgeting: A literature review. Accounting Perspective 17 (4): 507-553.

Lau, C. M. and M. Sholihin. 2005. Financial and nonfinancial measures: How do they affect job satisfaction? The British Accounting Review 37 (4): 389- 413.

Lau, C. M. 2015. The effects of nonfinancial performance measures on role clarity, procedural fairness and managerial performance. Pacific Accounting Review 27 (2): 142 – 165.

Lau, C. M, and Scully. 2015. The roles of organizational politics and fairness in the relationship between performance measurement systems and trust. Behavioral Research in Accounting 27 (1): 25-53.

Lau, C. M., G. Scully, and A. Lee. 2018. The effects of organizational politics on employee motivations to participate in target setting and employee budgetary participation. Journal of Business Research, 90: 247-259.

Lazear, E. P. 1987. Pay Equality and Industrial Politics. Unpublished Paper, Hoover Institution.

Leventhal, G. S. 1980. What Should Be Done with Equity Theory? New Approaches to the Study of Fairness in Social Relationships. In Social Exchanges: Advances in Theory and Research. New York: Plenum Press.

Libby, T, and R. M. Lindsay. 2010. Beyond budgeting or budgeting reconsidered, A survey of North-American budgeting practice. Management Accounting Research 21: 56-75.

Locke, E.A., and G. P. Latham. 1990. A Theory of Goal Setting and Task Performance. Prentice-Hall, Englewood Cliffs, NJ.

Morlidge, S., and S. Player. 2010. Future Ready: How to Master Business Forecasting, John Wiley & Sons, Chichester.

Nguyen, D. H., M. R. W. Hiebl, and C. Weigel. 2018. Beyond budgeting: Review and research agenda. Journal of Accounting and Organizational Change 14 (3): 314-337.

O’Grady, W., and C. Akroyd. 2016. The MCS package in a non-budgeting organisation: A case study of main freight. Qualitative Research in Accounting & Management 13 (1): 2-30.

Onsy, M. 1973. Factor analysis of behavioral variables affecting budgetary slack. The Accounting Review 48 (3): 535-548.

Otley, D. T. 1978. Budget Use and Managerial Performance. Journal of Accounting Research 16 (1): 122-149.

Özer, G., and E. Yılmaz. 2011. Effects of procedural justice perception, budgetary control effectiveness and ethical work climate on propensity to create budgetary slack. Business and Economics Research Journal 2 (4): 1-18.

Parker, C., R. Dipboye, and S. Jackson. 1995. Perceptions of organizational politics: An investigation of antecedents and consequences. Journal of Management 2l (5): 89l-912.

Ram, P., and G. V. Prabhakar. 2010. Leadership styles and perceived organizational politics as predictors of work related outcomes. European Journal of Social Sciences 15 (1): 40–55.

Sandalgaard, N., and P. N. Bukh. 2014. Beyond budgeting and change: A case study. Journal of Accounting and Organizational Change 10 (3): 409-423.

Sholihin, M., and R. Pike. 2010. Organizational commitment in the police service: Exploring the effects of performance measures, procedural justice and interpersonal trust. Financial Accountability & Management Journal 26 (4): 0267-4424.

Soetanto, T. V., and L. P. Fun. 2015. Super slack-based model efficiency and stock performance of manufacturing industry listed in Indonesian Stock Exchange. Procedia - Social and Behavioral Sciences 211: 1231-1239.

Van Elten, H. J. 2017. Relative performance evaluation amongst business unit level managers. Accounting Research Journal 30 (2): 185-204.

Witt, L. A., D. C. Treadway, and G. R. Ferris. 2004. The role of age in reactions to organizational politics perceptions. Organizational Analysis 12 (1): 39-52.

Yılmaz, E., Özer, G, and M. Günlük. 2014. Do organizational politics and organizational commitment affect budgetary slack creation in public organizations. Procedia - Social and Behavioral Sciences 150: 241-250.

Zahra, S.A. 1987. Organizational politics and the strategic process. Journal of Business Ethics 6 (7): 579-587.


  • There are currently no refbacks.

Copyright (c) 2022 Gadjah Mada International Journal of Business

Creative Commons License
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.