Academic journal article Revue Canadienne des Sciences de l'Administration

Managing Budget Conflicts: Contribution of Goal Interdependence and Interaction

Academic journal article Revue Canadienne des Sciences de l'Administration

Managing Budget Conflicts: Contribution of Goal Interdependence and Interaction

Article excerpt

Abstract

Managers are confronted with many conflicts when they use a budget. How they discuss their opposing views may have a substantial impact on whether the conflicts contribute to the budget process productively or destructively. This study used the theory of cooperative and competitive goal interdependence to analyze the interaction between managers as they deal with budget conflicts. Structural equation and other analyses of interviews with managers in a large utility indicate that cooperative goals support an open-minded discussion of opposing views, which in turn promotes productivity and work relationships that result in acceptance of the budgeting system and a sense of team unity. The results were interpreted as suggesting that organizations that structure cooperative goals and develop constructive controversy skills help their managers use their budget conflicts productively.

Members of an organization are highly interdependent when they develop and use a budget. Top management uses a budget to specify the objectives and plans for the organization as a whole, allocate limited company resources, and anticipate its revenues. However, as divisions and groups compete over scarce resources and fight to determine organizational direction, work on budgets can test and disrupt this interdependence (Knights & Murray, 1992; McGuire, 1992; McKinley, Cheng, & Schick, 1986; Pfeffer, 1981). Nevertheless, budget discussions are not always divisive and unproductive (Koberg, 1987). This study uses Deutsch's (1973) theory of cooperation and competition to suggest how interdependence affects the management of budget conflicts. Specifically, managers with cooperative rather than competitive goals are expected to discuss budget conflicts directly and constructively and, as a result, use conflict to complete budget tasks, strengthen relationships, and build commitment to the budgeting process.

Budgets are expected to serve many purposes. Managers use budgets to specify targeted plans and communicate organizational objectives to try to structure the efforts of different departments and divisions. They also use them to set authorization limits, targets, and lineitem expenditures. The purpose of these targets and standards is to motivate managers and employees to accomplish their department's objectives. Comparisons of actual performance with these targets form the basis of many managers' performance evaluations.

However, researchers have long noted that work on budgets creates unintended consequences, tension, and conflict that make realizing the proposed benefits of budgets problematic (Argyris, 1953, 1977; Hertog, 1978; Hofstede, 1967; Hopper, 1980; Hopwood, 1970; Johnson & Kaplan, 1987; Kaplan, 1984; Richardson & Gibbins, 1988). These conflicts can undermine productivity and work relationships, and can lead to disenchantment with the budget and disunity within the organization.

Budget management, and particularly how budget conflicts are discussed, can greatly affect whether conflict is constructive or destructive (Collins, 1982; Covaleski & Dirsmith, 1986, 1988, 1995; Ezzamel, 1994; Ocasio, 1994). Skilled discussions among managers can assist in coping with the strains and disagreements of working with a budget and ensure that budgeting contributes to the organization's effectiveness.

Constructive controversy research can identify the type of the discussions that help managers make budget conflicts productive (Tjosvold, 1985; Tjosvold & Tjosvold, 1995). Under certain conditions, confronting an opposing view has been found to create uncertainty about the adequacy of one's own position and the desire to understand the contrary view (Tjosvold, 1982; Tjosvold & Deemer, 1980). Once people understand opposing ideas and information and have seen each others' perspectives, they can appreciate the limitations of their own views and incorporate other arguments. They can then combine the most reliable information and the best ideas to make high-quality decisions that they are willing to implement. …

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