The Role of Accounting Data in Performance Evaluation, Budgetary Participation, and Organizational Effectiveness

The relationship between managerial leadership styles and measures of organizational effectiveness, such as performance of subordinates, is an unsettled issue in management accounting research. Despite preliminary evidence by Argyris [1952], and later by DeCoster and Fertakis [1968], that the effectiveness of budgetary systems is associated with supervisory leadership style, subsequent research has produced inconclusive findings. Two cases in point are the results of Hopwood [1972] and Otley [1978]. Hopwood found that a leadership style characterized by a heavy emphasis on budget-related performance was significantly associated with job-related tension (JRT). He went on to speculate that JRT would be dysfunctional for performance. Otley, attempting to replicate and extend Hopwood's work, explored the relationship between leadership style and performance, hypothesizing that the tension-producing style found by Hopwood would be associated with inferior subordinate performance. Although his results were inconclusive, they suggested that superior performance levels were associated with a budget-focused leadership style. This paper reports the results of a study undertaken in an attempt to reconcile the results of Hopwood and Otley. In the study, I hypothesized