Budget participation and employee performance in real estate companies: the mediating role of budget goal commitment, trust and job satisfaction

Abstract

Purpose Recent years witnessed an exponential growth of the Portuguese real estate market. This growth has generated the need to implement effective management control tools to allow companies to improve their planning and monitoring of activities. Drawing on the agency and goal-setting theories, this paper explores the impact of companies' participative budgeting processes on employee performance in the real estate industry. Design/methodology/approach For this purpose, a questionnaire was developed and a sample of 116 employees that participate in the budgeting process of real estate organizations collected, with data analyzed using structural equation modelling. Findings The results show that participation in the budgeting process has an impact on employees' performance through budget goal commitment, trust and job satisfaction. However, no statistical support was found for the role of budgetary slack in this process. Research limitations/implications This study was conducted in a single industry and is based on self-reported measures of employees that participate in the budgeting process of their organizations. Practical implications The findings highlight the need for real estate organizations to involve their staff in the elaboration of budgets, contributing to a higher level of commitment to established goals, job satisfaction, trust and performance. Real estate organizations should provide adequate working conditions, foster their employees' autonomy and recognize their work. Originality/value The findings encourage real estate companies to extend the participation in the budget process to employees and, ultimately, to mitigate the probability of budget failure.