Centro de Turismo Rural y Restaurante– Casas del Río

INTRODUCTION

Both the psychological and the behavioral accounting literature have focused on the effects of goal setting, or standard setting, on performance. In addition, while the conventional accounting literature has assumed participation in goal setting to be a means for affecting motivation, behavior, and task performance, the behavioral accounting literature has examined the effects of participative budg- eting attitudes and performance. This chapter will elaborate on the results of research into the effects of goal setting in general and participative budgeting in particular on task and/or attitude outcomes.

GOAL SETTING AND TASK PERFORMANCE Evidence in Psychology

A goal can be defined as “what an individual is trying to accomplish . . . the object or aim of an action.”1 _{Its equivalent in accounting is the performance}

standard. Goal setting, or standard setting, is assumed to affect motivation, be- havior, and task performance.

Among the attributes of goals are (1) goal specify, which refers to the extent performance level to be accomplished is explicit as to its content and clarity;2

(2) goal difficulty, which is the probability of accomplishment. A survey of empirical studies has shown that most studies support the hypothesis that setting specific, hard goals produces better performance than medium, easy, do-your-

best, or no goals.3_{Mechanisms, psychological processes, and cognitive activities}

that influence the effects of goal setting include: (1) direction, which refers to what needs to be done in the work setting; (2) effort mobilized to accomplish the goal; (3) persistence of the individual at the task; and (4) strategy devel-

opment, which refers to the development of strategies, or action plans, for at-

taining goals. In addition, feedback on progress toward a goal, rewards given for goal attainment, and participation in the setting of goals have been found to mediate the positive effects of goal setting on performance. Of the individual differences, only need for achievement and self-esteem appear promising as moderating variables of the relationship between goal setting and task perform- ance.

Evidence in Accounting

Several studies have examined the effects of setting budget goals on perform- ance.4 _{Rockness tested the effect of goal-setting difficulty, alternative reward}

structures, and performance feedback on both performance measures and satis- faction.5_{The results of the experiment verified parts of a budgetary model that}

predicted that (1) subjects in the high-budget condition differed from those in the medium-budget condition, (2) absolute performance increased with more direct reward structure, and (3) differences in planned performance existed be- tween subjects receiving formal feedback and those receiving nonformal feed- back.

A study by Chow explored the linkages between job-standard tightness, type of compensation scheme, and performance.6_{In addition to conducting the con-}

ventional investigation of the relation between goal setting (in this case job- standard tightness) and performance, Chow built on the agency research and adverse selection studies to suggest that goal setting and type of compensation scheme affect not only workers’ effort but also their self-selection among em- ployment contracts and, through these, job performance.7 _{The results of the}

experiment indicated that (1) for subjects with assigned treatments, job-standard tightness and type of compensation scheme had significant independent but in- significant interactive effects on performance; (2) when permitted a choice of compensation schemes (given an assigned job standard), subjects self-selected among them by skill; and (3) the selection of one’s own compensation scheme enhanced performance.

These results add to the large body of evidence showing that setting specific, difficult goals generates higher performance than specific moderate goals, spe- cific easy goals, or general (i.e., do-your-best) goals.8_{Various studies have also}

shown that goals promote performance by increasing motivation (i.e., the direc- tion and level of effort) as well as stimulating the search for, and consistent use of, relatively effective task strategies.9_{The motivational effects of goals on the}

level of performance depend, however, on the levels of moderating variables. For example, task uncertainty and task complexity have been found to moderate

the relation between goals and performance, whereby as task complexity in- creases, goals are less effective in promoting performance.10_{Hirst and Yelton}11

confirmed the beneficial effect of budget goals on promoting performance levels but found that task interdependence does not moderate the relationships.

Toward a Theoretical Framework: The Role of Task Uncertainty

As these results suggest, accounting studies concur with the psychological literature in the finding that setting specific difficult budget goals leads to higher task performance than setting either specific moderate goals, specific easy goals, or general goals. Naylor and Ilgen have suggested, however, that research should expand to search for the moderating variables that mediate the relationship be- tween goal setting and performance.12 _{Hirst gave the following two reasons to}

make such a search:

First, it has the potential to delineate situations in which goal setting does not have a positive effect on performance. This is significant because it suggests a need to control for moderator variables in future studies that empirically investigate both the direct effects of goal setting on performance, and the way goal setting combines with other factors (e.g., participation) to affect performance. Second, knowledge about moderator variables can have practical implications. In particular, the designers of goal setting programs can use such knowledge to anticipate the effects of their programs, and to introduce goal setting interventions in one of those situations where they are expected to have a positive effect on performance.13

In fact, Hirst proposed a theoretical framework that traced the effect of a po- tential moderating variable, task uncertainty, on the relationship between goal setting and performance. The relationship between goal setting and performance is linked by a hypothesized sequence of activities in line with models of task performance provided by Locke et al. and Porter, Lawler, and Hackman. The model includes four conditional mechanisms along the path linking goal setting to task outcomes. These are: (1) goal setting, in terms of difficulty and speci- ficity; (2) a set of cognitive activities interpretation, strategy search, and selection of valid strategies; (3) intentions, in terms of direction, level, and duration of effort; and (4) action, in terms of the task performance. Hirst argued that diffi- culties can arise in performing the cognitive activities where task uncertainty is high. It postulates the negative effects of task uncertainty on the completeness of task knowledge and the positive effects of goal setting based on complete task knowledge. As a result, Hirst proposed a hypothesis of task uncertainty as a moderating variable:

H1: There is an interaction between goal setting and task uncertainty affecting task

Exhibit 8.1

The Effects of Task Uncertainty on the Relationship between Goal Setting and Task Outcomes

While the focus has been on task uncertainty, future theoretical and empirical attempts will focus on identifying other moderating variables and integrating the findings to provide a sound basis for the design of budgetary control systems.15,16

Hirst’s model indicates that goal-setting effects are conditioned on the com- pleteness of task knowledge, which is in turn dependent on task uncertainty, and goal setting is where task uncertainty will moderate the relationship between goal setting and performance. Basically, when the interaction between goal set- ting and task uncertainty is low, goal setting will cause either a smaller increase or a reduction in performance. The model depicted in Exhibit 8.1 expands Hirst’s model on two counts: (1) by showing the nature of task outcomes, and (2) by presenting limiting restrictions on the nature of goal setting. Both addi- tions are now explained:

1. Limiting restrictions on goal setting are presented as the conditions necessary for the subject’s acceptance of the level of difficulties of the goals assigned to him or her. These are a verbal agreement by the subject accepting the goal,17 _{perceived goal}

difficulty, and perceived expectancy of goal attainment by the subjects.18_{These con-}

ditions must be satisfied before the relationship between goal setting and performance is examined, as failure to accept a misrepresentation of the level of difficulty of the goal creates a new strain on three cognitive factors (i.e., goal interpretation, strategy

search, and selection) that must be performed if goal setting is to have a positive effect on task performance.

2. The task outcomes include measures of performance, motivation, and task satisfaction. Two measures of performance are (a) a measure of successful completion of the task and (b) a measure of effort.19_{One measure of intrinsic motivation was included as a}

task outcome following research findings that indicate that goal setting may influence variables associated with intrinsic motivation.20

The conclusion from this model was formally stated in the following hypoth- esis:

H2: Given that goal setting has been found acceptable in terms of goal agreement, per-

ceived goal difficulty, and perceived expectancy of goal attainment, there is an interaction between goal setting and task uncertainty affecting task outcomes and performance, effort and intrinsic motivation.21

The results of an experiment by Belkaoui22_{suggest that both goal difficulty and}

task uncertainty affect task outcomes. The goal difficulty results verify earlier findings in both accounting and psychology that show that setting specific dif- ficult goals leads to higher task performance than setting either specific moderate goals or general goals. The task uncertainty results verify the thesis that the level of task uncertainty will affect both performance and effort. Basically, the more certain the task, the higher the performance and effort put in a job.

The interaction effects results suggest that given that goal setting has been found acceptable in terms of goal agreement, perceived goal difficulty, and per- ceived expectancy of goal attainment, there is an interaction between goal setting and task uncertainty affecting task outcomes of performance, effort, and intrinsic motivation. Basically, as tasks increased, both performance and effort were found to decrease. Task interest, however, was found to increase as the task became more uncertain and then decrease as the task uncertainty continued to increase. The results, coupled with earlier results of goal setting on performance, imply that (a) given the choice between presenting an individual with an easy goal or a difficult goal, the more useful course in terms of performance, effort, and task interest seems to be the latter, and (b) given the choice between pre- senting the individual with a certain task or an uncertain task, the more useful course in terms of performance and effort seems to be the former. To motivate task interest some degree of task uncertainty seems to be beneficial.

Future research may need to investigate the same research issue under dif- ferent conditions. Gender differences, which were not taken into account in the present work, sometimes induce different cognitive patterns and these are not necessarily eliminated by random assignments to groups. Another neglected con- dition is related to the self-selection and effort effects of different employee contracts. Task uncertainty differences may affect not only workers’ efforts, but