Budgetary fairness and managers’ performance in defence budgeting

Prior studies in budgetary setting have suggested that budgetary fairness has positively affected manager’s performance, both directly and indirectly. This study proposed that the indirect relation between fairness and performance is mediated by intervening variables of budgetary participation, organisational commitment, budget satisfaction and budget performance. The study explored tripartite theories of organisational justice, goal settting and contingency theories to examine budgetary fairness and performance relationship in defence setting, a classic exemplary of mechanistic organisation. The study proposed three main modelling approaches in examining the relationship that are direct effect model, mediating effect model and interaction effect model. In the direct effect model, the study proposed three dimensions of fairness that are procedural, distributive and interactional fairness to have a positive and significant effect on managerial performance, budgetary participation, organisational commitment, budget satisfaction and budget performance. In the indirect effect model, the study hypothesized that the relationship between budgetary fairness and managerial performance are mediated by budgetary participation, organisational commitment, budget satisfaction and budget performance. In the interaction effect model, the study suggest three way interaction effect of fairness, budgetary participation, organisational commitment and between budgetary fairness, budget satisfaction and budget performance to influence managerial performance. Data were collected from a sample of 128 defence budget managers selected based on purposive sampling from Ministry of Defence. The hypotheses were analysed using Structural Equation Modelling by Smart PLS and SPSS statistical tool. The results revealed positive and significant influences of fairness on performance directly and both indirectly and interactively through organisational commitment, budget satisfaction and budget performance. Nonetheless, the influence of budgetary participation as mediator and as well as in interaction effect model linking fairness to managerial performance was not supported. These findings were not expected, thus suggest further research on its role in budgetary setting. The result revealed that fairness, commitment and satisfaction roles in budget setting in mechanistic organisation positively related to the Modified Budgeting System concept of let the manager manage in public sector. The study proposed new model development known as a ‘Justice- Contingency- Outcome’ model as a guidance for future research in this domain.