Budgetary criteria in performance evaluation: a critical
appraisal using new evidence
David Otley
a,
*, Raili M. Pollanen
b
a
Department of Accounting and Finance, Lancaster University, Lancaster LA1 4YX, UK
b
Faculty of Administration, Regina University, Regina SK, S45 0A2, Canada
Abstract
Previous studies on the use of budgetary criteria in performance evaluation have used a wide range of variables,
measures and models, but have concentrated upon extending rather than repeating previous work. This study includes
replications of parts of ®ve previous studies and obtains results that dier in many respects from previous ®ndings.
Because of the use of similar measures and models, it can be concluded that the dierent results stem primarily from
the dierent sample of managers studied. More generally, it is suggested that control practices dier across organiza-
tions, cultures and time; universal ®ndings should not be expected. Rather, a more coherent programme of work is
required to explicate the varied ways in which budgetary techniques can be used in performance evaluation and man-
agement. # 2000 Elsevier Science Ltd. All rights reserved.
1. Introduction
The past 25 years have seen a small but con-
tinuing stream of studies that have sought to
explore the in¯uence of budgetary controls on
managerial performance. The seminal work in this
®eld was the study by Hopwood (1972) which
explored the role of accounting data in managerial
performance evaluation. It was quickly followed
by a study which, using similar measures, found
con¯icting results (Otley, 1978). This apparent
con¯ict stimulated a stream of work, much of it
from Australian authors (e.g. Brownell, 1982,
1985; Dunk, 1989; Harrison, 1992), which intro-
duced additional variables in order to provide
contingent explanations of the observed dier-
ences in managerial behaviour.
In one sense, this stream of work was clearly
successful. A variety of exploratory studies pro-
duced a range of ®ndings and statistically sig-
ni®cant results. Indeed, Brownell and Dunk (1991)
stated that ``the continuing stream of work devo-
ted to this issue constitutes, in our view, the only
organized critical mass of empirical work in man-
agement accounting at present''. Even so, the
work is characterised by a number of de®ciencies.
Dierent authors have tackled dierent aspects of
the issue; dierent studies use dierent subsets of
variables; in many cases, the same variable is
measured in importantly dierent ways. The sam-
ples of managers studied have been drawn from
dierent types of organization in dierent coun-
tries and the sample size has been generally quite
small. Some studies use samples of managers
drawn from a single organization; others use
managers from dierent organizations. Most
Accounting, Organizations and Society 25 (2000) 483±496
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* Corresponding author.