CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
Every conscious organization requires a mission along with associated goals and objectives to guide its actions. However, in the absence of a budget, such as in the case of a business like a bank, it might meander aimlessly, lacking clarity about its direction and purpose. This underscores the fundamental role of a budget in facilitating the achievement of the organization's objectives. Essentially, a budget is defined as a monetary plan, prepared and approved before a specific timeframe, detailing projected income, expenses, and capital allocation to achieve specific goals (Lucey, 2012).
The process of creating a budget is known as budgeting (Garrison, 2011). A well-structured and carefully considered budgeting system can yield substantial benefits, encompassing planning, coordination of activities, plan execution, communication, authorization of actions, motivation, performance control, and evaluation (Horngren and Foster, 2013). It's important to note that these benefits don't materialize automatically but require effort (Lucey, 2008).
Two distinct value systems are associated with the motivational function of budgeting, categorized as: (a) Traditional views of organizational behavior rooted in traditional behavioral assumptions. (b) Modern views of organizational behavior based on contemporary behavioral theories. Traditional views align with conventional theories, whereas modern views correspond to modern theories of human motivation (Louderback and Hirsch, 2007).
Upon closer examination of various human motivation theories, a common underlying principle emerges: motivation comprises a desire for a chosen goal, coupled with the subsequent drive to pursue that goal (Horngren and Foster, 2013). People tend to perform tasks for which they are rewarded (Cascio, 2003). McGregor's argument revolves around traditional management theories primarily addressing lower-level needs, with the expectation that employees will fulfill their higher-level needs outside of work. This approach often results in complaints from managers about good compensation and job security but poor productivity (Louderback and Hirsch, 2007).
Modern motivational theories generally support the idea that participatory management enhances productivity (Cascio, 2002). The theories relevant to the budgeting context include the "Need Hierarchy Theory" and "Expectancy Theory" (Louderback and Hirsch, 2007). It is widely believed that involving subordinates in budget setting can alleviate many issues associated with traditional systems (Hopwood, 1996). Participatory budgeting is recognized as a motivating factor (Lucey, 2012).
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1.2 Statement of the Problem
An inadequate budgeting system and the resulting budgets can lead to decreased morale, demotivation, and reduced productivity among employees. The use of authoritative (unilaterally prepared) budgets can instill anxiety, as they are often kept closed and secretive, which can foster dissatisfaction among employees because their own goals and aspirations are not taken into account within the budget. In organizations with poor budgeting systems, individual goals may not align with the overarching goals of the organization.
The authoritarian (authoritative) nature of such budgets can make employees feel undervalued, leading to a decline in morale, and the pressure stemming from these budgets can create unfavorable conditions that hinder motivation and the achievement of organizational objectives.
In the 21st century, Nigerian banks are marked by organizational conflicts, inter-departmental disputes, frequent employee quarrels, incidents of fraud, feelings of resentment, mistrust, and other counterproductive behaviors that have a detrimental impact on productivity and the overall attainment of organizational goals.
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1.3 Purpose of the Study
The main purpose of this study is to examine the influence of budgeting and budgets on motivation and productivity of bank employees. The specific objectives include:
(a) To find out if the selected banks in Kano State operate budgetary system.
(b) To examine the extent of employees participation in budget preparation.
(c) To find out if budgeting and budget influence morale and enhance motivation and productivity of employees in banks.
(d) To make recommendations on how budgeting and budget can be used to boost motivation and productivity in banks.
1.4 Research Hypotheses
With regards to the objectives of this study, the following hypotheses are formulated:
Ho1: Participatory budgetary system does not boost employees’ morale.
Ho2: Participatory budgeting and budgets do not motivate employees.
Ho3: Participatory budgets, relative to morale and motivation, do not improve productivity.
1.5 Significance of the Study
This research aims to provide valuable insights to banks on how to prepare budgets that can effectively boost employees' morale, motivation, and productivity. It seeks to alleviate anxiety and foster greater acceptance of budgets, ultimately reducing the sense of alienation among bank employees and facilitating the achievement of organizational goals. The findings and recommendations from this research are expected to be of significant benefit to the banking industry in Kano State and Nigeria as a whole.
Furthermore, this study will serve as a valuable source of information and reference material for other students or researchers interested in exploring related fields.
1.6 Scope of the Study
This research is designed to outline and analyse the influence of budgeting and budgets on the motivation and productivity of bank employees using First bank in Kano State as organisations of study. It shows that the success of budget depends on the manner in which the budget is prepared. It discusses autocratic and participatory budgeting and budgets as they influence employees morale, motivation and productivity.
1.7 Limitations of the Study
While the research findings could be equally useful to other banks in the banking industry, selected banks in Kano State are used as units of analysis for the purpose of convenience. Thus, this study is limited to a particular segment. Time tight is another limitation. The time approved for the research is deemed too short to facilitate indepth investigation which is often required in this form of study. Financial constraint is another limitation.
1.8 Research Methods
The descriptive research method employing judgemental sampling technique is used with questionnaire constituting the primary data source. Personal interview also constitute another source of primary data.
Library books, magazines, newspapers and other periodicals form the sources of secondary data. Data collected are analysed and interpreted using figures, charts and tables. The chi-square (x2) statistic is used in testing the hypotheses formulated.
1.9 Definition of Terms
Budgetary Process: This is the means by which planning information is systematically gathered and plans are developed, communicated and implemented (Chatfield and Neilson, 2003).
Budgeting: Budgeting is the accounting activity concerned with expressing predetermined management objectives in monetary terms (Smith et al, 2005).
Budget: A budget is defined as a plan quantified in monetary items, prepared and approved prior to a defined period of time, usually showing planned income to be generated and/or expenditure to be incurred during that period and the capital to be employed to attain a given objective (Lucey, 2012).
Master Budget: This is a comprehensive budget which expresses the overall business plan for the whole organization for a period of one year or less (Smith et al., 2005).
Morale: Morale is the general attitude or outlook of an individual or a group toward a specific situation (Rachman and Mescon, 2005).
Motivation: This is the desire for a selected goal combined with the resulting drive or pursuit toward the goal (Bateman and Zeithaml, 2010).
Productivity: Productivity is the amount of goods and services a worker produces (Usry et al, 2008).
