Management Accounting Section Midyear Meeting

Budgeting and Employee Stress in Times of Crisis: Evidence from the Covid-19 Pandemic

• In Event: Covid and Management Control

Abstract

Studies have shown that that management control practices change in response to global crises as firms attempt to manage the accompanying uncertainty and financial strain (Asel, Posch & Speckbacher, 2010; Becker, Mahlendorf, Schäffer & Thaten, 2016; Janke, Mahlendorf & Weber, 2014). The purpose of this study is to develop more comprehensive insights into the behavioral effects that stem from such changes. Using survey data from business unit managers in the Netherlands, our results show that firms tighten their budget controls in response to a negative impact of Covid-19. In turn, the tightening of budget controls is positively associated with increases in employees’ emotional exhaustion because of increased perceptions of role ambiguity and role conflict. We furthermore find that the effect of tighter budget controls on role ambiguity is mitigated when managers perceive that the budget controls are used in an enabling way prior to the crisis, but heightened with increasing trust in superiors. These results suggest that if firms use their budgets to help managers acquire a deeper understanding of their tasks and responsibilities, they are better able to respond to a negative shock and the accompanying tightened budget controls, which helps mitigate the undesired behavioral response of increased role ambiguity and emotional exhaustion. Our findings also suggest that trust, which usually is beneficial to organizations, has a ‘dark’ side in that managers will push themselves harder to reciprocate the trust they have in their superiors, thus, increasing their stress in the form of role ambiguity and, in turn, emotional exhaustion.

Authors

• David S. Bedford, University of Technology Sydney

• Roland F. Spekle, Nyenrode Business Universiteit

• Sally K. Widener, Clemson University