Accounting, Organizations and Society, Vol. 8, NO. 4, pp. 323-340, 1983. 0361-3682183 $3.00 + .OO Printed in Great Britain. @ 1983 Pergamon Press Ltd. BUDGETING AS A MEANS FOR CONTROL AND LOOSE COUPLING MARK A. COVALESKI Graduate School of Business University of Wisconsin-Madison Madison, WI 53706, U.S.A. and MARK W. DIRSMITH The Pennsylvania State University University Park, PA 16802, U.S.A. Abstract Budgeting has been traditionally viewed as one means for achieving control over activities performed at middle and lower levels in the organization through an essentially downward flow of information. This paper proposes that the use of budgeting, particularly in the nursing services area where central- ized control by a hospital administration may not be attainable, is more complex than thii traditional definition would suggest. In such a setting, budgets may well be used as a negotiating tool with which middle level managers advocate the needs of the subunit to upper-level organizational members. Such a use of budgets would emphasize an upward flow of information which is, in turn, consistent with the image the organization wishes to portray to its environment. . . . the most striking example of value rigidity I can think of is the old South Indian Monkey Trap, which depends on value rigidity for its effectiveness. The trap consists of a hollowed-out coconut chained to a stake. The coconut has some rice inside which can be grabbed through a small hole. The hole is big enough so that the monkey’s hand can go in, but too small for his fiit with rice in it to come out. The monkey reaches in and is suddenly trapped - by nothing more than his own value rigidity. He can’t revalue the rice. He cannot see that freedom without rice is more valuable than capture with it. The villagers are coming to get him and take him away. They’re coming closer . . . closer1 . . . now! What general advice - not specific advice - but what general advice would you give the poor monkey in circumstances like this? (Pirsig, 1974, pp. 306307). Management control has traditionally been viewed as facilitating the process by which re- sources are acquired and consumed in accomplish- ing organizational objectives (Anthony, 1965). One form of management control device, budgets, has been defined as being financial plans which provide a basis for directing and evaluating the per- formance of individuals and subunits within organ- izations so as to better coordinate and control their various activities (cf. Bruns & Waterhouse, 1975). Consistent with this definition, budgeting research has traditionally focused on the effects of budgetary systems on budgetees, such as enhanc- ing their attitudes towards the budget through such practices as budgetary participation in order to achieve better control over their activities We wish to thank Stephen F. Jablonsky and John W. Slocum, Jr. for their help in conducting this research. We also wish to thank our two reviewers for their constructive criticism. 323