When employees who are evaluated, and possibly compensated, on the basis of budgetary performance have input into their budgets, they may provide information so as to bias the budgets to make them easier to attain. Employee participation in the budgetary process has two distinct cognitive aspects. First, participation can contribute to higher quality budget decisions because it allows employees to communicate their private knowledge to budgetary decision makers. Second, participation requires interactions with superiors and others in the organization, and thus may allow employees to obtain information that is relevant to performing their jobs. In summary, participation can enhance the flow and use of important information both up and down the organizational hierarchy.
Budgetary participation can also motivate employees to strive harder to attain their budgets.
When employees have an opportunity to express their views concerning their budgets, they are more likely to internalize the budgets, and thus have greater acceptance of and commitment to the budgets. Participation in the budgetary process can also help employees attain important values they seek from membership in the organization. Early researchers, perhaps influenced by democratic principles, expected that greater amounts of budgetary participation would lead to greater benefits for organizations. However, they found that participation sometimes had little or no effect on important employee attitudes and behavior. These equivocal findings motivated researchers to identify factors that moderate, or condition, participation's effects.