Budget use, task uncertainty, system goal orientation and subunit performance: A test of the ‘fit’ hypothesis in not-for-profit hospitals

Researchers have used contingency theory to argue that organizations perform more effectively if structures and control systems are designed to match contextual variables. The ‘fit’ hypotheses developed in the organization and management control literatures to test this theory have generally assumed the existence of a unifying set of organization goals and that individual behaviour can be directed towards the achievement of these goals. Management control systems, such as budgeting, have been similarly conceptualized. This paper argues that the extent to which individuals will behave in an ‘administratively’ rational manner and wittingly or unwittingly match the use of control strategies to organizational contextual variables will depend on whether they identify with the organization as a system. The paper tests the three-way interaction between task uncertainty, budget use and system goal orientation. The empirical analysis based on a sample of 192 subunit managers in four large Australian not-for-profit hospitals provides results to support the hypothesis developed.