Flattening The Organization: The Effect Of Organizational Reporting Structure On Budgeting Effectiveness

This study investigates whether increasing a superior's span of control improves the effectiveness of the budgeting process. The authors characterize the superior's utility function as consisting of a utility for norm enforcement as well as wealth, leading the superior to reject profitable projects believed to contain excessive slack. Authors develop theory to predict that superiors become more willing to reject projects as their span of control increases. Further, subordinates anticipate the superiors' behavior and reduce slack as the span of control increases. Experimental results are consistent with these predictions.