Budget Participation, Budget Goal Clarity, and Organizational Performance: The Mediating Role of Organizational Commitment in the Public Sector

This study explores how budget participation and budget goal clarity influence organizational performance, while examining the mediating role of organizational commitment. The research was conducted at the National Narcotics Agency (BNN) of South Sumatra Province, Indonesia, a public institution engaged in drug prevention and eradication efforts. The study applied a quantitative survey method involving 110 employees who were directly associated with budgeting and planning activities. Data analysis was performed using the Partial Least Squares–Structural Equation Modeling (PLS-SEM) approach. The results show that budget participation does not directly contribute to improve organizational performance. This condition may occur because the budgeting mechanism within the institution is still largely characterized by a top-down system, limiting employees’ influence in decision-making processes. Even so, participation in budgeting was found to indirectly improve organizational performance through stronger organizational commitment. In contrast, budget goal clarity demonstrated both direct and indirect positive effects on organizational performance. The findings further indicate that greater employee involvement and well-defined budget objectives are able to strengthen organizational commitment, which subsequently supports better organizational outcomes. These results emphasize the importance of organizational commitment in enhancing the effectiveness of budgeting practices within public sector organizations. From a theoretical standpoint, this study extends the discussion of public sector performance management by integrating Agency Theory and Goal-Setting Theory to explain how budgeting practices are associated with organizational performance. In practical terms, the study suggests that public institutions should provide broader opportunities for employee involvement in budgeting activities while ensuring that budget goals are communicated clearly in order to foster stronger commitment and improve organizational performance.