Advantages and Disadvantages of Participative Budgeting
Participative Budgeting is the situation in which budgets are designed and set after input from subordinate managers, instead of merely being imposed. The idea behind this sort of budgeting is to assign responsibility to subordinate managers and place a form of personal ownership on the final budget. Nearly two decades of management accounting research has resulted in equivocal findings on the consequences and effects of participative budgeting (Lindquist 1995). Participative budgeting certainly has various advantages, these include the transferral of information from subordinate to superior increased job satisfaction for the subordinate, budgetary responsibility and goal congruence. Its disadvantages include budgetary slack and negative motivation, however it is the conditions in which participative budgeting takes place determines whether the budgeting process is successful. The conditions are dependent on various factors such as the level of participation, level of subordinate influence, the extent to which budgetary slack takes place, volatility, job related information, and the complexity of the budget.
Participative budgeting has the advantage of transferring information from the subordinate to their superior This knowledge is likely to be more reliable and accurate as the subordinate has direct contact with the activity and therefore is in the best position to make budget estimates. Participative Budgeting also gives subordinates the opportunity to discuss organisational issues with superiors, in which an exchange of information and ideas can help to solve problems and agree future actions (Nouri & Parker 1998). This transferral of information is important particularly when dealing with a matter of high task difficulty as, the more difficult a task, the greater the need for consultation with subordinates. Participative budgeting has a higher performance rate when dealing with more difficult and more volatile tasks than non consultative budgeting (Lau & Tan 1998)
The disadvantage of subordinate/superior information transferral is, of course, that the information supplied by the subordinate may not be entirely accurate; the budget estimations may be overstated to make the subordinate’s job easier to achieve. The difference between the true estimated budget and the overstated budget is ...
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...an agreement, in which the superior may have a final say in the matter, this too can be detrimental to the business because it only serves to lower the morale of the manager, and confidence in the work he or she is trying to achieve. Secondly the attitudes of the negotiators can greatly affect the outcome. For example, if one negotiator has a competitive behaviour rather than a cooperative behaviour then it will most likely make the other negotiator adopt a more competitive attitude and thus decrease the likelihood of inducing counteroffers that can lead to an agreement (Fisher, Fredrickson & Peffer 2000). Negotiations can also cause those involved who disagree in significant and irreconcilable ways to accentuate those differences (Hilton 1994).
In conclusion, the advantages of participative budgeting include an increase and transferral of information, an increase in subordinate morale and job satisfaction, the development of negotiation skills and goal congruence. However these advantages only come into full affect when particular conditions are present, without these conditions it may turn into a disadvantage through budgetary slack, low job satisfaction and responsibility.
I attended the Saturday Lab 1 session discussing the Denison Specialty Hospital case study. In our session, we had a through discussion into the different budget terminology. I learned about the difference between accrual and cash accounting methods, which is based on the timing of when the revenue and expenses are recognized. I also learned about responsibility centers as an organizational unit under the supervision of a manager, who is responsible for its activities and results. In addition, the manager is accountable for the budget of the department that they head. Therefore, a centralized form of management in developing the budget because it makes easier to because the information for the department budget is located
For government budgeting to be effective, the process that guides it must be an evolving one. As the government gets bigger, it will most likely destabilize the existing method. Therefore, it must change to keep pace with the demands and growth of the country. The process must be capable of handling the complexity of our nation and its multifaceted needs so it will always need revisions and restructuring to face these new challenges. Its ultimate goal must be to reinforce the government and strengthen the country.
The first common theme is the importance of clear strategic intent and big picture thinking in negotiations. Before taking the Negotiation Behaviour unit, I always perceived negotiation as a fixed-pie, a zero-sum gain situation, where one party wins and the other party loses. This belief has often led me to a competitive behaviour in negotiation by trading the big picture thinking with the need to win, getting too detailed too quickly, leading to a positional approach instead of having a broad goal and explore for ways around problems to create value and get the best outcome.
A company's budget serves as a guideline in planning and committing costs in order to meet tactical and strategic goals. Tactical goals such as providing budgetary costs for daily operations, and strategic objectives that include R&D, production, marketing, and distribution are all part of the budgeting process. Serving as a guideline rather than being set in stone, the budget is a snapshot of manager's "best thinking at the time it is prepared." (Marshall, 2003, p.496) The budget is a method in which to reign-in discretionary spending, and will likely show variances between what costs have been anticipated and what costs are actually incurred.
Love – a simple four letter word shrouded in mystery and many different meanings. Philosophers, poets, and writers have all tried to discern the significance or concept of love for many centuries. Plato, for example, was one such philosopher who in his work the Symposium (which means “Drinking Party”) wrote about “Eros” – the term for sexual love in Greek. The Symposium was written approximately around 384 and 379 B.C.E., and follows five elite Athenian men as they pronounce their admiration of Eros while lounging on couches listening to flute girls play in the distance. Each of the men has different backgrounds ranging from tragic poet, comedian, doctor, playboy, and even Socrates himself (Norton). All these characters bring diverse views on the subject of love, and each speaker seems to build on the last enhancing the story. Times have changed so much since Plato wrote The Symposium is it possible to compare Plato’s ornate description of love to love in the modern world? Love today is much like love in Plato’s time, and I believe people today are still searching for their “other half” – the missing piece, for it is a complete love which makes us better people.
However, this assumption is incomplete in reality. The main problem that causes the failure of negotiation is due to culture differences. Many companies are going global, people will negotiate with people come from different culture and different countries. If people do not realize what the main problem is, they will continue to have trouble with this problem.
As any romantic will assert, love is by far the most powerful force known to human hearts and minds. This sentiment is espoused throughout history, almost to the point of cliché. Everyone has heard the optimistic statement, “love conquers all,” and The Beatles are certain, however idyllic it may be, that “all you need is love.” Humanity is convinced that love is unique within human emotion, unequalled in its power to both lift the spirit up in throws of ecstasy, and cast it down in utter despair.
Love is arguably the most powerful emotion possessed by mankind; it is the impalpable bond that allows individuals to connect and understand one another. Pure love is directly related to divinity. Without love, happiness and prosperity become unreachable goals. An individual that possesses all the desired superficial objects in the world stands alone without the presence of love. For centuries love has been marveled by all that dare encounter it. Countless books and poems have been transcribed to explain the phenomenon of love, but love surpasses all intellectual explanations and discussions. Love is not a definition, but rather a thought, an idea. This idea, the idea of love, burns inside us all. Instinctually, every soul on Earth is
Budget participation is another factor that is important in evaluating and determining the firm’s performance. Sharing of information among organizational members is crucial in the budgeting process. Research has found that if the opinions of the employees are collected and reviewed in the budgeting process, then the firm will have a higher possibility of achieving the goals and targets compared to budgets which are set up by the directors. However, this is only considered effective if the employees value their membership in the committee and think of the targets of budgeting as a common desired goal. Hence, participation by individual members can improve group interaction.
Therefore if managers see budgeting as an unnecessary burden then there will be a lot of shot falls which cannot be accounted for. Budgeting should hold a very important position in the day to day activity of an organization but should not consume all the time that could be used to monitor other controls. Budgeting is therefore a necessary burden that adds value to the organization.
Negotiations always occur between parties who believe that some benefit may come of purposeful discussion. The parties to a negotiation usually share an intention to reach an agreement. This is the touchstone to which any thinking of negotiations must refer. While there may be some reason to view negotiations as attempts by each party to get the better of the other, this particular type of adversarial negotiation is really just one of the options available. Among the beginning principles of a negotiation must be an acknowledgment that the parties to a negotiation have both individual and group interests that are partially shared and partially in conflict, though the parameters and proportions of these agreements and disagreements will never be thoroughly known; this acknowledgment identifies both the reason and the essential subject matter for reflection on a wide range of issues relevant to a negotiation. (Gregory Tropea, November 1996)
I learned a few things about my school and myself in regards to this area of leadership by participating in this activity. I learned that my school asks for very little participation from the teachers and community in regards to the budgeting process. But it could be an excellent venue to review prior year accomplishments as well as decide on future objectives with these stakeholders. If I were an administrator, involving the community and faculty would not only help in maintaining awareness, but I could also use this as a way to help those who may not be directly vested in my school, but who are helping fund it through their taxes, recognize effective administration in our efforts to reduce costs and provide needed resources to the various programs. I also feel that budget decisions cannot be solely programmatic or solely monetary. There needs
It requires an adequate and sound organizational structure, that is, there must be a definite assignment of responsibility for each function of the enterprise. Budgeting compels all the members of management, from the top to bottom to participate in the establishment of goals and plans. Budgeting compels departmental managers to make plans in harmony with the other departments and of the entire enterprise. Budgeting helps the management to put down in figures what is necessary for a satisfactory performance. Budgeting helps the management to plan for the most economical use of labor, material and capital. Budgeting tends to remove the cloud of uncertainty that exists in many organizations, especially among lower levels of management, relative to basic policies and objectives. Budgeting promotes an understanding among members of management of their co-workers' problems. Budgeting force management to give adequate attention to the effects of general business conditions. Budgeting aids in obtaining bank credit as banks commonly require a projection of future operations and cash flows to support
Manager makes budget and show the target of company and employees are given the powers to perform these targets that is achieve the goals and objectives. After checking the variance in budget through budgetary control process, manager can fix the responsibility of each department and its employees in a particular department .Thus it can be said that budgets help managers in integrating personnel efforts within the organization towards a common goal. By properly appropriating adequate budgets to different activities within the organization, all activities can be synchronized and all efforts can be coordinated to achieve the organizational objectives and meet the goals of the firm
This essay seeks to discuss participatory budgeting and the need to enhance budget participation in Botswana. Participatory budgeting is promoted over the world as a tool for a well functioning democratic government by different institutions like World bank, OECD , budgets practitioners (expects), civil society organizations, (Tanaka, 2007) . Participatory Budgeting is necessary as it is through it that a more transparent and accountable government can be realized. Budget Participation is refers to opportunities that government avail to the civil society organizations and citizens at large about government policies and operations to deliberate, debate and influence the allocations of resources,