Employer advantages and disadvantages of participative budgeting

Many managers intentionally pad out the budgets because they believe that it is likely to be reduced regardless, and therefore it is better to overestimate than be accurate. 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.

It contrasts with imposed or top-down budgets where the ultimate budget holder does not have the opportunity to participating in the budgeting process.

The security issue in participative management also arises from the fact that since early stages too many people are known to lots of facts and information.

A subordinate is likely to be more satisfied and perform a lot better if he or she believes that they have had a chance to participate in the decision making process and that their superiors have been neutral and without bias in terms of procedural justice fairness of procedures and distributive justice fairness of standards Lindquist In the process of establishing budgets, the various factors like production capacity, sales possibilities, and procurement of material, labour, etc.

The reason for padding out the budget is to allow for any unsuspected environmental changes that may take place Dunk The disadvantage of this aspect of participative budgeting is that there are many factors involved in achieving what is believed to be distributive justice and procedural justice.

Participative budgeting and its advantages

Participative Budgeting — Definition, Advantages and Disadvantages Participative Budgeting — Definition, Advantages and Disadvantages Participative budgeting is the situation in which budget are designed and set after input from subordinate managers, instead of merely being imposed.

Inputs and feedback starts pouring from each side. Is participative management really beneficial? 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.

In lots or organizations that employ participative management, most of the employees are satisfied with their jobs and the level of satisfaction id very high. 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.

However, the condition which determines the success of a participative budget depends on various factors such as job related information, the level of participation, the level of subordinate influence and complexity of budget.

What Are the Benefits of Participative Budgeting?

Participative budgeting may result in slack budgets, but a lack of participation may result in budgets that provide subordinates with inadequate resources to perform well. No flaw or loophole goes unreported.

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.

What are the challenges involved in implementation?

Participative Budgeting – Definition, Advantages and Disadvantages

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.

Transferring information from subordinate to superior is one of the participative budget setting advantages. Besides the desirable effects, participative budgeting has its undesirable effects these include time consuming, padding the budget. A deep understanding of both is required in order to ascertain a decision making style and adopt the same.

This transferal 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.

What are the pros and cons? A budgeting system in which all budget committee members are given the opportunity to apply their own budgets in practice. Conversely most superiors cut budgets because they believe that most budgets are padded Hilton Advantages and Disadvantages of Participative Budgeting 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.

It takes time to verify the accuracy of measurements which means that decision making will be slowed down. The disadvantage of budgetary negotiation is that a situation of too much participation can arise, resulting in negotiations that drag out and lead to vacillation and delay.

Advantages and Disadvantages of Participative Budgeting By: The disadvantage of this aspect of participative budgeting is that there are many factors involved in achieving what is believed to be distributive justice and procedural justice.

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.

Time consuming is the biggest disadvantage of participation in budget setting. The advantages seem to outnumber the disadvantages.

Secondly the attitudes of the negotiators can greatly affect the outcome. This and quality control means that the costs are controlled automatically. Working hours may get stretched on their own without any compulsion or force from the management. These and lot more, I am sure.

Managers who are doing a job on a day-to-day basis are likely to have a better idea of what is achievable, what is likely to happen in the forthcoming period, local trading conditions, etc.Participative budgeting and its advantages The advantages of participative budgeting: • Improved quality of forecasts to use as the basis for the budget: Managers who are doing a job on a day-to-day basis are likely to have a better idea of what is achievable, what is likely to happen in the forthcoming period, local trading conditions.

Participative Budgeting – Definition, Advantages and Disadvantages Participative budgeting is the situation in which budget are designed and set after input from subordinate managers, instead of merely being imposed. The benefits of participative budgeting include creating budgets that are more easily achievable and increased morale.

This type of budget gives employees incentive to make sure the company stays within financial limitations. The disadvantages of budgeting include the following: Time required.

It can be very time-consuming to create a budget, especially in a poorly-organized environment where many iterations of the budget may be required. Employee Engagement: Top 22 Advantages & Disadvantages.

By. Krishna Reddy. 0. Facebook. Twitter. Google+. Pinterest. For the employees to be participative in the meetings and discussions, it is important for the board of directors to let them know about the context.

it shakes the budget of the company if the extras are invited for. Employer Advantages And Disadvantages Of Participative Budgeting Advantages and Disadvantages of Participative Budgeting Participative Budgeting is the situation in which budgets are designed and set after input from subordinate managers, instead .

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Employer advantages and disadvantages of participative budgeting
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