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ACCA Applied Knowledge · Management Accounting · Behavioural aspects of budgeting

A manager is told by senior management to meet a budget that has been set entirely without any input from her or her team. Which behavioural outcome is most likely?

Lower motivation is most likely, because managers who had no say in an imposed budget feel no ownership of its targets. Participation normally increases commitment and acceptance, whereas imposition tends to produce resentment, weaker goal congruence and poor performance against the budget.

  1. AGreater commitment to the budget because the targets are clearly authoritative
  2. BLower motivation because the team feels no ownership of the targetsCorrect
  3. CImproved goal congruence because senior management controls the process
  4. DReduced budgetary slack because managers cannot influence the numbers

Explanation

A top-down imposed budget gives managers no ownership, so they are less likely to accept and work towards it. Commitment tends to fall, not rise. Slack and goal congruence are not improved by imposition; participation is the usual remedy.

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