ACCA Applied Knowledge · Management Accounting · Behavioural aspects of budgeting
A sales manager is told that her budget target for the coming year is deliberately set at a level that is achievable by only a small number of the best performers in the company. According to behavioural research on budget targets, what is the most likely effect on her motivation?
Motivation is most likely to fall. When a budget target is set so high that only a few top performers could reach it, the manager sees it as unattainable, becomes frustrated and puts in less effort rather than more.
- AMotivation will fall because the target is seen as unattainableCorrect
- BMotivation will rise because the target is highly demanding
- CMotivation will be unaffected because targets do not influence behaviour
- DMotivation will rise because she will receive larger bonuses
Explanation
Research shows that targets seen as impossible lead to frustration and a drop in effort, because the manager expects to fail whatever she does. Very demanding targets raise motivation only up to the point where they are still seen as achievable. Option B ignores this limit.
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