ACCA Applied Knowledge · Management Accounting · Behavioural aspects of budgeting
According to research on target-setting and motivation, which budget target is most likely to produce the best performance from a manager?
A challenging but achievable target that the manager accepts is best. It stretches performance without causing frustration. Easy targets give no incentive to improve, while unattainable ones lead managers to give up and become demotivated.
- AA target that is easily attainable so the manager always achieves it
- BA challenging but achievable target that the manager acceptsCorrect
- CA very demanding target that is almost impossible to reach
- DNo target, so the manager is not pressured
Explanation
Motivation is generally highest when targets are demanding yet attainable and accepted by the manager. Very easy targets give no stimulus, and impossible targets cause demotivation because the manager gives up. Having no target removes the benefit of a performance standard.
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