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ACCA Applied Knowledge · Management Accounting · Behavioural aspects of budgeting

Senior management asks department managers for budget proposals and holds meetings to discuss them, but then sets the final budgets without altering them in response to any manager's comments. Managers realise their views have no effect. Which problem is most likely to result?

The likely result is pseudo-participation: managers are consulted in form only, their views are ignored, and the budget is effectively imposed. They then feel no ownership, so motivation and acceptance of the targets fall rather than rise.

  1. APseudo-participation, leading to reduced motivation and acceptanceCorrect
  2. BBudgetary slack, because managers control the final figures
  3. CImproved goal congruence, because managers were consulted
  4. DReduced time taken to prepare the budget compared with true participation

Explanation

Consultation without real influence is pseudo-participation. Managers see it as a pretence, so they feel no ownership of the budget and may be demotivated. Slack needs managers to influence figures, which they cannot here. Goal congruence is unlikely to improve, and time saving is not the behavioural issue asked about.

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