ACCA Applied Knowledge · Management Accounting · Nature and purpose of budgeting
Which of the following is most likely to reduce the motivational effect of a budget on a divisional manager?
Setting targets the manager views as impossible to achieve reduces motivation, because the manager sees no link between effort and success and may stop trying. Participation, linked rewards and timely feedback all tend to improve motivation.
- ASetting targets that the manager considers impossible to achieveCorrect
- BInvolving the manager in setting the targets
- CLinking a bonus to achieving the agreed budget
- DGiving the manager timely feedback on performance
Explanation
Targets seen as unachievable cause demotivation because managers believe effort will not lead to success. Participation, bonuses linked to targets and feedback generally increase motivation, so they are not the answer.
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