Describe some problems with participative budgeting
Some potential problems are:
1. Standards may be set too high. This can discourage managers/employees from even trying to meet the standards. Alternatively, standards can be set too low. This will not encourage workers to stretch to meet achievable (yet higher) standards.
2. Managers may pad the budget. Managers know that the budget sets the standards against which their work will be measures. Not surprisingly, managers may prefer an easier standard, with budgetary slack built in.
3. Pseudoparticipation may be more the rule than participation. Here, top management sets the budget and does not seek or use input from lower level managers. The so-called participation is simply the opportunity for lower level managers to formally acknowledge the budget.
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