Bonnie's Bakery is a relatively small company that makes pies, cakes, and cookies sold in supermarkets. Sales employees' bonuses are determined based on meeting or exceeding the budget. For the coming year, sales employees have set a budget target of 3 percent for sales growth. The market has been growing at 6 percent, and the company has averaged 10 percent growth for the last two years. What is the problem here, and how can it be fixed?
What will be an ideal response?
Answers will vary
A budget represents a standard by which performance can be evaluated. Employees are likely to find a budget constraining, and they find the process of being evaluated to be stressful. In this case, the stress is increased because the budget directly affects the employees' compensation. The sales employees are trying to develop a budget that will be easy to achieve, to increase the bonuses they will receive. The problem may be addressed through interaction with managers, in which the managers seek to develop reasonable and realistic sales targets. Also, bonuses could be calculated in another way, such as on sales growth or growth in market share, rather than based on "making" the budget.
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