Performance Analysis (2)

Question 1

Another name for bottom-up budgeting?

Answer 1

Participative budgets

Question 2

Effectiveness of participative budgeting (established and large)

Answer 2

In well-established busiesses and very large businesses

Question 3

Effectiveness of participative budgeting (affluence)

Answer 3

During periods of economic affluence

Question 4

Effectiveness of participative budgeting (budgeting skills)

Answer 4

When operational managers have strong budgeting skills

Question 5

Effectiveness of participative budgeting (autonomously)

Answer 5

When an organisation’s different units act autonomously

Question 6

Advantages of participative budgets (information)

Answer 6

Based on information from employees most familar with the department

Question 7

Advantages of participative budgets (knowledge)

Answer 7

Knowledge spread among several levels of management is pulled together

Question 8

Advantages of participative budgets (morale)

Answer 8

Morale and motivation are improved

Question 9

Advantages of participative budgets (committment)

Answer 9

Increased operational manager’s committment to organisational objectives

Question 10

Advantages of participative budgets (realistic)

Answer 10

THey are more realistic

Question 11

Advantages of participative budgets (co-ordination)

Answer 11

Co-ordination between units is improved

Question 12

Advantages of participative budgets (resource)

Answer 12

Specific resource requirements are included

Question 13

Advantages of participative budgets (manager’s overview)

Answer 13

Senior manager’s overview is mixed with operational level details

Question 14

Disadvantages of participative budgets (time)

Answer 14

They consume more time

Question 15

Disadvantages of participative budgets (budgetary slack)

Answer 15

An ability to negotiate targets may tempt managers to introduce budgetary slack into their targets

Question 16

Disadvantages of participative budgets (individuals)

Answer 16

Individuals may not be properly understand the strategic and budgetary objectives of the organisation

Question 17

Disadvantages of participative budgets (changes)

Answer 17

Changes implemented by senior management may cause dissatisfaction if they ignore opinions of employees involved in negotiating targets

Question 18

Disadvantages of participative budgets (unachievable)

Answer 18

Budgets may be unachievable if managers not sufficiently experienced to contribute usefully

Question 19

Disadvantages of participative budgets (empire building)

Answer 19

Trying to enlarge the size, scope and influence of an individual’s power or team’s power

Question 20

Disadvantages of participative budgets (earlier start)

Answer 20

An earlier start to the budgeting process will be required, compared with top-down budgeting and target setting