Behavioural aspects in budgeting

Behavioural Implications of Budgeting 6 Implications Article shared by: Here in, some behavioural implications of budgeting have been discussed:

Behavioural aspects in budgeting

The behavioural Aspects of budgeting Critically evaluate the role of participation in budget setting, including any relevant theory.

Explain what you understand by such dysfunctional behaviour in budgetary control mainly in the public sector. Should managers be involved in setting budgets. Benevolent authoritative - motivation by reward, communication downwards but still centralized decision making and strong hierarchy 3.

Consultative - motivation by reward, communication two way but still largely centralised decision making 4. Participative - group participation with good communication and decision making by group processes.

Likert postulated that with the participative style there is greater involvement for individuals, better labor relations and higher productivity. Management needs to attempt a participative in budgeting on the assumption that Theory Y holds: Coch and French - study of participative v non-participative budgets; Hofstede - positive correlation between higher participation and higher budget motivation; and Bass and Leavitt - employees participating in setting standards performed better than those who did not.

Fieldler - suggests that styles of leadership other than participative can be perfectly effective. Argyris - danger of pseudo-participation Anthony - Budgets may be seen as commitments by managers to achieve the targets set Hofstede - "budgets and cost standards act as incentives for motivating budgetees" But what motivates people: Maslow - hierarchy of needs from physiological food, shelter etc ; safety job security, fair treatmentaffiliation social contactsesteem both self esteem and from others and finally self actualization doing what one is fitted for - widely tested and confirmed.

Maslow - stress those factors at the apex of the hierarchy of needs self actualisation and esteem as their basic needs will have been met. Herzberg - ensure that hygiene factors are adequate and focus on providing the motivating factors 3. Contradictory messages on the link between performance and pay - Herzberg suggest salary is a hygiene factor but in Maslow there may be a link to esteem 5.

Other motivational theorists Vroom expressed "motivation to perform an act" as a function of "orientation" and "expectancy" - in terms of budgetary control this means that the desire to achieve a budget target is a function of the preference for obtaining the result over not attaining it and perception of your ability to influence the outcome.

Becker and Green and Stedry linked aspiration levels of employees with performance. Stedry showed that the best results were achieved by those with the highest aspiration levels - thus we may say "budgets should be attainable but not too tight".

The difficult level produced the best and worst outcomes - good outcomes were where the budgetee saw the target as a challenge and bad outcomes where the target was deemed impossible and the budgetee withdrew.

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Good performance was also linked with high achievers and younger people. Child and Whiting noted: As Lowe pointed out there is a balance for the budgetee of the benefits from achieving a target by negotiating down the target and disappointing his superior with the size of the present forecast.

Lowe also indicates that the goodwill based on past performance is important - if there is none the employee has little to lose by setting high targets to gain present acceptance but if the is a good record forecasts may be tempered with a view to maintaining the record.

Budget Communication Miles and Vergin summarised the following precepts: Solution Summary This problem involves the fundamentals of accounting.By the end of PART 1 of this lesson, you will be able to 1. Discuss what a budget it used for. 2. List and briefly discuss some of the behavioural aspects of budgeting.

The behavioural aspects of the budgeting process are also examined. Finally, the public sector budgeting process is analysed, focussing on the need to tackle Beyond Budgeting issues in the 21st.

Jan 08,  · ACCA F2 Behavioural aspects of budgeting Free lectures for the ACCA F2 Management Accounting / FIA FMA Exams. Behavioral Aspects of Profit Planning and Budgeting—I Introduction Budget making is a technical task. The behavioral aspects of budgeting refer to the human behavior that is brought out in the process of preparing the budget and the human behavior that is induced when people try to live with the budget.5/5(3).

By the end of PART 1 of this lesson, you will be able to 1. Discuss what a budget it used for. 2. List and briefly discuss some of the behavioural aspects of budgeting.

Behavioural aspects in budgeting

BEHAVIORAL ASPECTS OF BUDGETING FOR CONTROL Perceived participation the impact of goal setting on motivation to achieve One of the basic tenets of modern organization the goal, found that where subjects were allowed theory is that involvement in the decision-making to set their own goals, there was a positive linear and goal-setting.

Behavioural aspects of budgeting | Shan Mah -