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Why the use of budgets as performance targets can lead to behavioural problems such as budgetary slack (budget padding)?

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تم إضافة السؤال من قبل simranpreet kaur , student , qut
تاريخ النشر: 2014/09/21
Shamel Rashad, CMA
من قبل Shamel Rashad, CMA , Finance Manager , Bavaria Alarm S.A.E.

This happens in bottom-down approach of budgeting. Usually directors tend to avoid being restrained by low budgets or committed to high targets.

 

So they buffer the budget, including higher than their expected Opex or lower than expected sales volume or value.

 

It's a sort of self preservation, so they always over-achieve and get their bonuses.

 

A good budget planner will know to challenge those numbers based on analyzing past performances and direct discussion. Until a more logical understanding of the budget numbers can be reached.

Rehan Qureshi
من قبل Rehan Qureshi , Financial Consultant , Self Employeed

Agreed with Mr. Shamel Rashad

FITAH MOHAMED
من قبل FITAH MOHAMED , Financial Manager , FUEL AND ENERGY CO for transportion petroleum materials

agree with mr shaml rashd answer 

مستخدم محذوف‎
من قبل مستخدم محذوف‎

agreed with mr shamel

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