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Interesting question - Budgetary slack is normally a deliberate under-statement of budget revenues or an over-estimation of budget expenses. By manipulating the budget a manager has a much better chance of achieving targets.
Very dangerous practice as it affects corporate performance at the end of the day!!!!!!
Budgetary slack is the deliberate under-estimation of budgeted revenue or over-estimation of budgeted expenses.
Budgetary slack interferes with proper corporate performance, because employees only have an incentive to meet their budget goals, which are set quite low. When there is budgetary slack for multiple consecutive years, a company may find that its overall performance has declined in comparison to that of more aggressive competitors who use stretch goals. Thus, budgetary slack can have a long-term negative impact on the profitability and competitive positioning of a business.
budgetary slack is a number told by the employee in bottom up approach in preparing the budget which explain what the employee can achieve through the given period by decreasing for example the sales revenue required or increasing for example the expenses, that give the employee the opportunity to achieve the budget in EASYE MODE with out stress.
and it has a negative impact on the employee motivation as they achieve their budget without any efforts
Gap between planned performance and actual performance.
It affects the CTC of personnel. Sometimes even gets fired.
