Answer to Question #66079 in Finance for Mage

Question

In his study of: “the impact of budgets on people” C Argyris reported the following comment by a financial controller on the practice of participation in setting budgets in his company:
“We bring in the supervisors of budget areas, we tell them that we want their frank opinion, but most of them just sit there and nod their heads. We know they are not coming out with exactly what they feel. I guess budget scares them”.
Explain why managers may be reluctant to participate fully in setting budgets, indicating the negative side effects, which may arise from the imposition of budgets by senior management.

Answer 1

Budgeting is the process in which standards or benchmarks are set by the organizations for future expected incomes, expenditures, costs etc.
Some managers are reluctant to participate in budgeting because they do not like to discuss financial matters. They may also feel like developing a budget stops flexibility.