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Two Main Forms Of Budgeting Process

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Budgeting process can take two main forms. First, an organization may choose want to adopt an imposed budgeting process (Covaleski, 2006). The imposed process does not seek input from junior employees who will implement the budget objectives. On the other hand, participative budgeting process seeks input from all employees in the organization (Covaleski, 2006). As such, the approach will affect how the employees will behave during the process of implementing the budget. Accordingly, the paper evaluates the how both imposed and participative budgeting impacts on the behavior of workers (Covaleski, 2006).

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Imposed budgeting fosters a feeling of dissatisfaction and defensiveness among employees. Since the management did not use the input of employees, they might feel left out leading to dissatisfaction when executing duties (Covaleski, 2006). Secondly, the approach kills the employees’ teamwork spirit. Most employees look up to the top management for guidance. Therefore, if the top management is autocratic, the employees will also become accustomed to doing things their way (Covaleski, 2006). Moreover, the approach reduces employees’ acceptance to organizational goals and objectives. Most might feel that the organization is selfish towards them. Consequently, they might exhibit resentment in achieving the organization’s goals and objectives. Lastly, the workers might perceive budget as a punitive device thereby losing the desire to achieve its goals and objectives (Covaleski, 2006).

On the other hand, participative budgeting motivates and improves the employees’ morale. During the budgeting process, employees’ input forms the greatest part of the budget. Consequently, the employees feel compelled to achieve the budgeting goals and objectives. Secondly, the process creates a sense of responsibility amongst workers. According to (Wampler, 2007) individuals will work harder to achieve standards that they were involved in setting. Furthermore, Wampler (2007) notes that the budgetary approach fosters positivity towards top management amongst employees. When the employees feel that the top management cares about their initiative, they will tend to love their managers. Consequently, the top management will be in a better position to obtain essential information needed to improve organizational performance (Wampler, 2007).

According to Covaleski (2006) communication flows from top to bottom in an imposed budgetary approach. He notes that the strategy better applies in a small organization where the number of employees is very few. Moreover, the number of departments are few such that the top manager can take hold of all the activities happening in the organization (Wampler, 2007). Such an autocratic approach, he notes, serves to get things done faster as the consultation process tends to be tedious. On the other hand, the information flows from bottom to top in a participative budgetary approach (Wampler, 2007). The method works perfectly for large organizations where it is difficult for to managers to grasp the operations in lower levels of services. As such, to build trust with junior workers, the management allow them to be the source of ideas on how to improve performance.

According to Covaleski (2006) top to bottom communication flow in imposed budgeting creates a dysfunctional behavior among employees. According to Wampler (2007), the dysfunctional behavior results from the employees feeling that the organization is using them to achieve their goals. As such, their feelings conflict with the objectives and goals of the organization. Lastly, the communication flow leads to withdrawal from employees (Covaleski, 2006). They might feel that their sole purpose in the firm is to meet the executive requirements hence they will not attempt to solve any problems independently. On the other hand, bottom to top communication fosters employees’ participation. Consequently, the employee develops responsibility for their actions as their input determines what the executive requires them to achieve. Lastly, the workers develop an autonomous behavior in solving problems that arise in their workstations (Covaleski, 2006).

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