Question

Plant managers of XZ company desire to participate in the company's budget efforts, which, for the past 10 years, have been handled solely by top executives. Plant managers feel that by becoming involved, they can make great strides in terms of improving operating performance of their aging facility.

Briefly discuss this situation, focusing on the benefits and problems of letting Plant managers participate in the company's budgetary efforts

Answer 1

Involving Plant managers in Company's budgetary efforts is a Participatory budget Approach.

In Participative Approach, the employees or the divisional managers were involved in budget setting process.

Benefits of Participative Approach are :

• Plant managers will feel that they are valued in the company
• They feel responsible for the profits to be earned by their plants as they are involved in setting the budget
• They are the one who knows ground reality. so, the plant managers must be involved in budget setting process for avoiding too much variance.

Problems of Participative Approach are :

• Budgetary slack will be created
• The budgets will be set at a low level voluntarily by the plant managers as they are the one responsible for variances
• Takes too much time in setting the budgets
• Costly than the Imposed style approach