The following are budgetary strategies that are employed in the creation of budgets. Read through them: Participative
Question:
The following are budgetary strategies that are employed in the creation of budgets. Read through them:
Participative Budgets—Allow subordinates to participate in establishing budget targets. Widely considered a positive behavioral approach, participative budgeting can (1) increase the accuracy of the budget by providing additional information that subordinates bring to the table, and (2) increase perceptions of ownership of the budget targets on behalf of the subordinates.
Strategic Budgeting—Implies a long-range view to planning based on the identification of action plans to achieve the company's goals and, ultimately, its mission. Many issues are considered, including a comprehensive internal and external analysis, competitive and economic analysis, and an assessment of various types of risk. Note that strategic budgets are easy to detect since terminology is always oriented to the “big-picture” (e.g., long-range, inside and outside the organization, large investments, economics, competitive opportunities/threats, assessment of distinctive competencies, and market risks).
A Rolling Budget—Is an incremental budget that adds the current period and drops the oldest period. Kaizen (continuous improvement) type companies typically use rolling budgets and de-emphasize past performance in budgeting since results are “expected” to continuously improve.
Zero-Base Budgeting—Is a process of starting over each budget period and justifying each item budgeted. This requires additional work over an incremental approach but may provide more accuracy. This process forces managers to carefully think about their expenditures in hopes of reducing or eliminating the cost of unnecessary items.
Budgetary Slack—Occurs when managers attempt to build in a cushion for spending and revenue in case targets are not met. The use of slack results in a conservative budget as opposed to the most probable or accurate budget. The risk of managers building slack into their budgets is increased where budget targets are used in evaluation of individual performance and incentive compensation.
Write a discussion board post that answers the following question: Which strategy could present ethical issues and why? What type of ethical issues could come up?
