You work in the finance department of a telecommunications firm with a large direct sales force selling
DMP Consultants specializes in redesigning antiquated budgeting systems. DMP has made a presentation to your finance department after conducting a thorough analysis of your firm’s sales force budgeting system. DMP Consultants has emphasized that your current budgeting system does not take advantage of what your salespeople know about future sales to their customer regions. By ignoring this information, your firm does not effectively plan for this growth, and you are at a competitive disadvantage when deciding to add capacity to your fiber optic network in a timely and efficient way. Moreover, DMP points to extensive research documenting that when people participate in setting budgets that are used to evaluate their performance, these people more readily accept the budgets and there is an increase in employee morale. That is, “participative budgeting” (where employees who are judged against the budget participate in setting the budget) results in happier, more motivated employees. DMP Consultants has made a proposal to implement a bottom- up, participative budgeting scheme to replace your top- down system.
You have been asked to write a short memo to the head of the finance department that analyzes the pros and cons of DMP’s proposal.
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