1) Participative budgeting的概念
Q: Who can tell me the concept of that?
A: It refers to the level of involvement lower level managers have in setting their own budget.
Q: As we know, there are also two extremes of participation in the budget process. So what are they?
A: “Top-down” and “bottom-up”.
1) Participative budgeting的优点
Q: Firstly, I wonder who knows the advantages of participative budgeting.
A: Uses managers’ specific knowledge
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2) Participative budgeting 的缺点
Q: So what about the disadvantages?
Opens the firm up to influence costs, especially when budget performance is tied to the reward system.
3) 优缺点在case中如何体现 (每人说一点就好)
Q: Now go back to this case, what advantages and disadvantages are evident in this case?
A: (1) This case says that each BU is responsible for a different product, so maybe it can create “ownership” of the final target budgets.
(2) In this case, as Ben said, the managers know so much more about the details of their part of the business than he does, so I think it has the advantage to use the managers’ specific knowledge.
(3) In the end, Ben complained about the budgets and cut their expense budgets, this may state that participative budget opens the firms up to influence.
Q: This question asks us to advise Ben to change his budget process to benefit from the advantages while managing the disadvantages. So any ideas about this question?
A: (1) I think the company needs to improve communication between managers. Thus, they can reach coordination.
(2) Maybe the company can set up their target. Then the managers need to be responsible for it.
(3) I just think Ben should give some guidance to the managers so that he will be satisfied with the budget.