Budget Bias and Goal Congruence Discussion
Business Finance
Answer the question in 200 word count and response to two student discussion in 100 word cout
Explain the cycle of bias by lower-level managers and bias adjustment by upper-level managers that can spiral out of control resulting in meaningless budgets. What features should a budgetary system have to encourage managers to engage in goal-congruent behavior (managers select actions that maximize overall company profits)? Give examples of bias and how goal congruence has been achieved at your current or a past employer.
By Keith
Explain the cycle of bias by lower-level managers and bias adjustment by upper-level managers that can spiral out of control resulting in meaningless budgets. What features should a budgetary system have to encourage managers to engage in goal-congruent behavior (managers select actions that maximize overall company profits)? Give examples of bias and how goal congruence has been achieved at your current or a past employer.
By Abena
A meaningless budget can be the result of a cycle of lower management creating slack or padding in their budgets and upper management having to adjust to compensate for the slack or padding. Budgetary slack is the deliberate under-estimation of budgeted revenue or over-estimation of budgeted expenses. This allows managers a much better chance of “making their numbers,” which is particularly important for them if performance appraisals and bonuses are tied to the achievement of budgeted numbers. Budget padding is the practice of inflating a proposed budget to either expand projects or cover unexpected costs. Upper level management would also need to adjust to make sure that the budget also meets the goals of upper management.
I have been employed by a company that practiced exclusive behavior instead of inclusive. I felt as though goal congruence was very limited. I felt as though there was a culture of not including the input of lower level management or even informing them with the goals of the company because they were looked down upon. Everyone was on a different page when it came to goals. Upper management would always take into consideration their own ideas. They were out of touch with the budgeting needs of the departments.
