Human Behaviors in Budgeting Essay Example | Topics and Well Written Essays - 2000 words

Human Behaviors in Budgeting - Essay Example A budget can deliver a criterion where employees are encouraged to achieve their targets under certain conditions. Conversely, budget can also inspire disorganization and conflict between employees or managers. If people are dynamically involved in developing budget, then it can be used as a device to support managers in handling their branches effectively. Budget can be a useful device for motivating people but if budget is developed from top level and enforces a threat for employees it can be resisted and will cause harm to the organization (Drury, 2007). Objectives of Budgeting Through budget, organizations can regulate the actions of different divisions. An effective budgetary system can act as a comprehensive control system for organization if there are certain implied or apparent links between budgetary processes and organizational rewards (Flamholtz, 1983). Budgeting comprises of creating specific targets, implementing strategies to accomplish the targets, and occasionally mat ch actual status with the targets. The targets can be general business objectives and particular goals for the individual divisions within organization. Budget provides a way for business by drawing the strategies of the operations in financial expressions. Budget helps organizations to direct activities and decreases the negative results (Warren & Et. Al., 2011). Though budgets are usually related with profit, they also play significant parts in operating several divisions of government. For instance, budgets are useful tools for managing finance for education and ration in rural areas. Budgets are also used in non-profit organizations such as public hospitals and cathedrals among others. Budget comprises of three activities which are planning, directing and controlling. Before planning the budget, it is important for organizations to forecast the amount of budget. The forecasting is often developed by considering the conclusions of past outcomes. Several statistical approaches are used for forecasting budget. The planning phase is comprised of forming specific objectives for future actions. It is a part of management process. Directing is the activity for satisfying the planned actions and controlling is periodically judging the progress of activities with the planned actions (Warren, 2008). Human Behavior in Budgeting Budget can have substantial effect on human behaviour. Budget can stimulate managers for developing their performance; adversely it can also de-motivate from putting extra effort and flatten the self-esteem of managers (Kimmel & Et. Al., 2010). The behavioural problems or dysfunctional consequences can arise from budgeting in three conditions which are: 1. The goal of budget is unattainable 2. The goal of budget is too simple to accomplish 3. The goal of budget disagrees with the goals of employees Unattainable goals: Employees will be de-motivated if performance expectations set by the managers are impractical or unattainable. An aggressive a nd achievable goal can probably motivate employees to accomplish the organizational objectives. Thus, employees should be engaged in