It has been argued that employee participation in the budgeting process will improve firstly staff motivation and following on from this the quality of budget decisions and the efforts of individuals to achieve their budget targets. This does however largely depend on the culture of the organisation, the personality of the individuals involved and the nature of the task or budget process. Participation budgeting is not right for everyone and all companies, the situation needs to be assessed carefully before a budgeting system is chosen.
It has been found that participative budgets are normally effective under the following circumstances.
-In well established organisations, a long established company likely has the expertise and experience within the industry necessary to introduce a participative system, a fairly new company may not posses these skills and knowledge.
…
