Budgeting process involves efficient allocation of the financial resources available in an organization to different units, activities and investments by reviewing the financial results of prior period. Apart from method of planning the revenue streams to meet the expected expenses, budget can be viewed as a tool to prevent from unnecessary spending or spending too much, process to co-ordinate different activities of an organization, way to communicate stakeholders about the activities that the organization will undertake and technique to allocate financial resources of an organization (Ndiwalana, 2009).
The budget and budgeting process can also be used for motivating the employees in following ways:
Employee Participation
One way to motivate employees by budget and budgeting process is to make them involve in the process itself. If the financial manager prepares the budget alone and ask the employees to behave in a certain way to accomplish the targets set, the employees may not be willing to give their best as their views and opinions are not considered in the budgeting process.
Consulting with the staffs about budgeting, organizing regular departmental meetings regarding budget, incorporating the ideas of those meetings in budget, ensuring free flow of budgeting information between management and employees, communicating the final budget to everyone and making the employees clear about their input in budgeting activities will intrinsically motivate the employees as they feel they are valued by the organization since the budget reflects their opinions (DeMicco & Dempsey, 1998).
Ownership and Commitment
Engaging the employees in the budgeting process makes them valued and they feel responsible for the achievement of the organizational goals. They will feel sense of ownership as the budget is the representation of their ideas, opinions and inputs. This will help in alignment of individual and organizational ensuring the use the available resources consistently with the mission and priorities of the organization. Thus incorporating ways to ensure ownership and commitment of the employees in budgeting process can motivate then and escalate their performance (Ndiwalana, 2009).
Performance and Reward Management
Measuring the employees’ performance based on their contribution in the achievement of financial goals set by budget and linking it directly with their rewards, bonuses, promotions and other benefits can also motivate the employees. Setting budget as the criteria for performance and reward management avoids anxieties and confusions and gives clear idea to the employees about what is expected from them. For example: If a company requires individual salesperson to sell goods of Rs.1,00,000 per month to achieve its desired revenue and it has provision for rewarding employees crossing the targeted sales figure which is well communicated to the employees, the employees will be motivated extrinsically to work harder and cross the target to get the rewards associated with it. In addition, it will also help in correcting the employees who are staying away from the goal (Freedman).
Ndiwalana, J. K. (2009). Budgeting Participation, Goal Commitment and Employee Motivation. Makerere University, Accounting and Finance. Retrieved from mak.ac.ug/documents/Makfiles/these...
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Budgeting process involves efficient allocation of the financial resources available in an organization to different units, activities and investments by reviewing the financial results of prior period. Apart from method of planning the revenue streams to meet the expected expenses, budget can be viewed as a tool to prevent from unnecessary spending or spending too much, process to co-ordinate different activities of an organization, way to communicate stakeholders about the activities that the organization will undertake and technique to allocate financial resources of an organization (Ndiwalana, 2009).
The budget and budgeting process can also be used for motivating the employees in following ways:
Employee Participation
One way to motivate employees by budget and budgeting process is to make them involve in the process itself. If the financial manager prepares the budget alone and ask the employees to behave in a certain way to accomplish the targets set, the employees may not be willing to give their best as their views and opinions are not considered in the budgeting process.
Consulting with the staffs about budgeting, organizing regular departmental meetings regarding budget, incorporating the ideas of those meetings in budget, ensuring free flow of budgeting information between management and employees, communicating the final budget to everyone and making the employees clear about their input in budgeting activities will intrinsically motivate the employees as they feel they are valued by the organization since the budget reflects their opinions (DeMicco & Dempsey, 1998).
Ownership and Commitment
Engaging the employees in the budgeting process makes them valued and they feel responsible for the achievement of the organizational goals. They will feel sense of ownership as the budget is the representation of their ideas, opinions and inputs. This will help in alignment of individual and organizational ensuring the use the available resources consistently with the mission and priorities of the organization. Thus incorporating ways to ensure ownership and commitment of the employees in budgeting process can motivate then and escalate their performance (Ndiwalana, 2009).
Performance and Reward Management
Measuring the employees’ performance based on their contribution in the achievement of financial goals set by budget and linking it directly with their rewards, bonuses, promotions and other benefits can also motivate the employees. Setting budget as the criteria for performance and reward management avoids anxieties and confusions and gives clear idea to the employees about what is expected from them. For example: If a company requires individual salesperson to sell goods of Rs.1,00,000 per month to achieve its desired revenue and it has provision for rewarding employees crossing the targeted sales figure which is well communicated to the employees, the employees will be motivated extrinsically to work harder and cross the target to get the rewards associated with it. In addition, it will also help in correcting the employees who are staying away from the goal (Freedman).
References
DeMicco, F. J., & Dempsey, S. J. (1998). Participative Budgeting and Participant Motivation: A Review of the Literature. Hospitality Review, 6 (1), 77-97. Retrieved from http://digitalcommons.fiu.edu/cgi/viewcontent.cgi?article=1121&context=hospitalityreview
Freedman, J. (n.d.). How Is a Budget Used to Motivate a Staff? Retrieved from Chron: smallbusiness.chron.com/budget-use...
Ndiwalana, J. K. (2009). Budgeting Participation, Goal Commitment and Employee Motivation. Makerere University, Accounting and Finance. Retrieved from mak.ac.ug/documents/Makfiles/these...