Section A

GlobalConsult Partners is implementing a new budgeting system. The CEO wants to ensure that junior managers feel ownership of their targets to improve motivation. Which budgeting approach is most likely to achieve this behavioral objective?

Answer options:

Top-down (imposed) budgeting

Bottom-up (participative) budgeting

Zero-based budgeting

Fixed budgeting

How to approach this question

Consider the behavioral impacts of budgeting. If you want people to own their targets, they need to participate in setting them.

Full Answer

B.Bottom-up (participative) budgeting✓ Correct

Bottom-up or participative budgeting allows budget holders to participate in setting their own budgets. This generally leads to better morale, higher motivation, and greater acceptance of the targets compared to top-down (imposed) budgets.

Common mistakes

Confusing the mechanics of budgeting (like ZBB) with the behavioral approaches (top-down vs bottom-up).

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