walker and company 1. Participative budget can benefit Sino Apparel Company in term of information accuracy. The budget is prepared by the subordinates who have close interaction with their daily work. This will allow a more accurate and reliable information to form an estimate budget. The quality of the budget will be improved.
Through doing the budget, the employees will understand how funding is allocated and thus they will be more responsible in using the resources. Moreover, employees will feel more connected with the business, increasing morale and thus have a positive impact on their productivity.
The new system encourages team work as coordination between employees and departments is necessary to have a consistent budget.
2. Impact on staff:
i. Departmental managers will have to review every budget for consistency and coordination. Sino Apparel Company managers may want to create budget slack in which the goals will be kept low to ensure they are met. Moreover they also might overspend as they fear of losing fund for subsequent budget. However, participative budgeting may encourage a better understanding by managers towards the actual production of their subordinate. They will have to provide budget guidelines to gear employee towards the company overall strategy.
ii. Since production workers get to participate in planning, they will feel more responsible towards their work and make more effort in meeting the level they set out. Morale and job satisfaction might increase. On the other hand, production workers may adopt a conservative budget which will allow them to receive more bonus as the performance is rated against the budget.
3. In order to introduce participative budgeting, Sino Apparel Company managers have to agree on the new budget system.
Once the new system is approved, managers will need to communicate the benefits of the new budget to their staff. Knowing these, staff will be more receptive