Cima P2 Exam Question 29

Question N 29:

 Discuss the motivational factors in involving functional managers in the setting of functional budgets?

If functional managers are involved in setting their own functional budget then this should have a positive motivational effect on their attempts to achieve it. These is because they will own the budget and accept it as being a fair target, seeing it as a personal failure if they do not achieve the target that they set (and therefore believed was achievable).
The difficulty with involving managers in the budget setting process is that if their performance is to be measured by comparing the actual results with the budget they have set then they may be tempted to set an easy budget by building in budget slack. This will prevent them from performing as well as they might do if a harder, but fair and achievable, budget had been set by someone else.