Participative Budgets

In this approach to budgeting, budgets are developed by lower level managers who then submit them to their superiors. The budgets depend on the lower level manager perception of what is achievable and the associated necessary resources. The degree to which lower level managers are allowed to participate in the budgeting process depends on:

(a) Senior manager’s awareness of participatory budgeting advantages.
(b) Their agreement with those advantages.

Participatory budgets are effective in the following areas:

1. In a well established organization
2. In a very large business
3. During periods of economic boom
4. Whenever operational managers have strong budgeting proficiencies
5. When the organization’s different units act autonomously