Problem
Since the current Managing Director and the FinancialController joined the Precision Plastics Company five years ago, they have set all aspects of the sales and operatingbudgets for the company.At the time they joined the company,there was a high level of staff turnover and some of the more experienced managers had retired and hence they decided to take controlover the budget process. Over the past five years,a considerable numberof experienced managers have joined the companywith responsibility for managing both costandprofit centre areas of responsibility. Over the past year, the company has not been making its budget and some managers appear to be somewhatindifferent to achieving the budget.
The Managing Director has asked you, as a consulting Management Accountant to review their systemsand you believethey may benefitby introducing a PARTICIPATORY BUDGET process ratherthan their current system which is very top-down.
Task
Write a BRIEF report to the Managing Director explaining how the use of Participatory Budgeting may change the behaviour of their managers. Include in your report the potential benefits and costs of this participatory approach.