Participative budgeting

Participative budgeting is a budgeting process under which those people impacted by a budget are actively involved in the budget creation process. This bottom-up approach to budgeting tends to create budgets that are more achievable than are top-down budgets that are imposed on a company by senior management, with much less participation by employees. Participatory budgeting is also better for morale, and tends to result in greater efforts by employees to achieve what they predicted in the budget. However, a purely participative budget does not take high- level strategic considerations into account, so management needs to provide employees with guidelines regarding the overall direction of the company and how their individual departments fit into that direction.