Table of Contents Page
Introduction 1
Budget Level
Training Received 2
In the Public Sector 4
Budget Concentration
Bottlenecks in Allocating Budgets 6
Budget Purpose
Time Frame 9
Budget Planning
The Level of Employee Involvement 11
Conclusion 12
Appendices 13
Introduction
Money is often referred as the lifeblood of the business since it is use to source out factors of production. A budget, on the other hand, provides this business money certain path, guide and basis of spending, investing or saving. Without a clear budget in mind, the business would not achieve optimize returns since it cannot anticipate the risks and costs involve in its future transactions. It is also difficult to establish certain goal in mind because such firm tends to operate without performance control and measurement. In this view, this paper deals with different aspects of a budget. Specifically, it evaluates how budget affects employee motivation (see Appendix 1). In doing this, budget is viewed in different directions not merely on money terms (budget level) but also budget concentration, budget purpose and budget planning. This is done to show the broad implications of the budgeting to organization’s human resource motivation.
Budget Level
Training Received
Cross-training can be done horizontally, upward and downward (2006). It is against human nature to remain static making job enrichment like cross-training beneficial to the human resource aspect of the firm. It is a form of motivation because it offers career development opportunity (personal) as well as promotes corporate loyalty (organizational). However, the benefits of reducing the trade-offs between personal and organizational needs would be limited by the budget level since the cost of training has both its direct cost (honorarium to the speaker) and indirect cost (productivity loss in the short-run).
Without enough budget appropriated to lost opportunities especially on the financial aspect, the firm tend to implement cross-training programs infrequently. However, the less frequent it is, the bigger the tendency for employees to see themselves as a mechanical robot within the waiting time. This may lead to reduced motivation as their worth and consequently self-esteem are strictly bounded on a 3-year assembly line responsibility. The firm, on the other hand, cannot develop a formal cross-training schedule like a monthly enrichment due to a specific performance target. In the early years of Ford Corporation, Founder and CEO Henry Ford made an assembly line where employees would work for a single task for the rest of the day ( 2006). Good thing that the firm had money to increase incentives for the employees. At the end, budget for either cross-training or substitute for cross-training like cash incentives matters.
Without training, the ability factor in job performance would be static at least for those contributions coming from the firm. This is based on the formula: Job Performance = F (ability) (motivation) ( 2005). The production manager will come and ask the assembly line how to minimize defects or conversely announce policies of doing so. With insufficient and poorly identified training budget, imparting knowledge or following line procedures will be limited to intrinsic abilities of employees. And since heuristic applications to difficult situations tend to be strong under time pressure or coercion (1994), subjective and individual approach to the problem at hand will be used as a main tool. This in turn is likely to deviate from the corporate goals on the average which is not the best interest of the established corporate programs.
Applying the concept of hygiene and motivation theory (2005), the motivational side of performance requires relatively bigger attention from a training budget. Even though there is supervision, managerial-employee relationship, working environment and salary (animal needs),referred to them to fall short of human needs. The satisfaction and recognition (human needs) that staffs can receive is derivable in advancement mechanisms being provided by the firm. In cross-training, people can receive supervision and inter-department relations as well as progress in their knowledge about the whole assembly line. The sense of responsibility is important in this theory that cross-training can provide to an employee. This is especially true when one is exposed in the whole assembly line process where he can develop concern for the next batch. Thus, this can positively impact how fast and reliable he does his part for the line.
In the Public Sector
The budget serves as the major weapon of the public to instill responsibility and accountability among politicians (2001). This somewhat drives public servants to avoid, if not hide, their deviations from such expectations as it could mean public speculation that if proven can result to ouster or election defeat. On the other end, at times of perceived short budget, they could resort to receive “grease money” from sectors/ businesses/ entities where the purpose of doing so is primarily for the public welfare. However, the latter statement is prone to public speculation and legal counteraction even under the shadow of good deed. Nonetheless, the given public budget confronted by politicians suggests how they would handle the risk and returns of filling the gap of the budget against their tenure goals. The motivation comes from personal interests initially, but ultimately, results to embody political aspirations for their constituents.
Applying the four causes of Aristotle ( 2006), the final cause tends to be the ends in which politicians are measured. Since it is unlikely on the average that they will resort to robbery to obtain the right budget, “grease” money especially from the business sector is a very lucrative source of financing. The motivation to do so which substantially deviate from honesty virtues has been enforced by public expectation lingered when the candidate announced his formal cause. To make him efficient and moving cause, he should accept trade-offs between doing the right and wrong or returns and risks. He can obtain or at least confident to meet the end he designed in pre-election campaigns.
Using budget outsourcing at times of recession makes politician trustworthy and dishonest as well as situational and relative heroes. They become vigilant in the process in both environmental scanning for greener industries and internally generating strategies that will connect them to their budget needs. Strategies include increasing registration and renewal fees, under-the-table settlements, front-up subsidy in favor of tax rate increase, among others. It motivates his inner circle political organization to remain in continues communication and efficient transactions to avoid being caught by the media or public. Also, his office would remain collaborative with all the sectors of community not only to scan public opinions and speculations but also to identify opportunities to increase the budget.
Thus, the rule-based category of trust in which promises should not deviated results is worked by corruption strategies (Trust, Honesty, and Corruption 2001). Of course, societal concern should be bigger than personal motives. Here, corruption’s wicked meaning is transformed into an acceptable one when translated as efficient corruption (2003). This is so because the excess of one sector of the community can be diverted to the less fortunate through political intermediaries. Resources that should be turned into investments by a private firm are delayed as to obtain sector balance, of say, farmers. Thus, a minimal budget can be optimized in favor of community goals through political manipulation. In effect, entrepreneurship and decision-making capabilities including values of political leaders are challenged. Such motivation would likely not happen if budget is in appropriate level.
Budget Concentration
Bottlenecks in Allocating Budgets
Applying managerial motives of the firm theory ( 2001), managers cannot obtain their self-vested interest as well as those of the firm without a hefty budget to implement acquisition and other diversification strategies. Without minimization of agent risk to job loss or maximization of compensation, managerial motivation would collapse. On the other hand, such mentioned strategies require physical, financial and organizational resources that may have complex consequences. Expansion is a major corporate restructuring which entails strategic actions/ responses. Being so, when implemented, reversing the strategy would be very costly and has long-term adverse effects. Without budget to support managerial entrepreneurship and leadership including their market value, they would feel unchallenged and less well-off than peers in other companies. Turn-over and internal corruption would tend to be seen as worthwhile options.
Departmental networks also often argue about appropriation of annual budgets for their specific causes. When budgets fail to meet expectations of such units, it may result to reduced motivation and even firm rebellion particularly against the finance division. For instance, a cut budget due to conservation endeavors by the firm may hurt the annual targets of the marketing and sales department to be able to get their productivity bonuses. On the other hand, manufacturing department may develop envy from the same unit due to higher budget of the latter due to intensified customer focus for year. The perceived excessive budget could have been used to buy new machineries or train new employees. These intra- and inter-unit bottlenecks that stemmed in budget allocation have also their impact to unit, relational and overall performance.
Applying performance budgeting to these instances can mitigate the destructive speculation of excessive/ meager budget allocations. Managers will be periodically audited in the post-expansion implementation to identify discrepancies from the original shareholder promises. In the same manner, departments who feel aggrieved will be provided with performance targets within the capacity of their budget level. Since this budgeting system is result-oriented, it should be coupled with ethical committee oversight to regulate unacceptable level of immorality to obtain intended results. Allocation of the budget and selecting the appropriate model should be inferred in firm specific aspects in order to identify motivational points.
In this process, the level of budget is undermined in favor of value-creating results it can offer to the organization after implementation of the strategy. The rules of the game are more important than the competencies of the team (firm) in this case. Even though that the probability of losing is over 70%, the team manager only expects his players to do their best to beat an unbeatable opponent. By doing so, employee motivation will meet its target no matter how much departmental budgets are. Managers, on the other hand, will enhance their strategic decision-making motivation with increased accountability. In effect, the whole organization will have a culture of meeting calculated expectations based on budget limits. Incentives can increase the boundaries of such approach that will reward performance that exceed a certain level or performance that surpass an operational difficulty and still obtain its goal.
Budget Purpose
Time Frame
A budget that is associated within a specific time frame also affects the level of motivation, if any, employees will receive after the budget post-implementation. One that is intended for monthly payment on electric bills is a kind of budget that does not affect employee motivation. Applying the Hygiene/ Motivational theory, this merely suffices the environmental side of animal needs. This is a proof that operational budgets are the least kind of budget that can affect employee behavior since it only resolves the baseline environment for employees to work.
On the other hand, price changes or productivity level rationalization can have positive effect to employees in an intermittent basis. Sales forecasts may anticipate high demand for the coming year and rising price can mitigate the intensity of production. Such can imply recognition to employees (human needs) that is a factor of motivation. However, after the lowering of production level to increase the leisure time of the staffs, corporate inertia evolves. Management would feel that one-time big strategy is enough. Unknown to their tactical approach, that non-managerial staffs are prone to see the small picture and derive conclusions for motivation. In effect, the absence of reinforcing motivational strategies can mean as economizing employee welfare wherein money is valuable than people.
Coming-up with a specific part of the budget dedicated for employee motivation can prevent indirectly relating their welfare to other projects/ expenditures. The focus is on people and not acting secondary or off-the-target priority. In the contrary, weekly, monthly and even annual budgets do not have the necessary tools that can relate internal resources and external opportunities of motivation. In the operational level, managers have the option to use theory X to discipline the non-conformant. In the tactical level, managers have the option to use theory Y as suggested in the preceding paragraph but theory X could be resorted if the theorized attributes of people excessively reach the limit of a used-to-be democratic leader.
Due to these difficulties, longer time frame analysis should be introduced. This can be in the form of training and development, productivity-based incentives, pension programs for loyal employees and educational scholarship. These programs, however, requires internal and external audit under managerial commitment coupled with stable or growing profit. Shareholders/ investors would not inject necessary funds if the plan is vague or non-measurable, some other business units are loosing and the firm is restrictive of change. Due to this, strategic approach to relate budget to the level of motivation is complex and tiresome method. Nonetheless, it successfully implemented, the firm will not only have a quantifiable annual motivational reports for evaluation but also managers are more confident and true in their relation with employees since they are aware that every task completed has its cumulative incentives afterwards.
Budget Planning
The Level of Employee Involvement
Budget is not necessarily meant above the tables of the finance and accounting departments. When a firm is strict in implementing policy with the CEO as the approving officer, inter-organizational conflicts and reduced motivation would ensue. This is why many of the firms have scheduled and even created management teams composed of different department and division heads. Based on my own experience, management meetings are held without staff involvement. The latter are only allowed observing management reports and operational outputs without the “right” environment to comment or suggest.
The absence of the “right” environment is the root cause of boredom, indifference and detachment with my company policies, standards and culture. Unit managers are acting like Gods because what they say is what would employees are intended to do. Even though at the end of every presentation the question “Is there any reactions?” would be invoked, such is only a dummy to imply everybody should affirm to make things simply and efficient. Budget matters are worst. Managers are only allowed to contribute even though employees are affected by its consequences. As illustrated, the communication system of the organization directly affects the procedure of making the firm’s budget. The problem of the model, however, is that the process becomes financially-centered without valuing (or respecting) its effects to employees especially for unit managers who have new or unattached subordinates.
Applying Chris Argyris theory, the absence of employee involvement undermines the psychological energy the firm can use to obtain annual targets or to implement a corporate change like downsizing. Even staffs are not gifted with the ability to quantify their needs, their views are useful in managerial decision-making. This is especially true when the management is planning to adopt programs that directly affect the extent and scope of their work. The level of budget or nature of program can be rationalized by employee opinions and personal experiences.
In this view, management teams should include the officials of the labor union in preparing budgets particularly those areas that directly affect employee. In that manner, a budget cut in training will not be viewed differently by concerned employees because they are represented in budget preparation. In the contrary, a minimal increase in basic salary can be enforced by providing “in-kind basket” distributed monthly. The mitigation of employee-management conflicts can be included in budget preparation. Thus, employees welfare are protected as well as boosted that affects how will they view the company and its managers in relation to their future working with them.
Conclusion
It is found that different aspects of budget/ budgeting can affect motivation of employees. Further, to be able to understand the level of such effect, it is necessary to include specific organizational or employee factors in the analysis as suggested in appendix 2. For example, budget level for training is less important in hi-tech firms due to fast product life cycle of their produced. Even though there is substantial training budget, staffs may not exemplify additional motivation level at work because technology will be replaced frequently. Therefore, what is needed is entrepreneurial spirit which would not be found in technical training rather inspirational seminars. The challenge therefore for the organization is not to resolved unfilled budget issues where it may end up creating problem (both business and financial) to itself. Rather, the task is to be able to identify key areas or problems (actual and potential) in the organization or the person in which the above budget aspects can treat or prevent.
Appendices
Appendix 1: Budget-Motivation Conceptual Framework
Appendix 2: The Role of Organizational/ Human Resources Specific Factors in Budget Motivation Framework
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