All 34 The Budgeting Process questions
More in The Budgeting Process
What are the criticisms and limitations of traditional budgeting? What is incremental budgeting? What assumptions must be agreed before budgeting starts? What is a responsibility center and what types exist? What is the budget timetable and why is it important? How does benchmarking support budgeting? How is a not-for-profit or public sector budget different? What behavioral issues arise in budgeting? What is 'beyond budgeting' and why has it emerged? How does budgeting link to strategy and long-term planning?
Advertisement
Back to results for “Variance Analysis”
Budgeting & Forecasting › The Budgeting Process

How do you set challenging but achievable budget targets?

Intermediate

Answer

Targets should stretch performance while remaining attainable with effort; overly easy targets breed slack and complacency, while impossible ones demotivate and encourage gaming. Use realistic assumptions, benchmarking, manager input, and consider the difficulty level's motivational effect, ideally setting targets that most managers can achieve with good performance.
Real-world example Targets are set at a level top performers can hit, motivating effort without being demoralizing.

Common follow-ups: What is the risk of easy targets? | What is the risk of impossible targets?

The Budgeting Process Variance Analysis The Budgeting Process
All 34 The Budgeting Process questions