What is a consequence of the top-down approach in budgeting?

The top-down approach in budgeting involves senior management making decisions and setting the budget with minimal input from lower-level employees. This often leads to a lack of employee engagement because individuals who work on the ground level may feel excluded from the budgeting process. When employees are not consulted or involved, they may have less ownership of the budget and its outcomes, potentially resulting in lower motivation and commitment to meeting budgetary goals.

In contrast, a more participative approach, where employees at various levels contribute to the budgeting process, often fosters collaboration and increases buy-in, thereby enhancing morale and commitment. The top-down approach, while potentially streamlining decision-making, typically sacrifices the insights and perspectives of those who execute the day-to-day operations, consequently limiting engagement from staff who might have valuable input to offer in the budgeting process.