Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 74

Criticisms of Traditional Budgeting/Incentive Issues As noted in the chapter, some individuals allege that the practice of tying managerial rewards to budgeted performance has dysfunctional consequences, including (but not limited to) gaming behavior. Search the Internet and pertinent literature (e.g., Michael C. Jensen, “Corporate Budgeting Is Broken—Let’s Fix It,” Harvard Business Review, November 2001, pp. 94-101) to further explore the issue of negative incentive effects associated with traditional budgeting practices. What alternatives are suggested to correct these negative consequences?