When used to motivate, what is the best type of budget target?

Question

When used to motivate, what is the best type of budget target?

BlackTom AI · Accepted Answer

When considering how to set a budget target that effectively motivates performance, we evaluate how the target balances stretch with attainability.
Option 1: 'Very difficult' – This creates a high-risk of discouragement if the target feels unattainable, which can undermine motivation and lead to disengagement or gaming of the system. It often damages confidence and may reduce effort rather than increase it.
Option 2: 'Conservative' – A budget target that is too easy tends to be demotivating because there’s little urge to push beyond the status quo; people may settle for the minimum and miss opportunities for growth, efficiency, or learning.
Option 3: 'Best guess' – Relying on an ungrounded estimate lacks rigor and accountability. It signals weak planning and can undermine trust in targets, as employees may view the target as arbitrary rather than a fair challenge.
Option 4: 'Challenging but achievable with effort' – This strikes the right balance by setting a target that requires effort and focus, but remains within the realm of possibility with planning, teamwork, and disciplined execution. Such targets tend to sustain motivation, drive purposeful action, and encourage innovative problem-solving without tipping into discouragement or hopelessness.
In light of motivational theory and practical performance management, the most effective choice is the fourth option because it maximizes engagement by providing an attainable but stimulating challenge.

22705 Management Planning and Control - Spring 2025 Modules 1-4: Self-assessment and feedback

When used to motivate, what is the best type of budget target?

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