NFIB

Benefits of Including Employees in Budget Decisions
05/ 14/ 2002

Although small business owners usually have a better long-term view of budgeting needs than their staff, simply imposing budgets on departments may alienate employees and cause resentment, especially within departments for which financial cuts are made. Not involving employees in budget decision can make them feel like their input isn't valued. In todayÆs Workshop, contributor Jeffrey Moses talks about the tangible benefits of allowing employees to participate in budget projections and decisions.

When involved in budget decisions, employees have the chance to understand the rationale behind specific budget measures. By giving them a chance to participate in budgeting, they'll realize the importance of cutting costs and sticking to specified budget measures. But when employees are left out of the "budget loop," cost-cutting and budget measures may seem vague or even arbitrary.

It has been proven that employees feel more valuable and more involved with their company when their ideas are used in budget decisions. The direct result is that employees work harder, longer and with greater enthusiasm, even when cost cutting directly affects their departments.

But how can you effectively involve employees in budget decisions? While each employee within a small business cannot be directly consulted, employee representatives could present ideas to management. These representatives may be department managers, team leaders or key employees selected by management.

ItÆs unlikely that you'll be able to consider all employee suggestions, most of which will not address the larger budgeting decisions that you will need to make. But it will help inform employees about the reasons behind budget decisions and how the budget measures fit into the overall planning for the company.

Many small business owners feel that trying to involve employees in high-level budget decisions is too time consuming. But few methods for increasing employee morale and enthusiasm are more effective and less costly. Employee suggestions are often surprisingly on target, and even if no employee suggestions are implemented, the goodwill generated is well worth the effort.

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