Page 301 - F2 - MA Integrated Workbook STUDENT 2018-19

Budgeting

2.3 Motivation

Motivation is the drive or urge to achieve an end result. An individual is motivated if
they are moving forward to achieving goals or objectives.

There is evidence which suggests that management accounting planning and control
systems can have a significant effect on manager and employee motivation.

These include:

 the level at which budgets and performance targets are set

 manager and employee reward systems

 the extent to which employees participate in the budget setting process

2.4 Incentive schemes

Budgets by themselves have a limited motivational effect. It is the reward structure
that is linked to achieving the budget requirements, or lack of reward for non-
achievement, which provides the real underlying motivational potential of budgets.

There are three main types of incentive schemes:

 Performance related pay (PRP)

 Bonus schemes

 Profit sharing

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