What behavioral consideration is a potential demotivator when setting budgets and targets?

• A. Participative budgeting improves acceptance.
• B. Incremental budgeting.
• C. Stable, unchanging budgets.
• D. Zero-based budgeting.

Answer: (B)

The behavior being tested is how budgets shape motivation. Using incremental budgeting means starting from last period’s budget and adding a small step up. That creates targets that are only slightly higher, so the stretch required to achieve them is minimal. People may not feel the need to push for major improvements and may even pad the budget or settle for just meeting the increment. In other words, it can reduce ambition and true performance improvement, which is why it’s a potential demotivator when setting budgets and targets.

Participative budgeting, by contrast, tends to boost acceptance and commitment, not demotivation. A budget that’s stable and unchanging can be demotivating in some cases, but incremental budgeting specifically fosters only minor gains and can undermine motivation to excel. Zero-based budgeting, while more demanding, requires justification for all activities and can motivate more rigorous scrutiny, not dampen motivation.