4 Main effective Performance Budgeting are:

To carry out the performance budgeting effectively, the following guidelines may help a manager.

1. The goals and targets have to be outlined, keeping the opinions of branch, regional and zonal managers in mind. Changes have to be effected, whenever required, taking internal as well as external trends into account.

2. The focus of budgeting should be on aspects which could be controlled at the respective levels (branch, regional or zonal level). Qualitative ascents (customer service public relations etc) need to be tackled carefully, taking employees into confidence.


3. Unrealistic and ambitious targets breed frustration and resentment at various levels. Additionally, we may have to encounter resistance from employees at lower levels. To ensure commitment on the part of the employees, targets have to be arrived at after consultations with people working at various levels.

4. Performance budgeting should not be used as a ‘whip’ as an instrument to criticize and ridicule employees. Such fault-finding exercises, often, do not deliver the goods. Budgeting should, instead, be used to employ resources effectively and meet targets collectively in an atmosphere of goodwill, mutual cooperation and joint participation.