In his study of: “the impact of budgets on people” C Argyris reported the following comment by a financial controller on the practice of participation in setting budgets in his company: “We bring in the supervisors of budget areas, we tell them that we want their frank opinion, but most of them just sit there and nod their heads. We know they are not coming out with exactly what they feel. I guess budget scares them”. Explain why managers may be reluctant to participate fully in setting budgets, indicating the negative side effects, which may arise from the imposition of budgets by senior management.

(In his statement Chris Argyris, he identified situations why mangers could be reluctant in setting budgets: as follows:
(i) The budget is seen as a pressure device,based by management to force „ lazy‟ employees to work harder. The intention of such pressure is to improve performance, the unfavourable reactions of subordinates against is seems to be at the core of the budget problem.
(ii) The accounting department is usually responsible for recording actual achievement and comparing this against budget. Accountants therefore are „budget man‟ is the failure of another manager and this failure causes loss of interest and declining performance. The accountant, on the other hand, fearful of having his budget derailed by factory management, obscures his budget and variance reporting, and deliberately makes it difficult to understand.
(iii) The budget usually sets targets for each department, achieving the departmental target becomes of paramount importance regardless of the effect this may have on the other departments and the overall company performance.
(iv) Budgets are used by managers to express their character and patterns of leadership on subordinate; subordinates, resentful of their leadership style, blame the budget rather than the leader thus it looses meaning.