Question

Budgeting at Maynard has always been set by upper management. Budgeting begins in early summer and by October the budget is disseminated to lower levels. Budgets are set knowing what their target sales should be, and sales personnel are held accountable to these sales levels. Maynard has four regional territories, headed by a Regional Sales Manager. Their sales compensation plan awards bonuses to sales personnel based on sales volume. If their sales target does not reach 80% of their targeted goal (100%), bonuses will not be given in that year. Sales personnel will be paid a bonus if they hit 80%-125% of their targeted goal. Bonuses will not be paid out over 125% of their targeted goal. Once the bonus goal is reached, that level of sales is used for the following year, plus an additional amount determined by upper management.

Evaluate Maynard’s budgeting system.

Answer 1

Maynard's budgeting system seems to be less transparent and more rigid. Instead of paying similar bonuses to personnel achieving their target within the range of 80% to 125%, they should pay bonuses in proportion to the target achieved. This would also benefit and motivate those personnel achieving target more than 125%. Also, the budget must be finalized with vision and experience of upper management as well as informative input from lower and middle management.