Due to the trend in favor of increased participation that organizations all around the world are following, there is also a distinct pressure for allowing employees to participate in key decision making efforts of the organization. Budget formation and monitoring is one of the most important financial decisions of any business. Employees are increasingly active in the process. There are many reasons why organizations encourage their employees to actively participate in the formation of budgets. This participation allows for a number of advantages that work in the best interests of the organization as a whole.
If employees are encouraged to participate in the budget formation, they will have better understanding of their tasks and targets (Parker & Kyj, 2006, pp.27-45). This means that they will be informed beforehand about what is expected from them. When an employee knows his tasks and is knowledgeable of the criteria that he/she has to meet, he may have a clear focus and sense of direction when he works. This clarity will increase the degree of certainty in the work place, hence increasing motivation. Many different works of literature support the idea that availability of information regarding job targets in monetary terms not only gives a clear focus, but also helps in increasing work performance.