Please write a discussion and respond to this 2 peers’ Discussion Prompts
Discussion:
- What size health care organizations lend themselves to top-down, bottom-up, or middle- out budgeting?
- Which one do you believe is the most effective?
- Why?
- Respond to at least two (2) of your classmates’ or your instructor’s posts. Your responses should include elements such as follow-up questions, a further exploration of topics from the initial post, or requests for further clarification or explanation on some points made.
- ALL citations and references needs to be APA 7th edition format. THANK YOU!
Peers#1
In top-down budgeting, senior management develops the budget with little or no input from department managers (Nowicki, 2015). In bottom-up budgeting, subordinates develop the budget and submit it to senior management for approval (Nowicki, 2015). In middle out budgeting, the combination of both top down and bottom up, senior management decides on budget parameters and subordinates submit plans within those parameters (Nowicki, 2015).
For large healthcare organizations, bottom-up budgeting tends to be the best option. Because bottom-up budgeting starts at the department level, each item in the budget has a proper explanation based on past and current information (Borad, 2019). Once all departments form individual budgets, top management will approve then form a master budget (Borad, 2019In bottom-up budgeting, there is a commitment to the budget by those who developed it (Nowicki, 2015).
For smaller organizations, top-down budgeting tends to be the best option. Since smaller organizations have less departments, there will be less disconnect between upper and lower-level management (Borad, 2019). This type of budgeting is a quicker approach than bottom up and it helps to overcome interdepartmental issues (Borad, 2019). Senior management tend to have the best view of the future but if the subordinates have little input, budget implementation can be difficult.
Most organizations are now using the middle out budgeting approach. Middle out budgeting allows for both senior management and department leaders to work together. I believe the approach is the most effective because mid-level managers are able to see both sides, the organization as a whole and the departments. Budgets are formed within parameters set by senior management to accomplish organizational goals and department goals. Because everyone involved has a voice, budget implementation is very successful in the middle-out approach.
Peers# 2
My understanding is that creating a budget for your home, small business, or a large corporation, there are two major approaches: the top-down approach and the bottom-up approach. “Top-down budgeting. Incorporate budgeting, a top-down approach involves the senior management team developing a high-level budget for the entire organization” (Braun, 2017). The budget is created by the top-level executives who decide the budget amount allocated to each top and lower-level accounts. Each department takes the amount that is allocated takes those numbers and builds their own corresponding budgets within the confines of the executive-level-created budget. Middle-out Budgeting is a combination of top-down and bottom-up methods. Bottom-up budgeting. “With a bottom-up approach, the process starts in the individual departments where managers create a budget and then send it upwards for approval” (Braun, 2017). This budget is approved or not approved, revised, or sent back for modifications if needed and a master budget is created from the various departmental creations. Top-down budgeting is usually most effective because it can represent significant time savings for those who are more involved in the day-to-day rather than the overall strategy for the organization and the bottom-up approach will result in higher spending targets compared to the top-down approach.