Circumstances which could cause the whole budgeting process to have a demotivating effect on management and employees within an organisation

Where the process of target setting is a top-down approach with management deciding targets for their subordinates.

Where unrealistic targets are set resulting in an idealistic budget rather than an attainable or realistic budget.

Where the expectation in the work environment is that targets must be met above all other things. In this instance managers will introduce 'slack' into the target setting process to ensure the target is achieved.

Where a critical approach is taken when targets are not achieved.