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Hi Lisa,
I see that incremental budgeting is commonly used in the public sector. I’m wondering if this is because the strategies/goals of the public sector change less rapidly and the environment is more stable i.e there’s no competition or dramatic cost increases. Could you also explain when it should not be used?
I understand listing everything might be taxing, but could you guide me on how to approach this thinking?
Thank you.
Hi!
Good questionWell here goes
Incremental budgeting is indeed commonly used in the public sector, yes partly because the strategies and goals of public sector organisations tend to be more stable, and because also they dont face the same level of competition or dramatic cost increases as other sectors.However, incremental budgeting should not be used in certain situations such as dynamic environments, when there is a need for innovation or significant efficiency improvements, or when there are major changes expected or when they require a strategic focus on long-term goals and value creation.
To approach this I would assess the stability, identity the needs, evaluate the budget alternatives and then make an informed decision about the most appropriate budgeting method to use.
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