Bottom-Up Budgeting: Advantages*

The advantage of bottom-up budgeting, first and foremost, is that it forces the creation of detailed project plans, particularly a detailed work breakdown structure, as an initial step for creating a project budget. Second, the approach facilitates participative management because all personnel, particularly those at the lower levels of the organizational hierarchy, are involved in the project budgeting process. The bottom-up approach assumes that the individuals actually performing the tasks are more likely to have clear understanding of the resource requirements for the tasks than their superiors. Furthermore, involving the lower-level managers and employees in the development of the project budget increases the chances of its acceptance. The involvement of the junior-level managers in the bottom-up approach also provides invaluable training, experience, and knowledge in developing a project budget. Third, bottom-up budgeting facilitates coordination between the project managers and functional department heads, who must take the various resource requests they receive from project managers into consideration as they develop their own budgets. Fourth, bottom-up budgeting, because it emphasizes the unique creation of budgets for each project, allows for top management prioritization among projects competing for resources. If it is determined that there are simply more projects than budget money available, the process of building a budget from the ground up gives top management additional information to use in determining which projects they are willing to support.

*Please Note: Portions of section 5.3.2 were adapted from Pinto, J. K. (forthcoming). Project Management: Achieving Competitive Advantage. Upper Saddle River, NJ: Prentice Hall.Used with Permission.