What is the concept behind managing and budgeting by objectives?

Managing and budgeting by objectives is fundamentally about establishing clear goals within a structured framework that aligns financial resources with specific outcomes. The concept emphasizes the importance of linking projected expenditures to a work program that defines those objectives, ensuring that spending directly contributes to achieving planned results. This approach enables organizations to prioritize their funding allocations based on strategic priorities, enhance accountability, and improve overall performance by focusing on what is intended to be achieved rather than merely on inputs or resource availability.

By articulating objectives and tying budgeted resources to those specific aims, organizations can more effectively measure success and make informed decisions regarding resource allocation. This fosters a proactive rather than reactive budgeting process, where planning is forward-looking and goal-oriented, allowing for adjustments based on performance outcomes.

In contrast, other options do not embody the same strategic alignment between budgeting and organizational objectives. Balancing multiple years or minimizing expenditures can sometimes obscure underlying performance goals. Focusing solely on revenue generation neglects the broader context of how expenditures must be aligned with objectives and outcomes, which is central to effective budgeting by objectives.