A creative advertising agency uses a 'bottom-up' (participative) budgeting approach, allowing junior art directors to set their own departmental budgets.

Which of the following is a recognized behavioral DISADVANTAGE of this approach?

In participative (bottom-up) budgeting, lower-level managers are involved in setting their own budgets. While this increases motivation and utilizes local knowledge, a major disadvantage is the creation of 'budgetary slack'. Managers may intentionally overestimate costs or underestimate revenues to ensure they can easily meet or beat their targets.