Allowing employees to participate in developing a budget makes them to own the budget and view it as a plan of action. A budget usually affects everyone in an organization hence it is critical to involve all parties and participants. Failure to involve the employees hampers effective execution of the budget. Employees might even feel that they are being forced to implement a plan yet they did not participate in its initiation. As an example, the public is often invited to supply their inputs when Kenyan central government is developing a national budget for a fiscal year.
Secondly, participatory budgeting increases confidence among employees and towards the management. Since a budget is initiated at the management level, employees can easily feel that such budget is a plan belonging to the management and not staff at the lower level. The likely effect is rebellion if the employees are not involved in the budget process. Participation therefore enhances confidence among employees and positive attitude towards the top management.
Thirdly, participatory budgeting improves cohesion and productivity because employees will work as a team towards a specific goal. An example is an organization that allows employees to set their own goals, which would act as a basis for determining a bonus issue. Such a budget is an opportunity for employees to work hard in order to receive a bonus issue. At the same time, employees would pull together their abilities with a view of increasing productivity because they are the ultimate beneficiaries of a productive organization.