The use of budgets in a vertically integrated U-form organization can lead functional managers to overemphasize short-term behavior that is easy to measure and underemphasize longer-term behavior that is more difficult to measure.

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In a vertically integrated U-form organization, functional managers may focus on achieving their own budget goals in the short term, even if it means neglecting long-term planning and investments that would benefit the organization as a whole. This is because budgets typically emphasize short-term performance metrics that are easy to measure, rather than more subjective and difficult-to-measure long-term goals such as innovation, employee development, or customer satisfaction.

The Use of Budgets in a Vertically Integrated U-Form Organization