ZERO BASE

Resistance and trust

Successful implementation of zerobased thinking lies in convincing employees of the benefits. Companies with workers who place a lot of trust in upper management are more likely to succeed. Sponsorship from the top is essential.

Leaders need to move the hearts and minds of people in their organizations in the right direction. It can be challenging for managers who have spent years investing and growing their business units, when expected funds are diverted elsewhere. People may say that in effect, they are being asked to re-apply for their own restructured jobs. They need to be convinced that zero base is less about cutting costs and more about value creation. Every Rand saved today will be reinvested in the future of the business.

Zero Base thinking is a tool for the control of everything a company spends money on It also applies in government and “not-for-profit” organisations, and doesn’t remove the need for detailed cost budgets.

Zero-base thinking can be applied everywhere - in direct manufacturing and sales operations, and to service and support departments.

Conflict and Control

The process usually creates conflict. You can’t expect every manager in the organisation to be happy to drop longstanding projects and let colleagues go, or to live easily with restrictive budgets that constrain every move.

After approval, even when everyone seems to be “on board”, the planned levels of expenditure need to be centrally enforced.

Control from the centre

Zero based budgeting – in the first year at least – must be followed by centralised authoritarian control of actual expenditure combined with detailed reporting and key performance indicators.

Without post-control, the whole process is a waste of time. Costs will creep up to previous levels and the credibility of the process will be lost.

A research report from Deloitte found that “poorly designed tracking and reporting” is a key factor in the failure of ZBB projects.