A caring culture

Zero-based budgeting challenges managers to answer the question: Can we do this better? Zero-based budgeting is much more than building a budget from zero. Good ZBB builds constant cost awareness throughout cost transparency, cost governance, cost accountability, and benchmarking. In this caring culture, people switch the lights off when they leave a room, keep their work areas and vehicles clean and tidy, empty their own waste baskets and conserve stationery, just as they would at home.

Prescribe the level of detail

The first goal in zero-based budgeting is to gain visibility into proposed spending. For example, for travel expenses, do you want budget owners to just plan the number of trips? Do you want to distinguish between domestic and international travel? How about meals and accommodation? Will you leave it up to the user to determine meal spending or develop a standard meal allowance? Think about all of the different nuances for the various cost categories, and issue standard working papers for managers to populate.

The key success factors in any zero-based budgeting project are

1. the original thinking in each department’s budget request,

2. the soundness of the adjudication process, and

3. the post-implementation controls.

Players

There are two player groups in the game: the department heads and the adjudicators. The people who do the spending (department heads) must have a chance to submit, motivate and defend their proposals for expenditure cuts, and another group are required to adjudicate these proposals, bring objectivity to the process, and make final decisions.

Consider the composition of the control group of adjudicators. They can be top managers, directors or stakeholders, or outside partners.