![]() ![]() They need to ask ‘starting again in an ideal world, how would we go about this activity and to what would we give the highest priority?’ They must re-look at their staffing, activities, projects and costs through new eyes with no reference to the past. Managers are required to justify their department’s existence, their activities, way of working, and their expenses, from scratch. The planning stage always starts from zero and requires the cost and benefit of every activity to be placed under the microscope. But more of that later.Įasy to define in concept, difficult to apply in practice, in ZBB, all – and I mean all − expenditure for the next period must be justified anew. The practice shot back into favour a few years ago when Brazilian private-equity firm 3G Capital used ZBB to squeeze billion-dollar savings from food processor Kraft Heinz. But getting it right requires strong leadership to steer your people through their initial resistance. When done well, ZBB drives significant, sustainable savings and enables efficient resource allocation. ZBB can provide a structured and rational approach to cost management. The soft targets are always the first to go – advertising, travel, training, maintenance, consulting fees, communications. This has reignited the conversation on ZBB as relevant to both the public and private sectors, with many practical lessons from the private sector’s past, especially for the public sector.ĭesperate shareholders with frozen cash flows may be tempted to slash and burn activities across the board, regardless of how sustainable their choices. ZBB supporters dispute the merits of traditional budgeting, which involves increasing last year’s costs for volume and inflation.Īs we struggle with the effects of the COVID-19 pandemic, companies need a control system that matches spending with their post-lockdown survival strategy and ignores historical spending levels. Zero-based budgeting (ZBB) asks managers to question each line-item in their budgets, and the related activity, from scratch. An old idea from the 1970s has re-emerged right on cue. ![]() South Africa’s uncertain future is motivating private and public sector managers to take a closer look at costs. ![]()
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