Zero Based Budgeting

A book on Zero Based Budgeting (ZBB) changed my professional life. I think I came across it at an airport bookstore in the early 1980s. President Carter used ZBB during his administration. Perhaps the Washington of today should return to it!

ZBB does not allow established costs to continue without fresh justification. We tend to extrapolate historical costs and revenues as well in to the future. Jobs are the most sensitive of fixed costs. No one can propose losses of own jobs and those of close friends. However, ZBB requires that all positions in an organization are looked at afresh during a budgeting process. Task consolidation and suspension of fresh recruitment are common though less invasive outcomes of ZBB.

It is easier to apply ZBB to outsourced services such as advertising. Travel budgets are favorites targets of all cost cutting exercises, but ZBB is a potential exception in this respect. One can retain or even enhance any cost proposal that has credible, specific, and probable prospects of gain. Lateral thinking is an important corollary to ZBB. Confrontations with binary choices plaque ZBB.

An excellent way to initiate ZBB thinking is to apply it to yourself, especially if you are in a senior position of influence. One of my former colleagues did this by flying internationally in economy though he was entitled to First Class luxury and privileges. Another voluntarily downgraded the standard of hotel accommodation for himself.

ZBB has useful applications in personal life. There are a number of fixed expenses such as vacations on which we cut back instinctively in lean times. However, searching questions can lead to substantial reductions of energy costs and mundane things like frequent dry cleaning.

The ZBB process is relatively simple, though automation can consume some resources at the outset in large organizations. You have to make a detailed and written justification for each item of expense. All proposals are vetted, preferably by more than one person. No expense finds place in a budget if it is not proposed or if it is rejected.

Write to me if you would like to know more, or apply it in your situation.

 What if you were in charge of Gudiwada in coastal Andhra Pradesh. A street scene from this busting town appears below:

Which kinds of budgets would you enhance? How would you link things such as garbage clearance with monies spent on paper for such essential services? Which budgets would you cut and how? Many people employed by corporations that work for profits criticize government employees and politicians for frittering away resources. Could any such critic do better in real life?

I would love to hear from you!