Magazine article Government Finance Review

Another Look at Zero-Based Budgeting

Magazine article Government Finance Review

Another Look at Zero-Based Budgeting

Article excerpt

The public and private sectors share a need for sustainable cost-reduction programs, which some organizations can meet with zero-based budgeting, McKinsey reports.The firm's research on privatesector firms found that just 26 percent were able to sustain cost reductions over four years. A survey found that cuts backfired and hurt growth instead of helping, and that the cost programs were abandoned once the budget got less tight - all of which made cost cutting more difficult the next time.The situation isn't much different for governments.

A potential fix is zero-based budgeting, which can function as "a sort of cost reset button" that, done correctly, can create sustained when change - something that cuts can't do. An enterprise-wide effort is needed to make zero-based budgeting work: "the whole organization, working with finance, thinking in much the same way, making decisions as if they were owners of the business as a whole."

Of course, doing zero-based budgeting correctly isn't easy. The process is extremely time consuming. McKinsey studied the success stories - "how they sustained a culture in which cost trade-offs became a way of life rather than a periodic event." There were a few commonalities, including the following:

* Shoot for major reductions. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.