Zero-based budgeting supports large-scale transformation by freeing up resources to drive growth and innovation, allowing organizations to fundamentally change what they do and how they work. BCG’s zero-based budgeting consultants help clients anchor this approach in a culture of cost-consciousness, delivering clear benefits including spend-baseline reductions of as much as 30%.
This approach isn’t about deploying one-time cost-reduction strategies. ZBB is about using facts to decide how to liberate resources and make smart choices about where to allocate them—and in turn, drive sustainable positive change in the business. Zero-based budgeting and zero-based operations work best when they’re tailored to an organization’s unique circumstances.
Zero-based budgeting should also lead to changes in mindsets and cultures—as well as to new roles, responsibilities, and processes. To manage these aspects of zero-based budgeting organizational design, leaders and managers must be invested in the approach and take accountability for executing it effectively.
Zero-based budgeting is more than a one-off cost reduction; it’s a method for transforming your business. Learn how BCG can help.
At BCG, we don’t take a cookie-cutter approach to the zero-based budgeting process. Instead, we tailor it to each client’s unique needs—including where they are in their business cycles and what they’ve defined as their strategic priorities and transformation agendas. As a result, we help companies avoid common pitfalls and capture the full potential of zero-based budgeting.
Notably, we enable companies to implement zero-based budgeting in ways that strike a balance between driving growth and managing costs, through these means:
Vision. Articulate why you’re initiating a zero-based budgeting program and what you want to achieve with it. Link the program to your company’s strategy, and design the program specifically for the strategy.
Transparency. Create full transparency with a detailed baseline, known value drivers, and rigorous analysis of cost and activities. Our proprietary SpendAI engine supports this transparency. The engine combines advanced analytics with machine learning to map transactions to specific cost categories so companies can identify spend by activity and owner. Decision makers can see—in detail—what’s being spent across the organization and can flag opportunities for improvement.
Governance. Introduce dual-cost accountability to support decision making and enable employees to own, manage, and drive the program.
Ambition. Lock in business model choices, prioritize saving areas, and establish smart targets.
Zero-Based Budget. Create a granular and holistic view from the bottom up, challenge the budget rigorously, and integrate targets.
Performance Monitoring. Set clear mechanisms for tracking costs, including how to address variances and reallocate funds.
Execution. Devise action plans and milestones. Implement and follow a process for variance and reallocation.
Reinvestment. Reinvest savings in a way that best drives growth for your company.
Examples of our zero-based budgeting work include:
A large oil and gas company wanted to instill cost discipline into its organizational culture as part of a broader transformation. By helping the client apply zero-based budgeting across multiple business lines, we enabled the company to identify up to $300 million in total value unlocked through new ways of working.
A multinational food company needed to execute a rapid cost-transformation program and extract new value from its marketing operations. By applying zero-based budgeting, we helped the client reduce SG&A costs by 25%. Nearly a third of these savings were delivered in the first year.
