Zero-based budgeting supports large-scale transformation by freeing up resources to drive growth and innovation. BCG’s zero-based budgeting consultants help clients anchor this approach in a culture of cost-consciousness that delivers clear benefits.
Zero-based budgeting is about more than deploying one-time cost-reduction strategies. It’s about using facts to decide how to liberate resources and make smart choices about where to allocate them. And Zero-based operations deliver maximum value when they are tailored to an organization’s unique circumstances and embraced by people throughout the business.
Zero-based budgeting is about fundamentally reimaging your cost base from scratch—supported by cost-reduction strategies and driving related cost-conscious behaviors. Successful organizations leverage zero-based budgeting as:
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.
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.
Organizational Culture. Foster a culture of cost ownership by implementing strong performance management policies and effectively communicating about, and managing, the changes that zero-based budgeting requires.
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.
ZBB is a powerful—and increasingly relevant—clean-slate approach to resource allocation. But to implement it successfully, companies must change their organizational mindset.
