Interest in Zero-Based Budgeting (ZBB) is somewhat cyclical, rising in times of financial distress, nearly disappearing in boom-times. This can be attributed, in large part, to detractors instilling fear in managers by depicting it as a “slash and burn” cost-cutting, or downsizing, technique. This is a gross misrepresentation of the ZBB process.
ZBB is applicable to the public sector (various levels of government), private sector (not-for-profit and commercial businesses), and the very private sector (personal finances). Each sector is unique in its execution of ZBB, but the principle of aligning expenditure with purpose is consistent throughout.
This installment of “The Third Degree” describes the ZBB process in each sector, compares it to “traditional” budgeting, and explores its advantages and disadvantages. Alternative implementation strategies that facilitate matching the ZBB approach to an organization’s circumstances are also presented.
To be effective in any pursuit, one must understand its objectives and influences. One influence, typically, has a greater impact on process performance than all others – the dominant characteristic of the process. The five main categories of process dominance are worker, setup, time, component, and information.
Processes require tools tailored to manage the dominant characteristic; this set of tools comprises a process control system. The levels of Operations Management at which the tools are employed, or the skills and responsibility for process performance reside, differ among the types of dominance.
This installment of “The Third Degree” explores categories of process dominance, tools available to manage them, and examples of processes with each dominant characteristic. Responsibility for control of processes exhibiting each category of dominance will also be discussed in terms of the “Eight Analogical Levels of Operations Management.”
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