Our client is one of the world’s leading brewers, with 200,000 employees in 150 countries and a portfolio of over 500 beer brands. The management philosophy of the CEO included “zero-based budgeting (ZBB)” in which budgets are reset to zero each year and every cost must be justified afresh.
Zero-based budgeting is not just a financial tool. It only works if it becomes an integral part of company culture: treating every dollar as if it were your own (ownership mindset), doing the “same” with less money (cost efficiency), and embracing cost management as a way of life (financial discipline).
First you start by defining clear ZBB expense drivers, cost package owners, and cost entity owners. Secondly, you identify opportunities and prioritize resources based on current needs and long-term benefits as opposed to “what’s always been done.” Thirdly, you improve operations and find cost-effective ways to improve operations so you can utilize the savings for business growth. Finally, you build ownership among people who understand the importance of the process and treat the company’s money as their own to create compelling success stories.
Zero-based budgeting, when done right, ensures zero overhead growth and lowers your costs permanently while helping you grow more profitably. ZBB is a critical lever for value creation and a key enabler for growth, especially after each merger or acquisition.
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