Beyond the ZBB buzz
February 27, 2018
February 27, 2018
Most companies have ongoing cost intervention programs. But the results pale in comparison to what companies are getting from ZBB. Our surveyed company set is seeing average cost reductions of 15 percent and average bottom-line savings of more than $260 million annually.
Companies using ZBB are seeing average bottom line savings of more than $260 million annually
The research also answers a “million (or billion) dollar question” about ZBB. Where are companies redirecting cost savings to support the corporate strategy? While nothing emerged as common practice around who owns the reinvestment decisions, companies are redirecting savings into growth initiatives (52 percent), digital (31 percent), other capabilities (29 percent) and the bottom line (15 percent).
92%
General and administrative (G&A) expenses
52%
Sales and marketing
43%
Direct and indirect labour
42%
Logistics and costs of goods sold (COGS)
As one pharmaceuticals executive explains, “We reinvest one-third into our growth initiatives, one-third in the salaries of our people, and one-third back to shareholders—and we see this as a winning formula.”
ZBx: It’s not just zero-based budgeting anymore
Are you ready to move beyond the buzz?
Kris Timmermans discuss the top three findings
No two ZBB programs look exactly the same, but there are trends in how companies are implementing them.
53%
Apply ZBB corporate-wide across the enterprise
45%
Apply ZBB worldwide
45%
Stagger roll-outs and pace their implementation
In addition, the research reveals that delaying a ZBB implementation by even one week could have an opportunity cost of $5 million to a global company.
The hype surrounding ZBB has fueled the idea that it is a silver bullet for all of companies’ cost management woes. The reality is that, like any major transformation, ZBB is not an easy fix. Anyone can do easy. Only those resilient enough to go through hardship will thrive. Companies report that cultural buy-in (67 percent), change management (41 percent) and data visibility (33 percent) are the hardest obstacles to overcome.
Companies are investing to evolve their cultures. Change management initiatives include widely-accepted tactics like communication (77 percent) and training and workshops (62 percent). Targets and incentives (15 percent) and role modelling (21 percent), which focus on truly changing behaviors, are less common.
Unlike one-time, high-level percentage cuts, ZBB is not a budgeting exercise that gets completed and everyone moves on. It is an act of culture. A mindset that becomes so ingrained in how people think and work that people do it naturally. Like breathing.
This research offers a compelling picture of the reality of ZBB today. But how will the best in the world take it to the next level? This is what’s next.
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