Khaleej Times

Engaging Employees with Zero-Based Budgeting

Zero-based budgeting is becoming popular among companies, but many have not fully appreciated the benefits of it.

By Akram Alami

First published on agosto 26, 2017
min read


This article originally appeared on Khaleej Times. Zero-based budgeting is increasingly becoming popular among companies, but many have not fully appreciated the benefits of it. Based on a recent global survey by Bain & Company, more companies use the tool as they face more pressure to cut costs. The system is quite popular in companies in the Asia-Pacific where 80 percent of executives interviewed by Bain for the 2015 report noted their plans to implement zero-based budgeting programmes. And chances that history may repeat itself could show low levels of satisfaction in the use of the programme. Less than half of big companies have reported success from their efforts. Following our analysis of the experiences of 11 publicly-owned corporations, despite the benefits of zero-budgeting, the system failed to engage employees. These companies were evaluated across three metrics of success: the EBIT margin growth, revenue growth and employee engagement. Glassdoor data showed that less employees recommend the company to a friend, dropping in nine of the eleven cases, by an average of eight percentage points. Observing employee engagement in hundreds of cases, we found out that the decline takes place as the power to lead decreases, top talents leave and morale wavers. We have seen though how the most successful companies boost employee engagement under zero-based budgeting by using an approach to organisational and business process simplification, which we call zero-based redesign. This method can revive a company's view about ownership, removing the idea that impedes employees from doing their jobs and simplifying the organisation as well as disappointing practices that dampen the enthusiasm of results-oriented high performers. This is visible in one our cases: A manager at 3G Capital reported that before the company used zero-based budgeting to simplify roles and objectives, remove layers of and standardise processes at Kraft-Heinz, he used to struggle keeping pace with a huge number of e-mails that go up to 300, including several unproductive meetings on a regular day. Now, the system has resulted to fewer than 40 e-mails in a day and meetings have become very targeted and well-organised. A thoughtfully devised, simpler environment should energise people, enabling them to improve performance and earn financial rewards for their results. Higher employee engagement positions a company to increase both revenues and margins faster than competitors over the long term. It also can set the stage for agile ways of working. Read the full article at Khaleej Times. Akram Alami is a partner with Bain & Company in Dubai.

This article originally appeared on Khaleej Times.

Zero-based budgeting is increasingly becoming popular among companies, but many have not fully appreciated the benefits of it.

Based on a recent global survey by Bain & Company, more companies use the tool as they face more pressure to cut costs. The system is quite popular in companies in the Asia-Pacific where 80 percent of executives interviewed by Bain for the 2015 report noted their plans to implement zero-based budgeting programmes. And chances that history may repeat itself could show low levels of satisfaction in the use of the programme. Less than half of big companies have reported success from their efforts.

Following our analysis of the experiences of 11 publicly-owned corporations, despite the benefits of zero-budgeting, the system failed to engage employees. These companies were evaluated across three metrics of success: the EBIT margin growth, revenue growth and employee engagement. Glassdoor data showed that less employees recommend the company to a friend, dropping in nine of the eleven cases, by an average of eight percentage points. Observing employee engagement in hundreds of cases, we found out that the decline takes place as the power to lead decreases, top talents leave and morale wavers.

We have seen though how the most successful companies boost employee engagement under zero-based budgeting by using an approach to organisational and business process simplification, which we call zero-based redesign. This method can revive a company's view about ownership, removing the idea that impedes employees from doing their jobs and simplifying the organisation as well as disappointing practices that dampen the enthusiasm of results-oriented high performers. This is visible in one our cases: A manager at 3G Capital reported that before the company used zero-based budgeting to simplify roles and objectives, remove layers of and standardise processes at Kraft-Heinz, he used to struggle keeping pace with a huge number of e-mails that go up to 300, including several unproductive meetings on a regular day. Now, the system has resulted to fewer than 40 e-mails in a day and meetings have become very targeted and well-organised.

A thoughtfully devised, simpler environment should energise people, enabling them to improve performance and earn financial rewards for their results. Higher employee engagement positions a company to increase both revenues and margins faster than competitors over the long term. It also can set the stage for agile ways of working.

Read the full article at Khaleej Times.

Akram Alami is a partner with Bain & Company in Dubai.