Marcel Duy, Product Director, Digital Business Planning at IKEA
Zero-Based Budgeting (ZBB) isn’t new, but its popularity continues to increase as companies aim to efficiently manage their budgets. But what exactly is ZBB? Despite the name, it’s more than a spend management practice where budgets always start from zero.
ZBB is a process that rigorously reviews every dollar in the annual budget, sharpens the actions that identify the right investments, and helps build a culture of cost management. It encourages decision makers to evaluate the budget based on real-time information and market shifts, then reallocate dollars to higher-value priorities.
Reducing costs, while jump-starting growth, doesn’t that sound good? However, successful adoption of ZBB depends on the participation of all departments in the company. If the whole company isn’t jumping on the ZBB bandwagon, there are still aspects marketers can apply to improve their productivity. Zero-Based Productivity (ZBP) extends the strategy from budget management to business processes, and focusing attention on viable paths to drive growth. We’ve got four ways marketers can apply ZBP tactics to increase efficiency in their marketing planning processes.
Successfully adopting Zero-Based Productivity (ZBP) is built on visibility and transparency. These are both integral to better understanding your marketing investments and daily team workflow. Start whittling down your investments and activities to reveal the critical tasks by gathering intel–a lot of it.
This step will require some data cleanup and analysis to paint an accurate picture of spending, workflow, and performance. But by the end, you’ll have one source of the truth where alternative decisions, benchmarks, budgets, and targets can be compared.
It definitely takes some effort, but you’ll walk away with better insights into your team that will continue to point you towards the right decisions during the marketing planning process.
After reviewing the data, you’re now ready to set up the right targets. Good targets act as North Stars and point the team towards their goal. We’ve probably all heard of SMART targets before, as a refresher they are:
All of marketing’s SMART targets should support larger corporate targets and goals. Review your data carefully and consider which targets matter most to boost the efficiency. By working from the ground up to prioritize a few goals, your marketing team will have enough resources to bring in results without spreading themselves too thin.
Having shared targets helps align expectations and plans, coordinate team efforts, and hold everyone accountable for achieving results. In addition, keep an open-dialogue with employees about how their actions benefit and contribute to the organization’s overarching goals.
A strategic plan for your marketing budget is an integral component of zero-based productivity. Your budget should be aligned to your SMART targets, to ensure every dollar invested moves the team closer to their goal.
Starting the budget plan from zero allows the marketing budget owner to be flexible with their resources. Marketing teams should take the move to ZBP as an opportunity to fix broken processes. If you just rinse and repeat year after year, your budget suffers. McKinsey found marketing organizations that recycled plans were allocated similar budgets year to year. In other words, there was no room to grow. So do your marketing organization a favor and adopt a better method for investment planning.
By discontinuing spend that no longer fits the needs of the market, as well as reallocating budget to better performing plans, a strategic marketing budget greatly improves your marketing planning process.
Track your old budgeting data against your current and future budget plans. It provides a baseline for marketing budget owners to avoid past wrong decisions by comparing the two strategies. The key to ZBP is to provide marketing with the best position to understand the data and seek new opportunities that will support the marketing planning process in the long-term.
Finally, long-term success of moving to a zero-based process relies on how everyone works in an organization. Introducing ZBP or ZBB is a long-term implementation. It’s critical to cultivate a culture that accepts and welcomes new changes.
Bringing new change can be a struggle, but there are ways to make the process less painful. To create lasting change, marketing leaders must do two things consistently:
1. Role ModellingLeaders play an important role as demonstrators of change. When they start adapting to the new change, it has the trickle-down effect of getting the rest of the team on the same page faster.
2. Foster Understanding Focus on answering “why” there are new changes and “how” your team will work to conquer fear of the unknown. Build a communication channel that your team can easily reach when they have questions.
With these practices, your marketing team will better adopt a zero-based culture to their daily workflow.
The end goal of applying ZBP to the workplace is optimizing overall operations and bringing innovative change to the organization. In the new era of marketing, we must be agile and flexible with all our resources, and ZBP offers marketers a new way to streamline the work process. With clear visibility into resources, you can better allocate investments to the right programs to drive impact during the marketing planning process.