Marketplace has a new podcast for kids, "Million Bazillion!" EPISODE OUT NOW

The ins and outs of ‘zero-based budgeting’

Nancy Marshall-Genzer Mar 27, 2015
HTML EMBED:
COPY

The ins and outs of ‘zero-based budgeting’

Nancy Marshall-Genzer Mar 27, 2015
HTML EMBED:
COPY

It looks like Kraft will be put on a strict diet after its merger with Heinz.

That diet could come in the form of zero-based budgeting which the parent company behind the deal – 3G Capital Partners – uses as part of its cost-cutting playbook.

It involves  managers justifying spending plans from scratch every year, and not just carrying over the last year’s budget.

“Every department within a large organization would have to justify their existence,” says Shane Dikolli, a professor of management accounting in the MBA program at Duke University.

He says when 3G Capital Partners took over Heinz, it saved money by getting rid of corporate jets, and even limited use of company printers.  

But there are drawbacks. Zero-based budgeting is time consuming, and can hurt morale. That’s why many companies just do it every few years.

But it is catching on, and not just in corporate suites. The Iowa governor’s budget office uses snippets of zero-based budgeting to examine government programs. And Iowa lawmakers are considering legislation to bring the state even closer to a zero-based budgeting system. 

 

 

 

 

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.