By changing course from a conventional to zero-based budgeting approach, chief human resource officers can specify and finance the priorities of the organization and identify what’s most important to smooth functioning.
Zero-based budgeting facilitates HR professionals to opt for a highly driven business strategy that helps in producing and conveying their budget demands. This approach comes with crucial advantages for budget holders across the HR who must evaluate new investment requirements like promoting remote working and ensuring employee health and wellness amid considerable cost constraints.
Zero-based budgeting can help HR leaders to rationalize the expenditure of every functional item for a given timeframe. The implementation of a zero-based budget requires a mindset transition and conscious efforts within the budgeting process. HR professionals are therefore required to advocate for investment or new initiatives and defend the pre-existing spending. If this is not done, HR is likely to get underfunded on significant activities to support workforce development programs and employee retention strategies.
How Zero-Based Budgeting Can Benefit Your Organization
The strategic plan created by HR graphs out the purpose that drives organizational ambitions but what actually funds such initiatives is the budget. HR professionals require an elevated level of vision into the investments that add value to the organization, as the strategic planning process starts getting more streamlined and responsive to adaptive strategy. This is where zero-based budgeting helps.
The traditional budgeting process involves whatever investments that were set in initial periods, plus or minus a budget for expansion or deduction. While in the case of ZBB, no hypotheses are being made about the expenditures that are to be retained. So, the budget is then developed from scratch assigning cost according to business priorities and outcomes.
Therefore, the primary objective of ZBB is for the chief human resource officers to select the area of spending to uncover the initiatives required for HR to play its part in attaining strategic goals.
How to make ZBB implementation more streamlined and manageable
The most adequate way to make ZBB implementation is by choosing to zero-base some items of the budget every year on a scheduled basis That will ultimately result in you zero-basing the entire budget after every few years.
Some chief human resource officers also say that using existing budgeting timelines is also useful in order to develop zero-based budget deadlines that coincide with typical budget submission deadlines. A general budgeting calendar helps HR professionals to justify budget analysis meetings, remarkably during selective enactment when some areas of the budget are being zero-based and others are not.
The average zero-base budget cycle time is 90 days in comparison to an average of 94 days for driver-based and rolling forecast-based models.-Gartner Research
How to attain a shift in mindset required for ZBB implementation?
Keep organizational priorities in mind
In the course of zero-base budgeting, every cost must be justified for its necessity to meet organizational priorities. So, all stakeholders must be clear about the organizational priorities. The HR strategic plan must elucidate the endeavors that HR will take to support enterprise strategy but even then it’s crucial to outline budget negotiations by emphasizing strategy, key metrics, and assumptions to compel budget holders to truly concentrate on strategic alignment.
Create opportunities for managers
The prime reason behind why businesses struggle to implement a zero-based budget is the fear of losing the resources they are seeding for a specific year. To help budget holders identify real cost savings and reduce such defensive behavior, it is necessary to give them the opportunities that can help them in financing funds from the reservoir of realized savings. The budget decision-makers can enforce such cost savings to finance new development initiatives or innovation programs or even to allocate managers to demonstrate the desired behavior for the success of ZBB implementation.