76

Where does
zero-base
budgeting work?

Understanding both its good

and its had points will help
yon decide whether
this technique should he used hy
your organization and,
if so, how, when, and where

James D. Suver and

Ray L Brown
As with many new management techniques, the
proponents of zero-hase
budgeting are very vocal
in stressing tlic advantages
in using the technique.
In this article, the authors
try to he more objective
by giving equal time to
the other side of the
question. Their review of
the literature indicates
that there are many
organizations that have
tried the technique in one
form or another and it
has not worked. Properly
implemented, however,
zero-base budgeting can
he a considerable improvement over the typical
budgeting approach. Since
it does not work equally
well in all organizational
areas, the astute manager
will selectively apply the
technique to those areas
that offer the potential
for the greatest payoff.
Mr. Suver is associate
professor of accounting at
the University of Colorado
at Colorado Springs,
teaching in the managerial and governmental
accounting areas. He is

a certified management
accountant and is currently developing budgeting procedures for
hospitals. Mr. Brown, also
a CMA, is assistant
professor of accounting
in the School of Accountancy, University of
Denver. His former duties
with the Secretary of
Defense included working
with the Office of Management and Budget in
analyzing and preparing
portions of the budget
for the Department of
Defense. Both authors are
currently implementing a
zero-base budgeting system for the Colorado
State Patrol.
Drawings by
Roland Topor.

Since 1970 zero-base budgeting bas become a popular

phrase, if not yet an established management planning and budgeting tool.
Only a few organizations30 to 100 by recent
claimsbave used zero-base budgeting. The state
of Georgia, under Governor Jimmy Carter, was an
early user, and otber states are climbing on the
bandwagon. President Carter has repeatedly said
be will use zero-base budgeting in order to make a
complete evaluation of the many programs and
activities of the federal government. Because of the
government's impetus, and its use in several eommereial companies, many business executives are
now finding tbemselves in the position of deciding
whether this technique will benefit their own organizations.
Zero-base budgeting is a term and technique introduced by Peter Pyhrr in 1970.' As with most
management techniques, the concept was not entirely new. The U.S. Department of Agriculture had
begun using a "ground up" budgeting tecbnique in
1962, which included a reevaluation of all the department's programs. As early as 192.4/ E- Hilton
Young, English budget authority, advocated rejustifying budget programs annually.- Nevertheless, it
took Pyhrr and today's events to give it its present
popularity.
Does zero-base budgeting deserve its popularity?
Should it be installed in your company; In tbe federal government? Before these questions concerning
the benefits of zero-base budgethig can be answered,
a brief review of the process is in order, because
there are actually a number of forms of zero-base
budgeting now being used.

Zero-base budgeting

Basic framework
A logical point of departure is to define zero-base
budgeting. Pyhrr described the approach used at his
company, Texas Instruments, as follows: "Rather
than tinker endlessly with its existing budget, Texas
Instruments prefers to start from base zero, view all
its activities and priorities afresh, and create a new
and better set of allocations for the upcoming budget
year."
President Carter, then Governor of Georgia, explained zero-base budgeting in this manner in his
budget address on January 13, 1972: "Zero-base
budgeting requires every agency in state government
to identify each function it perfonns and the personnel and cost to the taxpayers for performing that
function." '
Gertainly, the most concise deffnition is this one by
Leonard Merewitz and Stephen H. Sosnick: "Perhaps
the essence of zero-base budgeting is simply that an
agency provides a defense of its budget request that
makes no reference to the level of previous appropriations." ^
All of these definitions express one common
thought. The manager must be able to justify each
activity's projected level of expenditures in toto,
and no level is to be taken for granted.
In this light, zero-base budgeting becomes just
another management tool, which can be used to
review, analyze, and evaluate budget requests. A
major question to be answered is: Does the tool perform the budgeting task better than other methods?
We will return to this question later, but first let's
further explore the basic framework of zero-base
budgeting.
I. Peier A, Pyhrr, "Zcru-Base Budfieting," HBR November-Deeember 1970,
p.

III.

2. A.E. Buck, The

ry)4), p. 172.

in Governments of Today [New York: Matmillan,

3. As quoted by George S. Minmk-r and R.H, Hcrmanson, "A Look at ZeroBase BudgetingThe Georgia Experience," Atlanta Economic Review, fulyAugust fy76, p. j .
4. Leonard Merewitz and Stephen H. Sosnick, The BuiJgei's New Clothes: A
Cntiijue vf rianninf.-PiogiamminpBu(l^etin^
ar\d Bencfn-Cost Ana}ys.ss
(Chicago; Markham, 1971), p. 61.
.5. Donald N. Anderson, "Zero-Base Budgeting; How lo Get Rid of Corporate
Ctabprass," Management Revicv/, October 1976, p. 6.
6. Arthur F. Brueningsen, "SCATA Process of Alternatives,"
Accounting, November 1976, p. s7.

Management

77

According to Pyhrr, the process has three steps: (1)

describe each discrete company activity in a "decision package," (2) evaluate and rank all these packages using a cost-benefit approach, and (3) allocate
resources accordingly. We will examine each of these
three steps in some detail.

Decision packages
Based on the literature we have reviewed, it appears
to us that there is general agreement that the key
to zero-base budgeting is the design of the decision
package. As Pyhrr defines it, "the decision package
is a document that identifies and describes a specific
activity in such a manner that management can
(a) evaluate it and rank it against other activities
competing for the same or similar limited resources,
and [b) decide whether to approve or disapprove it."
Donald N. Anderson, budget director at Southern
Galifornia Edison, defines decision packages in this
manner: "Galled a 'decision package,' this summary [operational plan) usually includes a statement of the expected business result or purpose of
the activity, its costs, personnel required, measures
of performance, alternative courses of action, and
an evaluation from a corporate or organizationwide perspective of the benefits of performance and
consequences of nonperformanee." "
The number and nature of decision packages will
vary from organization to organization depending
on the activities to be accomplished. For example,
administrators in the school district of Greece, New
York identified approximately 150 packages for the
elementary, junior high, and senior high schools. A
few of the packages were: administration, nurses,
lunchroom monitors, music, psychological services,
tutors, and K-6 basic instruction.*' According to the
study by Minniier and Hermanson that we referenced earlier, the state of Georgia identified approximately 11,000 packages for its 1972-1973 fiscal year.
It seems logical that any large organization can expect to have several thousand packages.
Anderson says, "The package should be broken down
into elements which should comprise no less than
one full person and all associated costs." Clearly, the
identification of decision packages is a formidable
task. The use of a computer system would seem to
be absolutely necessary in any large organization.
In addition to the initial identification, Pyhrr states
that packages can be divided into two basic types:

November-December 1977

78

Harvard Business Review

1
Mutually exclusive packages that serve to identify
alternative means for performing the same function.
The best alternative is chosen and the other packages are discarded.
2
Incremental packages that reflect different levels of
effort which may be expended on a specific function.
One package, the "hase package," may represent a
minimum level of activity, and other packages may
help to identify higher activity or cost levels.

sive levels of managers until a final list for the organization is obtained. Texas Instruments formed
committees at each level of management that consisted of the supervisor as chairman and all the
managers whose packages were being ranked as
members. These committees determined rankings.

Of course, the base package includes those functions and costs that are required by law or represent
inescapable ohligations such as royalties. More important, it normally defines the minimum level of
effort below which the activity ceases to exist.
One of the radical aspects of the decision package
is that it is used by a manager to define his or her
ohjectives and responsibilities and how best to meet
them at various assigned or assumed levels of effectiveness. To do this, the base package may be
set at the minimum essential level of service; or, in
order to expedite the review process, it may be established by management at, say, 50% to 60% of current performance. The manager also defines the
methods for achieving his objectives, such as services rendered by another department or subcontracted. He can even recommend eliminating some
of his activities.

Another approach is to let each level of management approve given amounts or percentages of those
packages relating to activities within its area of responsibility. For example, the first level of review
can rank and fund up to 50% of the proposed expenditures for the hudget year in question. The next
level(s) may handle funding in the 5070 to Ho% area.
Finally, top management only bas to concentrate
its efforts on the remaining part of the hudget. It
sees all the packages, but deals primarily with the
upper increments to those hase packages that have
been approved at lower levels. It may also review
any proposed new programs that have not been
adopted at lower levels.
When the rankings and the total expenditure level
have heen determined, those packages that are approved constitute the new budget. If the zero-base
budgeting process works according to theory, each
activity of the organization has been scrutinized and
evaluated, then continued, modified, or discarded.
The result should be the most effective budget attainable. At a minimum, it should be an improvement over the results of the typical incremental
hudget technique, in which management normally
analyzes only year-to-year changes in budget
amounts plus new programs.

Resource allocation
Once the decision packages have been completed,
management is ready to start the review process. To
determine how much to spend and where to spend
it, management ranks all packages in order of decreasing henefits to the organization. Theoretically,
once management has set the budget amount, the
packages would be accepted down to the spending
level.
However, setting priorities in this manner is more
easily said than done. It is almost impossible for
a group of top executives in a large organization to
have the expertise and the time to rank and establish
a priority for thousands of packages.
One solution to this problem is to have each manager rank his own packages and each supervisor
rank the packages of all managers that report to
him. This procedure can continue through succes-

Results to date
The use of zero-base budgeting has produced mixed
results. The estimated number of organizations using
it varies widely. In 1976, Pyhrr said it had 100 users,
and also in 1976 two researchers, Paul J. Stonich and
William H. Steeves, claimed there were more than
30 users.''^ There are at least 30 articles, 2 books, and
parts of other books analyzing the subject, and it
has been a topic on the agenda of many management symposiums.
7. Pttcr A. Pyhrr, "Zeni-Basc Botlgciing: When: lo Use It and How to Begin,"
S.A.M. AdvanveJ Monascmcn! /uurnoJ, Summer 1976, p. <,-, and Paul |,
Stonich and William H. Steeves, "Zero-Base Planning and Btjdgeting,"
Public Utilities Fonntglitly, Scptcmbet y, 11)76, p. is-

Zero-base budgeting

79

November-December 1977

80

Harvard Business Review

But are users of the technique happy with it? Pyhrr

said that Texas Instruments was happy with it. And
Stonich and Steeves, in reporting that New Brunswick Telephone Company Limited was implementing it throughout the company after a limited trial,
wrote:

1
The establishment of a financial planning phase
prior to budget preparation.
2
An improvement in the quality of management
information.
3
An increase in the budget involvement of personnel at the activity level.

"The process is basically sound and workable [and

is] extremely helpful to middle and senior management. In addition to improving communieation and
understanding hetween management levels in the
setting of priorities, it is very useful in reevaluating
the basic objectives of various functional activities
and in identifying critical areas of weakness in the
corporate planning process."
In 1976 the state of Georgia was still refining its
version of zero-base budgeting. The June 1975 revision for the fiscal 1977 budget instructions added
four levels of effort for each function and four
different kinds of decision packages for each activity,
redefined the functions which would generate decision packages, made an effort to formalize performance measures, and created additional sehedules
for the variety of expenditures that are above the
base level.
The city of Wilmington, Delaware found it useful
and intends to continue using it.^
Stonich states he knows of two eompaniesa large
public broadcaster and an electronics companyin
which individually designed zero-base budgeting
systems worked well. On the other hand, he also
states that two othersa large bank and a leisure
products companyusing a "canned" approach, admitted that "zero-base was a failure here." **
The experience of the Department of Agriculture
with its ground-up budget in 1962 was also mixed.
Interviews with every high-level person who was
intimately involved with the effort revealed that few
decisions were made and savings were insignificant.
However, other benefits were reported by almost
one-half of those interviewed; for example, many
were satisfied with the rational procedure, and new
agency members, in particular, said they learned a
great deal.
The experience of the state of Georgia seems similar.
A survey of department heads and their budget
analysts concluded that there were three primary
advantages assoeiated with that state's use of zerobase budgeting:

The survey cited three disadvantages as well:

1
An increase in time and effort required for budget
preparation"This is a very serious problem."
2
A contention that the new system had not significantly affected the allocation of funds. (In fact, fund
reallocations were claimed to be a function of the
Executive Reorganization Act rather than the zerobase budgeting system.)
3
An ineffectiveness of the decision-package ranking
approach to meet changes in the level of funding.
(Instead of adjusting programs aecording to the initial decision-package ranking, new decision packages were required when the level of funding increased or deceased.)

Lessons learned
Certainly, all management techniques have their
disadvantages, and zero-base budgeting is no exception. In order to enable you to put its strengths in
better perspective, we shall take an unusual approaeh
and comment on its weaknesses first.

Unwarranted claims
Zero-base budgeting has sometimes been heralded
as a revolutionary budgeting technique. This simply is not true and may be one of the major
disadvantages of this concept. Zero-base budgeting
has many similarities to PPBS (Planning-Programming-Budgeting System), a system installed in the
Defense Department in the early 1960s that promised
more than it has delivered to date. Both concepts
are based on analyzing the inputs and outputs for

Zero-base budgeting

Specific programs rather than on emphasizing the

traditional line-item, or ohject-of-expendlturc, approach.
PPBS has had difficulty over the years, in fact, hecause output measurements in terms of achievements were either lacking, too subjective, or too
argumentative. These same prohlems can arise when
management tries to compare the outputs of nonrelated decision packages in a zero-hase system.
They also exist when it tries to determine the costhenefit ratio of a single decision paekage.
Promising and not delivering is not usual for a new
management technique. However, any idea which
promises much and delivers little usually causes
human prohlems. Managers at all levels of an organization who are disillusioned hy the fact that a
lot of extra work has not resulted in any significant
reallocation of resources will undoubtedly develop
negative attitudes toward the system. These are attitudes that can kill the possibility of ultimately
ohtaining significant results.
The fact that zero-base budgeting is not revolutionary is supported by results to date. Eleven of thirteen
Georgia department heads indicated that there had
been no apparent reallocation of financial resources
in their departments as a result of zero-base hudgeting. The other two department heads thought that
there may have been some reallocation; however,
they were unable to give a single example, according
to Minmier and Hermanson. Likewise, the previously mentioned experience of the Department of Agriculture only resulted in identifying an excess expenditure for files and a $10,000 reduction [out of a
multibilhon-doUar budget) in an obsolete research
program.

Unwelcome intrusion
Another danger in installing zero-base budgeting is
that it implies that the budgeting technique heing
replaced is inadequate. This is not necessarily true.
In fact, many managers may have used a system
similar to zero-base for years and so feel resentment
toward the "new" technique.
Stonich mentions two companies that unsuccessfully used a canned approach when installing a
8. David W. SinslcUin, Bruci; A. Smith, and James R, Cleaveland, "ZeroBased Budgeting in Wilmington, Delaware," Goveinmental Finance,
August 1976, p. 29.
9. Paul J. Stonich, "Zero-Base Planning- A Management Too!/' ManagetiaJ
Planninji, July-August 1976, p. 4.

81

zero-base system, hut obviously the procedures

adopted should be a function of the system currently in effect. For example, if your current budget
is largely the effort of the controller's department,
a complete change to the zero-base concept of making each manager prepare decision packages would
probably be traumatic. And if your current budget
effort approaches the zero-base concept, a change
in systems could (1) be taken as an affront by those
involved, plus (2) cost a lot for a small improvement
in format. In this latter ease, one might consider
some modifications in the current system, such as
making more of an effort to define programs or
outputs, that would move the organization closer to
a zero-base approach.
Zero-base budgeting requires a lot of time, money,
and paperwork. Developing decision packages takes
a great deal of time. So does evaluating them. It was
estimated that using zero-base budgeting for only
part of the Wilmington, Delaware budget doubled
the cost of budget preparation in 1975. As quoted
from the Georgia experience, the time and effort
required made budget preparation "a very serious
problem."

Unwieldy process
A big problem in zero-base budgeting is the review
process. Reviewing thousands of decision packages
is a monumental burden; reviewing them each year
is a boring, not-too-productive Herculean task.
Pyhrr has recommended that each level of the organization approve given pereentages of the budget.
(Other criteria such as actual dollar amounts could
be used instead.) However, there appears to be a
great weakness in this approach. The methods of
beating the system seem numerous because items
ean be hidden from top management's review by
putting them in the decision packages reviewed and
approved at lower levels. Lower level managers can
hide inefficiencies, scratch each other's back, include
expenses to buy off employees, or label featherbedding items as essential The result may he that significant inefficiencies in an organization will not
be revealed by this approach.
Additional review problems are evident. Few organizations have individuals with sufficient knowledge of all the areas being reviewed to make the
intelligent and tough-minded decisions that are
necessary to eliminate low-priority, obsolete, and
redundant operations.
1

Harvard Business Review

82

Alternatives to zero-base
budgeting
There are two related programs
that may result in accomplishments similar to those of zerobase budgeting. They are
performance auditing and the
sunset concept.
Performance auditing has many
namesoperational auditing,
management auditing, and so
forth. Its objective is to review the
effectiveness, efficiency, and
economy of an activity. In this
regard, it accomplishes the same
objectives as zero-base budgeting. However, it does not lend
itself to setting priorities or ranking activities throughout an organization, though it has other
advantages. It does not have to
be performed annually, which is
beneficial because most programs do not need an annual
in-depth review. Also, it does not
require changes in the budget,
accounting, or management information systems.
Performance auditing can be
conducted by a management
team, the internal auditors, or
outside consultants, including
some CPA firms. Like zero-base
budgeting, it does require each
manager to analyze, or to cooperate in analyzing, his operation,
including the efficiency and effectiveness of each program.
This technique also requires developing output measurements.
Performance auditing lends itself
to a more in-depth management
review too, because top management needs only to "audit"
and review as many or as few
activities as it desires and can do
so on its own schedule. An indepth review of thousands of decision packages by a given date
on the budget calendar does not
allow time for the analysis required to meet the theory of the
zero-base concept.

The sunset concept has been

popularized by the state of Colorado and was proposed by
Senate S.2925 in 1976. It was
reintroduced in 1977. In essence, this concept states that
the sun will set on given activities
every three to seven yearsthat
is, the activity will automatically
be abolished on a given date. For
the activity to be resurrected, it
must pass the same type of scrutiny it would be subjected to in a
zero-base system or a performance audit. The sunset concept
ensures that each activity will be
reviewed. In theory, the review
will also be in sufficient depth so
that outdated, redundant, and
low-priority programs and their
costs will be weeded out.
How well this concept works in
practice is currently being tested
in Colorado. Thirteen regulatory
agencies were to have been reviewed by July 1,1977. Work
was actually completed on nine
of them, and the other four are
still under review. Of the nine,
only two were retained, with
changes. Four were abolished.
Two were reorganized into one.
And the final agency was abolished, but its functions were
transferred to the attorney general's office. These results appear to be significant when
compared with those reported by
other states using zero-base
budgeting to analyze the relative
importance of programs.
The state will review the remaining 30 regulatory agencies over
the next five years. The Colorado
legislature is depending on performance audit reports as the
basis for its review. Afterward,
the legislature has the choice of
introducing new legislation to
continue or modify an agency's
level or scope of operationsUnless a bill is introduced, the
agency automatically dies.

November-December 1977

As tbe history of PPBS shows, a budgeting system

that does not complement the structure of an organization and its management information systemparticularly for accounting and control purposesis quite difficult to implement, control, and
evaluate.^^ Unless an accounting system can collect
data in decision-package format, there is no practical
method of checking budgeted costs during and after
the budgeting process.
The final limitation on the use of zero-base budgeting is that it is most effective in support-type activities. Normally the extra work required for zero-base
budgeting is not warranted for any operation (e.g.,
production) for which input-output relationships
exist.
Of course, all these disadvantages must be weighed
against the advantages of zero-base budgeting, so we
shall now examine the strengths of this management technique.

Sounder assumptions
A principal advantage is that every discretionary
cost in an organization is defined and categorized.
Most of the budgeting systems in use today leave
management with a feeling that it does not understand or control the budgeting process. Hence, the
search for new techniques.
Most systems are generally based on the assumption
that last year's programs are probably all right and
that the budgeting effort should concentrate on incremental changes or additions to the previous
budget. However, the growth of costs in administrative areas has left many managers wondering
whether these costs are appropriate. Zero-base budgeting provides a system for evaluation, usually using
cost-benefit relationships. It also provides a means
for looking at alternative methods of accomplishing
objectives.

Selective applications
Another strength of zero-base budgeting is that it
does not have to be applied throughout the organization, or even throughout the services and support
areas. It can be applied selectively to those areas
about which management is most concerned. Likewise, it can be limited to the time, money, and
people who are available to install, monitor, and
operate it.

Zero-base budgeting

Tbe scope of a zero-base budget can also be limited

by omitting decision packages for those activities
required by law. However, this assumes that any inefficiencies in these activities are not important.
And, as we have seen, the scope of a zero-base budget
can also be reduced by limiting the number of decision packages passed to top management. Lower
level managers can approve certain dollar amounts
or percentages of the expected budget, leaving only
the more controversial or difficult packages to be
reviewed at higher levels. An alternative is to list
the costs of decision packages in terms of (1) present
amount, (2) present level of performance, and (3)
recommended level of cost and performance.

Streamlined communications
Zero-base budgeting provides a method of making
organization-wide reviews of programs and priorities more realistic. These reviews tend to be efficient
because the budget instructions are designed to ensure that everyone in the organization is using the
same forms with the same assumptions concerning
the organization's economic outlook, changes in activities, price increases, pay raises, and so on.
It is also a good training and educational device.
This budgeting technique has been acknowledged
as beneficial in educating newer employees concerning their operations and methods of achieving organizational goals, even in those organizations where
zero-base hudgeting has apparently accomplished
little else. It also gives employees a sense of participation in the budgeting process, which is particularly
beneficial in those organizations that hold managers
and supervisors responsible for meeting cost objectives or that stress participative management techniques.
Lastly, since zero-base budgeting provides a method
of establishing priorities for current and new programs, it provides a basis for eost reductions or additions as revenues fall or rise.
Given these advantages, when and where should
zero-base budgeting techniques be used?
In profit organizations, overhead areas such as services and support are prime candidates beeause they
are predominantly managed eosts. The labor, ma10. Sec Robert N. Amhony and Regina Heizlingcr, Mantigement Control in
Nonprofit Ursanizations {Homewood, Illinois: Invin, 1975), p. 339.

terials, and overhead directly assoeiated with production are usually already controlled by inputoutput relationships. In government, the techniques
can be applied to almost all activities since service
is the primary function.

Political realities
Jimmy Carter and others have reported that zerobase budgeting is useful in government, particularly
in reallocating resources out of low-priority into
higher-priority programs. However, Carter's 13 department heads in Georgia could not cite a single
instance in which this objective had been achieved
in their departments. Minmier and Hermanson confronted Carter with this information and reported:
"He [Carter] understood the negative responses of
the department heads and departmental budget
analysts on this issue since the contribution of the
new budgeting system in this particular area would
not be apparent to them. This was hecause the reallocation of financial resources was a result of a combination of two factors: (1) the reorganization of the
executive branch of state government and (2) the
manner in whieh the zero-base budgeting system
was initially adopted and implemented."
We leave the reader to draw his own conclusions.
In addition to the disadvantages and advantages of
the Georgia experience that we listed earlier, dissatisfaction also existed because the department
heads did not participate in the decision to adopt
zero-base budgeting. Still, despite their attitude
about the system and their belief that it did not
result in reallocating resources, 84% of the department heads and budget analysts recommended its
continued use (in some form). They believed that
it was a basic improvement in the budgeting process,
and they also did not want to learn a new system
or relearn the old incremental system.
Wilmington, Delaware also had modest results with
zero-base budgeting. Only five changes, valued at
$29,000, were made in the budget, and only four decision packages were reranked. Political considerations such as the reluctance to eliminate jobs or to
increase taxes limited the reallocation of programs
and dollar amounts.

November-December 1977

84

Harvard Business Review

However, the councilmen desired to continue the

new budget system despite a lack of significant cost
savings or cost realloeations. Positive aspects of zerobase budgeting in Wilmington included the first
detailed identification of all the services provided
by the city; priorities for these services; more involvement by managers in the budgeting process;
ranking of federal and state grants; and a better
basis for measuring management performance. Disadvantages cited were an increase in time, effort,
and paperwork; doubled budget costs; complaints
about the amount of detail involved; risk of inefficient programs being hidden at lower levels; and
lack of knowledge ct)ncerning the level of funding
actually needed to accomplish a given level of serviee (the output measurement problem).

base technique. The cost and trauma involved might

be justified as providing a basis for better management and better allocation of our tax dollars.

The lack of valid measures for administrative and

support functions is distressing in profit-making activities. Measurement is even more critical in government activities since there is no effective market mechanism to limit unnecessary expenditures
and programs. The fact that no one knows, for
instance, how many social services should be provided to each income category and situation renders
impossible a complete and objective analysis of government programs.

It, like all programs, requires top-down support and

sensitivity. The program requires training, lots of
time, lots of paperwork, and changes in budget preparation behavior. It requires hard-nosed deeisions
by people knowledgeable about the goals and operations of the entire organization. And, to be most
effective, the system requires output measurements
in order that every decision package can be ranked
on a cost-benefit scale.

What zero-base budgeting can do is to rank the

programs either by entire program or by program
increments in accordance with political realities.
Politicians, as in Wilmington, are reluctant to give
up pet programs or abolish popular but cost-ineffective ones. It has been reported that the most dispensable program in the Department of Agriculture is the 4-H Club, but no politieian would cut it
from the budget. Therefore, perhaps the most useful
aspect of a zero-base system is a complete identification of the current and proposed programs and their
eosts. Then it would be up to people at the top to
make the hard choices of which programs to expand, contract, change, or abolish, and to explain
these choices to the public.
Even if government had a bottom-line concept and
a scientific approach for making these types of decisions, we are probably asking too much of our
legislators to act within the time constraints of the
budgeting process. Perhaps then, the related concepts
of performance auditing and "sunset" legislation,
described in the ruled insert on page 82, would
better serve to provide the information on which
programs and services are most beneficial. However,
a government unit without a good budgeting system should seriously consider adopting tbe zero-

Applying the concept

If you are dissatisfied with your present budgeting
system, or are uneasy about the magnitude of some
or all of your administrative programs, you will find
that zero-base budgeting provides you with a systematic method of addressing your problems.

Thus there is good and bad in zero-base budgeting.

Only you know the budgeting problems of your organization; whether you need to really dig into
program costs; whether you have the talent to meaningfully review the budget; and whether the operating environment of the organization would be receptive to a zero-base program.

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