Zero-Based Budgeting

The most recent All-In Podcast (episode 145) featured Presidential Candidate Chris Christie. A standout moment was this discussion on the US Defense Budget and the principal of Zero-Based Budgeting (ZBB).

Zero-based budgeting (ZBB) is a method of budgeting in which all expenses must be justified for each new period. The process of zero-based budgeting starts from a “zero base,” and every function within an organization is analyzed for its needs and costs. The budgets are then built around what is needed for the upcoming period, regardless of whether each budget is higher or lower than the previous one.

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The elegance of ZBB is the constraint of starting from 0. In a budget you start with $0 and assess line by line what is absolutely necessary. The sum-total is your budget.

This applies to time management. If you have a month to do a project, the project will likely take you a month. You’ll find a way to use all the time. But if you start from 0, by breaking the project down to only the necessary components that need to be completed, maybe you finish the project in two weeks.

Whether the resource is money or time, the discipline of constraint ensures that you use the resource efficiently. Otherwise the resource can feel endless and becomes susceptible to waste.

In Product Management a parallel is the “enough” principal that Jason Fried discussed here. ZBB can be repurposed as a Product Management method for implementing the principal of enough.

Whether it’s a new feature, a homepage redesign, or a brand new product, start from zero and stop at enough.