Zero-base Budgeting Research Articles

Target-Based Budgeting and Adaptations to Fiscal Uncertainty

Since 1983, the state of New Jersey, like many other states and npmerous localities, has used target-based budgeting (TBB) to prepare its eixecutive budget. As in many other states, the process replaced a zero-based budget (ZBB) process that had been criticized as too cumbersome and insufficiently directed by the governor's office. The change also reflected the recession of the early 1980s in the desire to have agency budget processes driven by revenue considerations as well as the central budget review. Since TBB was implemented, New Jersey's fiscal fortunes have fluctuated, and the governor's office has changed hands and parties. This article discusses TBB in NewJersey and the system's adaptation to changing fiscal conditions. The article is divided into three parts. The first is a brief overview of TBB. Second, the budget process in New Jersey is described, with particular attention to the process of setting targets for the executive agencies. My focus is on the target-setting process, because decision packages are subject to the same sorts of analytical processes used in ZBB; target setting can be contentious; and target setting is important in the light of suggestions about how the budget process can be adapted to promote entrepreneurial government. Finally, I draw some conclusions and raise some questions about TBB-at least NewJersey's experience of it.

A decision support system for investment planning on a microcomputer

A Decision System (DSS) for investment planning was designed and implemented for Pohang Iron and Steel Co., Ltd. (POSCO), using a database management system on an MS-DOS micro-computer. This paper outlines the design of an investment DSS which focuses on mid- and long-term investments. It also considers why such an investment DSS is needed at POSCO, discusses problems encountered in designing the DSS, and establishes decision criteria for determining investment priorities. The modelbase proposed uses the concepts of Analytic Hierarchy Process (AHP) and Zero-Base Budgeting (ZBB), along with an appropriate scoring method, database and dialogue system to support the investment manager in evaluating investment proposals. Results of implementing the investment DSS are discussed.

Zero‐Base Budgeting:

There are advantages and disadvantages to using zero‐base budgeting (ZBB) in a library. ZBB provides an operating, planning, and budgeting process for managers. Although ZBB is a time‐consuming process, it has advantages even when its success is questionable. A review of the strengths and weaknesses of this process is presented. Readers can then decide whether to try ZBB in their own libraries.

ZBB, MBO, PPB and their effectiveness within the planning/marketing process

AbstractSubstantial attention has recently been focused on the reported failures of zero‐base budgeting (ZBB), management by objectives (MBO), and planning, programming, and budgeting (PPB) as management techniques for corporations as well as governmental agencies. This writer has determined that these failures occur because the ZBB, MBO, and PPB techniques are used in lieu of an integrated planning/marketing process and fail to recognize the process or the limitations and scope of these techniques. The techniques can and do work well where they are treated as part of, rather than as a substitute for, the planning/marketing process, and are modified to function efficiently within the process. All elements of the planning/marketing process must be given a fair share of attention if the profit or non‐profit enterprise is to succeed.

Zero base budgeting: A survey of practices in India

Zero Base Budgeting, as an innovative management control technique, is rising to prominence in India. Many enterprises are in the process of implementing it in order to enhance the financial productivity of their scarce resources and to eliminate wasteful expenditure. The present study is a survey of the current and potential users of ZBB and analyses their perceptions of the various facets of ZBB. The study found that management-oriented factors have to be taken into account by Indian enterprises in the design and effective implementation of ZBB. The author suggests that the ZBB process should be computerised for minimisation of the problems arising in its implementation. Specific strategies also need to be evolved to handle manpower problems arising in the process of implementing ZBB. A non-quantitative ZBB model is also suggested for Indian conditions.

A Blueprint for Application of Zero Base Budgeting to Indian Banking

Zero base budgeting is an approach to budget formulation. It seeks to evaluate afresh the budgeted activity levels and related expenditure. Resources are released from projects and tasks that have outlived their utility. Zero base budgeting can serve as an effective tool for redeploying resources. The budget settlement process in banks is an exercise in distribution of targets rather than a plan based on the business potential of individual branches. Zero base review would eliminate the incrementation tendency of carrying forward the previous year's inefficiencies. Kaura outlines a blueprint for application of zero base budgeting to Indian banks.

Changes in Task Uncertainty Induced by Zero‐Base Budgeting: Using the Thompson and Hirst Models to Predict Dysfunctional Behaviour

Generic budgeting systems such as PPBS and Zero‐Based Budgeting (ZBB) are criticized by academics for failing to give consideration to some of the key variables affecting behaviour in budgeting endeavours. Despite this criticism, the literature has devoted little attention to modifications that can be made to make the systems more responsive to different configurations of organizational variables. This paper addresses this oversight in regard to ZBB. In particular the paper discusses ZBB within the context of two variables: (a) the degree of task uncertainty engendered by the system and (b) the character of performance measures used to evaluate units that employ ZBB. The paper argues that ZBB materially increases the degree of task uncertainty. Configured with the type of performance measures used to evaluate departments employing ZBB, the paper maintains that the increase in task uncertainty creates incentives to engage in dysfunctional behaviour, largely in the form of invalid data reporting. It is hypothesized that this problem may be responsible for the general failure of ZBB to lead to large budget re‐allocations.

THE TWILIGHT ZONE OF LIBRARY BUDGETING

It is alarming that the budget technique which is almost universally criticized as ineffective is the one almost universally used by libraries. Few library managers use innovative techniques like Zero‐Based Budgeting (ZBB) or the Planning Programming Budget System (PPBS) for financial management. Instead, most library budgets are just prepared on an incremental basis. In essence, this means that a constant—usually an inflationary factor—is applied to modify the previous year's figures. Many library managers seem to consider such budgeting to be synonymous with financial management.

Budgeting for Reference Services as Part of a Library's Financial Planning

Changing patterns for reference service are having an impact on budgeting as new programs vie with existing ones for funding. In developing a budget for reference services, the reference manager should be familiar with library budgeting systems and with the institutional mission, goals and objectives. Budgeting is an integral part of library planning efforts. The more complex budgetings systems, such as the program-planning budgeting systems (PPBS) and zero-based budgeting (ZBB) share elements with strategic planning and are particularly useful in times of change. Evaluation and performance measurement are essential parts of this financial planning. The reference manager should be able to forecast reference service direction for the library and to provide cost-benefit estimates for varying levels of service as a contribution to library strategic and financial planning.

Role of budgeting in planning, implementing, and monitoring hotel marketing strategies

This paper deals with the analysis of the role of budgeting in planning, implementing and monitoring hotel marketing strategies. The marketing budgeting process is seen as having a most crucial interrelationship with the hotel total profitability and the resource allocation process for the marketing mix programmes. The budgeting process is presented as a planning and control tool. A comparative example of target profit planning with discussion of its weaknesses and possible improvements is introduced Some hotel marketing budgeting techniques such as ZBB (Zero-Based Budgeting), ERC (Efficiency-Risk Coefficient), ARGE (Asset Revenue Generating Efficiency) and the CRM (Critical Ratio Method) are also presented and discussed.

THE USE OF RATIONAL SYSTEMS IN BOUNDED RATIONALITY ORGANIZATIONS: A DILEMMA FOR FINANCIAL MANAGERS

Financial AccountabiliQ &3 Managmcnf, 2(4), Winter 1986 0267 4424 $2.50 T H E USE OF RATIONAL SYSTEMS IN BOUNDED RATIONALITY ORGANIZATIONS: A DILEMMA FOR FINANCIAL MANAGERS PHILIP BROMILEY AND K.J. EUSKE* INTRODUCTION It has been decades since financial managers were trained to believe that employees and organizations could be handled as if everyone was a simple rational cog in a big machine. Cognitive limits to rationality, motivational theories, leadership, and human relations theories are all based on deviations from the simple rational model of man. Yet management technology is still dominated heavily by systems which are fundamentally based on the assumptions of economic rationality. If people and organizations differ from the implicit assumptions of a manage- ment technique, managers should be seriously concerned that the technique is not producing the outcomes promised and may in fact be producing harmful outcomes which are not anticipated by the providers of the technology. Management techniques such as Planning, Programming, and Budgeting Systems (PPBS), Management by Objectives (MBO), and Zero-Based Budgeting (ZBB) rest upon the rational model. While studies in the manage- ment and accounting literature have analyzed the appropriateness of some of these techniques (c.f., Jablonsky and Dirsmith, 1978; Dirsmith and Jablonsky, 1979a; and Dirsmith and Jablonsky, 1979b) and, more generally, the rational model (Staw, 1980) in various environments, rationally-based techniques continue to be adopted regardless of the empirical assessment of their desirability. Years after the US federal government had discarded PPBS, other govern- ments continued to adopt it. Zero-based budgeting swept through the USA just as PPBS did with many organizations adopting it without evidence of its utility in their environment. MBO systems have received mixed evaluations - partially resulting from differences in the techniques and values used in evaluating the systems Uablonsky and Dirsmith, 1979a). However, MBO systems are still actively being implemented. For instance, in 1979 the US Army implemented what is essentially an MBO system for officer performance appraisal. Since all such systems have implementation and operations costs as well as some potential impact on performance of the organization, their appropriateness is of critical importance to the government manager. 'The authors are respectively, from the Department of Strategic Management and Organization, University of Minnesota, Twin Cities, Minneapolis, Minnesota; and the Department of Administrative Sciences, Naval Postgraduate School, Monterey, California. They gratefully acknowledge partial support for the development of this paper from the NPS Foundation.

Zero Base Budgeting

Zero Base Budgeting

Using ideas of cybernetics in organization development

This paper ought to be seen as an attempt to give attention to possibilities in using ideas of cybernetics in organization development, especially an organization on municipal level. These cybernetican ideas have been combined with the ideas of zero-base budgeting. The inspirations to this paper have mainly to be sought in the books Brain of the Firm by Stafford Beer [1] Living Systems by James Grier Miller [2] and Zero-base Budgeting by Peter A. Pyhrr [3].

Application of modified ZBB and inventory control system in small merchandising businesses

The present economic climate in Canada and particularly in Newfoundland has had crippling effects on small businesses. This is especially so in the case of those small businesses whose financial and management control systems are weak. This paper suggest a methodology to improve such control systems using a modified Zero Base Budgeting (ZBB) and inventory management process.

Management of Resources

The budget process is a vital component of the collection management program. This article describes the advantages and disadvantages of four approaches to materials budgeting: 1) the budget formula approach; 2) modified quantitative data approach; 3) planning-programming budget system; 4) zero-based budgeting. Other factors in the budgeting process are also considered, such as the role of the collection development librarian in budgeting, effective budget preparation, and how to calculate the impact of inflation in the budgeting process.

The integration of zero-base budgeting with management-by-objectives: An empirical inquiry

Popular arguments in the management literature advocate the implementation congruity and complementarity of zero-base budgeting (ZBB) with an established management-by-objectives (MBO) system. The present study examined management perceptions on 28 ZBB implementation variables for MBO users and non-MBO users which were gathered from 153 managers at two hierarchical levels within a single private sector organization. Results from both univariate and multivariate tests indicate that ZBB implementation was not facilitated by the existence of an MBO system for either lower level management or for upper level management. The evidence obtained here strongly suggests that the purported conventional rationale underlying ZBB coupling with an extant MBO system is seriously defective; ZBB design implementation issues need to be thoroughly re-assessed, with the emphasis on matching compatible systemic properties between information sub-systems.

Accounting and budgeting systems: The issue of congruency

The importance of designing an accounting system that is congruent with an organization's budgeting system has been noted in the literature. Unfortunately, in many government organization it is common to find incompatible budgeting and accounting systems. The purpose of this study is to investigate whether gearing the accounting information system to a zero-base budgeting system increases the perceived usefulness of the budgeting process. This issue is examined under conditions of both scare and abundant resources. Based on an empirical study, it is shown that the usefulness of a budgeting system to budget recipients may indeed be dependent on the accounting information system, conditioned on the availability of resources. Given the relationship between budgeting and public policy, implications of the study for the public policy making process are discussed.

Zero-base budgeting—Dealing with conflicting objectives

While Zero-Base Budgeting (ZBB) has received considerable attention in the public sector, virtually all the studies dealing with the system have neglected or given cursory attention to the problem of multiple conflicting objectives. This paper presents a goal programming approach as a systematic means to develop the ZBB process for multiple objectives. This approach allows the administrators to more realistically portray the decision environment as well as their judgment in their budgetary planning models, thus making the budgeting an effective and pragmatic way to implement the planning and decision making process. This study demonstrates a goal programming based ZBB system in the public sector based on real-world data.

Strategies for information systems implementation: The case of zero base budgeting

The objective of this study was to develop specific strategies that could be used to ease the implementation of a zero base budgeting (ZBB) information system. Drawing from the organizational design literature, a model was constructed to test a hypothesis concerning the relationship between several coping strategies and the information imbalance an organization may experience with ZBB. The results of an empirical study suggested that organizations could use certain strategies to lessen the likelihood of an unsuccessful implementation of ZBB resulting from information processing requirements exceeding information processing capacity.

APPLICATION OF A MODIFIED ZBB AND INVENTORY CONTROL SYSTEM IN A SMALL MERCHANDISING BUSINESS

ABSTRACT The present economic climate in Canada and, particularly, in Newfoundland has had crippling effects on small businesses. This is especially so in the case of those small businesses whose financial and management control systems are weak. This paper suggests a methodology to improve such control systems using modified zero base budgeting (ZBB) and inventory management processes.