Slashing Budgets or Biggest Bang for Your Buck? Zero-Based Budgeting Demystified by Accenture: An SAP Concur Podcast Conversation

Getting teams to think critically about what they need to spend to achieve their goals is no simple feat. Defining the outcomes to be achieved places value realization on any change for an organization. If overall growth and profitability are key metrics for your organization, zero-based budgeting, or ZBB, might be something to consider. Listen in for immediate tips for how to combat the Great Resignation, harness the power of spend technology, and disambiguate the financial priorities for your organization today.  

Alberto Herrera Senior Value Consultant for SAP Concur, shares that this is not a “cost-cutting haircut” but rather showing employees that you’re “putting money where it matters” in this interview with James Portnoy, Senior Strategy and Consulting Manager, and Manoj Das, Managing Director of Human Experience Management for Accenture.

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Transcript:

Alberto Herrera:

Thank you for joining the latest edition of the SAP Concur Conversations Podcast series. So today we're going to be discussing budgeting tips and how organizations are turning to methods like zero-based budgeting to ensure they are spending wisely to help navigate this rapidly changing business landscape. My name is Alberto Herrera, and I am a Senior Value Consultant on the Value Experience Delivery team here at SAP Concur. Joining me today, we have two experts from Accenture who can speak to how companies are using these mindsets to transform culture, align priorities, and also what role data and technologies are playing in this transformation. So, Manoj, let's start with you. Can you just give a brief introduction? Tell us a little bit about yourself.

Manoj Das:

Absolutely, Alberto. Thank you for hosting this podcast. My name is Manoj Das. I'm Managing Director in our Human Experience Management practice of Accenture North America. And besides HX and practice, I also look after our SAP Concur Travel and Expense practice, and I've done this work in the HR space been for 21 plus years delivering large-scale programs in HR transformation both in on-premises and cloud solutions. Happy to be here.

Alberto Herrera:

Fantastic, thank you. And James, can you do a little introduction?

James Portnoy:

Absolutely, James Portnoy, also with Accenture. Been with Accenture for a little over 12 years. I'm part of our strategy and consulting practice focusing on CFO and Enterprise value and have spent a considerable amount of time doing some shape or form of finance transformation. And then also part of our strategic cost management, COE in the past where we do a lot of ZBB or ZBx type implementations.

Alberto Herrera:

Fantastic. Well, thank you again. Thank you both for being here. So happy to have you on. So, with that, we have a lot of content to cover. So, let's just go ahead and jump right into it. So, I think probably the best place to start is just going to be the basics, just Budgeting 101. So why should companies be thinking not only about budgets, but the underlying process of how to budget? Why is that so important right now?

James Portnoy:

Yeah, it's a great question, Alberto. Let me maybe take this one. I think if we just back up to the very basic principles of budgeting, it's all about developing your annual operating plan and figuring out what your resource allocation is going to be for a given year. And there's a lot of different methods of budgeting, but ultimately, that's really what it comes down to. And the reason why it's so important is, especially in modern times is the business environment is changing so much, the markets are changing so much. There's a lot of volatility. There's a lot of "black swan" events. And so, having a good process in place to really allocate your resources to where the world's going, where your business strategy is going is really where the premise of budgeting really started and it's been refined over time.

Alberto Herrera:

And so how have companies traditionally approach budgets? I think we're going to discuss some newer technologies and approaches, but how is this traditionally approached?

James Portnoy:

Sure, I think when you talk to anyone who's worked in finance for a while, I think when they hear the term traditional budgeting, it's the typical process of going back and looking at your last year's actuals and just making a percentage-based adjustment. Not necessarily really thinking through and starting from zero around where's the company heading in the next year? What are our strategic priorities? And therefore, what are the optimal? What's the optimal resource allocation to really achieve that business strategy?

Alberto Herrera:

Right, and with those traditional approaches, that's where you get that end of fiscal year rushed to spend as much money as you can, so you don't lose it for next year thing?

James Portnoy:

Yeah, absolutely. And I think one of the other shortcomings of the traditional budgeting approach is what I mention before. The business environment is changing at a faster pace than it ever has. And so the assumption of whatever we spent last year is a good indicator for what we should be spending this year on a category by category basis doesn't necessarily hold true anymore. I mean, the pandemic's a great example of that.

If someone had budgeted a certain amount of PP&E in 2019 and used that as the basis for their 2020 estimate, I'm sure when they did their budget to actuals variance, there's going to be a massive variance. And some things can't be foreseen, but that's really the premise behind maybe abandoning a traditional budgeting approach and going to something a little bit more dynamic and a little bit more forward and future looking.

Alberto Herrera:

Absolutely, it seems like all these companies are looking for more agility in these processes and their approach to the market. And then so with the traditional budgeting, are there any specific considerations when it comes to the employee initiated spend or travel budgets? Obviously, this is top of mind for us here at SAP Concur.

James Portnoy:

Yeah, I mean, I think from a traditional budgeting standpoint on the travel side, it goes back to what I just talked about. A lot of times you'll look at what you spent in the prior year. And then you might get a challenge from your budget holder to see if you can drive some savings off of that. But again, it's usually done on a percent reduction basis in a traditional budgeting process versus if you were to introduce something like a zero-based budget, the change becomes more of you're starting from zero. You don't start from last year and you really have to think through what is the required travel based on where my business is heading for this year and justifying that spend through the ZBB process.

Alberto Herrera:

So, identifying those different needs in your business makes a lot of sense. So, I think that's the perfect transition to go into this zero-based budgeting. So just now that we have those basics down, let's just unwrap what ZBB is. So, can you help define what ZBB is and explain that a little bit?

James Portnoy:

Yeah, I'd love to take a crack and I think the concept and the term of ZBB has a lot of different meaning and a lot of different connotations to a lot of different people. And so, if I break down just the acronym of ZBB, it translates into zero-based budgeting. And so, if we look at it purely from a budgeting process, the concept of ZBB is what I just alluded to. It's instead of starting from last year as your starting point to develop your budget, you're really starting from scratch in certain areas of spend like travel and meetings and those things.

And it's a much more rigorous process where because you're starting from scratch, it really makes the budget holders, and the employees think through what do they really need to spend in order to achieve the overarching business strategy. And one of the other concepts that usually is involved in zero-based budgeting is as you're budgeting from zero, you're really incorporating a lot of policies into your budget. Budgeting essentially is policy compliant. And it's a really good way to really control you spend and really focus on what the business needs for the coming year.

Alberto Herrera:

Interesting, so it sounds like you touched on it a little bit, but can you elaborate on what problems are companies trying to solve with zero-based budgeting?

James Portnoy:

Yeah, and I'd say people use zero-based budgeting for a number of different reasons. I think one of the primary reasons of adopting zero-based budgeting is to get your spend under control. If companies are looking to grow, but they feel like they're bogged down by their expenses or their expenses aren't necessarily supporting their growth initiatives, that's really where it comes into play. And so, I think what people find is that they start with it thinking it's more of a cost optimization exercise. And one of the things I really like to demystify is it's not a cost cutting exercise, it really is about cost allocation. And so, you might be reducing spend in some certain categories, but that doesn't mean you're taking all of that to the bottom line. You might just be reallocating it towards a different category of spend that's more in line with your business strategy and growth.

Alberto Herrera:

Yeah, that makes a lot of sense. So instead of that traditional approach of just basically slashing a little bit from everywhere, it's looking at where are my resources going to get the biggest bang for a buck thing, right?

James Portnoy:

Absolutely, that's 100% the concept behind it.

Alberto Herrera:

And are there specific organizations that this appeals to or is this an across-the-board thing?

James Portnoy:

Yeah, it's really interesting. I think based on Accenture's experience and we do a lot of this work in a lot of different industries with a lot of different clients. And I'd say there's a spectrum in terms of zero-based concepts that different organizations adopt. And so, some companies use it as an aggressive cost cutting tool while other organizations just use it as a way to get better visibility and be a little bit more granular in terms of how they do their financial planning and allocate their resources.

Alberto Herrera:

And so, I want to make sure that we touch on this because I know we're going to mention it a little bit later on in the conversation, but so focused on this overview of ZBB, we have this concept of dual cost ownership. So, what is that and why is that important in terms of zero-based budgeting approach?

James Portnoy:

Yeah, so a lot of companies who adopt zero-based budgeting from a budgeting process technique will also take a look at the governance over their budgeting process and introduce, as you said, this concept of dual cost ownership. So, if we think about traditional budgeting, your budget holders own their full P&L and they had the liberty to really move dollars around into different buckets as long as they hit their bottom line and spend and are in line with plan.

The introduction of dual cost ownership essentially introduces almost like a horizontal owner of a budget that looks at a specific category of spend. So, I'll take travel as an example. You might have a global travel category owner whose part of the budgeting process and works with the individual budget holders to ensure that he's really challenging them to budget from zero and make sure that they're really allocating only the dollars they really need to hit their overarching strategy. And so, what that does is it really drives standards and consistency around policy adoption and policy compliance across different areas of the organization.

And it's especially in global companies where you have a lot of different business units and working in a lot of different regions, having this concept of a global cost owner or even a regional cost owner to drive these standards is a way to really normalize spend across the organization. And where you might find little pockets of savings in each cost center, each budget holder, when you add those all up across the organization and drive that through a dual cost ownership structure, it can actually result in really significant savings. And we've seen those materialize across our clients a lot.

Alberto Herrera:

So, when we talk about that dual cost ownership, it sounds like it's a way for accountability, but also a way to get some buy-in from some leadership and some managers that are managing these budgets, right?

James Portnoy:

Yeah. Yeah, and we might start touching on the change management approach a little bit later, but that's absolutely one of the bigger benefits of the dual cost ownership structure. A lot of times you'll actually put pretty senior folks into these dual cost owner roles or global cost package owner roles and it's a way to really demonstrate that the organization is serious about adopting this new budgeting process or this new culture of cost consciousness.

Alberto Herrera:

So, is that a really time consuming task for some of these senior leadership that are at that level and having to improve at that dual cost?

James Portnoy:

Yeah, I think I'd say it's in the short term as you're really standing up these programs, it does take some time. You have to onboard them; you have to explain the concept of dual cost ownership and you have to explain what their roles and responsibilities are. And there's obviously a change adoption approach in terms of getting them comfortable with their role and getting them integrated into the budget cycle and having them go through a couple cycles. So, I'd say upfront, there's a little bit of extra work. As companies continuously repeat this process, it really just gets embedded their DNA and it just becomes part of business as usual.

Alberto Herrera:

Absolutely, so let's elaborate on some other pros for zero-based budgeting. So, there's a concept of optimizing cost not just budgets. So how does that help?

James Portnoy:

Yeah, so I mean, I think, again, it goes back to some of the concepts we talked about before. So, I think the number one benefit of going through a zero-based budgeting process is what I already mentioned, which is really optimizing your resource allocation to where the business is going and where the business strategy is leading the company. I think secondly, because you're budgeting at a more granular level and you're putting a lot more rigor into the process, once you're done with the budget, it's set, but then you're going to be adjusting and things happen throughout the year.

Because you've planned at such a detail level, things come up throughout the year. What it really gives you is flexibility to make changes on the fly as you're going through the year and still hit those budget targets as things happen across the business. So, I think one is, again, it's maximizing that resource allocation against strategy and two is the agility and flexibility it gives you to make changes throughout the year as things happen in the business.

Alberto Herrera:

Yeah, so I would assume that the companies that had already implemented a zero-based budgeting approach before March of 2020 probably fared a little bit better in those preceding months, right?

James Portnoy:

Yeah, I think obviously having your budget outlined at a granular level could only have been a beneficiary. I think those who also had not only the budgeting process nailed down, but really good ongoing, what we call control and monitoring or just ongoing visibility and reporting. Those who have that near real time information at a granular level, easy to access are able to really react a lot faster and understand what the levers they have to pull because they planned at such a detail level.

Alberto Herrera:

And then so billing off of what you spoke earlier about just some of the human intents resources that are required at the beginning setup upstage or that granularity of data that's needed, are those some of the larger barriers to this process? And how do some of these clients overcome those?

James Portnoy:

Yeah, I think, and I mentioned this earlier too, I think absolutely if you haven't done the process before and it's a completely new concept, there is a change adoption curve that every single company needs to get on. Anybody who's used to doing things a certain way, if you completely transform that and have a completely new process to put in place that's way more granular, requires way more effort, there's going to be a learning curve and a little bit of pain and noise up front.

What we've seen though is those who stick with it and really have that sponsorship at the top of we want to be a cost-conscious culture, after they go through a couple cycles, again, it just becomes business as usual and the norm. And it becomes a lot easier once you get comfortable with what the process looks like, how you do it, the different driver-based models you would use for different categories of spend. It just becomes second nature to companies.

Alberto Herrera:

And so also you had touched on some of these misconceptions around zero-based budgeting and I want to focus on the management technique versus the budget cutting process. I think a lot of people see this as just a way to slash budgets. It's another excuse to slash budgets, start at zero thing, but it really is more of a management technique. Can you elaborate a little bit on that?

James Portnoy:

Yeah, absolutely. And it's always one of the first things we talk about in terms of demystifying ZBB. It's not about cost cutting just for the sake of cost cutting. Usually, the end result is you do generate savings out of doing this process, but you do that by really getting to that granular visibility of what is currently going on, identifying savings initiatives around policy compliance, around vendor rationalization and building all of those into your budget to really optimize your cost towards where your company's going. So, we talk about it as a management technique. It's a management technique to actually get your organization to allocate your resources to the business strategy versus just saying, we're going to do this to go after and cut costs when the end result might actually have a negative impact on the top line of the company.

Alberto Herrera:

Absolutely, so I think that really speaks to that transformation of culture that we mentioned in the beginning. So, this ZBB approach, the intent is really to transform that culture, to have all of the people in the chain look at the resources that are required to do their jobs effectively and then determine, all right, where are these resources going to be most effective? Whereas you have these cost cutting initiatives that a lot of the ones that I've seen implemented throughout the years, you get a really nice return in that first year or something like that, year, year and a half and then a lot of that cost just bubbles back up in different ways.

James Portnoy:

Yeah, it's a great observation. Absolutely something that we see across a lot of our clients who go through, what I'll say, cut to the bone type cost cutting exercises without really thinking through is this is sustainable solution? And so, I think again, one of those demystification around ZBB or zero-based management being more of a management technique than just a budgeting process is exactly that because we see the ZBB process as being something that's sustainable in a way to continuously evaluate your spend and move those dollars around every single year based on where that company is going.

Alberto Herrera:

Yeah, and I think sustainability is the key word there. I know that Accenture performed this analysis on, I think it was on some publicly traded M&E companies where they found that the cost cutting initiatives that they had implemented, they saw an initial positive impact, but it reverted below prior profit levels, I think within two years or something like that. So, they got that initial little bump and then within two years, it was completely gone. And I think that was something that you all had published on your site.

James Portnoy:

Yeah, I think one of the things that we see a lot of the time is they'll treat this as a one-time project. And you'll go through the rigor of understanding who spends how much on what. You'll go through the rigor of identifying a number of savings initiatives. You'll go through the zero-based budgeting process and bake those initiatives into your budget. And that's where sometimes they'll stop.

And then when you take your foot off the gas and don't pay attention to the ongoing visibility and the ongoing reporting and control and monitoring and the ongoing continuous identification of initiatives, that's where a lot of the times we'll see some of those savings start creeping back into the P&L because they treat it as a one-time exercise versus treating as a true cultural shift to being a cost conscious culture and starting to really think through how they spend and say, "I'm going to spend my company dollars as if they were my own."

Alberto Herrera:

And I think one of the easy ways out for some of these cost cutting measures that they can piece it together. They can say, all right, we're going to cut the travel budget by X percent or we're going to cut this other procurement budget by X percent. Can a similar practice be used for ZBB? Can you piece ZBB into places or is it all or nothing thing?

James Portnoy:

Oh, yeah, great question. It's an absolute spectrum. And so, there's different, even within zero-based budgeting, there's different budgeting techniques that you can take, and you might apply different techniques or different levels of initiatives on different categories of spend. And so, we talk about a spectrum too because there're certain companies who really do need what we call fuel for growth. They really do need to look at the entire spend, entire taxonomy and look at all categories of spend and try to incorporate zero-based budgeting concepts into as many of those as they can.

Other companies will take more of a hybrid approach and they might say, we're going to apply ZBB principles to a set of categories of spend like travel and meetings and go down that route. So, it's absolutely flexible. Like I said, it's a methodology and it's a technique and you can apply it to a number of different examples. And there's no one size fits all answer to this.

Alberto Herrera:

Do some companies use that as a buy-in technique to piloting certain areas of it and then rolling it out to other areas of the organization?

James Portnoy:

Yeah, absolutely. We've definitely seen that where you might start with a couple categories and say, let's go prove this out. And they see the results that come out of that. And then they expand it into future categories. Absolutely, we've seen that happen.

Alberto Herrera:

Excellent, and so we had talked about ZBB and how companies who implemented it before the pandemic probably fared a little bit better, but why should companies now start to think about ZBB as they prepare to engage in a recovery strategy?

James Portnoy:

I think more important than ever, we're in this, what people are calling the new normal. And I think we're still trying to understand what that new normal is and it's a fluid situation. I mean, every single week, we've got new guidance from the CDC that could be impacting our return-to-work policies or our PP&E policies. And so, I think doing the zero-based budgeting process and trying to get down to that level of rigor could...

It's going to be really valuable for the recovery process because things are going to change. And so, having that granular visibility and knowing where the levers are to pull, when things do change is going to be incredibly valuable. So, I think it's absolutely something that other companies who haven't adopted it should take a close look at it to have that flexibility and agility throughout the year as things are changing.

Alberto Herrera:

Right, we have seen that huge shift in this employee initiated spend. When you think of the COVID work from home, expenses that came along with that, we were seeing new expense categories and different things like that. So, with that work from home, we've seen this dramatic increase in overuse or even misuse of miscellaneous and other expense types. So how does that impact the financial forecasting when you see more and more things being put in these large gray buckets?

James Portnoy:

Yeah, so when we talk about other and miscellaneous, we see issues in terms of visibility and getting visibility to spend both in your T&E systems like a Concur where you give employees the option to hit those other and miscellaneous as well as in, even in your general ledger, you're going to have ledger accounts that have that miscellaneous and other designation to it. When we go through this process as part of budgeting, we don't only look at the budgeting process.

The other thing we really look to do as part of this cost-conscious culture build is create ongoing visibility control and monitoring. And a lot of times what we'll do is we'll take a look at the ledger; we'll take a look at your T&E system and look at your category of spend and do the best to normalize your spend taxonomy. And when you start coding expenses, whether it's in your ledger, in your T&E system, having a home for every spend at least on the indirect side, that's going to come through and really trying to minimize the use of that other and miscellaneous.

And unforeseen things happen like the pandemic where new categories of spend that you never even thought of creep up. But I think that's really where a tool that Concur and the flexibility and ease of adding a new category and connecting into your ledger is pretty useful. You can do it incredibly fast and start getting visibility to those new categories of spend an incredibly fast way.

Alberto Herrera:

Yeah, with those tools that are highly configurable like Concur, we did see clients coming up with just really unique ways to handle these new business challenges. They really rose to the occasion and they were able to track all of this spend that would've just gone into those big gray barrels and just gone off into the ether, so.

James Portnoy:

Yeah, and I can't even... On the surface, it might not even seem super material, but even just having that metadata that sits in your T&E system around who's buying the PP&E equipment and what work from home equipment are they buying, it can be really useful from a workforce planning standpoint and the return to work planning standpoint to understand what real estate are we going to need and what are the trends we're seeing across the organization in terms of what we should be budgeting for going forward.

Alberto Herrera:

So, I think with that, let's go into the process and technologies that are required to implement a solution like ZBB. So just high level of what technologies are useful to gather these data points. And then what does that process look of setting up something like this in an organization?

James Portnoy:

Sure, so again, I'll go back to there's a spectrum of ways to do it, but the way we've traditionally approached implementing a ZBB type program is actually starts before the budgeting process. So usually, the first thing we want to is establish our baseline of spend and we call that visibility at Accenture. It's really understanding who spends how much on what. And so, establishing that baseline, we look at the ledger, we'll look at accounts payable data, we'll look at purchase order data, we'll look at T&E data to essentially refine and do a forensic analysis on the general ledger and essentially restate 12 months of spend to establish a baseline.

Then what we do is we use that and then assess policies, we assess how many vendors are being used and essentially develop a series of what we call savings initiatives or value targeting initiatives, where we believe there's further opportunity for better cost allocation across the enterprise. And then we might move into the governance setup. We talked about the concept of dual cost ownership. And before you even want to go into your zero-based budgeting process, if you're going to go with that concept of dual cost ownership, you want to identify who those cost category owners are going to be, onboard them, explain what the ZBB process is going to look like.

And only then do you actually get to the actual zero-based budgeting process that we've talked about on this podcast so far. And that's where we start really ironing out and baking in and timing those savings initiatives that we identified and locking them into the budgets. And that's one of the biggest reasons that we see a lot of P&L benefit coming out of this process because you're actually locking those savings initiatives into the budget and trying to hold your budget holders accountable to them.

Manoj Das:

And to add from technology perspective, Alberto, you asked what technology is required? James talked about the process. Obviously, you need a system that can hold the budget information. That's your financial system. And then you need all the system that will provide necessary input either in the form of this spend such as Ariba from procurement perspective or a system like SAP Concur from travel expense perspective and some other information that are required to connect together such as the employee data, information such as the HR system.

So those are the systems that are required. And if the companies have other expense, they need a track such as real estate system that will track the cost that comes along with it. All the inputs need to be tracked somewhere. And those systems will provide the input ultimately to go to the finance system where the budget information will be held, and reporting will be done to understand the variation from those in the budget and to then do for the analysis to understand where things are not going according to the plans. Those are technology components that are required.

Alberto Herrera:

Right, and so it sounds like you're going into that control and monitoring phase. So, you're saying these are all the systems that are required to gather these data points in order to be able to go into that control and monitoring phase to make sure that all of those policies that you set up previously are being followed and things like that.

Manoj Das:

That's right. I think when clients are going through a journey like ZBB, there are two major aspects to consider broadly. One is the strategy of ZBB that they want to implement, being clear about what is outcome and the process in which they will apply the ZBB and the concept of their situation. But also, from sustainability perspective that was James was talking about, it is not just a one-time effort and one time exercise.

So, you need a set of tools that are able to be connected that will capture data from a spend category for example that will pass necessary information that can use for controlling and understanding whether the ZBB intentions are being followed and if they're not followed, what are the deviations? And being able to then drill down to detail to understand where deviations are coming from.

So, it's really important that when companies are going through this exercise, they're keeping these two aspects at the same time. One is understanding ZBB side, strategy and implementation. At the same time, having the technology that can be implemented at the same time so that you are able to sustain this on an ongoing basis, not just a one-time effort.

Alberto Herrara:

And it sounds like that repeatability is one of those crucial aspects for that transformation of culture that this process is looking to do. And without that monitoring phase of this process, you would go ahead, you go through all this trouble, set this process up, everyone would go about their year and then you'd have to start from scratch the next year. I think it sounds like this control and monitoring phase helps this be a repeatable thing where the next year just gets easier and easier to be able to implement this, right?

James Portnoy:

Absolutely, Alberto and I actually want to hit on what you talk about with control and monitoring and connect it back to talking about there's a spectrum of ways to do this in some of the trends we're seeing. And one of the trends lately that I'm seeing is there are companies out there who actually don't necessarily want to go through the visibility, the value targeting, even sometimes the zero-based budgeting process. And they skip straight to, I just want granular control and monitoring.

So, some companies, they might not go full on ZBB, but they're really, really emphasizing getting this visibility in an ongoing, automated and sustainable way. And so that's one trend I'd say that we're seeing more and more of is a bigger emphasis on this really good spend analytic reporting both from a financial standpoint as well as from an operational standpoint. And what I mean by that is some of the things Manoj was mentioning, which is financial reporting is one thing and understanding did I hit my budget, or do I have a variance? And where did that occur? And what spend category did that occur?

And another lens to put on is understanding why and some of that operational data travel for example, why did I miss my travel budget? You might have to go into your T&E system and understand how well am I doing on my compliance against policy? Am I following the number of hotel nights I'm allotted? Am I booking my flights 21 days in advance if that's my policy? And having that operational reporting to understand the deviations in the financials is something we're seeing a lot of companies want to get their hands around.

Alberto Herrera:

Yeah, I mean, to me, that sounds like one of the key takeaways from this whole conversation because zero-based budgeting, when you're first introduced to it, it sounds like such a daunting task, insurmountable. It's easy to look at what you spent last year and say, "All right, this minus 5%." But to really start from scratch, it sounds like this mountain of a goal. But I think that what we're saying is that if you have those correct platforms in place and you're gathering the right data, that this just continues to get easier and easier and it becomes second nature, right?

James Portnoy:

Absolutely.

Alberto Herrera:

And so, one of the things that I want to get a little bit better understanding of was with this great resignation upon us, you have this employee retention is at the top of mind for a lot of executives. Are you able to gather the impact of ZBB on employee sentiment and what that experience is?

James Portnoy:

Yeah, I don't know if we've seen anything specific as part of the great resignation, but it's always something you want to consider when you're implementing this. There's absolutely, off the bat, sometimes a negative reaction to it. And I think a lot of that's just rooted in needing to be educated and understanding what it is and what it isn't because I think going back to one of the first things we talked about, most people, if they hear the words ZBB will go and Google it.

And a lot of the things you'll get back is cost cutting and some really negative language around it. And so I think it's really important to demystify it up front and explain to your entire employee base why you're doing it, what the benefit is going to be to the company and in term what the end benefit is going to be to the employee. So, I think there's always going to be some noise whenever you're doing any transformation, but it's just about how you communicate it and get ahead of it from a change management strategy standpoint.

Alberto Herrera:

Right, and I think that just goes back to that buy-in, of getting that buy-in from not only leadership, but the individuals that are managing these budgets, the individuals that are contributing to these budgets. I think that having that right messaging makes all the difference. If you're talking about, hey, let's just have this cost cutting haircut compared to, hey, let's take analyze approach to this. Let's really look at what we're spending money on, where we're going to make the biggest impact. And I think that if you have that right communication to employees, they'll see like, oh, okay, they really care about what's important. They're putting money where it matters. We're just not wastefully spending and cutting money everywhere.

James Portnoy:

Yeah, and I think I'll add just one more thing to that, Alberto, in terms of the evolution of this process over the last, even just five years because ZBB isn't even anything new. It's been around I think since the 70s or 80s. But I think one of the things that's really improved from an employee experience standpoint is even when we started doing this heavily in the market, it was extremely human intensive. And that was partly because of where technology was at the time.

And even in the last five years with S/4 coming in from SAP and the universal ledger. And it's just a lot easier to get your hands on some of this data. And a lot of companies have done a lot of work around automating certain reporting. And so, I think technology has also been a big driver of actually alleviating this process and making a little bit more automated and taking a little bit of the burden off of the finance, procurement and the employee base.

Alberto Herrera:

Absolutely, and then so with all that, how do you assess or gauge if it's working? What is that golden metric that you look for to make sure that this is actually doing what is promised?

James Portnoy:

Yeah, I think it's a great question and there's a lot of different ways to measure success. I think it's important to start out when you start this is to define the outcomes that you're trying to achieve. And I think putting a value realization component on top of this that says, when we start this program, here's the outcomes we're trying to achieve and we're going to create metrics around that that are measurable and we're going to measure those.

So, I think in terms of what determines success, for me, I think is after two years or three years if they're still running this process and it's part of second nature and it's part of the culture. I think that's what we would consider success in a lot of these programs. And frankly, I haven't seen any of these that didn't actually result and both better resource allocation as well as actual P&L savings. And so, I think company growth and profitability growth is probably the best measure of success for these programs.

Alberto Herrera:

Excellent, and so I know we covered a lot of information. So, if we had to narrow it down to three to five key takeaways, what are three to five things that you would want listeners to take away from this conversation today?

James Portnoy:

Sure, so I think one goes back to my key point on the demystification. I think the one thing I want anyone who's not super familiar with ZBB or if it's a new concept to them is to understand that ZBB is not a cost cutting measure, it's a management technique. It's a way to allocate resources to your business strategy. I think the second thing is that there's a spectrum. There's not a one size fits all for zero-based concepts and zero-based management techniques.

And any company can take a look at the full spectrum of a ZBx methodology and pick and choose concepts that fit best for them and implement them. And there's absolutely a way to do that. And then third is technology absolutely does play a role in the sustainability of running a process like this and getting that ongoing visibility control and monitoring and understanding not just the financial root of your spend, but also the operational drivers is what's going to create the sustainable solution and sustainable savings ongoing and that sustainable optimal resource allocation towards your strategy.

Manoj Das:

Yeah, I'll add a couple things to that from technology lens. It's really important that you have a technology that allows you to be able to implement with the degree of rigor that ZBB will be required to be implemented. So topnotch technology that has those capabilities are very important. So far as HR system is concerned such as SAP success factors, such as a cloud-based system, such as for talking about spend category, they industry related is SAP Conquer and that is extremely robust and that can meet all the needs of capturing information, having the controls right up front in the beginning, when the expenses are captured, passing on the data that will be further analyzed once it goes to the finance system.

That is a critical thing to keep in mind from technology perspective. The second thing on the technology perspective is the timing, when these technologies are put together in conjunction with ZBB. If the ZBB is done and all this controlling and monitoring activities are left to be done again manually after the first initial year, then likely the success that you're going to see is going to be reduced because you're going to have to have more effort, more project-based work from ZBB perspective and then redo the whole thing.

So, the best thing to consider is to do the technology implementation along with ZBB. So, the benefit A, can be realized in the first year itself in terms of savings and objectives that we have from ZBB, but also it can be sustainable. Sustainability is the most important factor here that allows you to use the benefit in longer term and change the culture per se.

Alberto Herrera:

That is great input. Yeah, making this process repeatable, sustainable is definitely a key to a successful implementation of ZBB or a process similar. Fantastic, so anything else you would all like to add into this?

James Portnoy:

Yeah, Alberto, maybe we can insert this. And I was going to add a fourth takeaway from this and that's on the adoption. And what I mean by that is where we've seen the most success of these programs is when there's a really C-suite level, top down sponsorship of moving towards a more cost conscious culture because I think a lot of times where we see it fail is if your senior leaders aren't bought in and they're not especially adopting the behaviors that they're expecting of their own employee base, that's where we a lot of times see it fail because if the employee base is being asked to give up some of their things that they love for the betterment of the entire company and they don't see those same behaviors being reflected in their leadership, then it's going to cause a lot of tension and that's where we see a lot of change management issues. So, I think top-down sponsorship and then top-down behavior is absolutely critical to the success of this program being sustainable.

Alberto Herrera:

Absolutely, that's a great add in. Leading by example is always going to be a great way to get buy-in from those users. I completely agree.

Manoj Das:

And Alberto, to close it, I'll say thank you very much from our Accenture team, James and myself for having us here. And hopefully this conversation has been very useful to our listeners.

Alberto Herrera:

Absolutely, I want to thank both of you for being on today. I hope the listeners found this very useful. I know I did. It was a great conversation, a lot of content, a lot of things to take away and think about. So again, thank you for your time. I appreciate it.

James Portnoy:

Thank you.

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Manoj has 21+ years of experience in advising clients in their HR transformation journey using technology. He leads global HR technology implementations for clients across industries in the areas of HR, talent management, time management, payroll operations, travel and expense management, integration with enterprise Management applications.

Manoj runs a non-profit organization focused in providing educational services in the field of Meditation. His year around Meditation workshops are attended by people across USA, Canada, Australia, and India

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Alberto is a Sr. Value Consultant on the Value Experience Delivery team at SAP Concur which provides customers with data driven insights for programmatic improvements. He’s an experienced professional specializing in Intelligent Spend Management across travel, expense, and accounts payable platforms. He has managed multiple T&E programs in both the financial services and life sciences industries. His background in Tax Accounting and Corporate audit drive a passion for process improvement, looking to bring best practice to all clients that align with their primary business objectives. When he is not wading through data he enjoys traveling with his family and volunteering his time with one of the two non-profits he is on the board of.

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