Introduction
Zero-Based Budgeting (ZBB) is a simple idea with a very behavioural impact: instead of starting next year’s budget from last year’s spend (plus or minus a few percent), you start from $0 and earn every dollar back by explaining what you’ll do, why it matters, and what it should cost. In other words: wipe the slate clean each budget cycle.
ZBB is less about spreadsheets and more about a mindset: every cost must be justified, rather than carried over from last year. Gartner describes it as starting with a blank slate and forcing a review of expenses, so resources align with strategic priorities.
In this article, we show what that mindset looks like in practice through four concrete examples:
- ZBB in IT cost management (TBM), where “set-and-forget” spend is common
- How a major bank uses ZBB to link costs to real service outcomes
- How governments use ZBB to reassess programmes and redesign funding models
- What manufacturing companies like Kraft Heinz reveal about ZBB’s risks and value
For more on the psychology of ZBB, and why it is being implemented at major organisations, read our other article: What is Zero-based budgeting (ZBB)?
Example: zero-based budgeting in IT cost management
IT budgets are magnets for “set-and-forget” spend: SaaS subscriptions that auto-renew, cloud environments left running overnight, and duplicated tools that each team considers essential. Survey data in Flexera’s State of the Cloud Report 2024 suggests organisations self-estimate 27% public cloud waste and 24% wasted software spend in the public cloud. This is exactly the kind of background leakage incremental budgeting struggles to catch.
Even the quick wins are often practical and unglamorous. FinOps guidance consistently highlights actions such as deleting abandoned snapshots, cleaning up unattached IPs, terminating idle load balancers, and removing unused non-production resources.
What ZBB changes: Imagine a 1,200-person company that is only slightly inefficient. It pays for three overlapping collaboration tools and keeps a fleet of dev and test cloud environments running 24/7 because no one wants to risk breaking anything. Under incremental budgeting, you negotiate around last year’s total and call it managed. Under a ZBB mindset, you flip the question.
You do not ask, “Can we shave 5%?” You ask, “If we were building this IT estate today from zero, what would we fund, and what would we refuse to fund?”
In practice, that means re-justifying spend in plain business terms:
- For SaaS: who uses it, which tier, and for what outcome? If usage data shows 40 people are on a premium tier but only 10 use premium features, the default becomes downgrading the other 30 unless there is a clear justification. Funding follows current need, not historic entitlement.
- For cloud: every always-on environment needs a reason to be always-on. The FinOps Framework highlights optimisation levers such as matching capacity to demand through elasticity, scheduling, scaling, and continuous rightsizing.
Why it matters: The difference is not just cost reduction, it is control over what gets funded and why. ZBB turns IT cost management into a recurring conversation about value and pushes teams to prove that spend maps to outcomes, not habits. Flexera’s survey also shows why this matters: public cloud spend exceeded budgets by an average of 15% in the surveyed period, so small inefficiencies compound quickly.
Key insight most people miss: ZBB works best in IT when you treat it as a permissioning model for spend, meaning “show me the usage and the value,” rather than a once-a-year cost review. That is how you prevent the same inefficiencies from returning in the next cycle.
Example: zero-based budgeting at a major bank
Large banks cannot operate like start-ups. They carry heavy fixed costs such as branches, personnel, onboarding, and regulatory requirements. At the same time, they must continue investing in areas like fraud prevention, cybersecurity, and resilience.
In JPMorganChase’s 2024 shareholder letter, Jamie Dimon emphasizes the scale and complexity of operating a global bank, highlighting the ongoing costs of branches, technology infrastructure, regulatory compliance, and risk management. He also points to continued investments in cybersecurity and fraud prevention as essential to protecting customers and the financial system.
What ZBB changes: The ZBB-style thinking here is subtle but powerful. Instead of allowing a large “consumer banking expense” category to roll forward from last year, costs are broken down into underlying activities and assessed based on their purpose.
This sharpens the conversation:
- If the bank funds high service levels such as fraud protection, 24/7 support, and nationwide access, it does so deliberately because leadership chooses those outcomes, not because they existed previously.
- The same applies to fraud prevention. Dimon highlights both the scale of fraud risks, and the significant investments banks make in detection and prevention capabilities. These investments are not discretionary, they are necessary to reduce losses, protect customers, and maintain trust in the system.
Why it matters: In banking, cost discipline is not about spending less at all costs. It is about spending deliberately. By linking costs to activities and outcomes, organisations avoid both blind cost cutting and uncontrolled growth in spending that no one can explain.
Key insight: ZBB in a bank is not about cutting budgets aggressively. It is about making explicit choices on service levels, safety, and compliance, and understanding what those choices truly cost.
Example: zero-based budgeting in government
Government budgeting is often incremental. Programmes are ongoing, services cannot simply stop, and budgets are typically built on existing programmes and appropriations.
However, this also means spending can persist even when programmes are no longer efficient or effective.
Georgia’s Governor’s Office of Planning and Budget applies ZBB to assess programmes against their statutory responsibilities, purpose, cost of service delivery, and achieved outcomes.
This creates a structured way to assess whether programmes remain aligned with their objectives and deliver value.
What ZBB changes: A concrete example from Georgia’s FY 2021 Zero-Based Budget Analysis is the Certificate of Need Appeal Panel programme.
In this case, the state used appropriated funds to reimburse panel members who adjudicate appeal hearings. The ZBB analysis recommended:
- eliminating state appropriations for these reimbursements and establishing a fee schedule to cover those costs, and
- transferring responsibilities to the Office of State Administrative Hearings, along with enhancing performance measures related to workload, efficiency, and effectiveness.
These were recommendations from the ZBB review, not necessarily implemented changes.
This illustrates how ZBB can go beyond reviewing spending levels to identifying alternative funding mechanisms and organisational arrangements.
Why it matters: ZBB introduces a systematic review of programme activities, expenditures, and performance, and can highlight opportunities to improve efficiency, clarify responsibilities, and strengthen performance measurement.
In practice, this may lead to changes in how programmes are funded or delivered, including shifting costs, consolidating functions, or redefining performance expectations.
Key insight: In government, ZBB is best understood as a structured process for programme evaluation and improvement. Its primary value lies in assessing whether programmes are effective and efficient, and in identifying potential changes to their funding, organisation, and performance measurement.
Example: zero-based budgeting in manufacturing and the counterintuitive lesson from Kraft Heinz
In manufacturing-heavy consumer goods, ZBB became known for driving aggressive cost discipline. Kraft Heinz provides a useful example of how this approach can evolve over time.
In its 2025 results, the company made a clear strategic shift: committing $600 million to invest in commercial levers to return to profitable growth, while pausing work related to its planned structural separation. This signals a deliberate move from cost focus toward performance and growth.
What ZBB changes: Under a strict ZBB approach, managers must justify every expense from scratch, and non-essential costs are repeatedly removed. This can deliver rapid savings, but it also requires clear choices about where to reinvest. Cost discipline alone is not enough, and resources must be actively redirected to the capabilities that drive growth.
Kraft Heinz’s response reflects a more mature application: not just reducing spend but reallocating it. By investing in commercial capabilities while pausing structural changes, the company prioritises execution and growth over further structural optimisation.
Why it matters: The goal of ZBB is not austerity. It is strategic cost allocation. In industries where brand, innovation, and execution are critical, competitiveness depends not on being the lowest-cost organisation, but on funding the right capabilities.
Key insight: The real power of ZBB is not in how much cost you remove, but in how deliberately you reallocate it. Kraft Heinz’s shift makes this visible.
Conclusion
Across IT, banking, government, and manufacturing, the pattern is consistent.
ZBB is not a budgeting technique. It is a way of forcing organisations to make deliberate choices: What do we want to deliver? What does it cost? And are we willing to pay for it?
The organisations that benefit most from ZBB are not the ones that cut the most cost. They are the ones that build the clearest link between spend, activity, and outcome.
Without that link, ZBB becomes an exercise in reduction.
With it, ZBB becomes a system for better decisions.
