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Meet the Father of Zero-Based Budgeting
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Pete Pyhrr is interviewed by the WSJ's David Kesmodel 40 years after his zero based budgeting method became popular in the Carter administration. Pyhrr developed the method as a controller at Texas Instruments in the 1970's, and says it is a great tool in difficult economic times or periods of rapid technological change to make cost reductions. WIth zero based budgeting budget figures are not simply adjusted upwards or downwards from last years numbers, but the budget is developed from scratch to reflect purposes served in the current environment. It brings costs and benefits of each expenditure into focus, so that more profitable projects can be financed over less profitable projects. Pyhrr published "Zero-Based Budgeting: A Practical Management Tool for Evaluating Expenses," in 1977. It was used by President Carter in managing the budget process in the state of Georgia and in the Carter administration, but fell out of favor in the Reagan administration. Pyhrr says he sees the need for using the method in today's budget cost reductions for government agencies to help taxpayers. As with TQC under Deming, which came back to the U.S. following Japan's use of quality control methods developed decades earlier in the U.S., zero based budgeting is coming back to the U.S. through its use by private equity firm 3G Capital Partners of Brazil in its Heinz operation.
3G Capital and cost reduction strategies including 'zeo based budgeting' tool- the Heinz-Kraft merger deal
03/25/2015
Food companies are experiencing rapid change with consumers moving away from packaged foods to fresher foods, pressure on margins, and the new strategies of private equity companies focussing on lean operations. 3G Capital of Brazil is unique in its approach by using zero based budgeting tool to have managers justify budgets each year starting from scratch. This is likely to spread throughout the packaged foods industry as it grapples with change.
Grouped Articles
Kraft-Heinz Deal Shows Brazilian Buyout Firm’s Cost-Cutting Recipe
Wall Street Journal 03/26/2015
How Kraft Rolled Out the Welcome Mat for Deal-Hungry Brazilians From 3G
Wall Street Journal 03/26/2015
Budgeting Tool Used by 3G Attracts Wider Following
Wall Street Journal 03/26/2015
3G Capital, Warren Buffett’s Favorite Partner in Deals Worth Billions
New York Times 03/25/2015
Meet the Father of Zero-Based Budgeting
Wall Street Journal 03/27/2015
3G Capital’s Brands Lose Market Share Amid Focus on Costs
Wall Street Journal 08/10/2015
Zero Based Budgeting as a cost reduction tool
03/26/2015
Under Zero Based Budgeting managers are required to start from scratch every year to develop a budget. This imposes a discipline and new level of frugality on managers, and makes them examine each item in the budget expenses for its purpose and what it accomplishes, forces managers to ask if it is wasteful, and whether it can be done in a more cost effective way or eliminated entirely. Experts say employees have to be trained to understand how to use the method. It was first introduced in business the 1970's, and was a method U.S. president Carter supported in federal government department budgets. It is being reintroduced in 2014-2015.
Grouped Articles
Budgeting Tool Used by 3G Attracts Wider Following
Wall Street Journal 03/26/2015
Meet the Father of Zero-Based Budgeting
Wall Street Journal 03/27/2015
Wave of change affecting the packaged foods industry with shifting consumer preference to fresher food and management shift to lean operations
03/26/2015
3G Capital Partners of Brazil puts together the Kraft Foods-Heinz merger deal based on its skills in reducing cost, with tools such as zero based budgeting to improve margins and share price performance for investors.
Grouped Articles
Kraft-Heinz Deal Shows Brazilian Buyout Firm’s Cost-Cutting Recipe
Wall Street Journal 03/26/2015
How Kraft Rolled Out the Welcome Mat for Deal-Hungry Brazilians From 3G
Wall Street Journal 03/26/2015
Budgeting Tool Used by 3G Attracts Wider Following
Wall Street Journal 03/26/2015
Meet the Father of Zero-Based Budgeting
Wall Street Journal 03/27/2015
Big Changes in Food Industry Turn Activists Upside Down
Wall Street Journal 08/07/2015
3G Capital’s Brands Lose Market Share Amid Focus on Costs
Wall Street Journal 08/10/2015
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