Zero Based Budgeting in The Planning Process

Zero Based Budgeting in the Planning Process Author(s): James C. Wetherbe and John R.
Montanari Source: Strategic Management Journal, Vol. 2, No. 1 (Jan. - Mar., 1981), pp. 1-14 Published by: Wiley Stable URL: http://www.jstor.org/stable/2485987 . Accessed: 17/02/2014 07:05
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Strategic
Manaigemnent Journal, Vol. 2, 1-14 (1981)
Zero Based Budgeting Process

JAMES C. WETHERBE
in the Planning
University of Houston, Houston, Texas, U.S.A.
JOHN R. MONTANARI
Arizona State University, Tempe, Arizona, U.S.A.
SUMMARY An attempt is made to integrate the zero based budgeting (ZBB) procedure into the firm's planning process. Previous studies have failed to provide an integrative framework for the application of ZBB which may account for some of the conflicting results obtained in previous ZBB programmes. Next, the results of an empirical assessment of the effectiveness of the ZBB integrative framewQrk in service oriented orgainizational units are reported. Strong support is evident for the ZBB planning framework developed here using constituency oriented indicators of effectiveness.
Zero based budgeting (ZBB) has emerged in recent years as a controversial approach to planning and budgeting. The discussions and debates of the pros and cons of ZBB have generally been based on opinion rather than rigorously designed and conducted empirical research (e.g. see Wildavksky and Hainmann, 1971; Pyhrr, 1977). The proliferation of these anecdotal reports of the successes and failures of ZBB programmes was primarily due to two factors:
1. 2. the failure of proponents of ZBB to integrate ZBB into the firm's overall planning process, and an absence of research designed to assess the effectiveness of ZBB in that planning process.
This paper addresses both of these factors. First, a framework is proposed which explicitly recognizes ZBB as an integral part of the planning process. Second, the results of a field study utilizing ZBB as a primary component of the planning process are presented and discussed.
PREVIOUS
PLANNING
FRAMEWORKS
Several authors writing on planning have provided normative frameworks for the planning process (e.g. Ansoff, 1979; Higgins, 1978; Stanford, 1979). Perhaps the most familiar is the discussion of product-market strategy formulations presented by Ansoff (1965). Since this original discussion of one important aspect of strategic planning, Received 15 Febr-uary 1980 0143-2095/81/010001-14$01.40 Revised 20 May 1980 (o 1981 by John Wiley & Sons, Ltd.
J. C. Wetherbe and J. R. Montanari
several authors have proposed both normative and descriptive models of several additional facets of the planning process. For example, Mintzberg (1979) discusses the goal formulation process in detail and relates it to the decision maker's relative power. Other authors (Kahalas, 1977; King and Cleland, 1977) stress the impact of environmental forces on strategic decisions. Similarly, Bemelmans (1979) suggests that a needs analysis must be conducted concurrent with the environmental scan to establish criteria for evaluating strategic alternatives. The types and modes of strategic decision making appropriate at various hierarchical levels were discussed by Carlson (1978) and Naylor (1979). Finally, several authors incorporate the duration of the planning and review cycle into their models (e.g. Katz, 1978; Nadler, 1978). Lin (1979) incorporated budget generation into the planning process. He suggests that fixed or traditional incremental budgets (TIB) are inappropriate for firms operating in today's dynamic business environment. According to Lin, more flexible, traditional budgets should be used by managers in production and sales units where budget changes can be easily tied to volume or output variations. However, in service oriented units where quantitative output measures are not available, zero based budgeting is more appropriate. and zero based budgeting Table 1. Comparison of traditionalincremental budgeting Traditional incremental 1. Changes in amounts based on increments differing from prior appropriationsonly 2. Justification (amount)of of magnitude increment only 3. Reference madeto basecase frequently or previouslevelof appropriation 4. All programmesperpetuated unless clear and dramaticevidence suggests abolitionfrom budget Zero basedbudgeting for totalexpen1. Reviewandjustification ditures(not just incremental changes) for each programme from zero for every pro2. Justification gramme, reconsideringbasic funding for programmes and any incremental changesfor next fiscalyear 3. No base case: defenceof entirebudget request,not simplychangesfrom premust be vious level of appropriation, reference point 4. Continuation of eachprogramme questioned and must be documented:this approach encourages reallocation of funds to new programmeswhen old cannotbe fullyjustifiedor programmes is identified betteruse of resources
Wetherbe (1976) summarized the differences between TIB and ZBB (see Table 1). He agreed with Lin that manufacturing expenses can utilize a more traditional budgeting model while support expenses require a ZBB model. However, the major thrust of these studies was developing the importance of integrating budget development into the planning process.
CONCEPTUAL FRAMEWORK Regardless of the level (corporate, divisional or departmental), time horizon (short, intermediate or long range) and nature (strategic, operational or developmental) of the
Zero Based Budgeting in the Planning Process
plans generated, four basic planning activities are involved. These activities are: (1) anticipation; (2) determination; (3) formulation; and (4) assessment. Anticipation refers to the use of scanning and forecasting procedures to provide the unit with information regarding the presence of future requirements and their probability of occurrence. The second activity is the determination of the unit's existing capabilities. Third, data from the first two activities are used to formulate objectives and budgets to direct the unit in using its resources in the most expeditious manner. Lastly, the efficacy of the unit's plans and operations must be assessed using control procedures developed from previously established objectives and budgets. Aspects of
Time
;_Anticipation *S can *Focus Forecast
N
E
P L A N N
N G C
~~~~~~~~Determi nation
*
t *Audi Compare * Procure
Y C L
E
Formulation ii*Objectives1 *Budgets /
Ass essment \ *Cont rol \;Feedback /
Figure 1.
Planning activities
these four activities are presented in Figure 1 with their proposed implementation sequence. The major thrust of this study was to incorporate the budget development process into an operational planning framework and to empirically test the relative merits of ZBB as compared to TIB. Lin (1979) provides a detailed discussion of the role of the budgeting process in corporate planning but fails to present research support for his model. The following discussion will explain the planning framework illustrated in Figure 1. Results of an empirical test of that framework are reported in a later section. Anticipation The first activity in the planning process, anticipation, involves three component tasks. Scanning, the first of these tasks, is a review of the unit's current operations and/or projects scheduled for implementation during this planning cycle. Using the TIB model, previous costs associated with these operations and projects would form the historical base on which the new budget is built. A ZBB procedurewould also use these operations and projects as a base but only to describe the initial budget areas to be considered. Once this initial scan is complete and the operations clearly delineated, then the unit manager should decide on the primary operational focus of the unit during the present planning cycle. This decision is usually implicit in the TIB model since the largest budget allocation is typically given to operations that historically accounted for the largest part of the budget. ZBB forces the manager to rank order or weight operational areas or projects in order of importance to the effectiveness of the unit. For example, the data processing unit in an R & D firm may have as its primary operational focus the support of scientific projects. A less important function may be to provide programming support for the payroll department. In another type of firm the relative importance of these two operations may be different. The next task under the anticipation activity is to forecast the levels of expected changes in the operations of the unit. This would include increases or decreases in the demand for the unit's products or services. Also included here are forecasts of the economies expected from improvements in employee or operating system efficiency and the effects of inflation on unit expenses. If the manager expects a 12 per cent increase in the cost of providing the unit's primary service during the planning cycle, then this must be incorporated into the budget regardlessof the budgeting model used. Determination The determination activity (Figure 1) of the planning process starts with an audit of the unit's capabilities evaluated in light of the results of the anticipation activity. That is, the audit must be structuredsuch that it details the unit's currentcapability to perform the operations related to its primary focus and at the forecasted levels. An audit for the TIB model would be organized on the basis of historical operational requirements, whereas, the ZBB audit would be structured according to the rank ordering of operational areas. The manager,once having become awareof future requirementsand the unit'sexisting capabilities to meet those requirements, must perform a requirements-capabilities comparison to determineif additional resources are needed. The comparison procedure and mechanism for procuring additional resources would be similar, regardless of the budgeting model used. It is important that a thorough and systematic approach to
operational planning be followed prior to generating unit budgets. This preparatory effort will facilitate budget generation and produce more accurate and meaningful operating budgets. Formulation Lin (1979) indicates that budget generation should start with the setting of objectives. Consistent with this view, the formulation activity (Figure 1) in our framework starts with the objective setting task. Morasky (1977) provides an in-depth discussion of the nature of organization objectives. He defines objectives as manifest statements that describe the specific state a receiving system should attain in a specified time period. Objectives must be reasonable, measurable (desired level and range), and have a time horizon specified. They must be directed toward the operational areas described in the previous planning activities. Budgets should be numerical representations of the costs and benefits associated with the unit's operations and/or projects. Since the unit's objectives are based on a thorough analysis of the unit's operational areas in our framework, budgets should also be numerical reflections of unit objectives. This task is where the application of the appropriate budgeting model is most important. Prior activities and tasks are appropriate regardless of the budgeting model used with the major difference being the source of operational information. However, ZBB establishes a rank ordered list of operational areas from a review of unit requirements and projected demands for the unit's products or services, whereas TIB uses historical budget data to delineate operational areas. Several authors (e.g. Lin, 1979; Wetherbe, 1976) have proposed that operational areas specified in historical budget data may accurately reflect the primary focus for output oriented units since the same quantitative criteria are used to evaluate unit performance every planning cycle. Therefore, the sales department's primary focus is always to promote sales and a sales budget based on expected increases over the last planning cycle may be appropriate. However, for service units where operational areas and their relative importance are usually shifting from one planning cycle to the next, the ZBB model, which requires regular review of each operation area and its importance, should be more effective. Assessment The final activity in the planning process, assessment (Figure 1), involves the development of detailed control procedures to assess the adequacy of the planning framework and overall unit performance. These procedures must be based on the budgets developed during the formulation activity and should specify acceptable ranges around budgeted values. Control procedures should be designed to monitor the desired levels explicitly stated in the budgets as well as temporal milestones, quality and quantity checks, and all other factors which require monitoring to insure adequate unit performance. The control task emphasizes the importance of using the appropriate budgeting model for the unit of concern. For output oriented units, traditional quantitative performance measures (e.g. sales levels, production quality and quantity) may provide accurate controls for the unit's functions. However, for service units, the lack of generally accepted quantitative measures argues for the use of the current, relevant operational standards established by ZBB.
Data from control measures are typically used in the form of negative feedback or exception reporting. As long as actual outcomes fall within the specified ranges, operational or planning modifications are reserved for the scheduled time in the temporal planning cycle. However, if unexpected deviations from acceptable limits appear, then an immediate review and/or modification of the appropriate planning and operational processes is required. Regardless of the type of feedback, positive or negative, it serves to guide the future activities of the operational planner as shown by the feedback arrow in Figure 1. In sum, several authors (e.g. Lin, 1979; Wetherbe, 1976) argue for the inclusion of budget generation in the operational planning process. Lin provides a partial framework for that integration in his discussion of an integrated budgeting system. Drawing on Lin's work, we have developed the expanded operational planning framework described above. Two main propositions were developed in our discussion: 1. 2. The integration of budget generation into a general planning framework will improve the quality of the planning effort. TIB is more appropriate for output oriented units while service oriented units can more effectively utilize a ZBB planning model.
The following section describes a field test of the second proposition while controlling for the first.
A PRELIMINARY TEST OF THE PLANNING FRAMEWORK Data used for this research are based upon a field test spanning two years. Users of separate, but very similar, computing centres at three universities participated in the study. One computing centre was used as a test group while the other two were used as control groups. The test group used ZBB as an integral part of the planning process while the control groups continued to use only incremental budget planning. All three computing centres used an integrated planning framework. Thus, the main difference among the centres was the budgeting model used. Some relevant areas of commonality among the test and control groups are listed in Table 2. The fact that the data are based upon the use of ZBB budgeting in a university of test and control groups Table 2. Similarities Test group Control group numberI 10,000
$13,600,000 $423,000
Control group numberII 7600

$23,000,000 $865,000
Enrollment
Institutional budget Computing budget
8500
$14,700,000 $538,000
supplier Primaryhardware Year computercentreestablished

Same EDP managers for last two years Budgeting approach prior to field test
IBM 1964
Yes incremental
IBM 1966
Yes incremental
IBM 1962
Yes incremental
computing centre is particularly beneficial and appropriate for the proposed research. Computing efforts, especially those located in universities, are characterized as being one of the most difficult organizational entities to effectively plan and control (McFarlan, 1971; 1973; Grindlay, 1975). Computing functions tend to be very pervasive within organizations, can possess considerable power, and are usually characterized by considerable conflict (Lucas, 1973). The multiplicity of services that are generally included in a university computing centre provide a rigorous environment for field testing the relative effectiveness of the ZBB budgeting model in service oriented units. Accordingly, a successful application of ZBB in this service unit would provide strong support for proposition two above. Operationalizing the model University computing centres were created in response to the demands of academic users for rapid computing capabilities. Consequently, the major focus of a university's computing effort must be the support of instructional and research programmes. Accordingly, the effectiveness of the ZBB model is evaluated in terms of its contribution to improving, over time, the computing function's support of these activities. Objectives of the computing centre, in order to be user oriented, must focus on the services demanded by users. Services commonly required by university computing centre users can be categorized as follows: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. Keypunch machines Work areas (tables, chairs, storage facilities) Consulting assistance for students Consulting assistance for faculty User documentation (reference manuals, user's guide, newsletter, etc.) User training sessions Programming services for user projects Computing equipment Processing of computer jobs Specialized software Equipment access Compute; terminals Computer plotting Optical scanning
For the test group, a ZBB model was used to establish budgets for the previously delineated services. Control groups used TIB to allocate resources to these services. Therefore, the major difference between test and control groups was the utilization of the ZBB and TIB budgeting models, respectively. Hypotheses Three hypotheses were developed to test the relative effectiveness of the ZBB and TIB budgeting models in the computing centres used in this study. To determine the centres' effectiveness in utilizing limited resources, particular emphasis needs to be placed on synchronizing the importance of a specific service with the level of that service which is provided. In other words, the more important a service is to the user, the greater is the
level of that service that should be provided by the computing centre. This concept is tested via the following null hypothesis: Hol: Two years after implementing ZBB, the improvements in the correlation between the importance and level of services offered will not be greater for the test group than for the control groups. An appropriate test of unit effectiveness must also include some indication of the differentialimpact of a ZBB budgeting programme versus a TIB programme on overall unit performance. Since performance is measured as the level of objective accomplishment (Steers, 1977) and objectives are user oriented, it is only reasonable to evaluate the quality of the services provided from the user's perspective. Only faculty users were included in this study. Faculty members were the only users who required both research and instructional computing support continuously during a planning cycle. Hypotheses 2 and 3 address user attitudes towards computing service efforts: H02: Two years after implementing ZBB, attitudes toward the computing centre's support of instructional activities will not indicate a greater improvement among faculty in the test group than among faculty in the control group. H03: Two years after implementing ZBB, attitudes toward the computing centre's support of research activities will not indicate a greater improvement among faculty in the test group than among faculty in the control groups. Two years represented two planning cycles for all participating computer centres. We believed that the use of two planning cycles would help attenuate the possible effects of external and internal confounding factors such as a random surge in demand for computer services or a 'Hawthorne Effect'. Data The instrument used for data collection was a questionnaire consisting of 16 questions. Data used to test H 1, derived from 14 questions pertaining to the different services, was provided by the computing centres. Respondents indicated their assessment of both the importance and the level of service for each of the 14 services by encoding their responses onto seven point Likert type scales. A then-posttest methodology was used to tap user attributions of importance for the 14 services listed. Terborg, Howard and Maxwell (1980) discuss the merits of using this methodology rather than the traditional pretest-posttest methodology. Users were asked whether a particular service was more important two years ago or now. For example: Work areas provided (tables, chairs, storage facilities)
more important then:
: more important now
no difference They were also asked how important the service was then and now. For example: Howvinmportant
Now Then Extremely low: Extremely low:
: :
: :
: :
: :
: :
: :
: Extremely high : Extremely high
Next, users were instructed to indicate the level of service received for the 14 services.
Zer-o Based Budgeting in the Planning Process
Responses were recorded on seven point Likert type scales as before. For example: More adequate then : Howvadequate Very poor Now Very poor Then : : : : No difference : : More adequate now
: :
: :
: :
:
: :
: Excellent : Excellent
This procedure was repeated for each of the 14 services. Hypotheses 2 and 3 were tested using data generated from two items designed to provide an overall assessment of the computing services available to support instructional and research activities. Specifically, users were asked to evaluate computing services available to support instructional activities. Next, users were asked the same question regarding research activities. An example of the question format is: Overall, please evaluate computing services available to support your instructional activities. More important then :
: More important now
No difference HowvIwportant Extremely low: Now Extremely low Then More adequate then : Adequate Howv Now Very poor Very poor Then
: : : :
:
:
: : :
: :
: Extremely high : Extremely high
: : : No difference
: More adequate now
: :
: :
: :
:: ::
Excellent Excellent
Subjects All faculty members who had actively utilized computing services at their respective universitiesfor the past two or more years were surveyed. Twenty-fivefaculty members were in the test group while control groups I and II comprised 14 and 27 faculty members, respectively (n = 66). Active users were determined from the computer utilization reporting system at each university. Any faculty member who had one or more active accounts for each semester over the prior two year period was surveyed. The two year minimum requirementwas necessary since respondents were required to indicate attitudes two years in retrospect. The chairpersons of the computer services committees and the directors of the computer centres at the three institutions distributed and collected the questionnaires within their respective institutions. None of the subjects were aware of their role in the research project. All faculty members returned their questionnaires, giving a 100 per cent response rate. This somewhat remarkable accomplishment was made possible because each user was accessible on campus and could be easily contacted for follow-up on non-returned questionnaires. The design of the proposed research can be defined as a field study in which a thenposttest methodology was used (Terborg, Howard and Maxwell, 1980). The treatment consisted of the implementation of a ZBB budgeting model at one computing centre and a TIB budgeting model at the remaining two computing centres. In order for the
10
treatment to be considered actualized, the following conditions were necessary or at least desirable. 1. ZBB budgeting must be executed properly and successfully. This condition was considered to be satisfied in that the planning committee successfully completed the ZBB exercise on an annual basis for two planning cycles and was able to achieve agreement on the resources to be allocated to the different computing services. A further indication of the operational success of the programme is that after the first planning cycle using ZBB, the planning committee unanimously adopted ZBB as their ongoing approach to budget planning. Any budget increases among the test and control group should be comparable. This condition was necessary to prevent one group from being able to expand and improve computing services due to additional resources not available to other groups. This condition was met in that during the field test all three institutions were being granted budget increases of approximately 6 per cent to cover inflation in the cost of equipment, supplies, and personnel.
2.
Results For Hol, data analysis consisted of performing correlation analyses between the importance and service level of each service for the then-test and posttest time periods. The correlation coefficients were transformed using Fisher's Z transformation (Bruning and Kintz, 1977). The Z values were then used to compute net improvement scores for the test and control groups by subtracting then-test Z values from posttest Z values. These scores were used to test the improvements of individual services and totalled to test the overall improvement of all services combined. The results of these computations are presented in Tables 3 and 4. The scores of the test group are higher than those of the control group. This provides support for the efficacy of ZBB in this service oriented unit. The net improvement scores were used to conduct t-tests for statistical testing (Table 5). The results of this test indicate the improvement of the test group is significantly greater than that of either control group. Therefore, support for the positive relative influence of the ZBB budgeting model on meeting user demands is evident in Table 5. A possible and understandable objection to the previous analysis may be that each of the 14 services was considered equal in importance. A second analysis was conducted which was designed to consider the relative importance of each service. An importance index was computed by dividing the mean importance score for each service by the total of all mean importance scores. The result was a relative importance index value or weight for each service. The previously computed Z values were then multiplied by the importance index and totalled. Again, the test group's improvement exceeds both control groups (Tables 4 and 5). The test group's final score is also greater than that of both control groups. Furthermore, the results of computing a sample orientation with weighted indexes indicated statistical significance in the improvement of the test group. Thus, the weighting of Z values produced the same result as the original test. The test of Hypothesis 2 involved an evaluation by user faculty of computing services available to support their instructional activities before and after the two year period. The data in Table 4 indicate a net improvement of faculty attitudes toward computing
Zer-o Based Buldgeting in the Planning Pr-ocess
11
A = After B = Before
Table Work Faculty Student 3. Software Computer Equipment Keypunch areas Turnaround User training Programming Documentation time training consulting consulting plotting access Correlation services
User
A B AB A B AB AB AB A B AB AB AB AB AB A B AB 21 24 25 -5 23 A 0 0 Net (After Total

-
coefficients 25 25 25 25 25 25 N and Z
0 0
-0
0 0 1
-0-0451 07355 6245 04013 08368 067825 6748 8728 08283 09117 0-7825 07187 1607 -00362 6052 08835 6819 09188 08239 05810 08452 4986 Test -00954 8560 i966 3452 2004 08916 0736
group transforma 0 1 1 1 0 0 0 1 1 for the
Before) Improvement After Before

1-2391 0-1621 0-0451 2031 100518 7013 3915 0-8327 1-5375 5793 1-1688 1-0518 0-7323 -00957 1-1827 4297 09050 -00362 0-5450 3447 1.2782 0-1992 3600 0-9406 0-6640 0.4252 2104 -0-0736
7 14 Test group 7-5705 6569 0864 2 5 8 -0 12 13 10 13 14 12 10
1 12
13
14
14 N
importance and
00 0
-0 0
0
r
group -0-7861 3045 -00215 ~~0-7643 04773 02765 04093 070000 2488 1797 06855 1918 06607 5946 7099 06802 05429 08160 07742 02110 2507 Control 3080 2402 0-4454 03410 4334 1854 0-4654 0-2614 5564 8644 I Control adequacy of group 2 6 9 I 10 0 0 0 0 0 group 1 1 0 0 0 4621 7146 1767 II Control 07941 0611 2541 1876 1-0065 -00215 4765 06083 3105 5195 3183 04348 1447 08295 0-4789 0-3552 10307 2142 5042 02839 0-1817 -0-1942 computing 0-2676 6276 2450 0-2562 0-8394
?0
24
26
24
2 27
27
27
27 819500009 26 27
27
27
27
27 N
services for the test
00
00 0 0
00
-0
7501 0-2441 8637 0-1380 1676 2908 04808 2208 06295 6155 3045 0-6485 02285 2985 0-8532 0-6667 03807 3140 2712 3840 7180 0257 05596 08302 04770 7684 07280 2720 Control and group 11 control
7
1 0
10 1
00 0 0
00
2991 05191 0-2491 2782 0-1389 8048 0-1692 2678 3077 2245 04009 3145 06323 1888 9732 05240 7177 0-3250 4047 9035 9245 3079 0164 07406 0-7727 -00257 02326 0-2790 0166062
institutions
12
J. C. Wether be and J. R. Montanani Summary of results Hypothesis Group N Mean Mean Net improvement score score (after - before) (before) (after) 7 5705 2 5946 2 4621 5 8069 2 2332 1 7685 28 1-3 13 22 12 13
Table 4.
Hol:
Importance and adequacy 7 0864 14 6569 Test See of service Control I Table 3 5 7099 8 3045 6 7146 9 1767 Control II Test Control I Control II 25 14 27 24 14 27 4 5856 10 3925 3 4899 5 7231 4 6114 6 3799 3.1 35 34 34 3-5 35 59 48 47 56 4-7 48
Indexed Anahlsis
Test H02: Attitudes towards support for instructional activities Control I Control II Test H03: Attitudes towards support for research activities Control I Control II
Table 5.
Significance between test and control groups Hypothesis Groups Test and control group I Test and control group II t value Degrees of Significance freedom level 26 26 26 26 37 50 32+ 44+
* *
Ho1: Importance and adequacy of service
1 75 1 92 2 45 3 30 2 55 3 22 197 + 1 90+
Indexed Analysis
Test and control group 1 Test and control group II
**
**
H02: Attitudes towards support for instructional 'activities
Test and control group I Test and control group II
**
H03: Attitudes towards support for research activities
Test and control group I Test and control group II
* p < 0 05 ** p < 0*01 *** p < 0*001 + Sam-nplevarianlce was not equal, therefore, t and degrees of freedom based on separate variance estimate
(Hays, 1963).
13
support for instructional programs at all three institutions. The test group with an improvement of 2 8 does, however, demonstrate a greater improvement than that of control groups I and II. Also of interest is that although the test group started with the lowest score, 3 1, it finished with the highest score 5 9. Table 5 indicates that the test group's relative improvement is significant at the 5 per cent level. Therefore, these data also provide support for Hypothesis 2. Lastly, faculty members were asked to evaluate computing services available to support their research activities before and after the two year period (Hypothesis 3). Again, the test group scores indicate greater improvement than that of either of the two control groups (Table 4). As in the previous discussion, the test group started with the lowest score 3 4 and finished with the highest score 5 6. Table 5 indicates significant (p < 0 05) differences between the test group and both control groups which provides substantial support for the third hypothesis.
DISCUSSION
AND CONCLUSIONS
The results presented in Tables 4 and 5 are, perhaps, deceptively straightforward. The three null hypotheses which cover three primary areas of user demand in this research setting were strongly rejected. One may conclude that in this service oriented unit, the ZBB model applied in an integrated planning framework resulted in higher quality user service when compared to the standard TIB model. Thus, Proposition 2 received strong support and Proposition 1 received indirect support. However, a caveat is in order here. The results obtained may be due to factors other than the ZBB methodology (e.g. interpersonal and technical skills of computer centre personnel). Since only three organizations were considered and the sample was selected by convenience, the results must be viewed in that light. An effort was made to control for several factors which could confound the results (Table 2); however, many other factors were beyond the control of these researchers. Given the limits of this study, the results provide strong support for the use of ZBB which is incorporated into an integrated planning framework for service oriented organizational units. The implications for a practicing manager are important. These results should help reduce some of the confusion surrounding ZBB by outlining tlle conditions necessary for a successful ZBB programme. The initiation of a ZBB programme without consideration of the other activities associated with the planning process could result in failure. Next, the manager can have some confidence that a well developed and implemented planning programme using ZBB should result in superior performance for the firm's service functions. The planning framework herein described is certainly not a panacea but, if implemented properly, it can contribute to improved effectiveness.
REFERENCES
Ansoff, H. Igor. Corporate Strateg': An Analyvtical Approach to Business Policjf or Growtth and Expansion, McGraw-Hill, New York, 1965. AIsoff, H. Igor. 'The changing shape of the strategic problem' in Schendel, D. E. and C. W. Hofer (editors), Str a tegic Managemi?ent: A New-, Viewtof Business Policv and Planning, Little, Brown and Company, Boston, 1979.
14
J. C. Wetherbe and J. R. Montanani
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Zero Based Budgeting in The Planning Process

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Zero Based Budgeting in the Planning Process Author(s): James C. Wetherbe and John R.

Manaigemnent Journal, Vol. 2, 1-14 (1981)

Zero Based Budgeting Process

University of Houston, Houston, Texas, U.S.A.

J. C. Wetherbe and J. R. Montanari