Zero-Based Budgeting (ZBB) is a term that’s gaining momentum across government as federal program managers face growing demands for budget transparency, operational efficiency, and strategic resource allocation. Unlike traditional budgeting methods that make incremental changes based on historical expenditures, ZBB requires program managers to justify every expense from scratch.
To deliver a defensible budget request, program managers need a mathematical model that translates their system of work into hard evidence to ensure funds are allocated strategically to high-impact services and aligned with mission-critical objectives. Successfully implementing ZBB requires a comprehensive understanding of all services provided, how those services link together to produce results for customers, and the services’ underlying cost model.
At Technical Assent, we use two key service-design tools to help our clients deliver the hard evidence behind a zero-based budget.
- A Detailed Service Catalog that outlines each service, its cost structure, and its strategic value.
- A Service Blueprint that visually depicts how services connect to build value for stakeholders and reveals dependencies, cost drivers, and performance metrics.
Together, these tools make a ZBB exercise straightforward to execute and a useful tool to manage program effectiveness. Further, equipped with these two assets, program managers can position themselves confidently as partners in efficiency audits and program reviews. What follows is a simple guide on how program managers can create and leverage a Service Catalog and Service Blueprint as a foundation for Zero-Based Budgeting.
1. Create a Service Catalog to Inventory Services, Costs, and Performance Metrics
A Service Catalog is a detailed inventory of all services offered by a program or agency. It's like a recipe book for the services your organization delivers, where each service’s recipe card contains the purpose, performance metrics, costs, and required resources to deliver each service.
To create a service catalog, program managers must first shift their perspective to think about their team’s work as a portfolio of services delivered to customers. This requires understanding of the customers of your service, the customer’s job-to-be-done, and the recurring activities you perform to support these outcomes.
A complete service catalog allows federal leaders to:
- Identify Cost Drivers: Understand exactly where resources are being spent by breaking down services into components.
- Justify Expenditures: Clearly link expenses to service outputs and mission outcomes.
- Prioritize Funding: Allocate resources strategically to high-impact services.
- Enhance Accountability and Transparency: Communicate the value and cost of services to stakeholders, promoting responsible stewardship of taxpayer funds.
2. Create a Service Blueprint to Visualize Value Creation
While a service catalog provides a detailed breakdown of services, a Service Blueprint visually maps how these services connect to create value. It illustrates:
- Customer Actions: The steps the customer takes throughout the service experience.
- Front-Stage Interactions: Direct interactions between the customer and service personnel or systems.
- Back-Stage Processes: Internal activities that support front-stage interactions but are not visible to the customer.
- Support Systems and Resources: IT systems, databases, and other infrastructure required to deliver the service. May be specific to the service or shared across multiple components of the organization.
- Performance Metrics and Costs: Key performance indicators (KPIs) and cost data associated with each component.
The Service Blueprint as a critical management tool to understand and communicate service experience and operational performance. The holistic view of the organization's operational model helps program managers clearly link budget needs to customer outcomes, identify redundancies and sources of potential waste, and align services with mission objectives.
It also provides a clear line of sight for how each service component contributes to mission-critical outcomes. Therefore, we prefer to keep them visually “rough and ready,” inviting the team to move pieces around and experiment with ways of delivering the right customer outcome faster.
3. Combine the Service Catalog and Blueprint to Build Your Budget and Support Efficiency Audits
Using the insights gained from creating the service catalog and blueprint, you have a comprehensive, mission-aligned, and prioritized set of building blocks from which you can create your budget from zero. These tools enable mission-focused decision-making and position your organization to lay out clear tradeoffs in efficiency audits and program reviews.
Finally, having a detailed service catalog combined with a comprehensive service blueprint results in these ongoing benefits for federal leaders.
Operational Efficiency
Federal program managers can continue to optimize operational efficiency by identifying bottlenecks or unnecessary activities and re-allocating resources towards opportunities of greatest potential impact. A service that can’t be clearly placed into the blueprint can be rationally reconsidered and reallocated. The service catalog and blueprint can help illustrate cause and effect by clearly demonstrating how funding adjustments will impact service performance and customer experience.
Performance Management
Federal program managers are able to promote performance management and accountability by linking funding to performance outcomes and ensuring resources are allocated to the most effective services.
Justifying Future Budget Requests
Federal program managers can confidently justify budget requests and scale services strategically by staying attuned to customer demand, modeling budget scenarios, and considering the tradeoffs among service levels and customer experience.