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Zero-Based Thinking: What Is It and How Can Finance Leaders Use It?

December 20, 2022 Lisa Van de Ven  
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Hindsight is 20/20. Or at least that’s how the saying goes.

And it’s true. By looking back, we can better determine the decisions we should have made and the actions we should have taken. We have a clearer view, in other words, of where we went wrong.

That’s why, when we think of hindsight, we usually associate it with regret. Because there’s no way to go back in time to make those decisions or to take those actions over again. 

But what if you could?

That’s where zero-based thinking comes in. For finance leaders, it’s a technique that employs hindsight to analyze the decision-making process—and encourages take-backs on all those things you got wrong. In doing so, you can course correct, pivot your strategy and become more agile in your approach.

Sound like something that might prove helpful? Let’s dig a little deeper.

💡Key Takeaways:

  • Zero-based thinking is a powerful decision-making technique that can help ensure you’re staying agile—ready to pivot away from bad choices that aren’t contributing to revenue or business goals.
  • By asking yourself, “If I were to start over again today, would I do anything different?”,zero-based thinking employs hindsight to analyze the decision-making process and help leave bad decisions behind.
  • Through a three-step process, finance leaders can apply zero-based thinking to all of their decisions—from hiring to investing. They just have to be ready to own up to the things they got wrong.

What Is Zero-Based Thinking?

Zero-based thinking (ZBT) is a technique leaders draw on to make tough decisions—and to assess the decisions they’ve already made. Developed by author and motivational speaker Brian Tracy more than a decade ago, it asks the question, “If I were to start over again today, would I do anything different?”

In other words, it employs the 20/20 view of hindsight.

If that sounds simple to you, that’s because it is. But that doesn’t make it any less powerful. By asking yourself what you would do differently if you were to start over, you reveal potential changes you can make to your strategy right now. Because, with time and experience behind you, there are often things you’d want to change. Having a tool such as ZBT in place gives you a starting point to do exactly that.

ZBT can keep you from getting stuck in a rut—doing what you’ve always done. Instead it encourages you to reassess your decision making, your successes and your failures. In doing so, it makes agility and pivoting your processes part of your ongoing business strategy, letting you plan better and adjust your past mistakes. 

In today’s market, especially—where resources are scarce, the economy is volatile and your business has to be more agile than ever—ZBT can be a powerful tool to have in your roster.

Applying Zero-Based Thinking to Finance

In essence, ZBT is the opposite of what-if analysis. Instead of planning for scenarios that haven’t yet happened to determine possible outcomes and how you’ll react, you’re looking back at situations that have already occurred and examining how you already reacted. As two sides of the same coin, then, finance leaders can use both to help hone and perfect strategic decision making to ensure staying on the right path to meet goals.

So how can you apply ZBT to some of your decision making?  Consider these examples:

  • Investing: Would you choose the same investment portfolio today if you were making your selections for the first time? If the answer is no, maybe it’s time to offload some.
  • Hiring: Would you hire the same people for your team if you were starting over today? If you don’t think so, perhaps it’s time to rethink your team and let go or reshuffle the members that aren’t working.
  • Project Management:  Would you embark on the project you’re working on again if you could go back in time?  If you’re already shaking your head, then why are you still investing important resources into it?

Of course, reversing a decision you’ve already made might seem more difficult than not making that decision in the first place. You’ve invested time and money in the interim. But that doesn’t mean you wouldn’t be better off if you cut your losses. And by putting ZBT into action, you can start to make the moves and put your case in place to reverse those decisions and pivot your strategy.

Zero-Based Thinking vs. Zero-Based Budgeting

As a finance professional, you may be asking yourself: Is there any connection between zero-based thinking and zero-based budgeting? After all, there sounds like there might be, right? 

The answer is no. But also yes, in some ways, too.

Zero-based budgeting was invented in the late 1960s/early 1970s by Pete Pyhrr, then an account manager at Texas Instruments. That means it’s been around for a lot longer than zero-based thinking. Yet some of the ideas behind it are similar. 

Like zero-based thinking, zero-based budgeting has a “start from zero” approach, wiping the slate clean with every new budget. And the purpose of each is closely aligned: to ensure your decision making is on track with your current goals and priorities, not stuck in your choices of the past. 

Zero-based budgeting reassesses those past decisions and every initiative you have underway to see if they’re worth budgeting for and are contributing to your current business goals. In doing so, it lets you identify new levers to pull or costs to remove to add value to your organization. Zero-based thinking does much the same, but looks beyond budgeting to all of your decision making.

Putting Zero-Based Thinking Into Action

So how do you employ zero-based thinking in your everyday decision making? Here are three steps to follow to make ZBT a regular part of the choices you make. 

Step 1: Analyze the Situation

Whatever it is you’re currently assessing—your team, an important project or your investment portfolio—you always want to start the zero-based thinking process with a close analysis of what you’ve done and the decisions you’ve made. 

Analyze your current situation—including everything that’s working and everything that’s not. How does each element contribute to your profits or organizational success and is it a good fit with your business ideals? While you may have already asked some of the same questions when you were making your decision in the first place, now you have the benefit of hindsight to guide you.

Take your team, as an example. Is every member contributing their part, or are there team members that are falling short? If so, are they adding any value?

This is where you need to be honest. If you had the same decision to make today, knowing everything you know now, would you make it again? Would you hire that team member again, for example. If you’re not sure, consider the effects that decision has had on your business or your overall output—is it causing stress, bleeding money or negatively affecting productivity without adding anything in return?

If the overall results are positive and you decide it was a decision worth making, that’s great—you’re on the right track. If there’s something you would change if you were given a do-over, then move on to step two.

Step 2: Go Back to Zero

If during step one you answered “No, I wouldn’t make that decision again,” or even “Yes, I would, but with a few caveats or changes,” then it’s time to go back to the beginning—or, what zero-based thinkers refer to as the “zero point.” If you were to start again with a blank slate, what decision would you make today?  

ZBT means you don’t try to make something work when you know it hasn’t been. And you don’t try to justify your bad decisions either. But it does mean you analyze the source of the bad decision, to pinpoint the problem. If a process you introduced isn’t having the impact you desired, maybe it’s the technology you’re using that’s the issue. If your investment portfolio isn’t earning the returns you’d hoped for, it could come down to one or two investments. Analyze the entire decision-making process to see where things went wrong.

But once you’ve identified the issues—those decisions you would change if you could—don’t be afraid to give up on them before they continue having a negative effect on your business. In fact, that’s the point of implementing ZBT in the first place—and what’s going to keep your business ready for whatever’s ahead. 

Step 3: Make Another Decision Instead

All that time and budget you spent trying to make that bad decision work? It hasn’t completely gone to waste. Now that you’ve gone back to the zero point, you can use what you’ve learned to make another choice instead. And since you’ve freed up resources, you can also now divert those resources into a new direction. 

That means you can hire a new person for your team, make a new investment or start a project that you think will better align with your business goals. Whatever the case, the ability to pivot like this will add to your overall agility as a whole.

Conclusion

Agility is key to business success and continued organizational growth—especially in today’s market, where so much is changing. Being able to course correct away from bad decisions is part of the process—and to accomplish exactly that, you need the right tools in place. Zero-based thinking can help. 

So put hindsight to work and start analyzing your choices with a 20/20 perspective.

 

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