After years of apparently ineluctable decline, suddenly it's ABC everywhere.
Shared services organizations are becoming more interested in ABC as they move towards commercial business models. It was a recurrent theme at the SharedServicesLink.com Future Finance 2001 conference last week.
ABC enables a shared services organization to understand its costs better, and so enables more sophisticated transaction-based pricing of its services.
We've had ABC features in Nimbus Control for a decade. Nimbus clients such as Steria have presented on how they use ABC in the design and delivery of their F&A outsourcing services.
But we're noticing a new level of interest in ABC, which has driven the recent product enhancements in this area. The capability to draw data into ABC direct from transaction logging systems now provides FS clients, for instance, with a simple way to overlay their production statistics (trading volumes) in the context of the process. Add in the cost-driven KPIs, and the risks and business controls, and everything is being presented, and managed, in one context: the end-to-end process.
When you start seeing ABC used in these ways, you have to wonder why it was out of favor for so long. It's going to be another core capability for any BPM 2.0 enterprise process management platform.
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Yes, ABC resurgence is happening everywhere, and I would argue that the reliance on transactional logging systems is the key to providing any meaningful cost and resource assignments, drivers, volumes, etc. used in successful ABC models/tools. Transactional data plays a HUGE part in that resurgent growth, especially in the Federal Government.
My current government client has tried five (yes, FIVE!!) separate attempts to implement activity-based costing. Each previous effort has failed. None has lasted longer than one year from start-to-finish. The reasons for those failures are numerous… we’ve all heard them before:
• ABC is too time-consuming and requires too many staff to maintain,
• There is no sr. management support,
• Rank-and-file/labor unions want nothing to do with ABC,
• There is no alignment with strategy,
• What do we do with the data – can we operationalize the ABC results (?),
• How do you maintain a model with over 2,500 activities - and why did we make that model in the first place (?),
• It’s the culture – change management is non-existent,
• We’re a not-for-profit, so what good is the ABC product cost information (?), and
• Huh, you want me to make decisions from the ABC results (???).
The list goes on-and-on. Fundamentally, ABC was abhorred because it was seen as an intrusion in the everyday work environment, and folks just didn’t know what to do with the results. Ultimately, they worked against each and every ABC implementation, fighting it “all the way” until each attempt inevitably failed.
Our sixth effort has met with a large measure of success. It’s been in production for one year, and upper level management is beginning to use ABC results in their decision-making process. Why?
Well… All employee time surveys were stopped. Staff worksheets that estimated drivers or workloads were trashed. We didn’t roll this out to the entire agency. Instead, we made ABC simpler through a reliance on detailed transactional data; an oxymoron, I suppose. We defined clear “systems of record” for our resources (staff, non-labor expense, and inventory). We relied on existing process definition and work by our performance management staff to provide activity information. System data directly fed our drivers. Cost, time, drivers, assignments…. Everything came from transactional systems.
In a sense, we’ve made this implementation into a “stealth” model. The tool is not agency-wide even though it provides agency-wide cost object/product line information for the first time. It’s currently used by only a handful of managers who are seeing the value in ABC, making decisions off the data, and building a base of support that will eventually change the thinking and culture around ABC. We made this mindset change (with BIG results, I might add) happen when we shifted our focus from staff interaction to transactional system data… debates about whether the data was good or bad and whether we could rely on the ABC results ended the moment we pulled everything from our transactional data systems.
Now, we can finally begin the conversation about how to integrate ABC into our performance management suite, where ABC supports our key decision-making, what operational efficiencies does ABC identify, and when do we make the information available to a broader audience. ABC is finally becoming a reality in the Federal Government! Transactional system data and its integration into our ABC implementation and ongoing production made all this happen.
If you’d like to discuss this further, please don’t hesitate to contact me at William.c.clark@hotmail.com. Bill
Posted by: William Clark (Bill) | 25 March 2011 at 02:28 PM