Implementing Activity-Based Management in Daily Operations

"Activity-based management makes cost and operating information useful by providing value analysis, cost drivers, and performance measures to initiate, drive, or support improvement efforts and to improve decision making."

"Processes and activities are the central nervous system of the process-based organization and represent the core of what the organization does to create value for its customers and stockholders."

"Since activities form the very core of what a business does, the basic output of the ABM system must be to provide relevant cost information about each significant activity."

"_Activity-based costing_ is defined as a methodology that measures the cost and performance of activities, resources, and cost objects."

"Managers use ABC to determine the actual, true cost of products and services."

"Activity-based management implementations that require highly detailed and precise reporting on a monthly basis will require greater installation efforts than those systems that require less precision and frequency of reporting."

"Implementing ABM requires a willingess to pursue a strategy for improving the activities of the business."

"There are five basic components to the activity-based cost assignment methodology:"

"Activity analysis is the stage where judgements are made about the value of activities to the organization."

"The first step to activity analysis is to define and specify business processes and activities. This is easier said than done . . ."

"Even a minimal level of customer or user satisfaction requires definition of what is being provided."

"Identifying the customer of an activity has enormous value."

"Specifying an activity as value added or nonvalue added can evoke considerable discussion and debate in an organization."

"Eliminating one cost driver improves many activities."

"Improved productivity, increased quality, and reduced cycle time are meaningless if customers are dissatisfied."

"It is not unusual to find organizations that spend only 60% of their cost resources on primary activities and spend the remainder on activities of support."

"Experienced ABM implementors recognize the value and limitations of using observation, questionnaires, historical records and documents, and experts as additional sources of activity-based data and information."

"For interviews to be successful, they cannot be approached in a haphazard way. Too much of the ABM implementation resource is at risk."

"As a basic starting point, any major initiative like ABM must contribute to the overall mission and vision of the organization to have value."

"Documentation of key findings, recommendations, conclusions, and next steps is a vital link between analysis and action."

"A cornerstone of an effective ABM information system is the avoidance of complexity whenever possible."

"Full integration is compete when people in the organization embrace activity management, take ownership, and internalize it as a better way of doing business and making decisions."