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Are You Puzzled? : ICMS – Success is NOT Logical
Are You Puzzled?
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16 August 2013 - 22:58, by , in Activity-Based Cost Management, No comments

My wife, daughter and mother-in-law love to put together jigsaw puzzles.  Working together, they can assemble a 1,000-piece puzzle on the kitchen table in just a few hours. When I asked them how they do it so quickly, they responded “It’s easy. We just put together the pieces to match the picture on the box.”  In other words, if you know what the solution looks like, the problem is half solved.

Charles Kettering once observed that a problem well defined is a problem half solved. What kind of problem are you confronted with today?

  • Has management defined cost reduction and customer profitability analysis as urgent needs for this year but you are puzzled where to begin?
  • Have you been tasked with the responsibility to assemble an Activity Based Management (ABM) software model for your organization, but you are puzzled what the reports should look like?
  • Have you already assembled your organization’s activity accounting information but are now puzzled how to get employees to use it?

There is a common solution for each of these problems … ABM case studies.  Actual experiences and results of organizations that have implemented Activity Based Management are invaluable.  Case studies tell you how other organizations performed their cost reduction and profitability analysis efforts.  Case studies show you a variety of formats for ABM and ABC reports.  And case studies provide you examples of the successful and failed methods that have been used to integrate ABM into the culture, policy and procedures of various organizations.

To end your puzzlement, where can you get ABM case studies?

  • ABM Toolkits from ICMScome with an ABM and ABC case study. The toolkit case study serves as the “picture” on your ABM “puzzle box”. Each case study shows you what activities to look for, how to assemble the activities into ABM processes and ABC cost pools. And each case study includes numerous examples of ABM cost improvement and ABC cost allocation reports.
  • Subscribe to journals and magazinesthat regularly feature ABM articles and case studies. Examples includeStrategic Finance (formerly Management Accounting magazine), Business Finance (formerly Controller magazine) and The Journal of Cost Management. In addition, there are numerous trade journals specific to your industry that likely report ABM studies.
  • Contact your local university accounting professor.They often have ABM/ABC case studies that are used in class.
  • Attend ABM conferences.People like yourself present their experiences with ABM at conferences. Most provide valuable handout materials. Get their business cards and benchmark with them.
  • Hire a seasoned ABM implementerto educate your management team on the positive and negative results of actual ABM case studies. Make sure that this person has many years of experience across different industries. For example, a distributor ABM case study could be of great value to a manufacturer contemplating a supply chain improvement initiative. Or the typical ABM findings of a hospital could be of great value to a distributor. Who do you call for case study presentations? In addition to contacting the author of this article as a resource, you can contact authors of magazine articles or partners of consulting firms.

Someone once told me that every good speech should tell an audience three things: (1) What’s up? (2) So what? and (3) What’s next?  ABM case studies answer all three of these questions:

  • ABM case studies will tell you “What’s up?”. Case studies explain the who, what, when, where and why ABM was implemented within an actual organization.
  • ABM case studies provide the answer to “So what?”. Case studies detail the findings and whether the results met management’s expectations.
  • ABM case studies provide the answer to “What’s next?”. Case studies indicate whether the organization continued or curtailed ABM after the implementation.

What happens when a puzzle is completely assembled?  If it’s ugly, you throw it away.  If you enjoyed the assembly process but are not enamored with the results, you’ll take it apart and put it away.  But if you like it, you’ll mount it, frame it and admire it every day.  I hope you end up with an ABM masterpiece.

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