March Madness
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12 August 2013 - 23:11, by , in Activity-Based Cost Management, No comments

Every year as winter wanes and spring approaches March Madness afflicts millions of people.  You’re probably thinking of the annual thumping of basketballs, squeaking of sneakers and the roar of the crowd.   Instead I’m talking about the business form of March Madness.  Senior managers from hundreds of companies begin to yell in late March and early April at the Chief Financial Officer “Oh no! What are we going to do? We’re already behind the annual profit plan!”

Basketball and cost management actually have a lot in common. If your organization is searching for a profit improvement game plan, here is a seven-point plan that never fails to provide a winner:

  • You’ll need good equipment… the best practice cost management methodology in the world today is Activity Based Management (ABM). Create an activity accounting spreadsheet for every cost center in your organization. The spreadsheet is the ball to get in the cost improvement ball game.
  • You’ll need good players… cost management is not a one-man or one-department job. Steve Jobs of Apple says, “None of us is as smart as all of us.” The best cost improvement teams are diverse, well trained, work hard and are mentally agile.
  • You’ll need an offensive plan… to penetrate “defensive” comments like “We don’t need a new cost management system” you’ll need a proven, irrefutable game plan. I recommend a Triangle Offense of ABM, ABC and ABB. ABM to reduce costs. ABC to allocate costs. And ABB to plan and budget costs. The Chicago Bulls won a lot of world championships using a Triangle Offense. So can you!
  • You’ll need to move and pass with a purpose… to get employees focused on quickly improving profits, senior management must define specific cost improvement targets, deadlines and consequences. Byrd Baggett says “Obstacles are the frightful things you see when you take your eyes off the goal.”
  • You’ll need to encourage players to follow their shot… throwing up cost reduction ideas for consideration without adequate follow through provides discouraging results. If basketball teams did not rebound, their field goal percentage would be a miserable 25%. Rebounding doubles your chances of winning the game. Quarterly ABM performance measures keep players focused on follow through and results.
  • You’ll need to go for the 3-point shot… don’t waste time. You need to improve the profit plan as soon as possible and as much as possible. Making small changes to small activities is a waste of time. And making big changes to small activities gives an illusion of progress. Shoot first for big changes to big activities.
  • You’ll need an ABM Coach… someone who has a track record of success. If you don’t have an experienced, dynamic ABM leader, give ICMS a call (817-475-2945).  We can quickly train, coach and convert your disorganized cost management team into one that is disciplined and destined for success.

When the game is on the line and there are only 9 seconds left on the clock, who gets the ball?  With 9 months or less to win back confidence in your profit plan, who gets the responsibility?  The best chance of winning comes with a proven methodology called ABM, a proven workbook titled “Using ABM for Continuous Improvement” and a proven trainer/coach from ICMS.

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Tom Pryor
TomPryor@ICMS.net
(817) 475-2945

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