Self-Defeating Beliefs
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16 August 2013 - 22:59, by , in Activity-Based Cost Management, No comments

“I don’t have enough time!”…
Have you ever said this to yourself? This statement is an example of a self-defeating belief. Self-defeating beliefs such as “I’m not good enough” or “I’ll never lose weight” get in the way of your success and happiness. Negative thoughts lead to negative actions.

For example, telling yourself, “I don’t have enough time” leads you: (1) to more stress; (2) to hurry and make a mistake; or (3) to become frustrated and do nothing.

During the past ten years, I have repeatedly heard Chief Financial Officers, Controllers and Cost Accounting managers say five (5) self-defeating beliefs regarding Activity Based Management (ABM). The good news is that each self-defeating belief has a victorious solution.

Self-Defeating Belief #1:
“I don’t have enough time to implement ABM.”

You should never say, “I don’t have enough time.” You have the same 24 hours per day as William Shakespeare, Thomas Jefferson, Thomas Edison, Billy Graham and Bill Gates. In fact, if you don’t help your organization reduce costs and improve decision making, you may find yourself with more than enough time on your hands. You and other employees will be out of a job!

SOLUTIONS:

  1. Purchase an ABM Toolkit. Create an Activity Accounting report for your department in less than 4 hours! Use the ABM report to identify an activity you can “unplug” for 60-90 days. Re-deploy that time to implementing a more comprehensive ABM Pilot Project. Your department’s ABM report can also serve as a tool to educate senior management on “What is ABM?”
  2. Rent a student. Purchase an ABM Toolkitand give it to a local university accounting professor and his/her students. Offer them the opportunity to learn ABM by implementing it in your company. You simply supervise the project. They win and you win.
  3. Spread the workload.Have a trainer from ICMS teach all your managers “how to” create their own Activity Accounting reports. This popular “How to Self-Implement Activity Accounting” one-day workshop takes the activity analysis workload off you and your ABM Project Leader.

Self-Defeating Belief #2:“ABM is just a fad. It’ll never last.”

ABM is not a fad. ABM celebrated its 10th anniversary last year and is still going strong. If your organization does not implement an ABM system in the next 3-5 years, you will find yourself at a distinct disadvantage compared to your competition.

PROOF:
Listed below are three indicators that ABM is the standard by which all cost systems, including yours, will be judged:

  1. Colleges teach ABM. ABM is now taught by most colleges and universities at both the undergraduate and post graduate level. In addition to textbooks, there are now over 50 books published on the topic of ABM/ABC. Check out this comprehensive list of ABM booksavailable on Amazon.com, including Using ABM for Continuous Improvement, published by ICMS.
  2. Software supports ABM. ABM and ABC modules are now integrated into most of the popular mainframe (i.e., SAP, Lawson, etc.) and client server (i.e., Peachtree, Oracle, etc.) software systems. While many small organizations choose to remain on a PC-based ABM software platform similar to the ICMS ABM Toolkit, larger organizations are upgrading to integrated ABM/ABC solutions. The February and March 1998 issues of CFO magazine list all the ABM integrated software products.
  3. Industries embrace ABM. ABM has been adopted as the universal costing method by many industry organizations. Initiatives such as the food industry’s Efficient Consumer Response (ECR), food service’s Efficient Foodservice Response (EFR) and healthcare’s Efficient Healthcare Consumer Response (EHCR) have all adopted ABM as the common costing language for the supply chain.

Self-Defeating Belief #3:
“My senior management will never support ABM.”

When I was recently asked by a campaign volunteer to vote for their candidate, my response was “No!”. My response was negative because I knew absolutely nothing about their candidate’s personal history, qualifications, principles or track record. It is possible that your senior management does not support ABM for the very same reasons.

SOLUTIONS:

  1. Talk to them. Schedule a 30 minute, one-on-one meeting with each member of your senior management team. Ask each manager, “What are the top 3 needs of our company and your area of responsibility?” Determine if their needs would be met by ABM. If ABM will help, they will support ABM.
  2. Show them. Provide senior management an Activity Accounting report of your own department or another cost center in your company. Seeing is believing. Believing leads to support. When management sees ABM, they tend to want it!
  3. Educate them. Have ICMS’s Chief Evangelist of ABMspend four hours with your senior management team. Over 90% of the companies that provide this interactive workshop to their management team immediately elect to implement ABM.

Self-Defeating Belief #4:
“I can’t afford to implement ABM.”

During a recent negotiation between American Airlines and its pilots, a captain offered the following justification for his salary:

  1. The average salary for a pilot is $120,000.
b. The average pilot flies 396 segments (takeoffs & landings) per year.
c. The average flight has 85.2 passengers.

Therefore, the pilot costs the passenger $3.55, less than an airport hamburger. The $120,000, experienced pilot is a bargain.

The pilot took his salary, which at first glance looks expensive, and made it more understandable and relevant to the customer. You may be under the false impression that implementing ABM is expensive. Actually the cost of implementing ABM can range from as low as $3,995.00 for an ABM Self-Implementation Toolkit to $250,000.00 or more for a large scale consulting project. When properly implemented, ABM provides a significant pay back. Consider the following example based on ICMS case studies:

CONSIDER:

  1. The average costof self-implementing ABM is $8,400…a $3,995.00 ABM Toolkit plus 50% of your time as project leader during a 90 day Pilot Project.
  2. The average non-value added wastein a company with $1,000,000 of labor and overhead is 20% or $200,000.
  3. The average cost improvementaction plan defined by employees during an ABM Pilot Project is $50,000.

Therefore, implementing ABM typically provides a 6 to 1 payback in 6 months. ABM is a terrific investment.

Self-Defeating Belief #5:
“I’ll probably fail at ABM.”

Annual surveys by the Institute of Management Accounting consistently show that the success rate of ABM Pilot Projects is very high…over 80%. Ferdinand Fournies’s thought provoking book, “Why Employees Don’t Do What They’re Supposed to Do”, provides a basis to understand why the remaining 20% of organizations either fail during or after the pilot project:

  1. Employees don’t accept ABM because they’ve never heard of ABM.
2. Employees don’t know how to do ABM.
3. Employees don’t know why they should do ABM.
4. Employees don’t think the ABM consultant’s method will work.
5. Employees think something else is more important than ABM.
6. Employees see no positive or negative consequence of doing or not doing ABM.
7. Employees think they are already doing ABM.
8. Employees are punished for doing ABM.
9. Employees are rewarded for not doing ABM.
10. Employees think ABM goals are unachievable.

SOLUTIONS:

  1. Train, Train, Train…train your senior management, train your ABM Implementation Team and train your employees “how to” read, interpret and use ABM to meet their needs. Explain the reasons why a new, improved cost system is needed and why ABM is the best practice method to meet those needs. Provide employees easy-to-understand books, such as ICMS’s Using ABM for Continuous Improvement.
  2. Target, Timeframe and Consequences…senior management must define ABM Pilot Project improvement goals (e.g. 5% or $50,000), define deadlines for improvement implementation and define positive and negative consequences related to the goals.
  3. Talk to ABM’ers…talk to organizations that have implemented ABM. Ask local suppliers or customers “Have you tried ABM?” Learn from their successes or mistakes before you implement.

CONCLUSION
What comes first – a positive attitude or success? The answer, in virtually all cases, is that a winning, positive attitude comes first, followed by a very successful implementation of Activity Based Management.

Zig Ziglar in his book See You at the Top writes that “it’s easier to act your way into a new way of feeling than it is to feel your way into a new way of acting.” You must focus your mind on being successful with ABM – even when you don’t feel like it.

Some days I don’t feel like exercising. A thousand excuses flood my brain. If I went with my feelings, I would skip the exercise that I need to improve my health. Instead of giving in to my negative thoughts, I act by changing into my shorts and running shoes. Within five minutes my negative feelings become positive actions. My positive actions lead to positive thoughts and improved health.

Stop procrastinating and feeling apprehensive about Activity Based Management. Convert your self-defeating beliefs into positive action. When you do, both you and your company will feel and perform better.

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

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