The First Phone
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17 August 2013 - 22:52, by , in Activity-Based Cost Management, No comments

Imagine how difficult it must have been to sell the first telephone.  The sales pitch might have gone something like this:

Alexander Graham Bell: 

“Do you want to buy a telephone?”

First Customer: 

“What’s a telephone?”

Alexander Graham Bell: 
“It’s a thing that you can use to call other people.”

First Customer: 

“Does anyone else own a phone?”

Alexander Graham Bell: 
“Not yet. You’ll be the first.”

First Customer: 

“If that’s the case, then I think I’ll wait until there is someone else that I can call.”

The first phone had no value. The second phone had significant value because it made the output of the first phone useful. As each additional phone was sold and added to the network, the value of all phones increased exponentially.

If you own PC-based Activity Based Management (ABM) software, with a single data set, created by a lone individual, you have something in common with Alexander Graham Bell.  One is a lonely number.  To achieve success, you both need more than one customer.  Additional users of the ABM software are needed to exponentially add value to any organization.  One PC model with one user represents a significant constraint to optimizing and sustaining the full value of ABM.

Bottleneck #1:ABM software is installed on a single PC.
ABM software is frequently installed on a desktop or laptop PC. While this approach is initially very practical, it will eventually become an obstacle to efficient information flow. A standalone software model restricts the flow of ABM data and reports to other employees. Employees that have no ready access to the ABM data cannot make timely, relevant decisions or measure performance improvement. Gaining access to the lone PC makes updating the activity cost for new time periods cumbersome and frustrating.

Solution: Install PC-licensed software on the network file server or purchase a network license with multiple user nodes.

When purchasing ABM software, most organizations opt for the lower priced PC license. Without thought, the software is often installed on a desktop PC, thereby limiting the number of people who can access the system. Why not install the PC-licensed software on a network file server?

While most ABM/ABC software products offer both PC and multi-node network licenses, it is often not practical to purchase the more costly network version when first launching ABM in a company. Network licenses provide the capability of simultaneous use of the software by more than one person. PC licenses allow only one user at a time. But installing a PC license on a file server provides the immediate flexibility of being able to access the ABM software from any PC on the network. Select a solution that best meets your needs and budget.

Bottleneck #2:Having only one trained software user.
The individual who creates the ABM software model is often the only person who fully understands ABM and the software system’s reporting capabilities. Because a lone individual has limited time and resources, that person quickly becomes a constraint to optimizing and sustaining the benefits of ABM. When only one person is available to update and use the software, they have little or no time to ask and answer ABM questions.

If the person who created the ABM software model leaves the organization, no one will be left to use or maintain the data. People with hands-on ABM experience are in much demand today in the labor marketplace. A talented person with significant ABM experience can easily command $75,000-$100,000 as an ABM consultant or corporate Director of ABM.

Solution: Provide software training to several people and have them use the software regularly.

While training several people on the software is often not practical at the onset, training should be an immediate consideration after completion of a successful ABM Pilot Project. Train people that will use the ABM software data frequently during the context of their regular job duties, e.g. accountants, industrial engineers, information systems managers, process improvement manager, etc. Three training resources exist: (1) have the employee who created the initial model cross-train other employees immediately after the pilot project; (2) have employees use a self-paced tutorial from the software vendor; or, (3) use expert trainers from the software vendor to train employees.

Bottleneck #3:Inadequate ABM training of non-financial managers.
The individual who creates and maintains the software model is often not capable of training other employees on the principles and uses of ABM. He or she does not have the time or talent to train others on “how to” read, interpret and use the ABM software reports for decision-making or continuous improvement. As a result, the valuable data that has been created in the ABM system goes unused. Senior management needs ABM training and coaching. Middle management needs ABM training and coaching. Eventually all employees need to be trained and coached how to use ABM to meet their needs. ABM training is now available on-line. Check out www.LearnABM.com and take a sneak preview at on-line ABM learning.

Solution: Provide “how to use ABM” training to all employees.

Best selling author and motivational speaker John Maxwell says “Don’t let your learning lead to knowledge, let your learning lead to action.” Provide employees hands-on ABM training. Show them how to use their own activity accounting reports to define, implement and measure improvement action plans for their department.

Training that uses generic ABM examples or case studies do not convince skeptical employees that question the principles and benefits of activity measurement. Adults, however, rarely argue with their own data. Therefore, training that combines “older” and proven continuous improvement techniques with the “newer” ABM data works best. The three most common options companies use to train non-financial employees are: (1) provide each employee a copy of the book Using ABM for Continuous Improvement workbook and require them to submit to senior management for approval an activity cost improvement action plan; (2) hire an experienced ABM trainer to provide an onsite workshop using your actual ABM data; or, (3) designate one or more qualified people in your organization to train and coach other employees on the proper use of ABM data.

Conclusion
Paul Strassmann, instrumental in introducing ABM to the U.S. Department of Defense during the Bush administration, says, “The excellent executive cannot be considered to be productive if the rest of the organization cannot translate his intentions into results.” Strassmann emphasizes in his book, Information Payoff, “the productivity of management must be measured by its performance as a team, rather than by summing up individual efficiencies.”

One PC-based ABM software model with a lone user will not result in lasting efficiencies.  Building a team of knowledgeable ABM users is absolutely imperative if maximum ABM benefits are to be achieved in any organization.  Make ABM data and knowledge readily available to everyone that needs it. Don’t allow anything or anyone, especially yourself, to be the constraint that restricts the effective use of ABM in your organization.

 

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Tom Pryor
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