The new business process called activity-based management
(ABM), is a fundamentally different process than what was understood and used by
U.S. companies in the past.
ABC was seen as a "quick fix" for
declining profitability or productivity.
Generally failed to examine underpinning of management
training and also to challenge the basic business process employed.
It takes for granted that our way of doing business is the best
Financial community example.
Need to benchmark business principles and processes against
"best in class" practices globally.
ABC to ABM: A shift in management.
"ABC is to advanced cost management what a windshield is
to an automobile."
Moving toward an organizational structure that facilities a
cross-functional view of the effectiveness of activities and business
ABC is the language used to communicate in the new
Previous failures of the implementation of ABC have
occurred due to companies failing to change their business processes.
For ABC to work, this must be one of a set of
cultural change initiatives
ABM is the umbrella structure for the cultural change (see
Exhibit 1). Without implementing and understanding other initiatives,
implementation of ABC is unlikely to succeed.
What is ABM?
Requires a re-education of the organization from the top to
Activities are the common denominator in the business process
Only universal measures for global competition today involve
the time and resource consumption of activities that support business
This is a total cost management approach.
Causes for organizations’ decline
Continual focus on short term financial measures versus focus
on performance measures.
Manifests into disjointed management initiatives with
narrow focuses. Many organizations do not understand the broader
context in which they should be viewed.
U.S. business needs to focus on the performance criteria
that all global competitors can use as a common denominator—productivity and
efficiency of activities that support value adding business processes.
Taken up the banner of quality without being able to define
the activities that add value to the quality initiative.
ABM is a facilitator of all these management initiatives
Gives an organization a common basis for understanding how to
evaluate cause and effect to facilitate productive.
The change process: making it happen
Focus on establishing a senior-level, cross-functional team
to evaluate and continually monitor the competitive factors affecting the
Performance measurement must be the focus.
Be clearly defined - driven by the strategy of the firm.
Evaluate financial and nonfinancial effectiveness both
internally and externally.
Champion the change process by re-educating the work force.
Tying the reward system to financial performance but also
to the continuous improvement of activities that advance the strategy of the
organization and improve the business processes enhances continuous
Conclusion: We are a country that has the ability to meet
challenges with insight and ingenuity. However, it will take cooperation between
the leaders of government, industry, and our unions to forge a new and
responsive industrial bases for global challenges ahead.