Value-Based Management in Government by Douglas W. Webster & Gary Cokins

Value-Based Management in Government by Douglas W. Webster & Gary Cokins

Author:Douglas W. Webster & Gary Cokins [Webster, Douglas W. & Cokins, Gary]
Language: eng
Format: epub
ISBN: 9781119660163
Publisher: Wiley
Published: 2020-01-29T00:00:00+00:00


It is a mistake for ABC/M project teams to refer to ABC/M as an improvement program or a new change initiative. When that occurs, managers and employees often label the new project as a fad, fashion, or “flavor of the month.” ABC/M information is simply used as a means to ends. It makes visible the economics of the organization and the consumption of resource expenses by its work activities and the outputs that consume them. Money is continuously being spent on organizational resources whether ABC/M measuring is present or not.

ABC/M is analogous to a physician's stethoscope that allows listening to one's lungs and heartbeat. Your heart is beating and you are breathing regardless of the presence of the stethoscope. In a similar way, an organization is continuously burning up its resource expenses through its processes and the work activities that belong to them, and it then traces the activity costs to who or what is consuming the resources. This is occurring whether ABC/M is monitoring these events or not.

The authors are deliberately dumbing down and understating ABC/M for an important reason. In the early 1990s, when ABC/M was beginning to get serious attention, the management consulting community began selling the system as consulting services. Unfortunately, in those days the consultants hyped and oversold ABC/M as a magic pill that could possibly solve all of an organization's problems. This raised management's expectations too high. If the consultants did not solve the problems that their client thought it had engaged them for in the first place, the blame fell on ABC/M for not working. But ABC/M worked just fine. It is simply full absorption costing, but done correctly – complying with costing's causality principle. It was just that some of the consultants did not accurately sell the system to their client – nor at times adequately understand how to interpret and use the ABC/M information. But that has changed now. The consultants have realized that their value-add is to help their clients solve their problems, and the ABC/M information is an important enabler to the solutions to those problems.

In many cases, organizations oversized the initial ABC/M system (e.g., with 1,000+ activities) well beyond the size needed to see results and get quick hits. It is important that an organization realize early on that ABC/M provides fundamentally good information to be used for understanding, discovery, and decision-making. Then ABC/M is better positioned for longer-term and wider acceptance. Chapter 14 describes the rapid prototyping with an iterative remodeling implementation approach that prevents oversizing ABC/M with a “right-sized” costing system that is good enough for better decision-making.

So, the authors are deliberately managing expectations about ABC/M by reducing one's perceptions that it provides all the answers. ABC/M restacks the costs but does not root them out. ABC/M's information can be a great enabler for providing answers; the key phrase is that it is an enabler.

There are many acronyms related to organizational improvement, TQM for total quality management and BPR for business process reengineering, to name a couple.


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