Managers are learning the language of quality and are attracted to ideas
which promote its tenets. Activity-Based Costing (ABC) is one of the latest ideas to be
promoted by consultants. In its message ABC uses the language of quality - process
improvement, empowerment and so on - but in the hands of those with a traditional attitude
it becomes no more than a sophisticated control tool.
ABC encourages the costing of all activities involved in providing a
product or service. In simple terms, the approach is to map the process flow and then
calculate the costs of the activities which make up the product or service.
Every manager of a unit with an involvement in product or service X is
asked to estimate the number of people involved and the percentage of their time given to
X. They then calculate the total cost of the work. The information, provided it is
reliable (which is doubtful), is used to identify where costs may be too high. But
managers are also encouraged to use it as a means of improving performance. In this
regard, the information is not so useful. It might encourage good questions such as 'Why
are the costs so high here or there?' - but is also likely to encourage 'attention to
output' and the associated problems of managing by numbers. |
