Performance Management Solutions

What is Activity Based Management?

Activity Based Management (ABM) is simply the application of Activity Based Costing (ABC) information to better inform a wide range of management decision-making.

Activity Based Management Issues

Management reporting and control

Managers at all levels in an enterprise need to understand their performance against plan on an on-going basis and in a language they can readily understand.

Conventional financial and management accounts fail in that they use the language of expense headings as found in the General Ledger. However, manager can much more easily relate to the resources at their disposal and to the activities undertaken with those resources.

A well-grounded Activity Based Costing model of an enterprise should lift management expectations of what an Activity Based Management System can deliver on an on-going basis.

Until now, updating and reporting an ABC model on a monthly or quarterly basis has often proved to be too work intensive for many, and ABM has lapsed, despite the initial promise.

However, a revolutionary approach has been developed in conjunction with Asea Brown Boveri (ABB) that overcomes these long-standing difficulties and now offers the opportunity of routine activity-based management reporting and control without the unnecessary burdens of the past.

Resource management and cost management

To manage costs proactively, it is critical to recognise that they are incurred in the acquisition of resources that in turn are needed to undertake activities that generate outputs.

Managing activities therefore facilitates the management of resources, and managing resources facilitates the management of activities.

This is "cause-and-effect" in action and distinguishes a well designed ABC implementation that delivers actionable results from an "also ran" that simply apportions costs. The following diagram illustrates this "cause-and-effect" relationship.