CASE STUDIES IN PERFORMANCE MANAGEMENT phần 1 docx

CASE STUDIES IN PERFORMANCE MANAGEMENTA Guide from the Experts TONY ADKINS John Wiley & Sons, Inc... CASE STUDIES IN PERFORMANCE MANAGEMENTA Guide from the Experts TONY ADKINS John Wiley

CASE STUDIES IN PERFORMANCE MANAGEMENT

A Guide from the Experts

TONY ADKINS

John Wiley & Sons, Inc.

00_fm_4611.qxp 1/23/06 12:42 PM Page iii

CASE STUDIES IN PERFORMANCE MANAGEMENT

00_fm_4611.qxp 1/23/06 12:42 PM Page i

CASE STUDIES IN PERFORMANCE MANAGEMENT

A Guide from the Experts

TONY ADKINS

John Wiley & Sons, Inc.

00_fm_4611.qxp 1/23/06 12:42 PM Page iii

This book is printed on acid-free paper

Copyright © 2006 by SAS Institute All rights reserved.

SAS and all other SAS Institute Inc product or service names are registered trademarks or marks of SAS Institute Inc in the USA and other countries ® indicates USA registration Other brand and product names are trademarks of their respective companies.

trade-Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers,

MA 01923, 978-750-8400, fax 978-646-8600, or on the web at www.copyright.com Requests to the publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, 201-748-6011, fax 201-748-6008, or online at http://www.wiley.com/go/permissions.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts

in preparing this book, they make no representations or warranties with respect to the accuracy

or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose No warranty may be created or extended by sales representatives or written sales materials The advice and strategies contained herein may not be suitable for your situation You should consult with a professional where appropriate Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

For general information on our other products and services, or technical support, please contact our Customer Care Department within the United States at 800-762-2974, outside the United States at 317-572-3993 or fax 317-572-4002.

Wiley also publishes its books in a variety of electronic formats Some content that appears in print may not be available in electronic books.

For more information about Wiley products, visit our Web site at http://www.wiley.com.

Library of Congress Cataloging-in-Publication Data

Case studies in performance management : a guide from the experts /

[edited by] Tony Adkins.

p cm.

Includes index.

ISBN-13: 978-0-471-77659-8 (cloth) ISBN-10: 0-471-77659-9 (cloth)

1 Activity-based costing—Case studies 2 Managerial accounting—Case studies.

3 Cost accounting—Case studies 4 Performance—Management—Case studies.

5 Industrial management—Cost effectiveness—Case studies I Adkins, Tony (Tony C.) HF5686.C8C295 2006

Printed in the United States of America

10 9 8 7 6 5 4 3 2 1

Dedicated to my wife, Judy, for her unselfish support and

dedication to our family

To our three children, Justin, Brendan, and Colin

Thanks!—Go Cougs!

00_fm_4611.qxp 1/23/06 12:42 PM Page v

2 LubeOil: Shaping Business Today and in the Future 21

3 HomeHealth: Delivering Activity-Based Costing 39

4 SuperDraft: Activity-Based Costing/Management and Customer Profitability 65

5 Canarus: Performance Management—The New

Ammunition for Armed Forces 81

6 Standard Loan: Interest in Activity-Based Costing

9 Wendals Foods: Managing Customer Profitability

with Activity-Based Costing Information 135

00_fm_4611.qxp 1/23/06 12:42 PM Page vii

10 Veri Glass: See Clearly with Activity-Based Costing? 149

11 ABC Airways: Implementation Lands Millions in Process Improvement Savings 159

12 Power & Light Gets a Charge Out of Activity-Based

Costing/Management 169

13 OBOK Food Company: Right Ingredients Cook

Up Savings 175

14 Veterans Benefits: Discovering the Cost of Doing

Business Using Activity-Based Costing 181 Appendix 191

PREFACE

It has always fascinated me how energetic, passionate, and in some cases cal people get over a topic like performance management and cost management.Over the years I have seen discussions that could have doubled as death matchesover whether you should use a verb/noun description of an activity in an ABCmodel

fanati-I have always tried to boil it down to something simple To me, performancemanagement is optimizing your organization’s performance If you are successful

at using activity-based costing to understand your cost management, you are ably surfacing that information in a way that it can be used to make decisions.Many organizations use a scorecard for that It could be a true “Balanced Score-

prob-card,” as Robert S Kaplan and David P Norton describe in their book, The

Bal-anced Scorecard: Translating Strategy into Action or a simple metrics report.

Implementations that end in success typically use their cost information, in someway, for planning and budgeting They may not have matured to a completely in-tegrated system that automates their capacity information and their budget execu-tion, but at a minimum, they take a greater understanding of their costs into theirbudgeting process

Recently the fanaticism has been over methodology and modeling approach,top-down versus bottom-up, consumption based versus driver based, time- orevent-based versus traditional ABC All of these approaches are valid; however,there is no one-size-fits-all In the foreword of this book, Gary Cokins outlinessome of these approaches I have implemented ABC models with small and largecompanies in over 15 countries, and they have all used multiple approaches intheir cost model Some costs are driven with traditional drivers, some are drivenwith a rate-based driver, and some simply use traditional allocations None ofthese methodologies is new; ABC implementations have been using all of themsince the mid- to late 1980s There is expertise out there to help companies decide

on a best fit for them

The key, which you will see in many of these cases, is to evaluate your needswith a pilot project and design the model around your own needs

00_fm_4611.qxp 1/23/06 12:42 PM Page ix

This book is a collection of case studies taken from actual companies Thenames of the companies have been changed in the interest of anonymity Thisbook is for anyone who wants to gain a better understanding of performance andcost management and how activity-based costing is the basis for understanding anorganization’s cost structure.

Tony AdkinsMarch 2006

ACKNOWLEDGMENTS

Since beginning to work with activity-based costing models in 1994, I have hadthe good fortune to work and learn from some of the best companies and minds inthe world of cost management When I joined ABC Technologies in 1996 and met

my good friend Gary Cokins, I began to see the excitement that companies rience when they realized that they finally had found a way to understand their or-ganization’s cost and manage their performance

expe-In growing my understanding of cost management, there have been manywho have helped me either through mentorship, thanks Gary, or by working side

by side with me while implementing activity-based costing/management andscorecards at some of the world’s best-run companies

I cannot imagine where I would be today without my first experience owing the great Tim Carey in Hong Kong on my first real ABC consulting en-gagement I do not know if it was the work on the cost model or the times in theIrish pub in Kowloon, but I will never forget that experience

shad-It is important for me to acknowledge the people who help me grow and ture at ABC Tech; in particular, I can’t forget Chris Pieper, Mohan Nair, Bob Ru-bitschun, John Rutledge, Chris Dorrenbacher, Tom Puccetti, and Nancy Coderre,who always stood behind me and allowed me to travel the world and work withgreat organizations

ma-In addition, I want to thank those at SAS ma-Institute who have made this deavor possible: Jonathan Hornby, Dan Minto, Christiana Lycan, Julie Platt, andall of the people in SAS Publications, without whose help this would have beenimpossible

en-I am fortunate to have had the backing and input of the experts who tributed to each case by evaluating it and providing their insight I was humbled

con-by the fact that these great authors, consultants, and friends agreed to assist me con-bycontributing to this work Thanks to Gary Cokins, Tom Kang, John Miller, AshokVadgama, Jonathan Hornby, John Antos, Alan Stratton, Jeffrey Thomson, DonBean, and Professor Ed Blocher

00_fm_4611.qxp 1/23/06 12:42 PM Page xi

Finally, I cannot forget Sheck Cho, Natasha Andrews, and Helen Cho andeveryone at John Wiley and Sons for their willingness to work with me on the pro-ject and their flexibility and insight into the manuscript.

Tony AdkinsMarch 2006

xii ACKNOWLEDGMENTS

ABOUT THE CONTRIBUTORS

John Antos is president of Value Creation Group, Inc., an internationally

recog-nized consulting group providing innovative strategic and operational solutions inareas such as activity-based management/costing/budgeting, strategic planning,balanced scorecard, outsourcing, performance management, reengineering, qual-ity and value management Mr Antos has been president, chief financial officer,

treasurer, and controller of various companies He is the coauthor of Activity

Man-agement for Services Industries, Government Entities, & Nonprofit Organizations

and Driving Value Using Activity Budgeting (both from John Wiley & Sons).

Don Bean is product manager, Activity-Based Management Solutions, at SAS

Mr Bean sets the strategic direction for SAS Activity-Based Management tions He has spearheaded product management and development efforts for ac-tivity-based analysis, scorecarding, and financial management solutions at ABCTechnologies, which was acquired by SAS in March 2002 He is recognized glob-ally as an expert in activity-based management, appearing as a speaker for Bet-terManagement Live seminars in North America, Europe and Asia Before joiningABC Technologies, Mr Bean spent 10 years in sales and product managementwith Control Data and FaxBack

solu-Edward Blocher is a professor at the University of North Carolina, Chapel Hill.

He is the coauthor of Cost Management: A Strategic Emphasis, Third Edition and

Cases and Readings in Cost Management, Third Edition (both with

Irwin/Mc-Graw-Hill) His articles have appeared in The Journal of Cost Management,

Strategic Finance, and Issues in Accounting Education He received his B.A from

Rice University, his MBA in Business Administration from Tulane University,and his Ph.D from the University of Texas

Gary Cokins is the lead Strategist, Performance Management Solutions, with SAS,

the world’s largest privately owned software vendor He is an internationally nized expert, speaker, and author in advanced cost management and performance

recog-00_fm_4611.qxp 1/23/06 12:42 PM Page xiii

improvement systems He began his career as a strategic planner in FMC’s Belt Division and then served as financial controller and operations manager In

Link-1981 Mr Cokins began his management consulting career with Deloitte &Touche Next with KPMG Peat Marwick, he was trained on ABC by HarvardBusiness School professors Robert Kaplan and Robin Cooper He is the author of

several books: Performance Management: Finding the Missing Pieces (to Close

the Intelligence Gap), Activity-Based Cost Management: An Executive’s Guide

(both with John Wiley & Sons), Activity-Based Cost Management Making It

Work: A Manager’s Guide to Implementing and Sustaining an Effective ABC tem (McGraw-Hill), and Activity-Based Cost Management in Government (Man-

Sys-agement Concepts)

Songyu He is a product marketing manager for SAS Activity-Based Management,

the world’s leading software for activity-based costing and profitability ment In that position, he drives product marketing by ensuring SAS understandsthe costing and profitability analysis needs of companies in major industries, such

manage-as retail/CPG, banking, telecom, and others He hmanage-as also been the director of ternational Business Development with ABC Technologies and helped many or-ganizations across Asia Pacific deploy activity-based management systems

In-Jonathan Hornby is the director, Performance Management, Worldwide

Mar-keting, SAS In that position, he ensures that SAS understands and delivers agement solutions that help customers achieve their desired goals with a clearunderstanding of cost Doing this involves close collaboration with businessthought leaders from management schools to commercial and public sector orga-nizations Mr Hornby works closely with SAS research and development, strat-egy, and implementation teams globally Prior to joining SAS, he had 15 years ofbusiness experience in the financial sector in activity-based management, processreengineering, performance analysis, and marketing

man-Thomas M Kang is president and chief operating officer at CSMG, where he

leads the company’s strategic planning and operations Prior to joining CSMG,

Mr Kang spent 10 years at Mobil Corporation, in strategic planning, business formance evaluation, operations management, systems implementation, and orga-nizational reengineering While at Mobil, he led a global initiative on theimplementation of strategic business evaluation models involving market seg-mentation/evaluation/improvement/investment techniques; today those modelsare still in use

per-xiv ABOUT THE CONTRIBUTORS

John A Miller is director of Client Services, Arkonas Management Consulting

Services He is an internationally recognized expert and leading authority in thearea of activity-based management and related performance measurement and

process improvement initiatives He is the author of Implementing Activity-Based

Management in Daily Operations (John Wiley & Sons), which has been

pub-lished in four languages Mr Miller has over 35 years of experience, a large tion of which has been in industry, where he held the positions of chief financialofficer for a publicly held New York Stock Exchange manufacturing company andfor a privately owned independent exploration and production oil and gas com-pany In addition, he has held positions of corporate director for Strategic and Op-erations Planning for two other large, publicly held Fortune 500 companies As aformer partner at Arthur Andersen & Co and founder of his own consulting firm,

por-Mr Miller has led and conducted activity-based costing, performance ment, and process improvement consulting projects for the government and in awide variety of industries in the private sector As a subject matter expert at An-dersen, Mr Miller was part of the Cost Management Competency Center, re-sponsible for the development of Andersen’s worldwide cost managementconsulting practice, including the development of ABM methodologies, tools, andtraining

measure-Alan Stratton, CMA, CPA, is a product strategist and subject matter expert at

SAS He is also a board member and an active participant at CAM-I, a consortiumleading development of management methods and techniques in cost, process, and

performance management He is the coauthor of An ABB Manager’s Primer:

Straight Talk on Activity-Based Budgeting and Planning, Second Edition, and An ABC Manager’s Primer: Straight Talk on Activity-Based Costing (Institute of

Management Accountants), the leading introduction to activity-based costing/management (ABC/M) and capacity measurement and improvement Mr Strat-

ton’s articles have appeared in Management Accounting, Journal of Cost

Man-agement, Corporate Controller, CMA Magazine, and As Easy as ABC Prior to

joining SAS, he was an independent ABC/M consultant, director of Customer vocacy at ABC Technologies, and held financial management positions at CostTechnology, National Semiconductor, Atari, General Instrument, and GTE

Ad-Jeff Thomson is vice president, Research at the Institute of Management

Ac-countants (IMA), the world’s leading association for management finance andaccounting professionals He recently retired as chief financial officer, BusinessSales at AT&T, where he was responsible for an $18 billion revenue stream

ABOUT THE CONTRIBUTORS xv

00_fm_4611.qxp 1/23/06 12:42 PM Page xv