TAPPING THE FULL-POTENTIAL OF ABC

Many companies have used activity-based costing in onetime profitabili ty studies. But when companies integrate ABC into critical management systems and use it to make day-to-day decisions-when they use it as ac tivity-based management - it becomes a powerful tool for continuously rethinking and improving a business. Most managers do not realize that implementing activity-based management is a major organizational-chan ge effort that involves a tremendous amount of work. The biggest obsta cle is resistance from employees. The authors focus on two companies - Chrysler Corporation and Safety-Kleen Corporation - whose success in implementing activity-based management can serve as a model for other companies. The benefits they have reaped have been 10 to 20 times thei r investments in their programs. Both companies persuaded critical emp loyees, such as plant managers, to give activity-based management a tr y, then used their success to persuade others. They tackled ongoing bu siness problems to show, rather than tell, employees how activity-base d management could expand the business and, as a result, jobs. Both be gan with one plant, then methodically rolled the system out into the e ntire organization, involving local managers at each stage. Both inves ted in educating employees at all levels in the principles and mechani cs of activity-based management. And once it had been introduced at a work site, both quickly dumped the old accounting system.