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Best practices in benchmarking

01 Sep 2003 | (News)

Activity-based management study benchmarks best practices Arthur Andersen, in cooperation with the APQC (the American Productivity & Quality Center), will kick off the new year with ABM (Activity Based Management) benchmarking studies looking at best practices in shared services and information technology (IT). Tom Freeman, Arthur Andersen's project director, is currently looking for additional companies to participate in the study either as a sponsor or as a best practice partner.

Entitled ABM 2000, the study will enable participants to discover how leading organisations use ABM to measure effectiveness in shared services. While the major focal point of the study will be on shared service issues, Freeman says they will also be focusing on the management of IT infrastructure and applications within the shared services context. Benefits of participation include faciliated half day site visits to leading organisations, written site visit summaries, formal knowledge transfer and networking sessions, hardcopy and electronic study reports, and presentations by leading academic researchers and copies of final reports from three previous ABM best practice studies.

Freeman tells the Bulletin that traditionally organisations have managed their finances by using a general ledger view of cost. What's different about ABM, however, is that it assigns costs to the activities that the organisation actually performs, the processes that consume those activities and subsequently to the things that cause costs to be incurred. "ABM essentially assigns costs to the business drivers of each activity," says Freeman. Consequently, ABM is critical in a shared service environment because charge outs, transfer prices and service level agreements are established based on business activities. Organisations need to be able to understand and effectively manage those associated costs, he says.

There are two categories of participants in the study, says Freeman. "Ideally, a sponsor will be a company currently operating in a shared services environment or is looking at moving to one", he says. "These may be companies that are looking for better ways of managing their costs of shared services, but may or may not have adopted ABM as a solution and are looking for ways to gain insight into how leading companies are using this approach." The second group, the best practice partner company, will have multiple years of ABM experience in a shared service environment and are looking to share their expertise with the sponsor participants through dialogue and on-site visits.

Freeman says the study will focus on two major areas: one will be a strategic focus on how companies use ABM to quantify the cost and performance improvements that can be achieved by moving to a shared services environment. The second will focus on using ABM for the ongoing management of shared services in terms of understanding the cost of service provision as well as establishing transfer prices or charge outs to internal and external customers that consume these type of services. ABM can also be an integral part of establishing and managing the cost of service levels that are contained in service level agreements.

Freeman says that a number of companies, located primarily in the U.S., have already been identified as Best Practice Partners. Freeman encourages any other organisations interested in ABM particularly as it relates to shared service operations to get involved in the study.

For further information please contact Tom Freeman at Arthur Andersen in Dallas, Texas at + 1-214-698-5463 or via e-mail at tom.freeman@us.arthurandersen.com

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