Activity-Based Management for Financial Institutions: Driving Bottom-Line Results

APPENDIX

ABC Model and Cost Object Reporting Rules and Assumptions

It is important to set ground rules early in the ABC implementation. This includes high-level ABC model and output rules and assumptions. Since the outputs—particularly the cost object reports—are defined early in the project, it is important to create the ground rules for the outputs first. This section contains an example of rules set within the first month of an ABC implementation at an Information Technology Shared Services organization.

MODELING RULES AND ASSUMPTIONS

Zero Profit Model

The intent of the model is to drive all Shared Services expenses to the appropriate Business Units (BUs). Shared Services also consumes their own resources, but these expenses will be re-assigned to BUs. This re-assignment will be driven to BUs based on their overall Shared Services consumption. The re-assignment will be a single line item on the consumption report.

Activity Relevance

Only activities requiring a minimum of five full-time equivalents (FTEs) or a monthly cost of $40,000 will be used in the costing model. While detailed information regarding most activities will be available using the Planview information, this information will be rolled up for ABC purposes. This modeling rule provides detailed costing information without dropping below managerially relevant information.

E-mail, Meetings, and Other Micro Tasks

E-mail, meetings, and similar micro tasks crossing multiple activities are not listed as tasks ...