Value-Based Management in Government

CHAPTER TWELVEUsing ABC/M Attributes to Assess Quality and Value-Add

PUBLIC SECTOR ORGANIZATIONS NEED to distinguish among work activities that are:

• Not required at all and can be eliminated (e.g., a duplication of effort)
• Ineffectively accomplished and can be reduced or redesigned (e.g., due to outdated policies or procedures)
• Required to sustain the organization (i.e., work that is not directly caused by making products or delivering services but cannot easily be reduced or eliminated, such as building security
• Discretionary and can be eliminated (e.g., annual employee picnic)
• Directly related to core activities (i.e., making products or delivering services)

ABC/M systems provide for distinguishing these work activities either by incorporating them into a cost assignment structure (i.e., organizational sustaining cost objects) or by tagging their costs as an overlay (i.e., attributes). ABC/M attributes described in this chapter address the third question related to activity analysis.

ATTRIBUTES ENERGIZE ABC/M COST DATA

Organizations have very few insights about how their individual costs – for products, service recipients, or business processes – vary among themselves aside from the amount of the cost. Traditional cost accounting methods do not provide any way for individual costs to be tagged or highlighted with a separate dimension of cost other than the amount that was spent. An example of the range of one tag that can be scored against activities is “very important” ...