Activity Based Management (ABM) provides a window to peep into the way activities in an organization have been taking place. This is turn opens up innumerable opportunities to 'lower down the costs' being incurred by way of infusion of resources. In this regard, BSC exists to provide a device for ensuring that the process occurs in 'expected' manner. The various perspectives that can help are- '% decrease in consumption of resources', 'process cost drop', '% of products meeting the minimum profit level' and 'increase in net margins' for knowing the Financial Standing of the organization. Customer profitability can be obtained with metrics like 'successful strategy index', 'strategy execution ratio', 'fraction of customer base labelled profitable' and 'customer base rise ratio'. Internal Operations can be obtained with metrics like 'average process efficiency', 'process modification index', 'number of other management disciplines ABM is associated with' and 'number of cost-effective product designs'. Lastly, Quality and Growth Perspective can be attained with metrics like Training: Revenues ratio', '% rise in successful strategies', 'drop experienced in time taken for decision making tasks' and 'key activities quality enhancement ratio'.
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Activity based management takes ahead the concept of activity based costing by incorporating value chain analysis and re-engineering steps to bring an ultimate improvement in the processes. Due to this reason, it is often termed as a way for 'managing activities using ABC'. The betterment through this ABM methodology is at both the operational and strategic level. The administration subject is taken care of by going with ABM scorecard.
After one has identified and allocated costs to various activities using activity based costing approach, those need to be managed to keep costs at reduced levels; this latter action falls in the domain of activity based management.
Consequently, activity based management helps in realizing the basic aim of 'adding to the customer value'.
This idea of managing activities using ABM is often broken down in to two categories- Operational ABM and Strategic ABM.
Looking at Operational ABM, one finds that it is about 'doing things right' for which the information derived from ABC is used. Activities that are found to have a 'neutral stand' when it comes to value addition to products are eliminated as these instances hold back the products from achieving full potential.
Strategic ABM revolves around 'doing right things'. This is to say that one gets to know about which products to develop and which activities to be employed for the purpose. The usage of this type of ABM has been stretched to know which customers are more profitable than others, thereby making it possible to concentrate on this group.
This is the actual scorecard with Activity Based Management Performance Indicators and performance indicators. The performance indicators include: financial perspective, % decrease in high consumption of resources, process cost drop, % of products meeting the minimum profit level, increase in net margins, customer profitability perspective, successful strategy index, strategy execution ratio, % of customer base labeled as profitable, customer base rise ratio, internal operations perspective, average process efficiency, process modification index, number of other management disciplines abm is associated with, number of cost-effective product designs, quality and growth perspective, training: revenues, % rise in successful strategies, key activities quality enhancement ratio, drop experienced in time for decision making tasks.
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