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Steps involved in Activity Based Management (ABM)

Click here to know about, Activity Based Management (ABM) and its Strategic Implications.

The steps necessary for process view of Activity Based Management (ABM) are as follows.
  • First step is to develop a clear mission statement.
  • Second one is to determine the core processes and the major cost objects.
  • Next step is to identify the supporting processes and then form the process teams.
  • In the fourth step, the teams should be formed in such a way that the employees should have required skill set to perform the task given to them.

Now, the strategic objectives of each process should be defined. After that long term goals such as operating objectives should be set. The main activities in each process have to be identified. Each process or activity center should be measured with the help of performance indicators which may financial or non-financial measures. After measuring, the cost drivers for each process should be identified and the necessary measures should be taken. When a new system like Activity Based Management (ABM) is introduced, care should be taken that employees understand the system and are well oriented which result in desirable output.

ABM principles can also be used for budgeting, resource allocation, performance evaluation, pricing etc. It gives accurate measurement which is relevant for taking managerial decisions. 


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