The role of Resource and Activity Drivers

On the most recent episode of Performance Management Edge, Mitch answers a question by Safdar Imam: What is the role and importance of identifying correct “Activity Drivers” and “Resource Drivers” in planning/ managing profitability in service industries?

This turned out to be too complex for one single response, and I chose to break it into a two-part response, with the first on Resource Drivers and the second on Activity Drivers. I’ll update when the second part is released. For both, I rely on the underlying framework of the CAM-I Cross.

I make the case that the use of fixed resource assignments certainly has its place, but for many organizations, it is critical to look at Time-Based assignments to more dynamically reflect the frequent changes that occur in many parts of service companies.

New Video: The Role of Activity Drivers in Service Businesses

Part 2 of the video response to Safdar Imam’s question is now live at PerformanceManagementEdge.com.

In searching for the elusive perfect activity driver, we frequently need to look to see what drivers are practically available, and use them in conjunction with factors to build a model efficiently. In the case of time-based drivers, building consumption models often requires us to use an activity driver – such as number of business days – that is not measured by cost object. While this gives us a true measure of activity consumption, a push-down of costs to the cost object level is then required.

Watch the full video – following John Miller’s segment – for more information. And be sure to send new questions on the PerformanceManagementEdge site.

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The Case for Finance Improvement

The new focus on analytics and “big data” is having major changes on organizations, as they strive to focus on niche business areas as a more focused and analytical approach to driving performance improvement. Companies will be increasingly relying on micro-customized products, services, marketing approaches and channels as they seek to improve profitability.

Defining “Cost Consciousness”

A more rigorous approach to measuring and managing costs across multiple dimensions provides greater sustainable impact than across-the-board cuts, or short-term efforts to meet budgets. Central to this is the use of better tools and techniques to measure and – more importantly in my opinion – communicate cost measures in a transparent and actionable way.