CASE STUDIES IN
PERFORMANCE
MANAGEMENT
A Guide from the Experts
TONY ADKINS
John Wiley & Sons, Inc.
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CASE STUDIES IN
PERFORMANCE
MANAGEMENT
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CASE STUDIES IN
PERFORMANCE
MANAGEMENT
A Guide from the Experts
TONY ADKINS
John Wiley & Sons, Inc.
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This book is printed on acid-free paper.
Copyright © 2006 by SAS Institute. All rights reserved.
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Library of Congress Cataloging-in-Publication Data
Case studies in performance management : a guide from the experts /
[edited by] Tony Adkins.
p. cm.
Includes index.
ISBN-13: 978-0-471-77659-8 (cloth)
ISBN-10: 0-471-77659-9 (cloth)
1. Activity-based costing—Case studies. 2. Managerial accounting—Case studies.
3. Cost accounting—Case studies. 4. Performance—Management—Case studies.
5. Industrial management—Cost effectiveness—Case studies. I. Adkins, Tony (Tony C.)
HF5686.C8C295 2006
658.4′013—dc22 2005029726
Printed in the United States of America
10987654321
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Dedicated to my wife, Judy, for her unselfish support and
dedication to our family
To our three children, Justin, Brendan, and Colin
Thanks!—Go Cougs!
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vii
CONTENTS
Preface ix
Acknowledgments xi
About the Contributors xiii
Foreword xvii
1 Performance Management 1
2 LubeOil: Shaping Business Today and in the Future 21
3 HomeHealth: Delivering Activity-Based Costing 39
4 SuperDraft: Activity-Based Costing/Management and
Customer Profitability 65
5 Canarus: Performance Management—The New
Ammunition for Armed Forces 81
6 Standard Loan: Interest in Activity-Based Costing
Rates High 95
7 Sierra Trucks: Trucking along with Activity-Based
Cost/Management 109
8 Sierra Trucks: Implementing Real Activity-Based
Budgeting 117
9 Wendals Foods: Managing Customer Profitability
with Activity-Based Costing Information 135
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10 Veri Glass: See Clearly with Activity-Based Costing? 149
11 ABC Airways: Implementation Lands Millions in Process
Improvement Savings 159
12 Power & Light Gets a Charge Out of Activity-Based
Costing/Management 169
13 OBOK Food Company: Right Ingredients Cook
Up Savings 175
14 Veterans Benefits: Discovering the Cost of Doing
Business Using Activity-Based Costing 181
Appendix 191
Final Thoughts 199
Resources 205
Glossary 211
Index 233
viii CONTENTS
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ix
PREFACE
It has always fascinated me how energetic, passionate, and in some cases fanati-
cal people get over a topic like performance management and cost management.
Over the years I have seen discussions that could have doubled as death matches
over whether you should use a verb/noun description of an activity in an ABC
model.
I have always tried to boil it down to something simple. To me, performance
management is optimizing your organization’s performance. If you are successful
at using activity-based costing to understand your cost management, you are prob-
ably surfacing that information in a way that it can be used to make decisions.
Many organizations use a scorecard for that. It could be a true “Balanced Score-
card,” as Robert S. Kaplan and David P. Norton describe in their book, The Bal-
anced Scorecard: Translating Strategy into Action or a simple metrics report.
Implementations that end in success typically use their cost information, in some
way, for planning and budgeting. They may not have matured to a completely in-
tegrated system that automates their capacity information and their budget execu-
tion, but at a minimum, they take a greater understanding of their costs into their
budgeting process.
Recently the fanaticism has been over methodology and modeling approach,
top-down versus bottom-up, consumption based versus driver based, time- or
event-based versus traditional ABC. All of these approaches are valid; however,
there is no one-size-fits-all. In the foreword of this book, Gary Cokins outlines
some of these approaches. I have implemented ABC models with small and large
companies in over 15 countries, and they have all used multiple approaches in
their cost model. Some costs are driven with traditional drivers, some are driven
with a rate-based driver, and some simply use traditional allocations. None of
these methodologies is new; ABC implementations have been using all of them
since the mid- to late 1980s. There is expertise out there to help companies decide
on a best fit for them.
The key, which you will see in many of these cases, is to evaluate your needs
with a pilot project and design the model around your own needs.
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This book is a collection of case studies taken from actual companies. The
names of the companies have been changed in the interest of anonymity. This
x PREFACE
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