Q&A with St.George Bank Limited - Customer Service Institute of ...

ABC doesn’t eliminate or change costs, it provides data about
how costs are actually consumed.
ABC doesn’t eliminate or change costs, it
provides data about how costs are actually
consumed. In the above example, if you wanted
to reduce costs using traditional data you would
have to decrease salaries, or decrease costs of
supplies. You don’t know enough to change the
forms, processes or overhead costs. In order
to correctly associate costs with products and
services, ABC assigns cost to activities based
on their use of resources. It then assigns cost
to cost objects, such as products, processes,
rework or customers, based on their use of
activities. This information assists in making
decisions about pricing, outsourcing, capital
expenditures and operational efficiency.
Customer service improvement teams can
use ABC to determine the cost and benefits
associated with their reengineered processes
and systems. This cost and benefit analysis will
then become part of the overall business case
for the project.
An ABC approach will account for:
• Activities/processes (comparing before and
after the customer service improvement
project)
• The frequency and cost of the activity/
process (comparing before and after the
customer service improvement project)
• The do-nothing scenario (what would happen
if we do not do the project)
• Which processes provide value (i.e. are
needed to attract and retain customers,
result in operational savings)
The steps needed to develop ABC data
include:
Step 1: Define the major business processes
and key activities of the organisation
(Process and Customer Touchpoint
Mapping).
Step 2: Trace operating costs and capital
charges to key activities. Use existing
accounting and financial data which
includes labour and capital equipment
expenses and any other resource that
can be changed/eliminated. Some
reports to analyse include: budget,
general ledger, supplier invoices.
Step 3: Link activities to processes and identify
the cost drivers. The best way to do
this is to actively engage the doers
of the process. Have the doers of the
process identify where the costs
come from – then seek out data from
that source.
Step 4: Summarise the total costs for each
process.
Step 5: Once processes are reengineered then
the “new” costs must be tabulated.
Finance as a Business Partner
A key decision made at the design stage of
the customer service improvement project is
that finance has to be involved in the customer
service improvement project from the very
beginning. This may sound easy, but in fact it is
not, especially in the beginning. Many operations
people see the finance people as bookkeepers,
scorekeepers or auditors. Operations people
typically do not like it when “those finance guys”
get involved in operational decisions. This is the
first big barrier to overcome.
Throughout the process, finance works closely
with teams to identify the benefits of a given
project. Many times projects actually report
more benefits than process owners originally
envisioned due to insight provided by the
finance representatives. During this period,
finance and the process owner agree on how
the benefits will be calculated once the project
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