Implementation of Activity Based Accounting and Organizational Performance

Abstract

The study consisted of five chapters: an introduction, literature review, methodology, discussion, and a summary and conclusion.  The study focused on Activity Based Costing or ABC as tool used to expense operating costs focusing on a case study of Global Home Loans, United Kingdom.  This meant defining ABC and examining its history and future as an accounting tool.  The purpose of the study was to do an in depth look at ABC implementation with relation to organizational performance.  This led to examining factors found within corporate culture that challenge implementation.  It also found that with proper management of communication, values toward being a learning organization and leadership in place, implementation of ABC and its software, as a framework can create higher levels of performance and a more cohesive organization. 

A methodology of case study focusing on Global Home Loans in the United Kingdom acted a framework for understanding ABC implementation and organizational performance levels.  Managers use models like SWOT and Porter’s Five Forces to analyze the usefulness of tools like ABC.  These tools allowed issues of performance to be addressed and results in a better implementation strategy.  Still the vary nature of implementation means change and with change results implications that need to be discussed.  While the implications of increased productivity, innovation, creativity and increased knowledge in the work place can be seen as positives, the negatives of such implementation must be addressed.

Introduction
In today’s global marketplace, it is necessary to introduce the concepts of e-business for an organization to survive by improving communication and learning.  This means using Activity-Based Cost systems or Activity Based Costing software (ABC) throughout the organization for easier accounting of operating costs and work processes.  By adopting such systems, it is hoped that communication and work processes will be seamless. The fact remains computers are not far from an individual’s desk, these machines are available to make-work easier, to incorporate new and accurate information into the day to day operational processes of an organisation.

This work will examine the general view of ABC and its relationship to organizational performance.  Because of investigation into this relationship, it was also important to explore issues of organizational behaviour and how they relate to implementation of tools like ABC.  Does this present limitation for the performance of ABC?

An effective ABC system should not only be a tool used to account for expenses but also should aim at making different organizational tasks easier.  In this respect, it is important for an organization understand how an ABC system works and how it will function within its reality to make the art of communication and work processes seamless.  By understanding the outcomes of a specific case study and related examples found in literature, one can reflect on the future of ABC systems within the organizational culture.  It is important to look to future applications to understand how technology influences present processes.

         The key concept of ABC is to addresses internal operating concerns and is an augmentation to the traditional General Ledger based cost management system. It is not a replacement for traditional accounting, but makes use of the source documents provided from standard job costing systems.  Instead of being heavily labour based, ABC looks at a business unit’s events as cost drivers and ascribes all company resources and accumulated costs against those events in a time-phased sequence.  Revenue tracking provides management with a different perspective on the profitability of products and services, providing insight into pricing.  Middle management and technical performing organizations are involved in the line item reporting provided within the ABC system, enabling management to achieve more responsibility of reported information throughout all levels of the organization. ABC is being professed by the accounting industry as the wave of the future and is gaining broad acceptance within larger organizations. This system is intended to serve performing entities and management alike. The key ingredient is integration: that is true integration, of scheduling and cost management systems.

Hypotheses:

     Yes, ABC influences organizational performance.  Yes, because of tools like ABC being utilised by organizations, organisational cultural values are influenced.  Yes, use of technologies resulting from globalisation and increased communication, changes the environment in which management makes decisions about ABC implementation.  Yes, there are implications to such enhancements warranting discussion.

Statement of the Problem

The subject of Activity Based Costing (ABC), its framework, convenience and implications/problems of implementation were assessed in this research to correlate with actual surveys conducted in a case study of Global Home Loans and case study example found in the literature.  This can be used as Methodology.

            The overall objective of the study is to investigate rather or not the implementation of activity based costing methods has an impact upon organisational performance and if so, what are the impacts?  With this in mind, it is important to examine the general view of ABC and show proof of the relationships expressed above.  The research presented here enhances other elements of ABC because it looks at the bigger picture of how organizational behaviour plays a larger role in performance.  The research also looks at models that managers use to make decisions for implementation.  These models are SWOT and Porters Five Forces.  Previously factors for performance have been addressed in numerous studies with relation to technological changes, issues of motivation and marketing but not with respect to accounting practices like activity based costing.  These research findings are different because of its context and specific focus on direct relationships between organizational tools (ABC), organizational values like leadership and motivational programs and influences on performance.  These ideas will be explored in Chapter 2: a review of literature and discussed in Chapter 4: Discussion.  Chapter 3 details the methodology used to construct the study and focused on a specific case study as well as highlights of existing literature.  Chapter 5 concludes the work by exploring the future of ABC in a changing work environment.  This chapter will also reflect upon issues existing for organizations as they implement tools like ABC.

Case Study Company Profile: United Kingdom, Global Home Loans
As globalization and telecommunications makes the world a smaller landscape in which to do business, Mozilo and Loeb of America’s Countrywide Financial Corporation looked to international markets where the concept of the American Dream could be translated.  As a result, Global Home Loans, a joint venture was born.  The joint venture is mutually beneficial as Global Home Loans has gained the infrastructure to compete and Countrywide has established a global presence, which will only strengthen as years go by regardless of the economy.  Residents of the world will always need housing and these companies offer the means in which to make that possible.

Global Home Loans or GHL is a revolutionary force in the United Kingdom mortgage market offering mortgage processing and loan servicing to established and new lenders.  The need for third party mortgage administration is becoming increasingly important in a marketplace characterized by intense competition, shrinking margins and an increasingly complex regulatory framework.  The key benefits, which GHL can deliver, include faster processing of mortgage applications, increased profitability, improved customer service and access to new distribution channels.

GHL is the United Kingdom’s largest end-to-end third party mortgage administrator, with a current servicing portfolio of over £55 billion and Mortgage Processing Centres across the country (Global Home Loans 2005).  GHL was established in May 1999 to provide mortgage processing and servicing to third party customers.  It is managed by its majority shareholder, Countrywide Financial Corporation, whose primary subsidiary, Countrywide Home Loans, Inc., is the second largest independent residential mortgage lender and servicer in the United States.  GHL’s vision is to improve the efficiency and lower the cost of mortgage processing and servicing while providing substantially improved levels of service to its customers.  With a staff 1800 employees, the organization currently handles up to 28,000 applications a month and service 1.2 million loans (Global Home Loans 2005).  Global Home Loans utilizes a distinct management focus on improving processes, technological innovation, quality assurance and staff training.  The company remains committed to providing superior levels of service and value for its customers and superior conditions of employment and recognition for its staff.  GHL’s overall objective and goal is to become the leading mortgage processor and servicer in the UK and Europe.
Review of Related Literature

Activity Based Costing

Cooper describes two stages in the ABC model (Cooper, 1987a; Cooper, 1987b). In the first stage, costs are assigned to cost pools within an activity centre, based on a cost driver. There is no equivalent step in a traditional costing approach. In the second stage, costs are allocated from the cost pools to a product based on the product’s consumption of the activities. This stage is similar to a traditional costing approach except that the traditional approach uses solely volume related characteristics of the product without consideration for non-volume related characteristics. Some examples of cost drivers not related to volume include setup hours, number of setups, ordering hours, and number of orders. Allocating non-volume related costs using volume-based methods distort the product costs.

The procedure of applying fixed costs to products through a cost mark-up percentage, based on some reasonable measure of activity in a department (machine-hours in fabrication, labour-hours in assembly), had its origins in the financial accounting requirement to allocate all production costs to items produced. This system works well at the aggregate level of financial statements – to obtain values for inventory and cost of sales – and is generally inexpensive to operate.  However, the system can produce enormous errors in attributing the consumption of production resources to individual products (Kaplan and Atkinson 1989).

In an activity-based system, the cost of a product is the sum of the cost of all activities required to manufacture and deliver the product. The allocation bases used by activity-based cost systems are termed cost drivers.  However, in a business environment characterized by high technology manufacturing, overhead cost is a large percentage of total manufacturing cost. While overhead as a percentage of total manufacturing costs has steadily increased, the percentage of direct labour content has decreased (Ruhl and Bailey, 1994).

     Still the concept of ABC is relatively new on the scene due to incorporation of new technologies used by corporations like Toyota, for instance the Just-In-Time method of workflow.  It is incorporating such tools into the process that change the way activities are allocated.  In this respect use or implementation of ABC software into a company wide system can be beneficial as it offers managers a means of overcoming the negative aspects of more traditional approaches cost allocation and older methods dating back to post World War II.  Traditionally, cost allocation has allocated products and services using on one driver, usually direct labour.  This has the potential to distort the image of cost estimates for an organization where the overhead is enormous.  This presents problems also for the changing organization.  No longer is overhead defined in such terms (Albright 2006, par. 3).  Another aspect of traditional methods also deflates the value of organization if the overhead is high for the global market.  This reduces competitiveness and has the potential to ruin a company’s brand identity.

         The action of implementing an ABC framework and utilizing such software now so prevalent in the business world creates a system with a two-stage allocation procedure and multiple drivers.  Stage one properly categorizes important activities and overhead costs in proportion with resources that have been utilized by the organization.

Cost drivers are then identified for each of these cost pools.  In stage two, the overhead is allocated from the cost pool to the final outputs, or cost objects, in proportion to the amount of the cost driver consumed.  When attributing costs, it is assumed that an organization has defined discrete output processes as events that drive costs. These events are then categorized as either First or Second Stage.

A First Stage Event Cost Driver is one that is measured by its consumption of resources.  The consumption of resources determines the event’s costs, as each resource will typically have a cost per unit.  These events are only tracked by what they consume.

A Second Stage Event Cost Driver is one that is tracked by the event’s output.  Each piece or item produced within a process of events can have a per unit cost. The “per-unit cost” includes resource consumption and the event is tracked via each piece produced as a result of the task.  The ideal ABC system approach is to provide reporting capability on events or processes for both cost drivers.  The key point here is that all costs are incurred based upon the event.  Each event is linked in some way to the General Ledger so as not to conflict with the official book of record reported to owners, creditors and government tax agencies.  Thus, ABC is an extension of the traditional accounting system.

As events and resource consumption are time phased, costs are also time phased.  It is important to note that the ABC system provides a methodology to allocate costs on the basis of actuals and their projections into the future.  ABC provides the ability to track and forecast both expenses and revenues.

         McMahon, et al, (1993, p.11) state that businesses which “have independent ownership, are not dominant in their field, and meet specific size guidelines which may include the number of employees or the net worth of the company” can be classified as small size business.  They also report that a manufacturing firm in Australia with less than 100 employees is considered to be small while for a non-manufacturing firm this figure is 20.  However, according to McMahon, et al, (1993, p.11) about 90 percent of small businesses in Australia employ 20 or fewer persons and the majority consists of fewer than 10 persons.  Justifying the advantage of small size in facilitating the diffusion of innovation, claims that a key factor in the continued existence of small firms lies in the behaviour of entrepreneurs and their propensity to innovate.  This means that facilitating diffusion of innovation in small business helps them to compete, otherwise large firms may capture the markets and this could be an important threat to the survival of small firms.  In other words, in addition to the other factors such as capital, and financial management, the facilitation of diffusion of innovations has an important role in the survival and of small businesses.  Supporting this argument, Shields and Young (1994, p. 175) state that, increasingly, small firms are gaining competitive advantage through innovative activity.  As small firms are expected to compete with large firms in the market, they always need to have better ability in diffusion of innovations in order to bring improvement in their products and services and to consider the introduction and production of new products, otherwise they could fail.

Companies must react quickly and manufacture high quality, low cost products to be successful in this new environment.  To make proper decisions, senior managers must have accurate and up-to-date costing information.  Traditional costing systems based on volume-based allocation of overhead have lost relevance in a manufacturing environment that has seen a sharp increase in overhead and a subsequent decline indirect labour.  These traditional costing systems tend to distort product costs and lead to poor strategic decision making (Kaplan and Atkinson 1989).

In this respect ABC can be seen as innovative when dealing with the deficiencies of traditional costing systems (Cooper,1988a; 1988b; 1990 Cooper and Kaplan).  This method can be used to trace overhead costs directly to cost objects, i.e., products, processes, services, or customers and help managers to make the right decisions regarding product mix and competitive strategies.  According to Cooper and Kaplan (1990), ABC can radically change how managers determine the mix of their product line, price their products, identify the location for sourcing components, and assess new technology.

Although the literature reports numerous ABC implementations in larger manufacturing firms, there has been limited accounting of ABC by small manufacturing firms (less than 100 employees) (Sheilds and Young 1994).  Upon closer examination, there appears to be several factors preventing small manufacturing firms from implementing an ABC costing system including lack of data, technical resources, financial resources, and adequate computerization.  Perhaps the main obstacle, lack of data, centres on the problem of collecting and processing the needed data in the correct format at a reasonable cost.  Because the information needed for ABC is costly and small manufacturing firms are typically constrained financially, these companies need to be very selective in the type of data and analysis that they use to determine overhead costs. Moreover, small businesses operate uniquely, a condition referred to as resource poverty, that requires specialized cost management approaches (Albright 2006, par. 4). Thus, a methodology that will enable a small company to obtain accurate product cost information yet minimize financial effort is needed.

From an historical standpoint, several large corporations such as Toyota and General Electric adopted this method of ABC in the late 1980s as more and more management leaders saw a need for measurement of each segment of the corporation’s performance (Kaplan and Norton 1998).  This in turn has changed the environment of the modern business world as it moves from one way of thinking to a higher plane of creativity.  Some of the benefits of such implementation can be recognized as reduction in costs and labour (Albright 2006, par. 2).  This is in turn spawns innovation and new opportunities for further competition (Drucker 1998, p. 149).  Using this method allows the organization to focus on factors that need improvement but also as a whole its health with respect to production levels and performance issues (Luthans 2000, p.  31).  It is because of such methods that new doors have opened to implement technologies and focus on internal organizational behaviours.  It has changed the face of business.  Still with that in mind, it has been found by research that acceptance of this method is slow to penetrate the work force (Cokins 2000, p. 1).  It is important to identify factors that work against such diffusion and for the sake of this paper, important to discuss issues of change and corporate culture values.  Change spawns a culture that is flexible but may also create culture that measures just numbers and not passion (Cokins 2000, p. 1).

Performance
To construct a general theory of performance, one must first examine different models or paradigms, which help to explain it.  These performance paradigms are themselves composed of movements of generalization, by which diverse activities are gathered together and conceptualized as performance.  The paragraphs below will focus on the Performance Studies paradigm.  It is analyzed both in terms of the challenge of social efficacy.  To theorize this challenge, one must look at its interdisciplinary origins, its practical and theoretical models, and the development of the paradigm over the past five decades.

The field of cultural performance that has emerged over the last half century includes a wide variety of activities situated around the world.  These include traditional and experimental theatre; rituals and ceremonies; popular entertainments, such as parades and festivals; popular, classical, and experimental dance; avant-garde performance art; oral interpretations of literature, such as public speeches and readings; traditions of folklore and storytelling; aesthetic practices found in everyday life, such as play and social interactions; political demonstrations and social movements.  This list is open to additions, subtractions, and debate, but from it one can see that cultural performance is cultural in the widest sense of the term, stretching from “high” to “low” culture, though its most ardent proponents stress its counter cultural aspects.  M.F. Ashley Montagu (1968, p. 3) defines culture “from the Latin cultura and cultus which means care, cultivation or allowing to grow something”.  Originally the connotation attributive reflected “agriculture or cultivation of the soil” (Montagu 1968, p. 3).  Only later did the word describe attributes of man and elements of personality within a group of men.  From the beginning, the concept of culture was difficult to disseminate. Even today in a world without borders or limits due to telecommunications technology, it is still difficult to grasp the notion of multi-culture.  Due to its melting pot, we are a culture defined equally by many cultures.  Hence, the concept of multiculturalism was born to accept everyone’s culture.  Lawrence Auster (2006, p. 1) writes for instance, “America is an assemblage of racially or ethnically defined subcultures, all of which have equal value and none of which can claim a privileged position”.  This definition includes all aspects of culture including that of religion and creed, gender and sexuality.  It really gives culture too many factors to be defined by accurately.  Given the great diversity of activities, how can we call them all “performance?”  Identifying different practices and discourses as “performance” first requires gathering them together and conceptualizing them as a field of study, a field of objects, a field of performance.  It simultaneously requires a gathering of subjects, a community of practitioners and researchers constituting itself around and indeed through performance.

         The challenge of efficiency extends from measuring and evaluating performance to creating and developing it.  Organisational performance is produced at the level of individuals, teams, departments, organisations, and industries, and it takes place across a wide variety of sectors, including business, non-profit, educational, and government organisations.  Because it stretches across different institutions, performative efficiency has come to be a social imperative in the United States, making it something of a national challenge. Challenge to America compared aspects of the United States economy and educational systems with those of Japan and Germany, two nations cast as challengers from whom Americans could learn something and thus better address this nation’s “crisis” in education and productivity.  President Bill Clinton, interviewed by Smith in a supplemental fifth part, echoed the call of Challenge to America: the United States must link its domestic educational and economic policies to international high-tech, high-wage economies, in short, to the efficiencies of the world economy (McKenzie 2001, p. 6).  The challenge of efficiency thus has global implications.

     The contemporary field of organisational performance, like that of cultural performance, is a discursive and practical construct, one whose sites of construction have been overseen by a paradigm of performance research, a gathering of subjects who collect different activities together under the concept “performance” and who participate in this movement of generalization by developing certain models drawn from other fields. Though performance appraisal is an important aspect of organisational performance, it is only one model contributing to it.  Performance Management utilizes many other models, including those of systems theory, computer science, behavioural science, and even the performing arts.

Effects of Accounting Practices and Performance

Corporate employers often seek ways to link employee compensation to firm performance.  Compensation granted in the form of employer stock or options to acquire stock provide a popular alternative.  A stock option is the right to purchase a specified number of shares of stock for a stated price (option or strike price) for a stated period of time (Crumbley 2001, p. 37).  Typically, the strike price is equal to or less than the market price of the stock at date of grant.  As a result, the option has no ascertainable value to the employee on the date it is granted.  However, the option does entitle the employee to future appreciation in the value of the optioned shares over the option period.  Thus, the compensation awarded the employee via the option is purely prospective and a function of the stock’s market price over time.

Stock options, once a perk reserved for top executives, have filtered down to mid-management-level and technical employees, particularly in high-tech companies that have adopted stock option programs to attract top talent.  Research found that about “Thirteen percent of the private sector workforce now holds stock options, according to one estimate” (Crumbley 2001, p. 38).  Now, under a revision to accounting rules by the Financial Accounting Standards Board, all companies that issues options, from the largest publicly traded companies to the smallest start-ups, will be required to estimate the value of those options and account for them as an expense.

The Biotechnology Industry Organization, a Washington, D.C., trade group, opposes the new rule, FASB 123R, saying it will be detrimental to small biotechnology companies trying to attract scientists while cash flows are tight and products are still under development (Sachdev 2004, p. 51).  One of the difficulties is that the rule will require the use of valuation models that are not designed for determining the value of employee options.  This will result in companies diverting much needed money away from research toward the development of extraordinarily complex and highly subjective stock option value exercises that none of the experienced investors in the industry will even consider in their investment decisions.  This issue has been around and does not seem to be going away.  There have been proposals in the past to do this, and there was always fierce lobbying by the high-tech companies that kept it out.  It is not exactly because of (accounting and auditing reforms under) Sarbanes-Oxley, but in light of the all the corporate misdeeds such as Enron and Tyco the FASB have stuck to their guns as a way to remedy the issue.

Under the old rule, companies may opt to expense options, but are not required to.  However, public companies are required to state in the notes of their accounting statements what the effect on earnings would be if they did expense their options (Schachter 2005, p. 26).  The diluted earnings per share figures are an attempt to show the difference in values if all the companies’ options were exercised.  Under the new rule, the company must estimate what the value of the options would be, and record that value as an expense.  If there were a vesting period, the expense would be spread over the vesting period.

The change will affect most companies but not very dramatically acknowledging that the biggest effect will be on high-techs and start-ups that use options as a compensation tool (Schachter 2005, p. 26).  Most high-tech companies are established, and they don’t use options to the extent that other smaller, start-up companies might.  The use of options is prevalent among companies such as smaller software firms housed at university research facilities.  It is a common practice, particularly among software companies, but still the larger ones are going to find this more burdensome.

Still the new rule probably will not have much impact on smaller companies because the options’ valuation will be relatively small.  For larger, publicly traded companies, the impact of this change is larger because the options are not small.  The valuation models are not meant for these kinds of options but instead are meant for options that are traded on an exchange (Schacter 2005, p. 27).  What companies like the Coca-Cola Co. are doing is actually having people come in and do a valuation, rather than use a model that really does not fit (Schachter 2005, p. 27).  This may mean an extra expense to the organization but at least there is a realistic idea of stock option value.  Smaller firms can hazard a guess and take a look at whether Black-Shoals will work, and one really does not know until financial analysts begin looking at price-earnings ratios and have to decide what number to use (Schachter 2005, p. 26).

Meanwhile, a bill that was proposed in Congress last year, the Stock Option Accounting Reform Act, would limit the expensing of options for top executives of established companies, but not for rank-and-file workers.  For now, accountants are operating under the assumption that the rule change will proceed.

Two issues have historically dominated standards setting in the area of accounting for stock options: Should compensation expense be recognized for stock options?  If so, over what periods should it be allocated?

Under APB 25’s intrinsic value method, compensation expense was determined as the excess of the stock price at the measurement date (generally, the grant date) over the option exercise price.  Since most stock option exercise prices were equal to or greater than current market prices, no compensation expense was recognized.  The accounting profession found this approach unsatisfactory because it ignored the possibility or even likelihood that the stock price might one day exceed the exercise price (Sachdev 2004, p. 52).

By adopting SFAS 123, FASB attempted to recognize the reality of stock option value.  The statement required stock options to be measured based upon the many factors that reflect their underlying values and, therefore, total compensation expense to be computed based on the fair value of the options expected to vest on the grant date.  Fair value would be estimated using an option-pricing model (Black-Scholes or binomial).  SFAS 123 allows but does not require that compensation cost resulting from the granting of stock options be measured and reported currently in the income statement and allocated over the remaining life of the option (Crumbley 2001, p. 38).  Consequently, companies granting stock options to employees can choose to follow either APB 25 or SFAS 123.  The fair value method must be used for employee compensation where warrants are issued in return for goods or services.  Companies that account for their stock option plans under SFAS 123 will recognize some compensation expense in the income statement over the vesting period (Sachdev 2004, p. 52).  Companies that continue to use APB 25 generally will not recognize that compensation expense.

Because the APB 25 approach most often results in higher reported earnings, the great majority of companies have not adopted the fair value method in SFAS 123.  However, SFAS 123 requires that companies that account for their stock option plans under APB 25 disclose in the financial statement footnotes how the use of SFAS 123 would have affected net income (Sachdev 2004, p. 52).

Leadership

In today’s business environment, creativity begins with a management team that values creativity at its core.  In today’s company, the role of management also involves leadership within a team structure.  Managers have the responsibility to set goals, maintain moral, aid in training and communicating corporate objectives.  However, this does not mean a leader cannot be a subordinate.  If a company is smart, it will encourage leadership by example across the board.  This instils in the employee a sense of pride and motivates them to achieve goals.  A good leader provides vision and clarity for the employee.  Such a leader will be able to communicate and create a rapport with their team.  This establishes their role.

     This connection begins at a fundamental level of human sociology where the use of story is central.  Howard Gardner (1995, p. 14) reflects, “the ultimate impact of the leader depends most significantly on the particular story that he or she relates or embodies, and the receptions to that story on the part of the audiences”.  By telling stories, allows for a certain level of openness or vulnerability on the part of the leader and makes them human.  By opening the line of communication, gives the employee knowledge of their environment and develops trust.  The leader’s role is to sell the idea of commitment within a culture.  Odiorne (1987, p. 138) suggests, “if employees know what is expected, and what help and resources are available, they can then be relied upon to govern their actions to achieve the commitments they have made”.  This sets the stage for goals and achieving high performance.  The culture in turn feeds off this energy and excitement.

     Bennis (1989, p. 15-16) writes:

There are three reasons why leaders are important.  First they are responsible for the effectiveness of organizations.  Second, the change and upheaval of past years has left us with no place to hide.  We need anchors in our lives as a guiding purpose.  Third, there is a national concern about integrity of our institutions.  Being mindful of own context is difficult for us.

Managers with a keen understanding of leading represent these three key attributes and create a foundation from which to act.  A leader must also display curiosity and have the guts to be daring.  They must be a dominant force within the team.  Bennis (1989, p. 185) reflects, there are two kinds of people “those who are paralyzed by fear, and those who are afraid but go ahead away.  Life is not about limitation but options”.  A healthy culture inspires options and the innovations that grow out of creativity.  Research discovered that leaders use different leadership styles for different situations.  For these managers who put their people first; they are more focused on nurturing and training.  Research suggests leaders are more interested in mentoring and training their team rather than focusing on output of numbers or turn around time.  This development in team building allows for “providing people opportunities to learn from their work rather than taking them away from their work to learn” (Hughes 2004, p. 4).

Still one cannot ignore times of fear.  Management sometimes creates fear on purpose or misuse to work employees harder.  From personal experience, fear can drive an employee to try harder at a better job or completely kill worker confidence.  This does not create positive outcomes but promotes conflict and an unstable team.  It is clear for management to be successful, it must communicate its vision but also create positive reinforcement.  Once key members understand people’s needs, then action can be taken to improve management’s role.  Only then will a leader be taken seriously.  Recognizing positive traits in a team member builds trust, integrity and also meets an important need.

Finally, there are many things a leader can do to motivate his or her team members and inspire excellence.  From personal experience there are many recommendations that come to mind.  At a company wide level, a recognition or awards program is effective in maintaining culture by motivating employees.  Being noticed for a job well done instils pride.

Flexibility

The concept of flexibility within the construct of an organization is important as it means that the organization has the ability to roll with the punches.  It means that the organization can grow as a result of change and keep an open mind for its present and future status.  This also means that the organization is flexible to possibility and new ideas.  This creates an atmosphere of creativity and innovation for the organization, which leads to success on many levels.

Research by Bennis (1989) and Gardner (1995) stresses the importance of the leader’s flexibility and capability to adapt to his or her environment.  An effective leader will understand not only his or her environment and people but also understand the potential for impact upon that environment.  By understanding this key element, an effective leader will know how to define the environment.  This is important because employees look to management for guidance.  The leader defines the boundaries for the team and creates an atmosphere for building relationships and open communication.  This in turn creates stronger teams.  Research suggests leaders are more interested in mentoring and training his or her team rather than focusing on output of numbers or turn around time.  This development in team building allows for “providing people opportunities to learn from their work rather than taking them away from their work to learn” (Hughes, 2004, p. 4).  A healthy culture inspires options and the innovations that grow out of creativity.

Having implementation as a catalyst means employees become adaptable to the environment and get used the reality varying from day to day.  This means work is never boring as the unexpected can occur.  Such reaction to change opens doors for creativity and critical thinking, which leads to innovations and competitive edge.  This results in a corporate culture that encourages new ideas and processes.  Modern times embrace the unpredictable and uncertainty with gusto, as they believe this reflects the state of the world as it is always in flux.  Change agents like war, the economy, technology and globalization has made postmodernism possible.  It is recognizing change that opens up different views.

It can be argued that by introducing technology to the organization, this is setting a standard for increased flexibility. There are not any guarantees that implementation will promote flexibility.  What technology does do for an organization’s flexibility is give its leaders more options and tools for problem solving (Demb 2004, p. 27).  Information technology has the potential to adapt and contribute to an organization especially during times of change.  According to Henry Lucas and Margrethe Olson (1994, p. 157), technology alters flexibility in three major ways:

1. IT can alter the time and place of work, generally by changing boundaries on where tasks    are accomplished and removing constraints on when tasks are performed.

2. IT affects the nature and pace of work; most often it speeds up the processing of    information.

3. IT enables the firm to respond quickly to changing market conditions.

(p.157)

Communication tools aid leaders in making quick decisions with co-workers who may at another location, miles away.  This removes boundaries to the workplace and makes it more flexible to the employee.  In this way, time and place are no longer a factor.  The speed of processing information is done in a timely fashion so that decisions can be made, tasks can be performed in order to take advantage of new opportunities.  This enables the firm to respond to changing market conditions and devise a plan for future conditions according to forecasts.  In this sense, technology and how it is used becomes the factory of yesteryear, as many service industries demand speed and flawless presentation.  Speed and power are what make information flow.  Still technology can be used in those environments that may seem like old ways of doing business as Lucas and Olson (1994, p. 157) suggest, “by using flexible manufacturing systems IT can quickly reconfigure manufacturing lines”.

            Use of technology can create a paradox for the organization in times of turbulence and upheaval.  In this way, flexibility must be open to new definitions of its own concept as there is a difference between organizational and technological flexibility that creates the paradox.  Part of the problem is that while technology creates flexibility for the organization, technology can be rigid.  This is in terms of innovation happening so rapidly that technology and its investment quickly becomes out dated.  This is what creates the inflexibility.  If the organization does not continue to update the systems, then it too becomes inflexible.  Sometimes these flexible technology systems are so complex that it takes a period of months to update them for the investment to be advantageous for the organization.

     There are three types of motivations influencing the acceptance of a technology such as ABC.  These motivations are: (1) intrinsic motivations (such as enjoyment and fun); (2) extrinsic motivations (such as usefulness); and (3) social pressure (Davis 1989, p. 319).  A management accepts a new system only when he or she shows a willingness to use the technology for the purpose it was designed to serve. It is thought that with this knowledge, researchers can develop better methods for designing, for testing, and for predicting how users will respond to new technology.  Peter Drucker (1998, p. 149) defines diffusion as the process by which an innovation is adopted and gains acceptance by members of a certain community.  Factors play an important role in the diffusion of an innovation like ABC software by interacting and influencing the outcome.  The four major factors that influence the diffusion process are: (1) the innovation itself, (2) how information about the innovation is communicated, (3) time, and (4) the nature of the social system into which the innovation is being introduced (Rogers 1995, p. 15).  Rogers (1995, p. 15) introduces what is called the Innovation Decision Process theory.  This theory explains diffusion as a process occurring over time that can be seen as having four distinct stages.  Diffusion’s four stages according to this theory are: (1) knowledge, (2) persuasion, (3) decision and (4) confirmation (Rogers 1995, p. 15).  Theory realizes that users of the innovation must first learn about it and have enough buy in to believe the innovation will work.  The innovation must be sold on its merits.  The user then makes the decision to accept the innovation and then adopts it by using it over and over.

Creative Thinking
Numerous definitions of creativity are recorded in the literature.  Creativity is often defined by use of synonyms.  These include productive thinking, divergent thinking, originality, imagination, and lateral thinking.  Because there is no generally accepted definition of creativity, it would be helpful to look at some definitions to date.  Creativity is defined as “the association of thoughts, facts, ideas, etc. into a new and relevant configuration, one that has meaning beyond the sum of its parts—that provides a synergistic effect” (Mish 2004, p. 293).  Bennis (1989, p. 15) defines the creative process as “that mental process in which past experience is combined and recombined, frequently with some distortion, in such a fashion that one comes up with new patterns, new configurations, that better solve some need of mankind”.  Creativity in problem solving can also be defined as the ability of a subject in a choice situation to modify self-imposed constraints so as to enable him to select courses of action or produce outcomes that he would not otherwise select or produce, and are more efficient or valuable to him that any he would otherwise have chosen.  Although this sampling of definitions reveals diverse elements found in creativity, these definitions do suggest some common thread found in creative thinking and that is, a new way of doing things.  From this overview standpoint, one can define creative thinking as a process that solves a problem in a new and original way that is useful to those involved in the creative undertaking.  It should be noted that the elements of uniqueness of solution and value of results are incorporated into the definition.  Both of these elements are essential in defining creative thinking.

3. Methodology

3.1 Scientific Approach

As part of any scientific study, it is important to achieve a baseline of study.  In this case, data collection is presented in the form of a case study of Global Home Loans or GHL in the United Kingdom.  The organisational use of ABC was focused upon with respect to organisational performance as well as how organizational culture issues become factors for management to attend to.  In a more perfect world or setting an actual survey and period of interview could have taken place at GHL.

3.2 Research Purpose

Purpose of this research is to examine Activity Based Costing with regard to organisational performance, specifically examples found in related literature and the case study of GHL.  Another part of the purpose of this research was to understand challenges management finds within organisational culture.  This investigation will require an in-depth study of ABC.  Because this study focused so intently on the organisation it was important to understand what influences organisational behaviour and values within the culture.

3.3 Case Study and Dissemination of Useful Data

As part of any scientific approach, it is important to focus on the correct segmentation of the population needed to prove the hypothesis.  For this purpose, the study focused on a specific organisation using Activity Based Costing or ABC.  For this reason, it was thought focusing on the performance of an accounting team at Global Home Loans was warranted.  In order not to be biased, it was important to focus on other examples found in the literature.  With respect to the issue of organisational performance, it was also important to look at the overall health of the organisational and examine issues relating to organisational behaviour that may challenge management.

      Experimental groups:  These will be organisations with accounting teams using ABC, specifically that of GHL.

      Control group:  These will be other organisations found in literature using ABC.

Ethical Considerations:

            When dealing with data, there are ethical considerations that come into play.  Because there was not a physical survey done for this study, the anonymity and protection of the subjects was not needed.  Because of the nature of case study and literature review, it was important to remain timely and focused on the topic.

Variables:

There are limitations or variables to any study and these variables below may alter the results of the study.

            Independent Variables:

Any organisations using multiple accounting processes and organisations found with low performance values.

Dependant Variables:

            Race, gender, average income, population density, and economic status.

The Sample:

            The topic applies to members of the community being affected by the implementation of ABC.  All participants found in the case were over the legal age of 18 years and a legally permitted to work in the United Kingdom.

Inclusion/Exclusion:

In the community population working at GHL, all people under the age of 18 years (college interns, summer aides) and those not legally permitted to work in the United Kingdom were excluded.

This study wanted to focus on management’s role in organisational performance but for the sake of understanding performance, all employees regardless of position or title were included.

Data Collection:

A survey of questions will be used as methodology for this study.  As part of the survey, participants will be encouraged to go into detail about his or her answer.  The following is a sample of what survey questions could look like.

Does your team use ABC?
What are the pros and cons of using ABC?
Are there other tools being used?
What is your role in the organisation?
How does management view ABC and its implementation?
Do you think organisational culture and its values at GHL affect performance?
These surveys were completed via email attachment and each employee was able to submit his or her answers anonymously without fear of retribution.

Human Subjects:

It was found in the case study that at any time, a participant can choose not to be surveyed and that survey will be excluded from the analysis.  Not at any time will the participant be judged by making this choice nor will his or her employment status be impacted by the study.

4. Discussion

SWOT Assessment

It is important to determine the impact an implementation of new software will have on the operations and activities of an organisation.  The objective is to utilize present technologies and future innovations to plan the future of a company. It is important to allow a flexible framework for strategy to interact within the environment.  Further the objective is to gain understanding of the surroundings and behaviours under which they are operating.  The key is to create an excellent strategy in which to include within the organisational culture.  It is best management remains informed of potential challenges and SWOT allows for clarity. GHL has a distinct management focus on improving processes, technological innovation, quality assurance and staff training.  Still one fact of the current situation at GHL is that they are not effectively utilizing the Internet web tools available and they have not seen the potential otherwise better systems of tracking loans would be in place.  This could allow for generation of further lending leads.  As much as GHL leads the industry in innovative ideas, it clearly lacks the policies and procedures on a consistent level to bring them to fruition.

Porter Five Forces
The use Porter Five Forces model in understanding the accounting facet of the mortgage industry to gather conclusions about the influence e-business has on strategy is warranted.  A market place can be an unstable environment.  An organisation’s ability to turn a profit is determined by Porter’s Five Forces of competition.  These forces include: (1) the intensity of rivalry among existing competitors, (2) the barriers to entry for new competitors, (3) the threat of substitute products or services, (4) the bargaining power of suppliers and (5) the bargaining power of buyers.  To compare and contrast side by side, these forces establish value for the product or service.  It represents customers, suppliers, distributors, substitutes, and potential new entrants.  By looking at the forces in detail, allows one to have insight into the factors that motivate an industry, its current profit levels and future successes.  Porter’s five forces allow for probable changes in future such as different suppliers, channels, substitutes, or competitors.

 Porters Five Force Model
The Five Forces framework gives management a better idea of the forces at work within an industry and organisation (Porter 1999, p. 3).  Change is inevitable and with the indication of the arrows flows through to affect such elements as consumer spending, rival companies, product availability and current retail designs in the market.  It is important to recognize change, as flexibility to change will predict how well a company adjusts and succeeds with these forces present.

Value Chain model

            Value chain activities are not isolated from one another.  Rather, one value chain activity often affects the cost or performance of other ones.  Linkages may exist between primary activities and also between primary and support activities.  Sometimes, however, the firm may be able to reduce cost in one activity and consequently enjoy a cost reduction in another, such as when a design change simultaneously reduces manufacturing costs and improves reliability so that the service costs also are reduced.  Through such improvements the firm has the potential to develop a competitive advantage.  Such structure creates efficiency in the employee and high customer satisfaction in the buying experience (Burn, p. 2).   By restructuring value chain activities as a means to prioritize importance, this opens the door to many to many business relationships, changes values and sets the stage for new propositions and recreates the business models.

We chose these three models to gather information for analysis to assist in the development of the e-Business strategy to better the existing implementation at GHL.  This allows for better understanding of the company’s potential for growth upon using the strategy.  By understanding the company’s needs, time and money can be saved and a policy of consistency can be introduced.  By using SWOT analysis, Porter’s 5 and the Value Chain model, one can better evaluate the needs of the GHL group and which areas of e-Business to focus upon.  Using the models offers in-depth analysis of the market and consumer spending trends.  It allows a company like GHL to get a feel of not only what others are doing in the market but to also to gain a competitive advantage.

After analyzing the facts from use of the three tools above, it is clear GHL has many challenges and factors to consider before implementing a better accounting strategy.  It is clear the group from tracking complications with their current system and has no policies and procedures in place to accurately use telecommunication effectively.  It should be understood that use of such technologies would drastically reduce overhead operating costs and put into place a more efficient way of doing business. GHL should focus on the return on investment or ROI in order to prioritize its goals and the benefits of these goals.

            Introducing an accounting strategy to an organisation somewhat familiar with such a concept or unwillingly flexible to change can be a challenge and take some time to implement.  This process is not a transformation overnight but more of an evolutionary process.  The implementation will need to be done on a step-by-step basis at a detailed level as to save money and time.  There is not much room for a mistake or misunderstanding of the plan put in place as they can be costly and create resistance to change.  Therefore it must be decided by GHL management what the exact goals are for this strategy.  Are they long-term or short-term?  What are the expectations for the organisation?  What do they hope to gain?  It is believed that by introducing a new company wide computer system, this will reduce inefficiency for customer orders, automate tracking of inventory and encourage communications across the company.  These are positive outcomes that have a direct relationship with operating costs.  By having the tools to promote these activities within the store, creates a uniform way of doing business and maintains the company’s image and identity to the public.  By promoting these functions, will aid in reducing overall costs of operation, therefore, allowing the company to invest those funds back into the project or later when the project is completed into other company interests such as acquisition of new stores.  By introducing a new accounting system and an integrated tracking format for customer orders both in store and online, makes the management of supple easier for the employees.  This type of automation may require outside sourcing to an independent IT company as to avoid continued cost involved with maintaining such a system.  This reduces costs of hiring new employees and training of existing staff.

Supply Chain Management
The typical SCM is one that is broadly linear in terms of supply and processing of raw materials and services into the final product for the customer.  There are three main parts to the supply chain process.  These parts are planning, procurement and fulfilment.  The SCM solution would provide many benefits to GHL day-to-day operations.  The B2B relationship that they have to their suppliers would function more effectively.  Immediate feedback can be given to know the effects of delivery date changes or increases in quantity parts ordered.  This immediate feedback will allow GHL to manage their inventory and the expectations of their customers better.  The immediate feedback is due to the real time connectivity the SCM system provides.  The master planning allows one to manage the inventory by project or on an individual job bases.  Minimizing the amount of headcount and space required for warehousing and managing inventory increases savings.  The primary management of inventory is turned over to the suppliers.

Purchasing is made simpler through the use of an electronic form that gets sent directly to the supplier after receiving the proper financial approvals within GHL.  The electronic form eliminates the tedious drawn out paperwork process of the past.  The fulfilment aspect of supply management is made easier by the ability to track your purchases and delivery times.  Contingency planning is a part of the supply chain process that becomes a part of the fulfilment process.  Reports can be printed to identify when a product has shipped, when it will arrive and how it will arrive.  Based on this information it can assist in determining if contingency plans need to be implemented (SCM 2005, par. 5).

There are SCM solutions available today that will also integrate into your pricing and discount models.  These available modules or options can add additional value to the SCM package Prehistoric may purchase.  The integration of these technologies often spill over into the other ERP, CRM and EDI solutions making the evaluation of these system much more important.

Still the model is evolving to include new innovations being used as tools.  The Amorphous type of chain changes as the company introduces new strategies.  This type of model best reflects the continuous flow of ideas and possibilities within the e-commerce construct or Internet medium specifically.  It helps anticipate future occurrences.  This aids a company’s tracking of Internet use especially when applied to advertising and promotions, as it is known “the number of businesses utilizing the Internet for e-business purposes was significantly low at 28% though an further 33% were actively considering the implementation” (Ritchie 2002, p. 2).

Procurement

Sometimes organisations look to sourcing inventory as a way to cut costs and speed up the process. GHL will find that by using the Internet as e-strategy that they can achieve multitasking on new levels, allowing for many lines of communication as once.  The Internet will allow GHL to tap into a bigger supply base to ensure dependable supply and backup sources.  This in turn will reduce the amount it takes to secure shipment of new products.  Enterprise Resource Planning (ERP) systems are particularly valuable in new product introduction because it acts as a means of sharing information.

Enterprise Resource Planning (ERP)
Enterprise Resource Planning (ERP) systems are software packages that attempt to integrate the information flow within a company, solving the problem of incompatibility between systems and operating practices.  The ERP system will streamline the GHL’s data flows and provide management with direct access to a wealth of real-time information.  This is facilitated by the used of database technologies which will link applications together and pass relevant data between them as necessary.  Any new information added to one of the system updates the other systems automatically, thus creating complete integration between them.  Directory services and middle ware are used in order to connect the applications and provide an infrastructure for users to communicate with each other and connect to the sources of information.

There are many benefits and drawbacks to using this method of data transportation.  It is important to analyze rather not this will be good fit for a company like GHL.  “A key difficulty is that departments distrust the information provided by another department, be it via an information system or some other mechanism.  Therefore checking and cleaning the data should be made an integral part of the implementation” (Bonner, p. 5).  If ERP is integrated with the organisation’s decision-making structure, ERP can begin to deliver business benefits, impacting data delivery levels.  Still its success can only be measured by the attitude of the user.

The implications of doing business within the modern business reality means constantly being open-minded to change as an everyday factor and remaining comfortable knowing that not every day is same.  Some people cannot work in such conditions.  As Stephen Robbins’ (2001, p. 546) comments, “As humans, we are creatures of habit. Changes substitute ambiguity and uncertainty for the known”.  People, by human nature, inherently resist change.  Management may find older employees are more loyal but have a harder time embracing new ideas like the Internet because they remember the old days.  They remember when life was less complicated and doing business differently was not an issue for competition.  Older employees remember that doing one thing and doing it well was all that mattered.

This resistance to change can result in conflict but it also creates opportunities for innovation.  Change in the global market, including multicultural demographics and new technologies, has required perceptions to change.  The attitude toward knowledge has evolved because more than one type is needed in order to implement a new idea.  This changes the needs of workers and organisations as diffusion of innovation takes place as many different points of view are considered.  This creates new identities for the personality to flourish.  As Kenneth Gergen (1995, p. 40) suggests these internal conservations within one’s personalities not only create war zones of conflict for the worker but also as a result create coping mechanisms for moving forward.  His work examines how the personality is constantly evolving to not only include past experiences but to also incorporate new ones into the present.  This allows the future to present itself in a way maybe not understood before hand.  For the organisation, this adds value as it spawns creative thinking but allows leaders to better understand the people on his or her teams.  This brings a whole new level to team building strategy that can start with the first interview and continue throughout an employee’s tenure.  This in a sense creates positioning of personalities so the work can get done efficiently.  This is one reason why many organisations have turned to personality testing during the recruiting process (Williams 2006, p. 2).  Knowing upfront how personalities fit into the organisational puzzle alleviates conflict and reduces resistance to change.

The practice of innovation also begins with embracing or adopting the unexpected.  Change and its impact upon personality positioning starts a cycle of direct relationships where one cannot survive without the other, especially within the modern business world where change occurs at the speed of light.  Peter Drucker (1998, p. 149) describes, “unexpected successes and failures are such productive sources of innovation opportunities because most business dismiss them, disregard them, and even resent them” and this type of behaviour represents people’s resistance to change but at the same time creates recognition of new opportunities within the market.

The concept of innovation brings up other implications, however.  It produces a whole new reality that employees may not be prepared to handle.  Product diversification could mean failure.  Technology, while it is wondrous and makes jobs easier, can also be dangerous.  With telecommunications, a new breed of crime has been created with identity theft and corporate brand protection becoming important.  Technology can be disastrous if put in the wrong hands.  Antibiotics used to cure infections have saved numerous lives while there is a continued threat of biological weapon of mass destruction.  With innovations come new inventions that make our lives easier but also have a higher risk when used.  This is the nature of the realm of possibility.  The postmodernist movement has given permission to anyone to create and discover.  This can backfire as it can also destroy and impose new rules of conduct upon communities.  As much as many like the idea of innovation, for those scared of change, it is difficult to embrace fully.  This leads to counter movements to conserve what is left of the modernist ideals.  This means as change rapidly flourishes out of control, those resistant aim to gain control of laws and rules to make change more difficult.  This leads to Big Brother watching every public move and return to conservative leadership.

The outcomes of utilizing ABC has been very different in the case studies, although the technology used was exactly the same and the objectives were very similar. The successes obtained seem to confirm the validity of the ABC concept and of its implementation from a pure technical perspective, but the failures imply the existence of other necessary success conditions, which in some cases have not been accomplished.  As part of this study, we have identified the following key success drivers in using the ABC.  These factors can make or break the success and effectiveness of such a system.

The first factor to keep in mind is Corporate IT culture.  A large diffusion of PC usage and the familiarity with a networked communication in a company obviously favour the adoption of a new IT system on the user side.  In the case of GHL, in which IT is part of the core business, a high level of IT culture also helped the developers to speed up the installation: the data population has been easier thanks to the existence of digitized documents, the server deployment has been supported by the company EDP staff, and so on. Therefore a very basic level of IT culture is definitely a disadvantage when adopting complex information system, but does not preclude the success.  Moving from typewriters to portals is possible.  It just takes more time and the risk of underestimating the amount of time required is very high.

     With the notion of culture comes one’s attitude toward the project.  In many respects, it is best to have the employee involved from the beginning; it makes the adjustment and learning process much easier.  It is important to keep in mind Users motivation and involvement.  The ABC project has had a special attention for the change management. The first warning about potential failures due to organisational resistances to change had been given since the very beginning of the project; afterwards, approximately two months before the installation in the test sites, a series of change management activities, like a session to train change agents in each pilot organisation and the periodical drawing up of a change management report, have been launched.  Results seem to be strictly related to the intensity of these activities.

Another factor present are the issues of responsibility and organisational framework. Even in its simplest form ABC impacts on several business processes and deeply affects the way in which organizations handle their knowledge and procedures.  Those in charge of deploying it must have a proportionate control over the target organisation and its active collaboration.  Roles and responsibilities must be as clear as possible.

     Furthermore, there is still great reluctance to use performance software systems because the transformation can be wrong in many ways.  It is risky and potentially costly.  Misguided efforts to put extensive systems in plants and on the shop floor have hurt firms in the past.  Most times, such a system requires transforming the business culture.  And in many cases as seen with specifically with GHL, those that want change do not have the knowledge or experience needed to management the system.  Companies that invest in computer-aided design and electronic systems will not achieve desired outcomes or productivity and performance gains if it fails to produce advanced work practices, skills training, and compensations systems that enable employees to effectively use them.

     Overcoming such issues will not foster innovation.  In fact, there may be a backlash.  Also in the day and age where running a business becomes evermore expensive, cost cutting has become a way of life.  This makes it harder for a company to make long term investments in such technology.  To help foster innovation, local government can step in to support the development and diffusion of tools that will make it possible for companies to move toward ABT (Jarboe et al 1997, p. 6).

       Managers want the system to be easy to use.  It must be user friendly and uncomplicated; otherwise the system causes more frustration than anything.  The idea is to keep the user in the loop with every step of ABC design.  Once the ABC is being used, it is important to continue the learning process by offering training and a step-by-step guide.  As new options to the system are added, these tools are change to meet the users’ needs.  With this in mind, we are going examine factors for use while looking at factors for non-use.  This does not include issues of transitioning to the new system or the process of implementation but only in existing ABCs seen in the case studies.  For this purpose, it will be important to look at each ABC system found in each case study, look at user interviews and first hand information to discuss how each system works.  Also it is important to offer distinct of which ABC type matches with which factor for use or non-use.  At this point, it may be safe to assume that the factors may or may not be the same when considering the human factor.  Factors include:  resistance to change, culture (both organisational and individual), and levels of expertise with technology and education.

Risk Assessment

            As with any company incorporating implementation, it is important to consider factors that may encourage risk.  By introducing such technology, what kind of risks is the company opening itself to and what can be done to alleviate risk?  In addressing this problem, the traditional business continuity methodology is still valid.  There is a need for organisations to re-assess their organisation’s risk procedures and damage control methods in order to assess better avenues of containment.  It is advised that during implementation that an alternative site for data storage be created.  By doing this, the company protects itself from any type of harm done to the administrative offices.  This would include but is not limited to: fire, earthquake, flood or electrical outages.  For each individual retail store, there is a need to consider these particular threats and put into place an action plan that details how to handle such threats.  Still GHL should remain consistent in its policies toward risk, meaning that each store should carry out the same protocol during a risk situation.

Summary and Conclusion

The overall purpose of this paper and study was to examine ABC’s relationship to organisational performance.  This paper worked to define ABC and its effectiveness in the business world.  In order to plan adequate implementation for a company the size of UK Global Home Loans, it was important to explore issues of corporate culture and performance.  As a result it was found that there are factors to implementing changes in accounting processes.  It was the mission of this paper to discover ABC implementation and its affect on organisational performance, if any.  Change is always factor when it comes to performance.  It was important to discuss change as catalyst so that one could understand issues facing performance at the management level.  Management looks to tools like SWOT or Porter’s Five Forces to gather insight to an implementation’s ramifications.

In this review, it was discussed the limitations of performance benchmarking with regard to accounting practices and increased use of technology.  Challenges to the measurement, causal, and face validity of metric benchmarking were described and shown to significantly hamper these strategies.  Benchmarking strategies typically lack a plan for systematic data collection tied to a strategy for instructional or institutional improvement.  In contrast, current diagnostic approaches offer plausible strategies to improve organisational effectiveness through the use of models that involve practitioners in framing problems and taking responsibility for finding solutions.

The adoption of diagnostic benchmarking represented a compromise between the external values of public reporting of standardized performance and internal corporate values.  Current diagnostic benchmarking projects are designed around the use of standardized outcome indicators, but allow institutional discretion in determining which activities to place at the centre of the self-evaluation.  After a “health check” based on “dashboard indicators” (Doerfel and Ruben 2002), poor performance on any indicator is intended to trigger further investigation into the nature of the underlying problem.  Therefore, like process benchmarking, diagnostic benchmarking depends on the knowledge of practitioners functioning as part of professional communities of practice to spur increases in organizational effectiveness.

The history of changes in accounting practices over the past two decades or the “roller coaster” relationship between accountability and assessment also suggests that accounting practices have evolved and will continue to evolve.  The review indicates that, in order to effectively spur organizational change, accounting practices should become more closely aligned with the work already being done at the organisation.  This conclusion is supported by the fact that regimes are intended to examine inputs, processes, and outcomes as an integrated system, and to do so in a manner that involves practitioners in problem definition and problem solving.

The forms of accounting practices and technologies to implement them have implications not only for knowledge and effectiveness, but also for the exercise of corporate leadership and of democratic forms of participation in organizations.  For the sake of performance, leaders have an obligation to provide an accurate understanding of their organisation’s effective functioning to the public, who may then have the necessary knowledge to set appropriate rules to leaders accountable for their actions.

Key Findings

The key findings included the following items below.

              First ABC can act as a backbone for accounting practices in order to optimize performance potential for some organisations as an integral part of the work system.  It was discovered that due to resistance to change, smaller more traditional firms studied had more obstacles.

         Secondly, when it came to implementation of ABC software, it has been found that much of the success of acceptance depends upon the user’s attitude and ability to be flexible to new ideas in the work place (Drucker 1998, p. 150).  From an economical standpoint of investment of infrastructure, it makes perfect sense to invest in software that one can grow and build upon.  This, however, requires additional supportive staff and team members whose function is meeting the need of keeping the software up to date.  Still without a positive and open attitude, the software is useless and will not become multi-functional with regard to performance.

            Lastly, research showed that the greatest obstacle to accepting new forms of ABC is fear of change.  Therefore, this makes the transition period crucial and should be handled with kid gloves by management.  Communication should be open and clear.  Any conflict or resistance should be addressed and resolved in a beneficial manner.  The employees must be heard, as they will be the primary users.  Otherwise, implementation can fail and have many negative results that can adversely influence the organisation’s operation and success in the market.  This type of interaction must involve effective leadership and a secure value system.  The employees will take their cues from leaders if the message is clear.  Still leaders should be open minded to hear criticism about the system.  In this respect, it was found that the nature of the system is cyclical and many factors influence a positive outcome.  It was found that implementation does not always take on the first try but that changes must be made for the better.  Sometimes it is by mistakes that one learns how to make the system better (Jarboe et al 1997, p. 67).

What the study highlights for management and corporations on a whole is that there is a movement to utilizing new tools within the process.  Implementation of new cutting edge tools is important for an organisation to remain competitive but it is also important for an organisation to pull from its collective knowledge and this may mean applying old tools in under to strengthen new ones.

There were limitations to the study that included lack of a real world survey of management using ABC in order to see the influence ABC has on organisational performance.  It was difficult to extrapolate data out of case studies based on organisational behaviours because many studies focused on different areas of operational functions.  For example, JIT application is utilized on the shop floor at Toyota but this does not encompass the full picture of the organisation for the sake of this study.  While some studies focused on segmentations of an organisation, others focused on smaller, family owned organisations that did not fit the profile of the GHL case study.  This caused frustration when it came to examining organisational performance at the size of GHL.  One could make assumptions that would be unfair to the progress of the study.

There will be future challenges because of the nature of the business world today.  Many managers face difficult decisions when it comes to performance numbers.  Never has productivity been measured so carefully to get closer to the bottom line of efficiency.  Judging from the literature reviewed, technology will act as a double-edged sword while providing innovative tools to speed up performance, it may also open up an organisation for disaster on many levels.  Not including issues of theft and risk, the major concern here is how attention to performance will change an organisation’s cultural value systems.  No longer will the human side be a part of considering one’s performance but rather one’s ability to outshine competition will take precedence.  As a part of the bigger picture implementation of software that makes a job easier, may in the long run have negative affects on an organisation’s people.  It may change how people are managed.  It may change how leaders understand his or her team and how to motivate them to perform.  These are issues in greater need of examination.
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