Transcript of "From input accounting to output outcome management at OFTA (CIMA Mar 2004)"
Hong Kong Division, March 2004The BottomlineSwitching from Input Accounting to Output/OutcomeManagement at OFTAPresidential Engagements Dr Horace Yuen, Managing Director, ABCM Consulting (China) Ltd Dr Joseph Yau, Council Member of CIMA Hong Kong Division and Assistant Professor, School of2004 Business & Administration, The Open University of Hong Kong14 Jan Annual Dinner 2004, HKICS Alan Lung, General Manager, ABCM Consulting (China) Ltd2 Feb Inauguration Ceremony of Accountancy Society, City University of Hong Kong5 Feb Spring Dinner 2004, HKU SPACE “The ABCM exercise in OFTA gives us an OFTA places high priority on training and5 Feb Opening Ceremony and Business Forum of Accounting Week 2004, Accounting opportunity to evaluate services costs and re- development. This is a carefully considered Students’ Society, HKUST deploy resources in a more effective manner. management goal as OFTA sees this as the only9 Feb ACCA Hong Kong Spring Dinner, ACCA But senior management should be prepared to way to keep up with the rapidly changing Hong Kong communicate openly and explain the reasons technological environment. OFTA operates on9 Feb ICAA Hong Kong Group Spring Dinner 2004, The Institute of Chartered behind an ABC exercise to avoid having the a trading fund basis and recovers its Accountants in Australia potential misconception problems,” WONG administration costs through the collection of10& Public Sector Reform Conference “Changing Kwok-shu, Assistant Director, Office of the telecommunication licence fees.11 Feb the face of Government - Making it happen”, Efficiency Unit HKSAR Telecommunications Authority (OFTA)12 Feb Spring Dinner 2004, HKSA A systematic way to understand the19 Feb Opening Ceremony of Exhibition 2004, OFTA could have been your average HKSAR key and other product costs Hong Kong Inter-Tertiary Accountancy Association (HKITAA) Government Department. Not much is “Having established the costing of OFTA’s key19 Feb Open Day, Ho Tung Secondary School spectacularly different at OFTA. But the25 Feb Spring Dinner for Year 2004, The Society products, the next logical step is to establish the change brought about by the introduction of of Chinese Accountants & Auditors pricing of other OFTA “products” based on26 Feb UCL Graduation Ceremony, HK College of Activity Based Costing and Management their true costs. From management point of Technology International (ABCM) at OFTA is no less than revolutionary.8 Mar The 13th Inauguration Ceremony of view, it is extremely important to ascertain the CUSA 2004-2005, The Society of relative cost and benefits of each ‘product’ Accountancy, Student Union of the To begin with, OFTA is the executive arm of delivered by OFTA to its customers. A typical Chinese University of Hong Kong (CUSA) the Telecommunications Authority, a statutory15 Mar Cocktail Reception to welcome Mr. Philip example is ‘an investigation triggered by public body created in July 1993. As the technical and Yang as the new Chairman of HKIAC, complaints on radiation risks of transmitters’. Hong Kong International Arbitration economic regulatory authority of the telecoms In this example, the cost of each investigation Centre industry, OFTA has a role of ensuring fair needs to be allocated properly to a combination19 Mar 30th Anniversary Dinner-Year 2004, The competition within the telecom industry. It also Association of International Accountants, of telecom licencees, for example, pager and Hong Kong Branch has a role and a vision of ensuring that Hong mobile telephone operators that trigger the20 Mar ACCA Centenary Conference - Kong gets the best telecoms services to meet investigation costs”, said Mr. K.S.Wong. Accountants Reloaded, ACCA the challenges of the information age.3 Apr Faculty of Business Administration Gala Dinner to celebrate the 40th Anniversary, The Chinese University of Hong Kong s e e i n s i d e1 Feature4 Member profile5 Activity6A China Overseas Building, 139 Hennessy Road,Wanchai, Hong KongTel: 2511 2003 Fax: 2507 4701Web Site: http://www.cimaglobal.com continued on page 2
This is conceptually different from the out a plan to roll-out the ABC modeling Moving on to strategictraditional costing exercise where costs are throughout the entire department using its management - resourceassigned based on revenue or head count. own staff resources in Stage Two. Stage Three management and resourceInstead the real challenges are to find out what was the further conceptualization whereby planningare the ‘cost triggers’ which drive the cost staff at each level have the implications and In OFTA, high service cost does not necessaryallocation to each activity relevant to the benefits of the ABCM implementation mean the need to reduce or stop the servicesproducts / services in question. explained to them. Stage Four is the full roll- being delivered because the public interest out of ABCM which is expected to be must be balanced against the cost. HoweverSetting priority and using ABC completed in the 2004/2005 financial year. In more accurate cost information will helpinformation to manage OFTA the current stage Four, OFTA has avoided OFTA to prioritise services and provide more setting targets that are too aggressive. It alsoKnowing that certain products / services have understanding of the costs of restricts the numbers of resource items,a relatively higher cost might not telecommunication licences. activities and cost objects, to 165, 600 and 50automatically mean that OFTA should stop respectively. Furthermore, OFTA allowsdelivering these products / services. Public OFTA is looking forward to the possibility of enough time for checking, reviewing andinterest must be balanced against cost. But, at using cost trend data, which will be built up enhancing the whole ABCM model.the very least, ABC makes OFTA more cost over the next few years, to plan for theconscious. Higher cost awareness at OFTA deployment of resources. Mr. Wong believes OFTA decided against trying to achieve ahas caused better priority to be assigned. For that skeptics of the ABC methodologies in very high degree of detail in ABCMexample, the low demand and relatively high Government should first try a pilot. implementation. For example in datacost of providing a 24-hour complaint hotline collection, instead of asking staff to returnfor radio interference would indicate that Mr. Wong also believes that advocates of timesheets everyday, OFTA decided thatOFTA should reduce the service hours. This ABCM should not be looking at organizing return on a weekly basis is good enough. Intype of cost and performance information is large forums to promote the ABCM concept addition, OFTA has planned to automate theextremely useful in enabling OFTA to in the Civil Service. “Nor should they be data integration between ABC database andeffectively re-deploy their resources. looking at large departments that are input- data gathering process in order to capture oriented at the very beginning. The Trading regular cost and driver data more effectivelyLooking ahead, OFTA hopes that ABCM can Fund departments with strategic output- and efficiently.be more broadly applied within OFTA in the oriented activities will most probably needcontinuous refinement of ABC information to such methodology to help them better managefacilitate resources management and pricing their resources”, said Mr. Wong.decisions.Four stages of implementation atOFTA Misconception is not an uncommon problem.Before the launch of ABCM, staff oftenquestioned the agenda behind such anexercise. Is this a cost-cutting or “BPR”exercise? Are they trying to cut my job? The ABCM exercise in OFTA has givenmanagement an opportunity to evaluatecurrent services and to re-deploy the resourcesto new and more useful services, moreeffectively. To make ABCM a success, seniormanagement should be fully committed to theproject and prepared to communicate openlywith all staff involved. They should explainthe reasons behind an ABC exercise to helpallay the concerns of staff as well as to avoidany potential misconception behind thescenes. This exercise needs commitment atthe highest level. Benefits must also beexplained to the skeptics. In the case ofOFTA, staff discussions at each of the fourstages of implementation were held.At Stage One, OFTA commissioned externalconsultants to provide conceptual training andto conduct a pilot study. From the experiencegained in the pilot project, OFTA has mapped 2 The Bottomline