New Management Techniques: An International Comparison

By Kidwell, Linda A.; Ho, Shih-Jen Kathy et al. | The CPA Journal, February 2002 | Go to article overview

New Management Techniques: An International Comparison

Kidwell, Linda A., Ho, Shih-Jen Kathy, Blake, John, Wraith, Philip, et al., The CPA Journal


MANY EXPERTS BELIEVE THAT BOTH FINANCIAL AND NONFINANCIAL performance information are necessary to the reporting efforts and accomplishments of governmental entities.

Governments around the world are under great pressure to control their costs and improve their service. In response to chronic fiscal constraints, local governments are considering management tools used in the private sector, such as activity-based costing (ABC), activity-based management (ABM), total quality management (TQM), benchmarking, process reengineering, and the balanced scorecard. Some government leaders believe that such tools are helpful in meeting the challenges of increased accountability while others dismiss them as merely another fad.

Management Tools

Traditional budgeting and financial management tools, such as line-item budgeting and financial trend monitoring, were not included in this study, but the following six tools were.

Activity-based costing (ABC). A procedure that measures the cost of objects, such as products, services, and customers. Activity-based costing first assigns resource costs to the activities performed by the organization. Activity costs are then assigned to the products, customers, and services that benefit from or create the demand for the activities.

Activity-based management (ABM). Activity-based management consists of performing activities more efficiently, eliminating activities that do not add value for customers, improving delivery of services, and developing better relationships with customers and suppliers. The goal of ABM is to satisfy customer needs while making fewer demands on organizational resources.

Benchmarking. Benchmarking is the process of studying and comparing how other organizations perform similar activities and processes. The other organizations are generally selected because of their excellent performance of the benchmarked process.

Process reengineering. This technique has been described as "the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical contemporary measures of performance, such as cost, quality, service, and speed" (Hammer and Champy, Re-engineering the Corporation: A Manifesto for Business Revolution, Harper Business, 1993).

Total qualty management (TQM). TQM is a management-led, organizationwide commitment to quality, as defined by both internal and external customers. It requires the development of a clear vision of what the organization does, what its values and goals are, and how it is going to achieve them. TQM focuses on understanding customers and their needs, as well as the needs of employees, while focusing on processes.

Balanced scorecard. A balanced scorecard is a set of measures that give top managers a fast but comprehensive view of the business. It complements traditional financial measures with operational measures of customer satisfaction, internal processes, and the organization's learning and growth activities-- operational measurements that are the drivers of future financial performance. The balanced scorecard can help management form a fink between long-term strategic objectives and short-term actions.

Research Method

The authors conducted a survey to understand the use of contemporary management techniques by municipal governments, their effectiveness, and future expectations. In addition, information was collected about the characteristics of the government unit, major barriers to implementation, and management tools helpful in developing alternate reporting.

Questionnaires were mailed to the chief administrative officers of various municipal jurisdictions in the United States in the summer of 1998, and the survey was administered in the United Kingdom and Canada in the winter of 1999/2000. Of the completed questionnaires, 140 were from the United States, 105 from the United Kingdom, and 157 from Canada (for response rates of 35. …

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