Academic journal article The Government Accountants Journal

A Survey of Management Techniques Implemented by Municipal Administrators

Academic journal article The Government Accountants Journal

A Survey of Management Techniques Implemented by Municipal Administrators

Article excerpt

In an era of limited resources, governments are under great pressure to reform their administrative systems. Local governments have been forced to consider innovative management tools to improve service while financial resources shrink. The tools include Activity-Based Costing (ABC), ActivityBased Management (ABM), Total Quality Management (TQM), benchmarking process reengineering and the balanced scorecard. Some government leaders believe they have found the answer to the challenge of improving quality and increasing productivity@ Others dismiss these contemporary management tools as another fad that produces only failure in a cycle of grand promises and disappointment. In light of the prevalence of traditional budgeting and financial management techniques, such as revenue and expenditures forecasting and the monitoring of financial trends, we examine the effectiveness and usefulness of some contemporary management techniques: ABC, ABM, benchmarking, process reengineering, TQM and the balanced scorecard. This article describes a survey in which government administrators were asked about their use of and attitudes toward these contemporary tools.

Tools Included in the Survey

Innovative management tools that have become more prominent over the last decade are included in the study. Traditional budgeting and financial management tools, such as line item budgeting and financial trend monitoring, are not included as they are proven tools that are necessary for the accountability of local jurisdictions The following six tools are included in this study.

Activity-Based Costing (ABC): A procedure that measures the cost of products, services and customers. ABC uses the costs of activities as building blocks. ABC 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 are creating the demand for the activities. The ABC concept was developed by Robin Cooper and Robert S. Kaplan from the Harvard Business School. They have published a series of articles advocating the use of ABC since 1988.1

Activity-Based Management (ABM): The management processes that use the information provided by an activity-based costing analysis to improve organizational performance. ABM includes performing activities more efficiently, eliminating the need to perform certain activities that do not add value for customers, improving the design of products and developing better relationships with customers and suppliers.2 The goal of ABM is to satisfy customers while making fewer demands on organizational resources. ABM was introduced in management accounting literature in 1992.3

Benchmarking: The process of studying and comparing how other organizations perform similar activities and processes. The other organizations can be either internal or external and are selected because they are known to have excellent performance. Xerox coined the term benchmarking in 1979. The approach has been in use for a number of years, although it was often called by different names. An early benchmarking article appeared in Harvard Business Review in 1987.4

Process Reengineering: "The fund mental rethinking and radical redesign of business processes to achieve dramatic improvements in critical contemporary measures of performance, such as cost, quality, service and speed."' Process reengineering was first introduced by M. Hammer in 1990 but did not gain wide dissemination until after the publication of Hammer and J. Champy's book on reengineering in 1993.

Total Quality Management (TQM): A commitment to quality that involves a clear vision of what the organization does, its quality values and goals, how it's going to achieve them, who its customers are, their needs, the needs of its employees and a focus on processes. Edwards Deming launched the TQM movement when he published his book Quality, Productivity and Competitive Position in 1982. …

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