Activity-Based Management (ABM) is a business management approach that uses Activity-Based Costing (ABC) to improve and monitor performance and make better decisions.
Activity-Based Management (ABM) uses the information derived through ABC to answer the question "
why do we incur these costs?". With accurate and reliable cost information at their fingertips, managers can make better decisions and achieve true, sustainable and measurable breakthrough performance.
ABM focuses on "cost drivers" and "performance measures" (as shown in the ABC/M Cross CAM-I Diagram below).
Cost drivers are any factor which causes a change to incur in the cost. There may be multiple cost drivers for any activity. Understanding the significance of cost drivers, both individually and in combination with each other, is the key to both understanding what causes cost to occur and to identifying specific costs that can be reduced or eliminated.
Performance measures are used to measure the output of activities. They include both specific cost measures and non-financial measures, such as clinical outcomes, patient functional status, cycle time, and customer satisfaction. Understanding the impact of activities on key performance measures is critical to finding the optimal answer, not just the answer with the lowest cost.
ExactCost® ABM is a powerful Business Process Management tool for healthcare delivery organizations.
