Why Did Abc Fail at the Bank of China?

Decent Essays
Why Did ABC Fail at the Bank of China? BY ABED AL-NASSER ABDALLAH, PH.D., AND WEI LI UNLESS TOP OF USING MANAGEMENT LENDS ITS SUPPORT, EMPLOYEES UNDERSTAND THE PURPOSE MODELS ARE TESTED, AND COSTS/BENEFITS ARE DETERMINED, IMPLEMENTATIONS COULD FAIL. ABC, ABC EXECUTIVE SUMMARY Few authors have explored the implementation of activity-based costing (ABC) in East Asian companies. This study investigates factors that led to the failure of an ABC implementation at a major Chinese financial institution—the Bank of China. Interviews with 18 employees at one branch revealed six factors that blocked the implementation: the lack of clear business purpose, a lack of education about ABC, poor model design, a lack of…show more content…
ABC VS. ent activity-based cost pools with respect to their classifications. In the second stage, using a series of costdriver-based rates, the pooled costs are allocated to product lines. Gary Cokins argued that, compared to the two-stage model, a traditional costing system is like a “checkbook” where one can read the total amount spent but can never know the purpose and results of each check.2 Traditional cost systems are always employee payroll related, which hinders a manager’s ability to judge and improve employees’ activities and performance. Furthermore, the payroll-related costs do not indicate the interaction and relationships between one activity and others or products and customer services. Managers will not be able to identify which events cause activity costs to vary. Based on managers’ views, however, an organization’s activity costs could be the most controllable part that managers can influence. Nonetheless, without knowing the costs’ drivers, managers are virtually unable to organize a company’s production costs efficiently. In contrast, ABC concentrates on activities involved in the work process that help managers operate a business or an organization. “ABC/M is work-centric, whereas the general ledger (traditional costing system) is transaction-centric.”3 Nonetheless, both systems have their points: The traditional
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