Why Did Abc Fail at the Bank of China?
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 participants, individual and organizational resistance to change, and the fact that few outsourcers were available. The study represents a real example of why ABC implementation might fail in an organization.
T
he key purpose of the Bank of China’s strategic plan is to generate, process, track, and close its leads in the Chinese financial market. As part of the plan, the bank aimed to introduce an activity-based costing (ABC) system across all of its regions in order to reduce costs and increase management control. The implementation failed, however, and the traditional costing system is still employed. We investigated factors that blocked the implementation of activity-based costing and management (ABC/M) in one provisional bank branch, the name and location of which are not disclosed for confidentiality reasons. Our interviews with 18 of the branch employees revealed six factors that blocked the implementation of
ABC. These are: x Lack of a clear business purpose about the implementation, x Lack of education about ABC, x Poor ABC model design, x Lack of participants, x Individual and organizational resistance to change, and x Few outsourcers available. Although some or all of these factors have been mentioned in previous studies,
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 participants, individual and organizational resistance to change, and the fact that few outsourcers were available. The study represents a real example of why ABC implementation might fail in an organization.
T
he key purpose of the Bank of China’s strategic plan is to generate, process, track, and close its leads in the Chinese financial market. As part of the plan, the bank aimed to introduce an activity-based costing (ABC) system across all of its regions in order to reduce costs and increase management control. The implementation failed, however, and the traditional costing system is still employed. We investigated factors that blocked the implementation of activity-based costing and management (ABC/M) in one provisional bank branch, the name and location of which are not disclosed for confidentiality reasons. Our interviews with 18 of the branch employees revealed six factors that blocked the implementation of
ABC. These are: x Lack of a clear business purpose about the implementation, x Lack of education about ABC, x Poor ABC model design, x Lack of participants, x Individual and organizational resistance to change, and x Few outsourcers available. Although some or all of these factors have been mentioned in previous studies,