Empirical Investigation of ABC - An Evolutionary Implementation

Abstract

The concept of Activity Based Costing often has a different meaning to academic researchers and to people involved in business. As organizations are rapidly changing in ways we have never seen or could have expected, theories are often corrected by reality found in business. In the world of rapidly changing global environments complex problems within companies more often are solved through the use of integrated multi-dimensional variables. With reference to the theorydevelopment of ABC we have focused on problems with implementation of ABC in a very specialized service organization. This article deals with three parts involved in one case: Theory, implementation and practical business operation. The enterprise involved in the case is Telia (33000 employees) and more specifically a subsidiary Telia Handel AB in Sweden (300 employees). The enterprise is the largest telecommunication operator in Scandinavia and is a distinctly service management unit. It is our aim to further develop theory connected to ABC action learning from this enterprise. The actual case was initiated in the autumn 1996, the empirical work started in January 1997. The most important contribution is: The ” institutionalized norms” of ABC show considerable tension and misfit between business reality and theory. Other contributions were: 1. The founding of a new factor related to the activity workforce that activities signify. 2. This study confirms earlier theory that it is a complicated and time-consuming process to find correct activity-drivers. 3. Traditional cost-allocation as the aim of an activity-based cost-system counteracts an effective implementation of ABC due to different purposes.