Shoemaker: We implemented the Metify application from ALG Software, which is specifically designed to handle activity-based costing data. We still use an Access database, but the importing of data is much more streamlined. Some information is taken directly from our PeopleSoft system. Also, we try to have the departments format their data in a way that we can just upload it directly into Metify, or else upload it into our Access database for formatting before we import it into the software. Either way, avoiding all of the manual keying into Excel spreadsheets is a big time saver. We're able to do more analysis, as opposed to spending a lot of time inputting information or putting together reports.

BPM: How does reporting on the costing information now work?

Shoemaker: We've created some standard reports that automatically pull current information from the Metify software when they are run. There's so much data in the system, it's really helped decision-making. For example, if you look at our claims area, we're able to map out the whole process of what it takes to process and pay a claim. We drill down to a lot of steps. Before, we just looked at a few major processes, but now we might have eight or nine different steps that we track. We can see, throughout the process, what the high-cost steps are and how we can reduce those costs. And we can compare it by our different lines of business to see whether there are certain lines of business that have higher costs than others.

BPM: What benefits have you realized from this capability?

Shoemaker: The biggest benefit is that we can pinpoint problem areas quickly. If you're just looking at a general, high-level analysis and it looks like your costs went up, then you have to do a lot of research, a lot of talking to people and sifting through data, to figure out why. Whereas the way we do things now, we can pretty quickly see exactly where a cost went up or down, and we usually have statistics that we track with it, like how many claims we receive electronically versus on paper. With the level of detail we have now, most of the time we can pinpoint what caused a variance in the costs.

BPM: Do you have any tips on how to get the most out of an activity-based costing system?

Shoemaker: Sure. One is, pick a key area in your organization that you think could benefit from it and spend the time in that area implementing activity-based costing. It does take time to go out and interview people and really understand their processes. Once you've been successful in an area, use it as a sales tool and model to expand into other areas in your organization.

Also, if you're new to activity-based costing it's definitely worth investing in getting a consultant to come in and help you during the process. They will save you a lot of time because they have the experience of having been through it before. I wouldn't say just hire consultants to implement the software, though, because you want to be involved in it so you understand what's going on and understand how to continue to move forward with it. Finally, senior management buy-in is critical to ensure you will have the needed support to be effective.

BPM: Was your activity-based costing initiative worth the effort?

Shoemaker: Definitely. Not only do we use it for allocating costs -- and if that's all you're using it for, then it's probably a lot of effort for the benefits -- but the real value is that you're able to manage your costs and report out on a lot of different information. It's created a huge awareness in our company of what drives our costs, and we've found that people are very hungry for this information. The more we've talked with other departments in the organization, the more they want to get data from us. Everyone that we talk to, once they see what we can do, gets very interested in it. They get engaged in mapping their processes and trying to understand their activities and their costs.

BPM: Have you encountered resistance from anyone who might be concerned about what the activity-based costing data would reveal?

Shoemaker: What I've found is that sometimes people's initial reaction is resistance because they're afraid that you're going to use the data against them. And some of that is the culture that was here a couple years ago. But once you work with them and you explain to them that this will help them manage their budget and forecast their costs in the coming years -- once you start getting this data -- then the resistance goes away and they become more engaged and interested in the data.

In fact, activity-based costing has been a good tool to break down the walls between finance and the other areas of the company. Finance people tend to think mostly in numbers, and operations people tend to think mostly in processes and getting stuff done. By going through this whole activity-based costing implementation, the finance area was going out and talking with the other areas of the company, trying to understand their processes. So it really helped both sides understand each other. We in finance got a better understanding of how the processes worked over in operations and why they do certain things. And vice versa. Operations managers were educated on the finances of the company and why it's important that they manage to a budget and why they have to track certain statistics.

BPM: Has the initiative improved communication outside of the activity-based costing processes?

Shoemaker: I think so. Overall we now have more collaboration in everything that we do. Not that activity-based costing was the only thing that caused that, but I think it was one of the key drivers that really broke the walls down between the different departments within the company and allowed people to share information more freely.

I've been here for eight years, and when I first got here, it was a challenge to go out to other departments and talk with them because everyone was guarded with their information. There was the mentality that if I give you something you're going to use it against me, so there wasn't a lot of trust between all the different areas. Now it's very free. We participate in their staff meetings; we do presentations about costs. They will call us and ask for information or seek our advice if they want to change a process or implement a new process. Therefore, it's more of a collaborative approach.