[BETA] Fortnightly

Changing the culture at American Electric Power.

As the electric industry gears up for competition, attention shifts to things like load migration, technology and customer service. The pressure is rising like never before to identify, catalogue and track costs.

Thus, at American Electric Power Company, we decided two years ago to reengineer much of our internal financial management apparatus, including systems, databases and technology. With the help of consultants, we developed, designed, tested and implemented an activity-based management system.

Because ABM offers a powerful tool, not just for managing costs, but for facilitating business-alignment planning and work-driven budgeting, we expect that it will help us improve our business operations and meet new (and still-emerging) customer needs.

The first client-server

From the moment we decided to adopt ABM, we realized we'd have to orchestrate a large culture shift. Like most utilities, we had long kept track of costs by account, according to regulatory requirements. Yet ABM is requiring AEP to plan, budget and keep track of costs by activity. That subtle change marked a big difference.

ABM is a system to allocate, manage and track business resources by looking at each activity a company performs. ABM can assist a power plant manager, for example, in making everyday decisions about managing costs in his location. It can assist top-level executives in making strategic business decisions, such as whether to discontinue an unprofitable product line or shift resources from one area of the company.

Employees often resist such changes. Morale and productivity can nose dive. Even when presented with upbeat scenarios of how new technology will help them, system users often cling to past work habits. To help overcome obstacles, we formed a senior-level Sponsor Team, made up of 15 of our top company executives. The Sponsor Team supervised our large Project Team and Site Coordinator Group. The Site Coordinator group, made up of dozens of users from across AEP, took on day-to-day responsibility for developing and implementing the new system. Over 10 months, project team members and site coordinators held numerous user-requirement workshops with groups from different parts of the organization. They hammered out functional system requirements for each department, brokering compromises along the way to create a single company-wide system of manageable proportions.

"We did a lot of awareness training, bringing all system users up to a common level of understanding about what the system would do for them," says Planning and Budgeting Team Leader Don Keller.

"We also identified the functional requirements of people from all the various units within the company. ... We ... were able to limit the activities that the system would track, monitor and provide data on to just 350."

Pam Flemming, performance reporting team leader, believes that some of the initial resistance to the new system came from a lack of awareness (em from the sheer amount of change that ABM represented.

"This is the first client-server technology that AEP has ever implemented. We've always been a mainframe environment," she observes.

Until AEP implemented ABM, many employees hadn't worked with computers on a daily basis. That's why