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How One Company Used ABM

Fortnightly Magazine - July 15 1997

Coopers & Lybrand L.L.P. He headed C&L's change management consulting engagement at AEP for two years. With more than $5 billion in annual operating revenues and more than 18,000 employees, AEP serves 7 million people in Ohio, Michigan, Indiana, Kentucky, West Virginia, Tennessee and Virginia.

The Role of Senior Leaders

From the early 1990s, AEP executives began to rethink the company's organization, cost structure, planning, budgeting and cost management. CEO E. Linn Draper, Jr., spearheaded "New Directions," an internal initiative focused on customer satisfaction and shareholder value, and which helped lay the groundwork to install activity-based management

As a member of a group of 15 top AEP executives on the Sponsor Team, Sr. Vice President Henry Fayne helped oversee the project team and site coordinator group that implemented ABM. The entire implementation plan involved individuals from the company's information services and telecommunications departments. All told, more than 500 people were involved.

Making It Work: Issues to Consider

Although implementing the system was deemed a success, not every approach worked equally as well as others.

What worked:

1. Training. The ABM team trained 1500 users in 75 days. Project coordinators and trainers became "resident ABM experts." Today, they answer questions and troubleshoot problems.

2. Simulation games. Simulations helped educate employees. Staged exercises introduced ABM techniques to track, monitor and assess the costs of different business activities. The games helped ABM come "alive" for employees. If done over, however, AEP would schedule such war games closer to the time of system design and piloting. (In some cases, simulations occured as early as a year ahead of system rollout.)

3. Employee involvement. System users were involved from the start to ensure that employees would "buy" the idea. But this strategy also harbors an inherent downside (see below).

What didn't:

1. Team continuity. Although it was of great value to use different teams to identify departmental requirements and to communicate and train people on the system, more continuity in team membership from one project to the next probably would have been better.

2. Software coordination. It would have been better to reengineer accounting systems and other "legacy" systems at the same time that ABM was implemented. Doing so would have established clean interfaces among all software, allowing more of a "one-system" integrated approach to reengineering efforts. In AEP's case, however, timely system design and implementation were paramount.

3. Employee involvement. Feedback can help and hinder at the same time. User involvement can delay progress as system specifications are hammered out among groups of users with differing needs and agendas. System design and development became problematic at times, but the team eventually stayed on schedule.


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