1. Program Support AB—The Journey2001 Lenhardt & Colton, LLC Activity Based—Solutions The Journey Program Support Group May 09, 2001

2. Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 2 Program Support Journey Initial Activity Analysis and ABC Model Development What can this be used for? Examples/Illustrations FY 2000/2001 ABC Update and Calibration Deploy ABM Institutionalize—and Get Ready for ABB

3. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 3 Reduce Cycle Time Reduce Cost Improve Quality Increase Level of Service Why deploy Activity-based?

4. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 4 Activity-based info helps you decide...... what to do differently.

5. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 5

6. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 6 Information is Data Endowed with Relevance and Purpose. Peter Drucker, 1990 You Need Good Information

7. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 7 Mn/DOT’s Purpose Identify Cost, Quality, & Timeliness (CQT) Manage CQT Measure CQT

8. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 8 Relevant Information Is Actionable Is Timely Is Available to those doing the work Is expressed in the same language as work Imparts an understanding of causes of activities/costs

9. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 9 Traditional Information… Is not relevant to the purpose of identifying, managing and measuring CQT

10. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 10 Traditional versus Activity-based Project Management Performance Measures Workload Requirements Focus on Activities And Outputs! Causes!! Do Not Focus Solely on Resources Variance

11. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 11 InputOutputActivity Resource $ An Activity-Based Approach Exploits the “Process Model” of Work

12. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 12 Activity Based Budgeting How many dollars do I need? Activity Based Budgeting Activity Based Management How well are we doing? Activity Based Performance Measures How/where can I best improve the process? Activity Based Continuous Improvement Activity Based—Solutions Activities Outputs Resources Activity Analysis Inputs Activity Based Costing How much does something cost? Activity Based Costing

13. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 13 Activity Based—Solutions Activities Outputs Resources Activity Analysis Inputs Activity Based Costing The tracing and allocation of costs to products & services via the activities & processes consumed by the products and services. Activity Based Costing The tracing and allocation of costs to products & services via the activities & processes consumed by the products and services.

14. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 14 Program Support Journey Initial Activity Analysis and ABC Model Development FY 2000/2001 ABC Update and Calibration Deploy ABM Institutionalize—and Get Ready for ABB Where is it all taking you?— Examples/Illustrations

15. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 15 Initial Activity Analysis and ABC Model Development

16. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 16 ABC Operational Model Crosswalks Mn/DOT Computer Databases ABC Dollarized Model Much has been accomplished! Activity Analysis InputOutputActivity Resource $ Activity Dictionary Resource Tracing Workbook Normalization Workbook Factors Workbook Schematics

17. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 17 Program Support Journey Initial Activity Analysis and ABC Model Development What can this be used for? Examples/Illustrations FY 2000/2001 ABC Update and Calibration Deploy ABM Institutionalize—and Get Ready for ABB

18. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 18 Activity-based Examples ABC Data Activity-based Cost Estimate Activity-based Service Agreement Activity-based Budget Scenarios—Net Prophet II Activity-based Continuous Improvement

19. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 19 Activity-based Cost Estimate What are you costing? What activity outputs does it consume? Are the outputs normalized? Which variety is consumed? How many are consumed? Use an Activity-based cost estimating worksheet to quickly obtain your answer.

20. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 20 Activity-based cost estimating worksheet

21. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 21 Activity-based Service Agreement What are you costing, for which district? How many outputs are consumed by that district? What is your negotiated cost-per-output with that district? Use an Activity-based service agreement worksheet to quickly obtain your answer.

22. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 22 AB Service Agreement Worksheet

23. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 23 Activity-based Budget What is the projected workload, expressed in terms of activity outputs? What is the forecasted cost per output?

24. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 24 AB Budget Worksheet

25. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 25 Program Support Journey Initial Activity Analysis and ABC Model Development What can this be used for? Examples/Illustrations FY 2000/2001 ABC Update and Calibration Deploy ABM Institutionalize—and Get Ready for ABB

26. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 26 Update and Calibrate for FY2000/2001

27. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 27 Process to Maintain Documentation From the Modelers’ Meetings 1 and 2.

28. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 28 Program Support Journey Initial Activity Analysis and ABC Model Development What can this be used for? Examples/Illustrations FY 2000/2001 ABC Update and Calibration Deploy ABM Institutionalize—and Get Ready for ABB

29. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 29 Activity Based Management A formal management process that supports excellence: 1.Encourages an understanding of how activities and processes contribute to the strategic objectives of the organization. 2.Encourages changes to traditional management. practices to emulate best practices and establish process controls to ensure consistently good performance. 3.Enables a systematic process of continual process improvement, allowing organizational improvement to be planned, budgeted, monitored and controlled. Activity Based Management A formal management process that supports excellence: 1.Encourages an understanding of how activities and processes contribute to the strategic objectives of the organization. 2.Encourages changes to traditional management. practices to emulate best practices and establish process controls to ensure consistently good performance. 3.Enables a systematic process of continual process improvement, allowing organizational improvement to be planned, budgeted, monitored and controlled. Activity Based—Solutions Activities Outputs Resources Activity Analysis Inputs

30. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 30 Continuous Improvement...

31. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 31 Deploy ABM

32. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 32 “Deploy ABM” Process A.Elements of ABM B.Plan the ABM Rollout C.Internalize the Vision D.Execute First Cycle of ABM E.Assess the Execution of ABM F.Institutionalize the Process of ABM

33. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 33 Activity Based Continuous Improvement Problem?Solution! How/where can I best improve the process? Activity Based Continuous Improvement Eliminate wasteful (non-value added) activities Optimize resources by continuously improving value-added activities Use activities/outputs to link all management tools

34. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 34 Establish “Value” Definitions—Examples An activity could be considered value added (VA) if: An activity could be considered non-value added (NVA) if: 4 It is required to meet external customer requirements. 4 It can be eliminated without impacting the form, fit or function of the product. 4 It is required by the government or other regulatory agency. 4 It involves rework or inspection. 4 It modifies or enhances the raw materials of our product. 4 It results in waste and adds no value to product or service. 4 The customer is willing to pay for the incremental value added. 4 It is performed due to inefficiency in the upstream process. 4 It is a critical step that cannot be eliminated in a business process. 4 It is duplicated in another department or adds unnecessary steps to the process. 4 It is performed to resolve or eliminate a quality problem. 4 It is performed to monitor quality problems. 4 It is performed due to a request or expectation of a happy customer. 4 It is performed due to a request from an unhappy customer. 4 It produces a valuable output. 4 It produces unnecessary or unwanted output.

35. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 35 Quality Tools for Improvement

36. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 36 Where to start? Scenario: Improve Process You’ve been given a 10% productivity goal.

37. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 37 Generate a list To define the opportunity, start by listing some of the visible adverse symptoms, or “effects” of some underlying problems within your workgroup –The visible signs of underlying problems generally are symptomatic of a deeper problem –Your goal is to brainstorm some of the effects, then work backward to determine the root cause

38. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 38 Remember Your Activity Analysis?

39. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 39 Link Adverse Effects to Activities

40. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 40 Estimate the Impact (ROM) Let’s investigate this one.

41. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 41 Determine Root Cause Some Quality Tools to Identify Root Cause –Brainstorming –Cause and effect diagrams –Data Collection (Check sheets) and Analysis –Pareto Analysis –“Five Why’s” approach

42. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 42 Fishbone (Cause/Effect) “Tool” Project : Reduce Unplanned Changes Reason Selected: Initial Cost Driver analysis showed that unplanned changes causes close to $ 650 thousand of recurring activity cost. People Policies Procedure Systems Analysis Cause of unplanned changes? Lack of training Customer makes changes Policies inadequate Procedure not being followed Inadequate tracking & communication tools

43. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 43 Data Collection/Analysis

44. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 44 Idea Affinity Diagram Prohibit Changes Hold Monthly Review Design Collaborative Goals with Incentives Other Identify Possible Solutions Identify Possible Solutions

45. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 45 Prioritize Possible Solutions

46. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 46 Trace Improvement to Primary Activities

47. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 47 Monitor the Improvement

48. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 48 ABM - A Systematic Process Identify improvement opportunities Develop action plans Implement & Evaluate Improve Processes Cost, Quality, Time (CQT) Evaluate Performance InputOutputActivity Resource $ Assign Resources to achieve Performance Budgeting PLAN DO CHECK ACT

49. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 49 A New Focus

50. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 50 How do you get there?

51. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 51 Deploy ABM in Program Support A.Elements of ABM B.Plan the ABM Rollout C.Internalize the Vision D.Execute First Cycle of ABM E.Assess the Execution of ABM F.Institutionalize the Process of ABM

52. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 52 Planning the ABM Rollout Identify and/or refine project goals & objectives Create project “scoreboard” to keep project focus –Predetermined success criteria Identify project sponsor –Provide “roadmap”, suggesting active leadership role for sponsor to carry out Recruit steering team and ABM project teams –Provide clear guidelines Develop and gain approval for project plan and key milestones Communicate plan as part of overall ABM communications effort

53. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 53 Deploy ABM in Program Support A.Elements of ABM B.Plan the ABM Rollout C.Internalize the Vision D.Execute First Cycle of ABM E.Assess the Execution of ABM F.Institutionalize the Process of ABM

54. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 54 Internalize the Vision Educate managers and employees to obtain: –Buy-in –Commitment –Participation Create the environment in which ABM can succeed –Communications –Rewards & recognition –Trust Educate managers and employees to obtain: –Buy-in –Commitment –Participation Create the environment in which ABM can succeed –Communications –Rewards & recognition –Trust

55. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 55 Deploy ABM in Program Support A.Elements of ABM B.Plan the ABM Rollout C.Internalize the Vision D.Execute First Cycle of ABM E.Assess the Execution of ABM F.Institutionalize the Process of ABM

56. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 56 Execute First Cycle of ABM Identify improvement opportunities Determine root cause, possible solutions Prioritize, recommend plan Coordinate with business planning Develop CQT performance measures.

57. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 57 Deploy ABM in Program Support A.Elements of ABM B.Plan the ABM Rollout C.Internalize the Vision D.Execute First Cycle of ABM E.Assess the Execution of ABM F.Institutionalize the Process of ABM

58. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 58 Assess the Execution of ABM Assess the Execution of ABM Summarize results Assess results vs. success factors Present findings to steering team Identify and charter process improvement teams as appropriate Hold periodic follow-up meetings to evaluate progress Determine next steps

59. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 59 Deploy ABM in Program Support A.Elements of ABM B.Plan the ABM Rollout C.Internalize the Vision D.Execute First Cycle of ABM E.Assess the Execution of ABM F.Institutionalize the Process of ABM

60. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 60 Institutionalize the Process of ABM Create/refine “ABM Process” dictionary Establish and train “ABM Process- owners” within each office Plan (with ABM process-owner teams) execution of ABM Cycle 2 Coach office teams during Cycle 2

61. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 61 Pitfalls to Avoid Lack of Top Management Buy-In Project Perceived as Just Another “Accounting Project” Lack of Absolutely Clear Goals & Objectives Insufficient Resources Committed to the Project Resistance to Change- Individual & Institutional Lack of Long-Term Vision Regarding the Role of ABM

62. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 62 Program Support Journey Initial Activity Analysis and ABC Model Development What can this be used for? Examples/Illustrations FY 2000/2001 ABC Update and Calibration Deploy ABM Institutionalize—and Get Ready for ABB

63. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 63 Activity Based Budgeting The process of planning and controlling the expected activities or business processes of the organization to derive a cost-effective budget that meets forecasted workload and agreed strategic goals. Activity Based Budgeting The process of planning and controlling the expected activities or business processes of the organization to derive a cost-effective budget that meets forecasted workload and agreed strategic goals. Activity Based—Solutions Activities Outputs Resources Activity Analysis Inputs

64. May 09, 2001 Program Support AB—Solutions 2001 Lenhardt & Colton, LLCSlide 64 ABB—Getting Ready Update and Calibrate Process Definitions and Models –Activity Definitions –Normalization Factors –Resource Tracing Develop Simple Output tracking methods Maintain and update the Process Documentation Set Make “Process Understanding and Definition” a regular part of your business meetings