Activity-Based Management and Strategic Costing at CIPO January 27 th , 2015
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Activity-Based Management and
Strategic Costing at CIPO
January 27th, 2015
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Agenda
• CIPO at a Glance
• Value of Strategic Costing
• Activity-Based Management (ABM)
– What is ABM?
– Components of ABM
• Activity-Based Costing (ABC)
– Basic Concepts
– ABC Methodology at CIPO
– ABC Model at CIPO
• How ABM is used at CIPO
• Challenges
• Success Factors
CIPO at a Glance
• Special Operating Agency
– Funded by a Revolving Fund fully-financed by user fees
– $150 million revenue generated per year, by clients
• Workforce
– Approximately 900 employees
– Mostly technical: engineers, scientists and researchers
• Volume
– CIPO receives about 100,000 IP applications per year
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IP Volume Patents Trademarks Industrial
Designs Copyright
Applications 36,900 49,500 5,200 8,200
Grants/Registrations 20,900 26,800 4,600 8,150
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Value of Strategic Costing
• Intense pressure to do more with less
– Increase quality and productivity
– Reduce backlog or processing time
– Lower costs
– Etc…
• The solution for governments under pressure cannot be to simply
uncover new sources of revenue or increase taxes
• Meeting this challenge often requires information such as:
– Accessing accurate and easy‐to‐understand financial data
– Establishing and understanding the actual costs of products/services,
business activities and access/distribution channels
– Identifying and implementing process improvements
– Evaluating outsourcing or privatization options
– Aligning activities to the organization’s vision, mission, and its strategic plan
What is Activity-Based Management?
• Methodology that provides information to facilitate strategic and
operational decisions about :
– Profitability and cost of business activities, access/distribution
channels and products/services;
– Capacity and resource requirements;
– Pricing strategies; and
– Ad hoc analysis.
• ABM is about making fact-based decisions:
– “Doing the right things” → Strategic ABM
– “Doing things right” → Operational ABM
– Measuring processes from different angles → ABC
• It offers more than a traditional accounting perspective, it offers a
business perspective
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Components of ABM
• Activity-Based Costing (ABC)
– The purpose of ABC is to generate multi-
dimensional unit cost information (by
products and services, access/distribution
channels, processes or activities) in order
to support the decision making process.
• Activity-Based Planning (ABP)
– The purpose of ABP is to predict
organizational capacity by suggesting FTE
requirements based on specific forecasts
(demand/volume, FTEs or other drivers).
• Activity-Based Budgeting (ABB)
– ABB predicts/support the budget allocation
process by determining the dollar value
based on ABP FTE requirements.
ABC
ABP
ABB
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Basic ABC Concepts
• Here are the 3 types of information needed to build an
ABC model:
Resources
A cost that is a
fundamental
building block of
an organization
Examples:
• Salaries
• Professional
Services
• Accommodation
• Training
• Travel
• Supplies
• Repair &
maintenance
• Etc…
Activities
What people or
machines do
Examples:
• Mail & scanning
• Examination
• Quality
• Grant/registration
• Process PO
• Train employees
• Install software
• Staffing actions
• Pay invoices
• Etc…
Cost Object
The units for
which separate
cost analysis is
desired
Examples:
• Products and
services
• Process or
Activities
• Access or
distribution
channels
• Customers
• Etc…
Business
Sustaining
Drivers Drivers
Drivers
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ABC Methodology at CIPO
• Measuring processes from different angles:
Resources Financial System
Activities
Cost Object
Corporate
Costs
•Salaries
•O&M
Corporate
Activities
Business
Sustaining
Costs (BSC)
Operational
Costs
•Salaries
•O&M
Operational
Activities
Products/
Services
Mark-up
Tra
ditio
nal C
ost A
ccounting
$1
50
M
AB
C A
ccountin
g
$1
50
M
Drivers
ABC Model at CIPO
Quarterly unit cost and productivity (ABC)
Turnaround time and inventory reporting (ABP)
Ad-Hoc Analysis
Output OLAP* Cube •Cost
•FTE
•Volume
•Stats
Cost & Drivers
•Direct
• Indirect
•Corporate
Activity
•PB & PAB
•TMB &TMOB
•CID
• IB
Access Channels
•Application
•Examination
•Maintenance fees
Products & Services
Access Channels
Products / Services
Activity
ABC Model
FTE (+ Time
tracking)
Cost
Volume
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*OLAP is an acronym for On-Line Analytical Processing
Software:
SAS-ABM
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How is ABM used at CIPO?
• Understanding operational costs, effectiveness and profitability for all business lines, products/services and activities by evaluating productivity and efficiency of actual business processes
• Assessing the impact of processes enhancements and policy/law changes which will facilitate the process of setting priorities
• Understanding the impact of the cross‐subsidization of products/ services and product lines
• Establishing pricing strategies
• Support the preparation of business cases and cost/benefit analysis
• Support ad-hoc assessments such as performance improvement plans, turnaround time analysis, inventory and service standard analysis, IT expenditure reporting, etc.
Assess impact
Integrate impact
Measure impact
Challenges
• People… you need their buy-in
– Senior Management
• Good sales pitch
• Concrete example
– Middle Management
• You can’t manage what you don’t measure
• ABM is a tool… people make decisions
• Data…
– Not enough, too much… understand the level of details required
– Accessibility and timeliness
– Clean data (accuracy, consistency)
• Resources… do you need an army of accountants?
– How many people do you need to create, run and maintain these models?
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Success Factors
• Must generate useful information for all levels of management in a
timely manner
– Senior Management
• “Global” information on products/services, channels, business activities,
productivity or capacity to support the strategic decision process such as
performance improvement plans, pricing strategies, etc.
– Middle Management
• Business line information (Patent, Trademarks, Industrial Design, Copyright)
• Specific function information (electronic vs. paper application [in person vs. mail-
in], call centers, etc.)
• Capacity information
• Cost per activity information
• Solid reputation with Central Agencies
– Good control and understanding of our costs translates into reliable costing
and pricing information (current and projected)
– Financial analysis are less likely to get challenged
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So Why Use ABM?
• To understand current and future cost and
capacity in order to facilitate strategic and
operational decisions in an ever changing
environment.
• “ABM is more than an accounting tool; it's a
system for continuous improvements”.1
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1Chartered Institute of Management Accountants: http://www.cimaglobal.com/Documents/ImportedDocuments/ABM_techrpt_0401.pdf
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Questions / Comments
Christian Bergeron, MBA, CPA, CMA Canadian Intellectual Property Office (CIPO)
Deputy Director, Costing, Performance
Measurement and Managerial Accounting
Email: [email protected]
Tel: 819-953-9660
Jean-René Drapeau, CPA, CGA Canadian Intellectual Property Office (CIPO)
Director, Business Improvement Services
Email: [email protected]
Tel: 819-934-0510
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