Why Activity-Based Management (ABM)?
ABC and ABM approaches are designed to provide a far fuller picture of the costs and profits associated with doing business compared to traditional cost accounting. By enabling a deeper understanding of true product and client profitability, and the relationship between the two, JPMorgan has an opportunity to identify then drive costs out of both front and back office activities. The company had used Oros from 2000 as the basis for its ABC model. Over time, however, it became clear that Oros struggled to handle the complexity of the business. “Initially, the profitability reports were not widely accepted,” says Whitman. Outputs were provided as a grid, by product and by client channel, showing the profitability of the business on one page. Before this, departments provided reports for their own cost centres, with widely differing margins involved. “We wanted to spark conversations between client and product channels, to get them to discuss the impact of rising costs in their own areas
