The balanced scorecard can be used with ABC. The idea is that you use an analytic hierarchy process (AHP) where you identify the cost drivers that specifically affect the outcomes on the balanced scorecard. "This integrated, more mature system can be expected to induce innovation, improve customer service, increase customer and employee satisfaction, and enhance total performance." (Theriou, 2007) When we talked last week about the possibility of companies failing to stick with ABC and managers having to be on board, this is why. Activity-Based Management and AHP allow companies to have a much better understanding of their intricate systems. However, in order for them to have that better understanding, they must be willing to go further than ROI and use methods like AHP. AHP is described in the article. It is helpful when a company has multiple quantitative and non-quantitative performance measures as everything is equated to the same type of scale. This allows you to determine which cost driver is more important for particular evaluation methods. Note that this shows just how careful you must be when picking the cost driver as these cost drivers are not only determining your costs but also helping you evaluate progress through the balanced scorecard. It is even holding people accountable through ABM as it creates evaluation methods that can be used for responsibility accounting.

How do you think a company know if they are picking the right measures or that their cost drivers are truly relevant to what they are doing for this type of evaluation?

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Answer A growing business needs to be closely and carefully managed to ensure the success of new investment decisions and expansion plans However many ... View the full answer