Activity-based management as a method for containing and reducing cost in Further Education and Training Institutions (FETs)

Abstract

This research focuses on Activity-Based Management as a method to manage and minimize costs in one Further Education and Training College, also known as a Training Vocational and Education Training Sector (TVET). Taletso College is the case sample. The research examines the role of ABM techniques (i.e. ABC and Value Chain Analysis) and how they could assist in containing and minimizing costs in the college sector by providing cost information that is significantly different from and better than cost information produced by the traditional method of accounting presently used in the FET/TVET sector. A common feature in the implementation of ABC is that it would assist the college sector identify the drivers of cost, with the aim of containing and reducing the total costs associated with the provision of programs and services to students. According to research findings the analytical nature of ABC techniques bring about a better understanding and transparency of operational processes, activities and cost structure. It could assist the college focus on its output rather than on mere measurement of the consumption of resources, produce timely, relevant and readily understandable management accounts to support decision making, link strategic direction and planning to operational reporting, develop a strategic support methodology by interpreting, measuring and reporting on critical cost factors. This would also assist in understanding and interpreting cost structure to better predict and control future costs. In conclusion, for ABC to be implemented successfully, the management of TVET/FET must change the way they do business, that is, they must change the way they think (philosophy) about how to contain and reduce costs. Lastly, this in tum, is meant to make them conscious of the need to change the old ways of doing business and encourage them to think and act differently in their working lives.