Each month, senior managers at Vermont Wireless Technologies review cost reports for the company's various departments. The report for the human resource (HR) group for April is as follows:
Human Resources
April 2011
Salaries and benefits............$75,000
Supplies.................$2,400
Depreciation of office equipment.......$1,550
Total...................$78,950
Jason Fox, the new vice president of operations, expressed his dissatisfaction with the report at a meeting with the company president, CFO, and controller' This report is garbage, he began. it shows that $75,000 is being spent on salaries in HR. but it doesn't provide any information on what we're paying for. We need to know the activities of HR and what they cost. How are we supposed to manage the activities without that information? At my previous company, we routinely did activity- based management studies, and they really helped us get a handle on operations and our costs.'
Maxwell Davies, the controller, responded that he'd get to work on ABM studies right away.
Two weeks later, his staff had developed the following information for the HR operation:
Activities in HR Monthly Cost
General administration of department
Salary of HR head ...........$10,000
Salary of assistant to HR head........$5,000
Depreciation of equipment........$300
Supplies.................$200
$15,500Benefits administration
Salary of administrator..........$8,000
Depreciation of equipment..........$250
Supplies................$350
$ 8,600HR Web site development/maintenance
One half-time staff person.........$3,000
Depreciation of equipment...........$500
Supplies.................$200
$ 3,700Operations
Salary of five clerks who process paperwork related to hiring,
retirements, terminations..........$14,000
Depreciation of equipment...........$700
Supplies...................$500
$15,200Training
Salary of six staff members who train new employees on
company policies............. $35,000
Depreciation of equipment..........$650
Supplies..................$300$35,950
Total...................$78,950
Additional information: The Company has approximately 6,000 employees and annual employee turnover of approximately 15 percent.
Required:
Comment on the insights provided by the ABM study to date. Where's the low-hanging fruit? In other words, what activities appear to be good candidates for further study and significant cost savings?