ABC costing at SHU and costing eLearning Sarah Heginbotham 18 June 2002

Today n Background n Activity-based costing n The project at SHU n ABC’s relevance to costing e-learning

Funding of HE in the UK n TEACHING –MASN, Student Fees –top-sliced then distributed to Schools using UIDM n RESEARCH –RESEARCH –top-sliced then distributed to research areas relative to their RAE grade n PRIVATE –overhead charged by the University

The Transparency Review n HEFCE Initiative n Cost of research n Compulsory n Report on 5 main activities n Uses ABC terminology n Use of activity time sheets n Phased implementation

Scope of the project n Funded by JISC n Course costing within the School of Computing and Management Sciences n 6 months n Transparency Review n Trial of Activity-based costing

Activity-based costing

Activity-based costing (ABC) ABC was developed as an alternative costing methodology by Robin Cooper and Robert Kaplan of the Harvard Business School (1988) in their research into product costing in the manufacturing industry.

Cooper and Kaplan (1988) n They argued that traditional costing distorted product costs (“peanut butter spread approach”) n There is a cost to all activities carried out within an organisation n Activity costs should be distributed to products in relation to their use

The ABC Model General Ledger Activities Cost Objects Budgets Business Sustaining Costs Methods Cost Drivers

Activity Drivers Hold Tutorials No. Students Business Intelligence Resources Cost for each Customer/product/channel group method Activities Staff time Cost driver I.T. & Management FT DL

n Decide on the Cost Object n Management Briefings n Create an Activity Dictionary n Allocate General Ledger transactions to activities n Collect and analyse staff time n Allocate the activity costs to cost objects The ABC Process

Advantages of ABC n Gives more than just financial information n Fairer system of overhead allocation n Accountability of central services n Highlights cross-subsidisation n Recognises the changing cost behaviour of different activities as they grow and mature n Can provide data for other initiatives - E.G. Transparency Review and EFQM.

Disadvantages of ABC n Data collection can be costly and time consuming n Initially it can be difficult to collect the data you want n Determining appropriate and acceptable cost drivers n More complex system

Implementing ABC takes time “Its important in a service organisation to get started with ABM and not worry about total accuracy from the start. Accuracy will improve with time” Antos (1992)

ABC in HE

ABC v traditional cost allocation in universities Using traditional methods n Top slicing - central decision making group decide on allocations to schools n Charge back - allocated to Schools using simple cost driver Using activity-based costing n Allocates costs to Schools on their actual usage

How we differ from manufacturing Manufacturing In manufacturing industry the central finance department require and analyse the costs of production and the make- up of the the organisations’ product portfolio. Its pricing policy is directly influenced by this information. In manufacturing industry the central finance department require and analyse the costs of production and the make- up of the the organisations’ product portfolio. Its pricing policy is directly influenced by this information. University Very rare to find a finance director examining costs on a course-by-course basis. Product information is held in the School and product decisions are not based primarily on cost.

ABC use in the UK HE sector (source Cropper and Cook, 2000)

The Project at Sheffield Hallam University

What we set out to do n Familiarise ourselves with activity-based costing n Literature Review n Review available software providers and choose an experienced partner for the project n Decide upon and collect the relevant data n Analyse the data n Provide useful information to the School involved n Report back to JISC and disseminate n Course costing handbook

Choosing a partner - Armstrong Laing n Experienced in both public and private sector n AL Consultants are recruited from successful implementations n User friendly software n Willing to enter into a true partnership n No previous ABC implementation in HE

Problems we faced n Timing –Limited time –Academic workload –Fuel crisis and rail problems –Industrial action n Initiative Overload n Bottom-up approach n Staff Resistance –Reluctance to fill out the Activity Dictionary –Fear of what we might discover

Following the ABC process.... Decide on the Cost Object Decide on the Cost Object n Management Briefings n Management Briefings n Create an Activity Dictionary n Create an Activity Dictionary n Allocate General Ledger transactions to activities n Allocate General Ledger transactions to activities n Collect and analyse staff time ? n Allocate the activity costs to cost objects 

Collecting Staff Time at Heriot-Watt n Annual retrospective questionnaire (inaccurate) n Diary sampling –2 weeks at random from a 12 week sampling period –half hour slots 7/24 –Anonymous (pin numbers) –Accurate but time consuming and costly n In year retrospective questionnaire –6 times per year –10 categories that can be easily consolidated to 5 for the Transparency Review

Lessons learnt at Heriot-Watt n Anonymity n What to do about non-returners n Cannot give staff too much information

How we had to adapt n Shorter sessions for workshops n Activity Dictionaries filled out by individuals n Longer time scales for return of information

What we would do differently next time n Ensure we have full top management support n Language n Alter the cost code structure and ensure it is consistent n Longer implementation stage

Type of information we found PG make up 5% of student numbers but 11% of overall student costs. UG make up 75% of student numbers but only 68% of overall student costs.

So where next? n Gain funding for the next phase of the project n Develop a comprehensive list of activities that are involved in e-learning n Re-run the exercise in an institution(s) where e-learning takes place

The activities for eLearning n The activities you choose/use will depend on what you are doing and why –revision –students cant make scheduled classes –to encourage collaboration etc... –remote students (place) –students working at different places/different levels of ability –run out of frogs to disect so you want to show it being done over the internet n Accepted that there is always a need for some f2f n ‘blended learning’

Course Lifecycle Model Planning and Development Production and Delivery Maintenance and Evaluation Three-phase model of course development

The activities

Delivery Media & Technologies: Print :   Textbooks, Study Guides, Workbooks - Are still very common in online learning courses. Audio :  Streaming audio  Streaming audio - Used to deliver the instructors comments over any network. Streaming audio Streaming audio   Audio tapes - Could be mailed to students. Video :  Streaming video  Streaming video - Can deliver video over any network. Streaming video Streaming video   Videotape - Could be produced and mailed to students.   Cable TV - Course segments can be produced and aired in various locations nationwide. Data:  Web Pages  Web Pages - A very common form of delivering content. Web Pages Web Pages  CBT Content  CBT Content - Often delivered via CD-ROM, but also deliverable via a network. CBT Content CBT Content  Computer files  Computer files - Can be ed or downloaded from a server (word processor, spreadsheet, presentation, database, etc.). Computer files Computer files   Online Tests - Computer scripts can be written to deliver a variety of test formats.   Interactive Tools -

Interactive Tools Asynchronous :   - Used for questions and discussion.  Listservs  Listservs - Basically to everyone in the class or section at once. Listservs  Web Forums  Web Forums - Also called discussion forums or bulletin boards. They are probably the most common form of interaction in online courses. Web Forums Web Forums  Newsgroups  Newsgroups - Public forums that use the Usenet system. Newsgroups  BBS  BBS - A computer bulletin board that you dial, and use like a web forum + + file transfer. BBS Synchronous :  Chat Rooms  Chat Rooms - Can be either moderated by an instructor of un-moderated for class use. Chat Rooms Chat Rooms  Shared Whiteboards  Shared Whiteboards - Allow class members to write on the same digital whiteboard. Shared Whiteboards Shared Whiteboards  Application Sharing  Application Sharing - The same program and file can be shared for demonstration or collaboration. Application Sharing Application Sharing  Teleconferencing  Teleconferencing - Could be used to deliver instructor audio, or for collaboration. Teleconferencing  Videoconferencing  Videoconferencing - Either from expensive, high quality, dedicated systems, or from less reliable desktop versions. Videoconferencing  MOOs & MUDs  MOOs & MUDs - Virtual worlds where users take on avatars and interact in various ways. MOOs & MUDs MOOs & MUDs

Costs of eLearning n Initial set-up costs n Key recurrent costs n Time spent on activities

(see Claeys, 2001) Key initial set up (capital) costs: (see Claeys, 2001) n n Development costs – –Development of Technologies used to teach – –Content development n n Hardware n n Software,including learning management platforms n n Infrastructure for networking n n Material costs (disks, papers, telephones, wires and other materials for keeping the technology programme going) n n Accommodation - including Physical space

Key recurrent costs (see Claeys, 2001) – –Support: student/learner support, teacher support, helpdesk, operations support, computer laboratory support   Technical support of the system, including maintenance and upgrading costs (of soft- and hardware)   Content development (with input from faculty, instructional designers, creative personnel)   Faculty development training   Personnel and management costs: administration and management labour and outsourcing fees, network management, technicians, programmers, multimedia developers,   Communication costs (bandwidth and server access charges)   Use of learning platform: leasing fees (per account, per number of learners or per server), maintenance and upgrading costs   Opportunity costs: computer downtime, costs of unused capacity (space, physical assets)

Initial findings of TCM (Johnstone and Russell, 2002) n People costs outweigh technology costs n Dont forget the student support services n Scalability and course development are the two primary cost determinants n Scalability can keep costs down n Sharing course development costs saves money

At last.....actual figures!!! n n “Course conversion costs are about $25,000 and up for a two-hour course, depending on the kind of interaction needed.” Schooley (2001) n n “...we can say with some level of certainty that it can take on average about 18 hours - of faculty time-to create an hour of instruction that is on the web”. Boettcher,1999

Media Hours of academic effort (taken from Boettcher, 1999) n n Lecturing n n Small group teaching 1-10 n n Videotaped lectures 3-10 n n Web development n n Teaching Text (book) * n n Broadcast television 100* n n Computer-aided Learning 200* n n Interactive video 300* * require support staff as well

Comparison of production costs ( where an hour of traditional face-to-face teaching is counted as 1 unit) n n Audio cassette/radio/teleconference 2 units n n 'Talking heads' video or televised lectures 2-5 units n n Computer networked mediated communication 2-5 units n n Printed material 2-10 units n n High quality video or TV programmes units n n Pre-programmed computer-based training units Multimedia units European Commission (IRDAC 1994),

Useful Web sites and articles n n cost_analysis_intro (Claeys, 2001) n n n n (Boettcher, 1999) n n (Schooley, 2001) n n n n n n Johnsstone Sally.M and Poulin Russell (2002) So, How Much Do Educational Technologies Really Cost? Change. March/April 2002 n n Hunt,M. and Clarke,A. (1977) A Guide to Cost Effectiveness of Technology-Based Training, Coventry, NCET

Details about the project can be found at - Thank you for listening