ABC costing at SHU and costing eLearning

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

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

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

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

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

6. Activity-based costing

7. 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.

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

9. The ABC Model GeneralLedger Methods Activities Cost Drivers Cost Objects BusinessSustainingCosts Budgets

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

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

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

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

14. 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)

15. ABC in HE

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

17. 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. 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. How we differ from manufacturing

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

19. The Project at Sheffield Hallam University

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

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

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

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

24. Collecting Staff Time at Heriot-Watt • Annual retrospective questionnaire (inaccurate) • 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 • In year retrospective questionnaire • 6 times per year • 10 categories that can be easily consolidated to 5 for the Transparency Review

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

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

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

28. 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.

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

31. The activities for eLearning • 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 • Accepted that there is always a need for some f2f • ‘blended learning’

32. Planning and Development Maintenance and Evaluation ProductionandDelivery Course Lifecycle Model Three-phase model of course development

33. The activities

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

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

36. Costs of eLearning • Initial set-up costs • Key recurrent costs • Time spent on activities

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

38. 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)

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

40. At last.....actual figures!!! • “Course conversion costs are about $25,000 and up for a two-hour course, depending on the kind of interaction needed.” Schooley (2001) • “...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

41. Media Hours of academic effort (taken from Boettcher, 1999) • Lecturing 2 -10 • Small group teaching 1-10 • Videotaped lectures 3-10 • Web development 5 - 23 • Teaching Text (book) 50 -100* • Broadcast television 100* • Computer-aided Learning 200* • Interactive video 300* * require support staff as well

42. Comparison of production costs (where an hour of traditional face-to-face teaching is counted as 1 unit) • Audio cassette/radio/teleconference 2 units • 'Talking heads' video or televised lectures 2-5 units • Computer networked mediated communication 2-5 units • Printed material 2-10 units • High quality video or TV programmes 20-50 units • Pre-programmed computer-based training 20-50 units • Multimedia 50-100 units European Commission (IRDAC 1994),

43. Useful Web sites and articles • http://www.nineveh.polito.it/Nineveh/thematic_analysis/?display_page=cost_analysis_intro (Claeys, 2001) • http://www.westga.edu/~distance/mcfadden24.html • http://www.cren.net/~jboettch/dlmay.htm (Boettcher, 1999) • http://www.ciol.com/content/news/trends/101102301.asp (Schooley, 2001) • http://www.learningcircuits.org/feb2000/feb2000_elearn.html • http://www.learningcircuits.org/2002/feb2002/moran.html • Johnsstone Sally.M and Poulin Russell (2002) So, How Much Do Educational Technologies Really Cost? Change. March/April 2002 • Hunt,M. and Clarke,A. (1977) A Guide to Cost Effectiveness of Technology-Based Training, Coventry, NCET

44. Details about the project can be found at - http://www.shu.ac.uk/cnl Thank you for listening