Kaplan and Johnson were at the forefront of the development of Activity-Based Costing in the late 1980s and early 1990s. But Johnson quickly became disillusioned with this new technique, describing it as a ‘juggernaut’ which was out of control:
As someone who helped put the activity-based concept in motion, I feel compelled to warn people that I believe it has gone too far. It should be redirected and slowed down, if not stopped altogether… Indeed, activity-based costing does nothing to change old remote control, top-down management behaviour. Simply because improved cost information becomes available, a company does not change its commitment to mass produce at high speed, to control costs by encouraging people to manipulate processes, and to persuade customers to buy output the company has produced to cover its costs.
Johnson HT 1992 ‘It’s Time to Stop Over Selling Activity Based Concepts’ Management Accounting September/October pp26-35
Johnson was concerned that ABC had become just another management fad that was being used to boost short-term financial results. ABC was being treated as if a new system of measures was the sole solution to transforming management. Many organisations who have adopted ABC have attributed setup costs as a cost driver, which leads to greater batch sizes (the opposite of the Toyota dictum of ‘single-piece flow’). This has led them to get rid of all low volume products and concentrate on the larger volume products – back to the old ‘economy of scale’ way of thinking.
Johnson later spent seven years studying the Toyota plant in Georgetown where he learned more about the folly of cost-management (Johnson and Bröms 2000).