• All team members must understand that they are part of a change project that requires them to be  open and constructive as well as to the point when it comes to making ­decisions. 

Step 3: Once the project management tasks are clarified, the project team will have to elaborate on how to structure the allocation system.  

Here the first step is to agree the cost objects. Cost objects are pools to which resources and costs can be attributed because of a cause and effect relationship. For example, salary cost can be attributed to the cost object “business activities” by quantifying how many hours the resource “employees” has worked on individual activities. Having agreed the cost objects, one has to identify their ranking i.e. how costs can be attributed from one cost object to another until all costs are finally attributed to the final cost object that are of interest to the internal ­clients. This can be done by identifying, once again, the cause and effect relationship between various cost objects. For ­example, the cost ­object “Maintenance” (a business activity) relates to the cost ­object “Switching equipment” (a network element) by identifying how much time maintenance has been spend on the switching ­equipment. One could then identify how much a ­particular marketing service, e.g. a minute of a mobile ­on-net call, has used the switching equipment to attribute a certain amount of switching equipment cost to the marketing service mobile ­on-net call. The same logic can then also be applied to the allocation of costs to tariffs, customer segments or sales channels.

Following that, the Profit and Loss Statement needs to be ­assessed in terms of all its cost accounts. For every cost ­account, one needs to identify a resource that has a cause and effect ­relationship with a cost object. The same needs to be done for every cost object. As a result, one obtains a diagram that is the allocation matrix that shows the resource that links every cost ­account with a cost object and every cost object with each other.

This allocation matrix is at the heart of any allocation system. This is the crucial point in the entire project and where most operators fail because they do not apply the 70-30 rule! It is strongly advisable that the project sponsor and the Chief ­Finance Officer and Chief Marketing Officer agree on this framework.