The ABC system is more useful in determining the cost of courses at HEIs than traditional costing methods (Ali 2012:96; Manuel 2011:10; Naidoo 2010:113). It has emerged as a favoured instrument that provides administrators of HEIs (and the responsible government department, in this case the DHET) with relevant and accurate costs of programmes and courses offered at these institutions (Hashim 2015). Although ABC is widely used in the business world, its adoption rate is very low at HEIs and it is not applied in any of the South African TVET colleges (Aldukhil 2012). Aldukhil (2012:130) also reports that only three educational and training sectors in the world use ABC.

There is a wealth of literature on factors relating to ABC adoption, which include the following: technical factors (Abusalama 2008; Cohen, Venieris & Kaimenaki 2005, Sartorius et al. 2007; Wahab, Mohamad & Said 2018; Xu 2012) and behavioural and organisational factors (Abusalama 2008; Chongruksut 2002; Clarke, Hill & Stevens 1999; Elagili 2015; Shields 1995). However, many of these studies relate to the application of ABC to profit-making manufacturing businesses and financial organisations. Very few studies have been devoted to South African HEIs, to assess the opinions and awareness of finance staff members on those factors that affect the introduction of ABC, especially by South African public TVET colleges. Fadzil and Rababah (2012), Aldukhil (2012) and Shields (1995) argued that ABC factors applicable in one business sector may not apply in another business setting because organisational structures vary among organisations.

The costing systems currently in use at HEIs are designed mainly for compliance and reporting purposes rather than for providing the information needed for effective management. One sector that would benefit greatly from ABC is higher education. At present, the costing system used at South African HEIs groups data to answer the financial reporting needs of International Financial Reporting Standards, such as how much an institution spends on salaries and benefits (Anguiano 2013). In the costing systems used at South African HEIs, only the number of students is considered as a cost driver (Abu-Tapanjeh 2008; Kim & Ballard 2011). The actual cost to deliver post-secondary education and how those costs relate to outcomes is not known, which means that HEI administrators and the DHET are not aware of the profitability of the student at each level of a course. Overhead costs are allocated by using the number of students regardless of the relationship with the product or service. Therefore, low-volume products are under-costed, and high-volume products are over-costed. This means that HEIs do not obtain accurate programme costs because they fail to allocate overhead costs, or they use a uniform cost driver (the number of students) to assign overhead costs to work divisions, and this criterion distorts programme costs (Kim & Ballard 2011).

Oseifuah (2013) argues that ABC is required in the public sector, such as TVET colleges, to translate the total general ledger account balances into their work activities, as the traditional costing system that produces general ledger information is too basic to be useful in financial decision-making. Technical and vocational education and training colleges need to be responsive to the government’s mandate to retain and graduate more students; moreover, their budgets are tight, requiring these institutions to do ever more with fewer resources. Activity-based costing offers a mechanism that can help these colleges determine the best way to meet their goals by monitoring the use of scarce resources, in particular activities to improve student retention and graduation (Hurlburt & Kirshstein 2014). Activity-based costing records how much time is spent on specific predefined activities, focusing primarily on work that is performed. According to Schmelzle and Buttros (2003), the application of ABC in the public sector can give needed information on the cost of government services for strategic decisions, such as determining the affordability of providing these services.

Contingency theory has been widely accepted and reported in the management and accounting literature (Ismail, Zainuddin & Sapiei 2015:22). It is based on the principle that the appropriateness of managerial controls or systems is contingent upon the environment of the organisational setting in which these systems operate and function (Fei & Isa 2010). Abusalama (2008) argued that ABC adoption and success depend upon specific contingent factors such as product diversity, cost structure, firm size, competition and business culture. Thus, the appropriateness of any costing system is dependent on the factors embedded in the entities involved (Aldukhil 2012). Contingency theory suggests that ABC adoption is contingent on behavioural and organisational factors, technical factors and the features of the management accounting system. These factors are discussed next.

The factors proposed in the literature that might affect ABC adoption and implementation are divided into behavioural and organisational, and technical factors, respectively. Behavioural and organisational factors consist of the size of the organisation, top management support, cost structure, product diversity, resistance to change, the presence of an internal champion and innovation, internal resource availability and training. Technical factors consist of identifying activities, grouping and aggregating these activities, assigning resources and costs to these activities and objects, and selecting cost drivers of indirect costs. Each of these factors is discussed in turn.

Behavioural and organisational factors are important to cost management practices (Fei & Isa 2010) and are discussed in the following section.

The contingency literature considers that larger organisations are generally more difficult to manage and require more specialised and integrated techniques (Drejer 2002) than smaller ones. Some researchers (e.g. Nair & Yee 2017; Pokorna 2016) argue that the size of a company usually explains the rate of adoption of sophisticated cost accounting systems because, in general, larger size increases complexity and usually requires greater access to individuals with the knowledge to design and implement an ABC system. Similarly, Naranjo-Gil (2009:813) and Elagili (2015:50) aver that larger companies have more resources, both for management and for the development of a complex costing system, such as ABC. Smaller organisations that lack such resources are forced to make difficult trade-offs in their investment choices and often forgo the implementation of systems, which may represent an expensive innovation such as ABC (Damanpower & Gopalakrishnan 2001). Elhamma’s (2012) study showed a positive correlation between the size of a company and the use of ABC. Thus, size can be an important factor related to the adoption of a new system. The study reported here therefore tested whether finance personnel perceive that larger TVET colleges are more likely to adopt ABC than smaller ones.

Management support is not only required in the preliminary stages of ABC implementation; rather, it is a continuous process to maintain the new system (Aldukhil 2012). According to Intakhan (2014), the role of top managers is to determine vision and policy, make decisions, solve problems, drive the organisation to growth and survival and motivate all employees involved in the application of the accounting system. Intakhan (2014) argued that the support from the administration means a level of importance, to assist both managers and anything else that is needed to drive ABC to achieve the common goals. If managers focus on involvement and participation, it should lead to the success of its implementation (Hoozee & Bruggeman 2010; Wahab et al. 2018). Al-Saidi and Gowda (2014) further averred that a lack of commitment of managers or top management support is one of the reasons for the non-adoption of ABC. Majid and Sulaiman (2008) concur and assert that senior management buy-in is essential for the successful introduction of ABC. There is a greater chance of success when top management supports the adoption of ABC because of the freedom and support given to the system implementers (Aldukhil 2012; Elagili 2015). Accordingly, this study investigated whether finance personnel perceive that TVET colleges, which have top management support, were more likely to adopt ABC than those which lack it.

Drury (2015), Elagili (2015) and Al-Halabi and Shaqqour (2018) argue that as overheads become an ever-larger component of product costs, they increase the distortion inherent in traditional costing systems. Veeira and Hoskin (2004) and Majid and Sulaiman (2008) considered the overhead costs of an organisation to be a factor that increased the likelihood of ABC being introduced. For this reason, this study investigated whether finance staff perceive that TVET colleges, which have a greater percentage of total cost as overheads than direct costs, are more likely to adopt ABC than those which have a smaller percentage.

According to Akinyomi (2014) and Schoute (2011), product diversity is also a major factor in the adoption of ABC. Companies that have many diverse lines are known to use this method of costing even though allocating costs to a broad product range is more difficult than to a narrower one. Chongruksut and Brooks (2006) attest that companies with product diversity and more production lines are more likely to use ABC for the allocation of overhead costs, and that this costing system has been introduced to solve the problem of increasing costing distortion because of product complexity and product diversity. Elagili (2015) argued that greater product complexity and diversity increase the costing distortions arising from traditional costing methods. This study made the assumption that product diversity is a significant factor in the adoption of ABC. Therefore, this study examined whether finance staff perceive that TVET colleges which have more product diversity are more likely to adopt ABC than those which have less.

The implications of organisational change, such as introducing ABC, should be considered within organisational and cultural contexts in which the change takes place because the human factor is important in any change of conditions (Lammert & Ehrsam 1991). From an organisational perspective, employee resistance can be a significant deterrent to organisational change (Bvumbi 2017; Folger & Skarlicki 1999; Kumar & Mahto 2013). Major operational adjustments or innovations, such as the implementation of ABC, may find resistance when those changes are perceived by the employees to alter values and visions related to the existing order (Leigh 2002). Employee opposition to ABC adoption may disrupt and delay the change process, even causing failure (Dubuhlele & Rundora 2014; Nair & Tan 2018). Askarany and Smith (2008) claim that organisations that adopt innovative policies are more likely to use ABC as such practices provide more appropriate and detailed information than that provided by the traditional costing methods. For this reason, this study tested whether finance staff perceive that TVET colleges, with employees who are open to change and innovation, are more likely to adopt ABC than those who are resistant to change.

According to Egan (2002) and Nair and Tan (2018), process and team integration are the key drivers for the successful implementation of new projects. The support of an individual who plays the role of champion in an organisation and the willingness of such insiders to accept and adopt innovations such as ABC are important factors in the introduction of the practice (Elagili 2015). An internal champion assists employees in familiarising themselves with a new system so as to understand its importance, thereby reducing any resistance to change within the organisation (Baird, Harrison & Reeve 2004; Nair & Tan 2018). Elagili (2015) argued that the presence of pro-innovation staff in a business is significant as it would help in educating senior management and users about ABC. This study therefore adopted the position that the support of an internal champion can be a significant factor in the adoption of ABC and determined whether finance staff perceive that TVET colleges, which have high internal champion support and innovation, are more likely to adopt ABC than those without such support.

The implementation of ABC demands sufficient internal resources such as the time and commitment of top management, accountants and appropriately skilled employees to build ownership, knowledge and action within the company (Chongruksut 2002; Nair & Tan 2018). Sufficient internal resources give employees the opportunity to learn about ABC and its advantages and make the staff less resistant to change (Shields 1995). Lopez (2013) concludes that ABC is accurate in allocating indirect costs to activities and measuring their performance, but consumes many resources. According to Garrison and Noreen (2011), Chiarini (2012) and Lopez (2013), the process of collecting information and identifying activities for implementing ABC is rigorous and time-consuming, so that limited resources are seen as a major stumbling block in its adoption. For this reason, this study investigated whether the finance staff surveyed perceive that TVET colleges, which have adequate resources, are more likely to adopt ABC than those which have not.

Training in this context refers to the degree of appropriate instruction on the ABC system used to deliver knowledge to those users who are involved in its implementation (Foster & Swenson 1997). Such training helps the institution involved to develop positive attitudes towards the introduction of ABC (Intakhan 2014) because training aims to transfer knowledge and experience in an easy-to-understand manner. Bvumbi (2017) found that training on ABC implementation is closely associated with its successful acceptance. Gurses (1999) also reported that one stage in the implementation of ABC is training. Aldukhil (2012) argued that, without training, problems can be expected during the design, implementation and use of the process. Training is thus a prerequisite to ensure that employees understand the benefits of the system and help them in their decision-making (Elagili 2015). Elagili (2015) further indicated that for the ABC model to work there needs to be training programmes, first for the administrative staff, followed by that for the implementers and users. The influence of training on ABC acceptance was examined by determining whether the finance staff perceive that there is a positive relationship between the two.

According to Abusalama (2008:175), the behavioural and organisational factors listed above may not alone explain all the reasons for the acceptance of ABC. Technical factors, which involve the identification, defining and description of activities, also need to be considered. Turney (1996) believes that technical factors – in particular, defining and describing activities – are at the heart of designing ABC. Lin (2001) conducted an investigation into how some aspects of an ABC system were applied by the Chinese Railway state-owned company and pointed out the technical difficulties in identifying multiple cost drivers used to allocate indirect costs to the products and services provided by the company. Xu (2012) and Wahab et al. (2018) concur with Lin (2001) and Turney (1996) by stating that a major issue critical in the adoption of ABC is how to identify the relevant activities and associated cost drivers at different stages of production. This study therefore examined whether the finance staff considered that technical issues are a reason for rejecting ABC.

This article adhered to all ethical standards to hold the integrity of the research. Ethical approval was obtained from Durban University of Technology (Ethical clearance number: IREC 018/16) on 21 September 2016.

Respondents were asked whether adequate training is provided when a new system is implemented. Of those surveyed, 13 (43%) indicated that sufficient training is not provided, 6 (20%) were neutral on the subject and 11 (37%) indicated that such training is available. The c² test indicated that there was a statistically significant difference in the responses (p < 0.05). Lack of training is therefore seen as a barrier to the adoption of a new system, and could be inferred as a barrier to the adoption to ABC. Prior research reveals that training on ABC implementation is closely associated with its adoption (Bvumbi 2017; Elagili 2015; Gurses 1999; Intakhan 2014). However, in this study all six TVET colleges do not practise ABC, so training has not played a part in its adoption (or the adoption of any other new system) by them.

Technical factors are of importance in the adoption of ABC. The respondents were therefore asked to indicate their level of agreement with the following three statements. They disagreed with the first statement: ‘I can rank all the tasks of the college according to the college’s divisions’. However, respondents were in agreement with the second statement: ‘I can list all tasks and duties that I perform in my job’. This may indicate that the participants are focused more on their jobs than on the tasks of the college. This is supported by the last statement, about which respondents were mainly neutral, or disagreed, that they could ‘break down the time spent on major activities performed at campus level’. The survey group also disagreed with the notion that their colleges identify and analyse the various activities relating to students, such as services and teaching. For three of the statements, there was a significant difference (p < 0.05) between the responses. In summary, these results indicate that technical factors could be a barrier to the introduction of ABC at the colleges as the respondents were more knowledgeable about their own tasks than the tasks of the college itself. Finance staff members in the KZN colleges could not categorise tasks as per division and their respective institutions, nor could they identify and analyse various activities involved with providing services or teaching students and break down time spent on major activities performed at campus level. Understanding the tasks of the college would be necessary to implement a new system, such as ABC. This finding is consistent with the conclusions reached by Wahab et al. (2018), Xu (2012), Abusalama (2008), Lin (2001) and Turney (1996) that there is a positive relationship between technical factors and ABC adoption. Although these colleges have some competent finance staff members, ongoing support along with sufficient training is needed in the technical issues of ABC implementation.

This study indicates that the adoption of ABC is contingent upon two behavioural and organisational factors (top management support and institutional cost structure [overhead level]), and technical factors (identifying activities, and then grouping and assigning costs to them). Current ABC models aver that only the technical factors need to be addressed together with organisational structure and culture (Fei & Isa 2010). The new ABC model proposed here is based on the belief that, to adopt ABC successfully, the possible lack of top management support factors must be identified first and addressed; thereafter, technical factors and overhead level must be taken into account (Figure 1). The model incorporates a logical flow of relationships that culminates with the adoption of ABC.

This model proposes that TVET colleges that address only technical factors and organisational cost structure without considering top management support may be unsuccessful in dealing with any implementation issues.