Slides 11 2 determine the implementation requirements for co

Determine the Implementation Requirements for Cost Management and Control... Terminal Learning Objective• Task: Determine the Implementation Requirements for Cost Management and Contro

Determine the Implementation

Requirements for Cost Management

and Control

Is This the Way to Win the Cost War?

Terminal Learning Objective

• Task: Determine the Implementation Requirements for

Cost Management and Control

• Condition: You are training to become an ACE with

access to ICAM course handouts, readings, and

spreadsheet tools and awareness of Operational

Environment (OE)/Contemporary Operational

Environment (COE) variables and actors.

• Standard: with at least 80% accuracy

• List four common characteristics of successful cost

management efforts

• Describe responsibilities of leadership

• Describe the characteristics and responsibilities of an ACE

Maturation of Cost Roles in

Winning the Cost War

4

Single Use

Estimated Future Cost

Cost Benefit Analysis

Cost Informed Decision Making

Persistent Use

Expected &

Actual Cost

Continuous Improvement

Cost Managed Organization

Universal Use

Planned &

Actual Cost

Mission Control

Cost Managed Enterprise

Cost War Cost War High Cost War Full Insurgency Intensity Conflict Spectrum Operations

Starting here (Some work is being done now) TARGET

Key Cultural Changes Needed to

Win the Cost War

• Institutionalize cost accountability

• Subordinates present after action reviews

explaining their performance compared to plan

• Eliminate budget entitlement mentality

• Plans are negotiated frequently and represent targets to be beaten

• Demand improved cost and output

• After Action Review challenges both

Paul A Rossi

Change Culture

Hold Managers

Accountable

Focus on Cost &

Performance

Divorce From Budget

Garrison Commander Fort Huachuca

Requirements for Victory

• There is more than one way to

• Win a war

• Win the Cost War

• There do seem to be common factors

• Good leadership

• Strong staff support

• Learning oriented AAR processes

• Actionable intelligence

Requirements for Cost Management

and Control Success

1) Aggressive, knowledgeable leadership

• Nothing happens without leadership drive

2) Strong staff, strong staff organization

• Analytic Cost Experts (ACEs) or

• Assistants to the Commander for Enterprise (ACEs)

• Leaders need expert costing and analytic support

3) Learning oriented process

• Institutionalizes a forum for creative accountability

4) Actionable cost intelligence

• Translates efforts and actions into dollars: the

language of management

Slide 8

Check on Learning

• What are the four common factors in

successful Cost Managed Organizations?

• What does ACE stand for?

1) Attributes of Aggressive, Knowledgeable Leaders

• Specify and define good information

requirements

• Participate actively in review process

• Signal the importance of continuous

improvement

• Understand that there is always a better way to operate

Cost Management and Control is

Not Simply Cost Accounting

• Cost management is a “people issue” not an

accounting problem

• Previous attempts at cost management

overemphasized accounting’s importance

• Even the best cost measurement system

• Did not …cannot cannot …and never will never will …

Behavioral Issues of Importance

• Subordinates respond to leadership’s

performance expectations

• “Tell me how you measure me and I’ll tell you how I’ll behave”

• Resistance to measurement is human nature

• “Tell me that you are going to measure me and I’ll fight it to the death”

• Resistance to change is also to be expected

Leader’s Role: Expanded

• Don’t:

• Delegate cost command

• Accept poor or confused reports

• Do:

• Expect subordinates to thoroughly understand and

competently explain “their” costs

• Expect subordinates to develop continuous improvement initiatives

• Signal the mission benefits of cost management and

control

• Acknowledge and reward good performance

• Create a cost accountable culture

Subordinate Leader’s Role

• Don’t

• Delegate reporting and report preparation

• Provide poorly prepared reports

• Do:

• Truthfully and credibly explain “your” numbers

• Show and explain both good and bad results

• Recognize the importance of meeting or exceeding planned commitments

• Prepare for probing questions

• Demonstrate continuous improvement capability with good continuous improvement initiatives

• Accept a cost accountable culture

• Why is it important that the Senior Leader not delegate responsibility for cost control?

• How should cost accounting information be

viewed?

© Dale R Geiger 2011 15

Check on Learning

2) Attributes of Good ACE Staff

• Develop excellence in analyzing data and

transforming it into information

• Learn the tools, mechanics, and methods of managerial costing

• (These people are not abundant in

government)

Key Barrier to Creating Cost Managed Organizations

• One of the biggest problems in implementing cost

management and control is that leadership has:

• Little, if any, experience in cost management, when

compared with industry

• Already demanding number of responsibilities

• No time for extensive training or education

• ACEs are therefore critically important to enable the leader effectiveness needed by Cost Managed Orgs

• The Leader-ACE team combines and exploits the skills

or both to the benefit of the mission

Supporting Roles: The Assistant to the

Commander for the Enterprise

• Maintain the schedule of meetings

• Publish list of required slides

• Support subordinates in discovering the

story

• Support leadership in interpreting

information and subordinate presentations

• Consolidate information as needed

The Job Requirements of the ACE

• This key cost management advisor must

have:

• Credibility

• Analytic capability

• Knowledge of organization functions

• Sensitivity to people issues

• Sound training in cost based management

Army ACE Job Description

from within

• This critical role (or anything like it) does not exist

• The ACE must quickly:

• Learn the organization’s mission

• Become a key, trusted financial advisor to the commander

• Become a valued resource to all chain of command

subordinates

• Be able to model “enterprise thinking”

• Success in the ACE’s mission is critically dependent on having very capable people

Finding Strong ACEs May Not Be Easy

• To many good accountants, numbers are the

• They understand their job is to translate the

number into actionable management

information

subordinate leader

ACE Relationships to Leadership and Process

leader

subordinate

leader

senior leader review

review

help leader critique

help leader prepare

ACE

help subordinates

prepare

ACE Staff Shadow Organization

leader

subordinate

leader

subordinate leader

subordinate leader

subordinate

leader

subordinate leader

subordinate leader

subordinate leader

subordinate leader ACE of ACEs

ACE

 Principles of Cost Accounting and Management

 Targeted at entry level CP11 Personnel, Sergeants, Lieutenants, Junior Captains

 Offered at Army Finance School at Fort Jackson (Columbia, South

Carolina)

 Course Length: Three Weeks

 Pre-requisites: On Line Math Refresher (TBD)

 Targeted at mid career CP11 Personnel, Staff Sergeants and above, Senior Captains, Majors and above

 Offered at Army Finance School at Fort Jackson (Columbia, South

Carolina)

 Course Length: Three Weeks

 Pre-requisites: On Line Math Refresher (TBD)

ACE Development: PCAM & ICAM

24

ACE Development: PCAM & ICAM

acct basic training gfebs

ext vs internal terminology financial acct balance sheet profit&loss stmt role of audit fund acct fund balance expenditure stmt unencumbered bal cost acct - ext defense cont expense stmts fed requirements mgr costing fasab 4 decision support cost mgmt/control cost relationships direct - indirect

fixed - variable allocation

cost tradeoffs break even

indifference pnts decision making wifs cost estimation learning curve

cost factors budget devl net present value

cost explanation aar

variance analysis reconciliation cost benefit analysis army training

Management

Intermediate Cost Accounting &

Management

Review of PCAM

Cost Benefit Analysis

Winning the Cost War

Leadership Driven Management Change Management

acct basic training refresher cost relationships refresher cost relationships refresher cost tradeoffs refresher cost estimation refresher cost explanation refresher cost benefit analysis

Winning the Cost War Leadership Driven Management

Stackable Credentials*

26

All CEs will require basic, advanced, and master skills with a concentration in:

Readiness – Capacity management and force cost analysis

Materiel – Logistics and working capital funds cost analysis

Human Capital – Manpower cost analysis

Services & Infrastructure – Services and capital asset costing

FAs and CPs that are common to all CEs should train to become a master in any CE

* NOTE: Stackable credentials are based on Financial Management (BC36/CP11) career field

demands for cost management, which is the Army maximum; other career fields will use a

subset of these requirements.

Based on the Financial Management Career Field

• All CEs should sponsor

participants in the CMCC;

application materials at:

https://www.us.army.mil/suite/page/616700

• Commands endorse and

prioritize multiple nominations

• Each course offering holds a

maximum of 25 students

Cost Management

Certificate Course

27

• What tasks does the ACE perform to support the subordinate managers?

• What is the ACE’s role in supporting the

leader?

© Dale R Geiger 2011 28

Check on Learning

3) Attributes of an Effective Review

organization’s calendar and culture

• Behavior change: makes continuous

improvement part of cultural expectation

4) Attributes of Good Information

• Must be managerially useful

• Managers are the users

• Must be technically credible

• Managers must trust

• Must be affordable

• Managers are the bill payers

Conclusions: Leadership Driven

Management

• Provides a workable doctrine for

decentralized, continuous improvement

• Proven workable in pilots with savings of millions of dollars to date

• Will continue to evolve and improve with experience and continuous learning

Transforming the Army:

Four Requirements for Success

Leadership Team with ACE to create “informed” leaders

Exploit existing strong leadership capabilities ACE Build strong staff, strong organization

Select, develop ACEs (Asst to Comdr – Enterprise) Design and deliver advanced training

Process Modify “winning the cost war” template

as needed Cost Info Use new tools as they come online

• Declare the Cost War

security from “under-managed” use of resources

Call to Action:

Suggested Steps for Engagement

Time Available Group Exercise

• Using the attached job description as a guide:

• Develop the job description for an ACE

• Prepare one slide highlighting key points of your job description to present to the class

© Dale R Geiger 2011 34