Slides 12 3 identify the characteristics of a cost managed o

Terminal Learning Objective Task: Identify the Characteristics of a Cost Managed Organization from the Case Study  Condition: You are training to become an ACE with access to ICAM co

Fort Huachuca Case Study

Cost Command and Control

© 2000-11 Dr Dale R Geiger CMA CGFM

drgeiger@manage.gov.org

Terminal Learning Objective

 Task: Identify the Characteristics of a Cost

Managed Organization from the Case Study

 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 minimum 80% accuracy

 Describe the transformation process that occurred

 Discuss lessons learned

me that there has to be a better way to use

increasingly limited resources There must be

a systematic management process of

continuous improvement that would be far

better than mindlessly cutting x% of our

capability every time there’s an x% budget

cut.”

Cost Management in the 90s

 Activity Based Costing

 Major efforts were made to provide cost

information to leaders

 Models broke organizations into activities

 Extensive allocations assigned cost to activities

 ABC Models

 Had many, many activities

 Were populated annually

Affordabl e

 Not Useful

 Not Credible

First Attempt: 1996

 ABC data, by itself, did not generate results

 “No sense of ownership”

 “Managers didn’t accept that the numbers were theirs”

 Managers thought effort

 Was unneeded waste of time

 Would be used against them

 Would go away if they waited out the

commander and his initiative

DA: Managerial Costing Steering Committee

 Met quarterly to provide advisory input

 Chaired by Deputy Cost and Economics and

Deputy Asst Chief of Staff Installations

 Comprised primarily of Major Command

Resource Managers

 Included Dr Geiger as Academic Advisor

 Teamed with LTG (Ret) Carney to “Armyize” ideas on cost management

 Initiated pilots in garrisons at Ft Huachuca, Ft Leonard-Wood, Ft Detrick, Ft Riley

Check on Learning

 Who were the key players?

 How did the operating environment contribute to the process?

Ft Huachuca Story

Garrison Commander Staff

no real way of impacting much All the budget was distributed to my subordinates and there

process that would free up resources for me to command

personally.” (emphasis added)

Slide 9, 13 February 2008

The Cost Command & Control Process

Subordinates Using

Strategic Guidance

Subordinates Running Their Operations

Actual Results From Managerial Costing

What was Expected? What Happened? Why?

Superiors Reviewing Subordinates

Slide 10, 13 February 2008

AAR Learning: An Engine of Innovation

refined info needs improved planning

Colonel Chopin Conducting AAR

“When I’m sad ……

my people get sad”

“and then they try

to make me happy!”

The Payoff: New Source of Funding

 After six months of pilot, Ft Huachuca

Garrison Commander disclosed that he:

 Had cost reductions greater than worse case budget cut for the next fiscal year

 Could now afford key spending

initiatives previously unaffordable in

 Quality of life

FY98

Transition Threat Recognized

 Permanent staff often “wait” out rotating commanders

 Incoming commanders often throw out

previous commander’s initiatives

 Transition Protocol was developed to

 Brief incoming commander on cost

management process and benefits

 Have incoming commander witness AAR

on pre-command visit

Ft Huachuca Story

 Colonel Boardman

 “Cost management is like a sailboat tacking into the wind As long as the hand is firmly on the

rudder and the sail set in the right direction it is

possible to make good headway However, you

know what happens as soon as you take you hand off the tiller Things immediately go backwards.”

Garrison Commander Staff

Ft Huachuca Story

Commander

85 30

FY03

$ Millions

FY03

UFR's Funded with Cost Savings Review Directorate Productivity in GMS Review Directorate Overhead

AGENDA

20 Minutes

Each Directorate Presentations

Directors

Ft Huachuca Story

like this Everyone sitting around the table was using cost information logically and constructively to

manage the operation.”

life and I don’t know how we operated without it.”

Garrison Commander Staff

04-07 Col Hunter Freauff/Kent Handled 30% Budget Cut

I n t e g r i t y - S e r v i c e - E x c e l l e n c e

As a member of the Air Force Managerial Cost

Accounting Council, I found the Fort Huachuca

Garrison Cost Management After Action Review on 29 June 2006 both exciting and insightful I had not seen such attention to both cost and quality in DoD since I was associated with the Navy Submarine Force

Nuclear Power program.

The enthusiasm of the Garrison Staff, the leadership of the Garrison Commander, and the results of Garrison efforts were truly impressive.

Capt Seth Baldwin, USN (retired) CGFM

Partner, Kearney & Company

Requirements Inventory - Leadership

 None of these garrison commanders had

prior experience in cost management

 Col Chopin was an aviator

 Col Boardman was special forces

 Col Portouw was military intelligence

 Col Hunter was infantry

 Yet they instinctively knew how to lead

effective cost management and control when well supported by ACE

Requirements Inventory – continued

 ACE Staff: enabled leadership, ran the

process, developed the measurements

 Process: after action review was key

 Measurement: less important than originally thought

 Biggest transformation barrier: middle

management aversion to change

Check on Learning

 What was Col Chopin’s motivation for

expanding the cost management process begun by his predecessor Col Elliot?

 Was this effort worthwhile?

 What were the key factors?

 Do you think this is repeatable at other garrisons?

Ft Huachuca – The Unhappy Ending

 NONE HAS OCCURRED SINCE

Garrison Commander Staff

04-07 Col Hunter Freauff/Kent Handled 30% Budget Cut 07- Col Sturgeon Kent

Group Activity - 35 Minutes

 Why did process fail?

 What are the lessons learned?

 Suggestions for improvement?