Fort Huachuca Case Study Cost Command and Control 12.3

Terminal Learning Objective Action: 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, spreadsheet tools, and awareness of Operational Environment (OE) variables and actors Standard: With minimum 80% accuracy: Describe the transformation process that occurred Discuss lessons learned

Ft Huachuca Story Garrison Commander Staff 94-96 Col Elliot Freauff Planted Seeds Jim Freauff: “As budgets get cut year after year, it seems to 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 Were very complex Not Affordable 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

LSA #1 Check on Learning Q1. Who were the key players? A1. Q2. How did the operating environment contribute to the process? A2. Q1. Who were the key players? A1. The Garrison Commander (Elliot) provided the leadership and Jim Freauff provided the accounting and cost information support Q2. How did the operating environment contribute to the process? A2. The reduced funding after the end of the Cold War had increased interest in cost management. The fact that the Army had just begun a managerial costing steering committee signaled the importance of the effort.

LSA #1 Summary We discussed the evolution of Activity Based Costing and the challenges it creates for organizations. Senior leadership failed to see the value added by using these resource intensive systems. As a result, managers were not using the system citing inaccuracies of the data.

Ft Huachuca Story (Cont.) Garrison Commander Staff 94-96 Col Elliot Freauff Planted Seeds 96-99 Col Chopin Freauff Began Pilot Colonel Chopin: “When I took command it was clear that I had no real way of impacting much. All the budget was distributed to my subordinates and there was nothing left to play with. I needed a process that would free up resources for me to command if I was going to make a contribution personally.” (emphasis added)

The Cost Command & Control Process What was Expected? What Happened? Why? Superiors Reviewing Subordinates Subordinates Running Their Operations plan execute measure review Subordinates Using Strategic Guidance Actual Results From Managerial Costing

AAR Learning: An Engine of Innovation better execution plan execute measure review improved planning refined info needs

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 FY98 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 Information technology Quality of life

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 (Cont.) Garrison Commander Staff 94-96 Col Elliot Freauff Planted Seeds 96-99 Col Chopin Freauff Began Pilot 99-02 Col Boardman Freauff Improved AARs 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.”

Ft Huachuca Story (Cont.) Garrison Staff Commander 92-96 Col Elliot Freauff Planted Seeds 96-99 Col Chopin Freauff Began Pilot 99-02 Col Boardman Freauff Improved AARs 02-04 Col Portouw Freauff Garrison Mgmt System

GARRISON MANAGEMENT SYSTEM U.S. Paul A. Rossi C FY03 9

GARRISON MANAGEMENT SYSTEM U.S. Paul A. Rossi C FY03 9

GARRISON MANAGEMENT SYSTEM Quarter Review U.S. Paul A. Rossi C 9

Ft Huachuca Story (Cont.) Garrison Commander Staff 92-96 Col Elliot Freauff Planted Seeds 96-99 Col Chopin Freauff Began Pilot 99-02 Col Boardman Freauff Improved AARs 02-04 Col Portouw Freauff Built Display System 04-07 Col Hunter Freauff/Kent Handled 30% Budget Cut Air Force Visitor: “I’ve dreamt about seeing a meeting like this. Everyone sitting around the table was using cost information logically and constructively to manage the operation.” Huachuca Garrison Dept Manager: “It is now a way of life and I don’t know how we operated without it.”

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 (Cont.) 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

LSA #2 Check on Learning Q1. What was Col Chopin’s motivation for expanding the cost management process begun by his predecessor Col Elliot? A1. Q1. What was Col Chopin’s motivation for expanding the cost management process begun by his predecessor Col Elliot? A1. To free up resources that he could command himself and make his contribution to the installation.

LSA #2 Summary Colonel Chopin was able to implement effective change by conducting cost AAR’s. By using their system, the Garrison Management System, Col Chopin established a new cost culture focusing on continuous improvement. We also discussed the importance of the ACE to continue the focus of Cost Management to the senior leadership.

Discussion Was this effort worthwhile? What were the key factors? Do you think this is repeatable at other garrisons?

Ft Huachuca – The Unhappy Ending Garrison Commander Staff 92-96 Col Elliot Freauff Planted Seeds 96-99 Col Chopin Freauff Began Pilot 99-02 Col Boardman Freauff Improved AARs 02-04 Col Portouw Freauff Built Display System 04-07 Col Hunter Freauff/Kent Handled 30% Budget Cut 07- Col Sturgeon Kent Citing Budget Limitations Col Sturgeon Ceased the Garrison AAR Made AARs “Optional” for Departments NONE HAS OCCURRED SINCE

Group Activity - 35 Minutes Why did process fail? What are the lessons learned? Suggestions for improvement?

TLO Summary Action: 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, spreadsheet tools, and awareness of Operational Environment (OE) variables and actors Standard: With minimum 80% accuracy: Describe the transformation process that occurred Discuss lessons learned