1. Fort Huachuca Case Study
Cost Command and Control
12.3

2. 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

3. 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.”

4. 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

5. 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

6. 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

7. 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.

8. 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.

9. 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)

10. 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

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

12. Colonel Chopin Conducting AAR
“When I’m sad ……
my people get sad”
“and then they try
to make me happy!”

13. 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

14. 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

15. 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.”

16. 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

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

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

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

23. 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
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.”

24. 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

25. 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

26. 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

27. 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.

28. 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.

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

30. 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
Col Hunter Freauff/Kent Handled 30% Budget Cut
Col Sturgeon Kent
Citing Budget Limitations Col Sturgeon
Ceased the Garrison AAR
Made AARs “Optional” for Departments
NONE HAS OCCURRED SINCE

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

32. 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