1. Identify Similarities Between Battlefield Management And Cost Management © Dale R. Geiger 20111

2. Why are We Interested in Cost Management? How many brigade combat teams can you afford if: Each costs $2B and you have $30B? Each costs $3B and you have $30B? Each costs $5B and you have $30B? © Dale R. Geiger 20112 Which provides the stronger Army?

3. Terminal Learning Objective Task: Identify Similarities Between Battlefield Management And Cost Management Condition: You are a cost advisor technician with access to all regulations/course handouts, and awareness of Operational Environment (OE)/Contemporary Operational Environment (COE) variables and actors Standard: with at least 80% accuracy Identify symptoms of the Cost War Describe the importance of Commander’s Intent © Dale R. Geiger 20113

4. Cost Management and Control: National Security Implications What if the cost of a BCT could be reduced by one-third while maintaining the same effectiveness? Simplify the math by considering Army Budget to be 30 and initial BCT cost to be 3 ARMY Budget 30 initial BCT cost 3 = = 10 BCTs ARMY Budget 30 2/3 initial BCT cost 2 = = 15 BCTs A one-third cost reduction yields a 50% increase in BCTs “My guess is that a third of the defense budget goes into the friction of following bad regulations – doing work that doesn’t need to be done.” Bob Stone former DASD Installations, Reinventing Government xxxxx xxxxx xxxxx xxxxx xxxxx © Dale R. Geiger 2011 4

5. Risk to Mission = Cost War The Cost War is the struggle: To accomplish and enhance your organization’s mission With fewer financial resources than you would wish While meeting specifications for quality, customer service, and ethics © Dale R. Geiger 20115

6. Are You in a Cost War? Do you need more resources? Have your budgets been cut? More than once? Almost always? Is your list of unfunded requirements increasing? Do you have limits on hiring? Are you getting unfunded mandates? © Dale R. Geiger 20116

7. Assess Before Continuing STOP: STOP: You need not proceed if your organization is not in a Cost War GO: GO: Proceed only if your organization is engaged in a Cost War © Dale R. Geiger 20117

8. What are You Going to Do About It? Alternative 1: Try to get more budget Better define and document “needs” Highlight deficiencies and problems Contrast funding levels to others’ React to cuts with downsizing, reduced service levels, personnel cuts © Dale R. Geiger 20118 The old way of doing things

9. Budget Appropriated Mission Accomplished $ $ Traditional View of Budget © Dale R. Geiger 20119

10. Traditional View of Budget © Dale R. Geiger 201110 Budget Appropriated Mission Accomplished $ $

11. What are You Going to Do About It? Alternative 2: Manage cost better Seek, but don’t count on, budget increases Develop a cost management paradigm Measure costs as needed Motivate a culture of continuous improvement in productivity Reprogram/redirect savings to self fund needs © Dale R. Geiger 201111 What This Course is All About

12. $ $ Budget Appropriated Manage ment Better Mission Execution $ $ $ $ Reprogrammed Efficiencies $ $ Payoff: Better Execution, Not Cost Savings © Dale R. Geiger 2011 12

13. Top 10 Reasons Government Orgs Manage Cost 1.Enhance Mission Execution 2.Enhance Mission Execution 3.Enhance Mission Execution 4.Enhance Mission Execution 5.Enhance Mission Execution 6.Enhance Mission Execution 7.Enhance Mission Execution 8.Enhance Mission Execution 9.Enhance Mission Execution 10.Enhance Mission Execution © Dale R. Geiger 201113

14. Productivity: Getting More Mission for Less Cost Private sector productivity is the cornerstone of recent economic success National statistics show sustained 3-4% annual rate of productivity improvement What did you pay for your first calculator? iPod? Cell phone? Computer? © Dale R. Geiger 201114

15. Conclusion: The Cost War Period of plenty (The Cold War) is over Period of limited resources (The Cost War) has begun Losing the Cost War will result in excessive loss of mission capability or missed opportunities for enhancement Winning the Cost War Requires a strong cost management process and a culture of continuous improvement © Dale R. Geiger 201115

16. Check on learning You know you’re in a Cost War if…..? What are the two alternatives for dealing with reduced resources? © Dale R. Geiger 201116

17. Assess Before Continuing STOP: STOP: Do not proceed if you would emphasize resource acquisition or if you don’t want this mission GO: GO: Proceed only if you wish to more efficiently use the resources you have and you want this job © Dale R. Geiger 201117

18. Can Government Manage? Many believe “Government Management” is an oxymoron Do you? Academics typically cite: Lack of profit motive History of government spending © Dale R. Geiger 201118

19. How Important is Profit Motive? Most managers in corporations are not profit managers Cost center managers outnumber profit center managers 40 or 50 to 1 Owner control is typically weak unless an individual owns a large share block Probably not much different than power of voters in political elections © Dale R. Geiger 201119

20. Can Government Manage? History of last 60 years of Government spending Cited as evidence by skeptics of Government’s inability to manage Used here as rationale that Government has not needed to manage © Dale R. Geiger 201120

21. Government Management Improvement Strategies © Dale R. Geiger 201121 A-76A-76 Business Process Reengineering Budget Mgmt PART PART Cost Management & Control Processes Centralized Decentralized DiscontinuousContinuous

22. Requirements for Cost Management and Control Cost Data: Cost Data: Providing the raw materials needed for decision making and process Process: Process: Institutionalizing a method of stimulating continuous improvement Cost Staff: Cost Staff: Translating data into information Leadership: Leadership: Driving management, setting and achieving intent © Dale R. Geiger 201122

23. Cost Management & Control Processes Must Require frequent management attention Stimulate learning: frequent feedback Generate goals that challenge Encourage performance to meet goals Eliminate entitlements Create continuous improvement culture Emphasize constant reduction of needs © Dale R. Geiger 201123

24. Battlefield Management Provides a useful template for cost management Good military commanders are inherently cost conscious in achieving missions Minimize cost in casualty losses Minimize cost in resources and capabilities Good financial managers must also be cost conscious in achieving their missions © Dale R. Geiger 201124

25. Battlefield Management Unique to government management arena No profit motive exists We’re pretty good at it Command, control, and communication paradigm provides a useful template for cost based management © Dale R. Geiger 201125

26. Cost Command and Control Process Battlefield Intelligence becomes Managerial Costing Warrior Pull becomes Cost Warrior Pull Modeling and Simulation becomes Cost Planning After Action Review becomes Cost After Action Review Command, Control, and Communication of Cost © Dale R. Geiger 201126

27. The Role of Cost Planning Provides proactive alternative to annual budget crisis Stimulates learning/training in financial consequences of alternative actions cheaply Provides a basis to evaluate mission success Clarifies short term assignments © Dale R. Geiger 201127 Cost Command And Control Cost Planning  Cost Projection  What- Iffing  Ad Hoc Analysis

28. The Role of the Cost After Action Review Document and explain performance Evaluate performance and create accountability Stimulate learning for: Better reconnaissance Better planning Better execution © Dale R. Geiger 201128 Cost Command And Control Cost After Action Review  Performance Measurement  Fixed Accountability  Continuous Improvement

29. The Role of Cost Warrior Pull Specify managerial costing requirement Perform intelligence prep of the battlefield Determine essential elements of info Lead the cost management process Set the agenda Negotiate and approve plans Critically review execution Signal the importance of cost management © Dale R. Geiger 201129 Process Cost Warrior Pull  Command Specification  Command Review  Command Goal Setting Cost Command And Control

30. Cost Command And Control The Role of Managerial Costing Develop needed intelligence for the cost manager fighting the cost war Needed: credible measurement of true costs of resource consumption Provide information to the cost management process Needed for decision making, planning processes, and after action reviews © Dale R. Geiger 201130 Managerial Costing  Relevant Costs  Customized Views  True Resource Use

31. Check on learning Why is “lack of profit motive” not an excuse for not managing cost in government? What is the role of the Cost Warrior? © Dale R. Geiger 201131

32. Commander’s Intent “Commanders must develop and communicate a clear vision or intent” --United States Army Field Manual FM 25-101 Battle Focused Training (emphasis added) © Dale R. Geiger 201132

33. Why is Commander’s Intent Important? Dynamic environment Changing conditions under fog of war Unanticipated enemy actions/reactions Unforeseen opportunities and threats Capitalize on the skills of subordinates who are best positioned to make decisions © Dale R. Geiger 201133

34. Commander’s Intent 34 --United States Army Field Manual FM 25-101 Battle Focused Training © Dale R. Geiger 2011

35. Why is Commander’s Intent Important? Commander physically cannot make all decisions Commander is not best qualified to make all decisions Command must insure control while reaping all possible advantages of decentralization © Dale R. Geiger 201135

36. A Military Analogy Consider the economy of force sector Some sectors in the front line are deliberately allocated fewer forces This permits concentration of force for The main attack The secondary attack The Cost War now places many government organizations in the fiscal economy of force sector © Dale R. Geiger 201136

37. What if You are in Command in the Economy of Force Sector? Your time and energy are limited You must allocate them between: Going to higher HQ to plead for more resources to increase your effectiveness Staying at your sector maximizing the effectiveness of the resources you have © Dale R. Geiger 201137

38. One Way to Think About Your Options Grant Me... The Serenity to Accept the Things I Cannot Change; The Courage to Change the Things I Can; And the Wisdom to Know the Difference  Resource Level  Resource Management  Your Decision © Dale R. Geiger 201138

39. Group Activity Break into groups Address the previous slide’s question Write a one page PowerPoint slide with your Commander’s Intent Present your statement to the class in 20 minutes © Dale R. Geiger 201139

40. Commander’s Intent in the Cost War Development of clear vision and intent is key to: Leading the continuous improvement process Developing and institutionalizing the cost based performance management process and needed cost measurement capabilities © Dale R. Geiger 201140

41. Leading the Continuous Improvement Process Change culture to one which: Aggressively seeks better ways to operate De-emphasizes defense of past practice (assumed best practice at that time) Requires and expects development of continuous improvement initiatives Today, tomorrow, next week, next month, next year, forever © Dale R. Geiger 201141

42. Steps to Cost Based Performance Management 1.Recognition that continuously reduced resources have become a way of life 2.Awareness that sound management of resources has become more important 3.Search for a workable management paradigm becomes critically important 4.Development of actionable measurement capability becomes indispensable © Dale R. Geiger 201142

43. Check on learning Why is Commander’s Intent important? What does it mean to be in the fiscal economy of forces sector? © Dale R. Geiger 201143