At the 2016 PDI the US Transportation Command (TRANSCOM) and the Bureau of Engraving and Printing (BEP) showed how being more cost effective makes their organizations more mission effective. Both are working capital funds and Ms. Anderson explained the special role of cost in such organizations as they receive no appropriations and must charge their users enough to cover all costs of providing a product or service over time.
Many organizations are satisfied to account for costs only to the extent mandated by external reporting requirements.
These requirements are extensively defined and relatively simple compared to the vast array of possibilities when leaders demand operational insights that are mission focused. TRANSCOM and BEP use innovations in managerial costing to gain important insights into their operations. Mr. Busier and Mr. Olijar showed how their leaders exploit these managerial insights for mission effects.
The array of managerial costing can be divided into two broad categories: cost information designed to enhance decision making and cost information designed to support continuous improvement of operations. Both categories require cost accounting be further analyzed and customized to be useful to the leader who uses it, credible enough to enable subordinate accountability or to make important decisions, and affordable since there is literally no end to the scope, complexity, frequency, and level of detail that might be imagined.
Supporting continuous improvement of operations means that actionable cost intelligence becomes an integral part of a leadership driven management process of periodically reviewing results. Costs are compared to expectation and subordinates analyze the differences to research causation and to identify opportunities for corrective and preventive actions.
Research (1) has documented three successful forms of cost managed organizations: organization based, role based, and output based. Organization based control simply builds cost reviews at nodes of the org chart and its established accountability relationships. Role based control establishes reviews where useful, such as in managing costs in support roles. Output based control builds the cost review process along the lines of the products or services provided and is the most complex from the cost accounting perspective.
The Bureau of Engraving and Printing provided an outstanding example of this most complex form. Mr. Olijar, Director and former Chief...