Reengineering a large-scale finance department.

• Author: Keevey, Richard F.

The Defense Finance and Accounting Agency was created in part reinvent, reengineer, restructure, downsize, and delayer the $250 billion financial management operation of the U.S. Department of Defense. This article discusses how that was achieved.

Imagine you are the Chief Operating Officer of a 30,000-person worldwide finance department with installations in the United States, Europe, and the Pacific Rim. Imagine also that you do business in 330 locations with almost 300 different finance and accounting systems. To make things even more interesting, imagine that all of these assets are now your responsibility after having been the responsibility of many different organizations for more than 200 years, and furthermore, the organizations were reluctant to relinquish control of their systems and their people. Consider, too, that the parent corporation you support is undergoing fundamental change and you are expected to do your part to meet downsizing targets as rapidly as possible. Moreover, it is assumed that you will fix many of the underlying finance and accounting problems that have plagued the organization for decades, yet the organization has failed to address them in a systematic manner. Such was the situation facing the Department of Defense Finance and Accounting Agency in the early 1990s.

The Defense Finance and Accounting Agency is the organization that does all of the accounting and pays all bills for the $250 billion U.S. Department of Defense (DOD) budget. Prior to the establishment of the agency, the work was performed by various accounting and finance offices under the direction of the Army, Navy, Air Force, Marine Corps, and a variety of separate Defense agencies. The agency serves various and numerous customers - 1.5 million military members; 800,000 civilians; two million retirees and annuitants; five million contractors and vendors; thousands of managers in need of financial and budget data; and the United States Congress. Clearly, the Finance Department of the Defense Department was facing a period of incredible change. When one speaks of reinventing government, nothing could be more dramatic than what faced this Finance Department. Challenges and opportunities abounded.

Why was the time right to do this? In some respects it was the obvious thing to do, and well overdue - too many people in the wrong places using old technology and processes, and spending too much time and money that could not be clearly identified. It was also necessary to downsize the finance operation because the agency was part of the world's largest corporation that had just won the Cold War and no longer needed the huge defense organization of the past. Furthermore, the defense establishment had just completed a "bottom-up" review to determine what was needed to defend the country. Instead of gearing up to fight a global war of the World War II type, the Defense Department determined that a worse-case scenario would be two major regional conflicts. Then they determined what was needed to win these two nearly simultaneous major regional conflicts and staffed accordingly. Based upon this review significant restructuring occurred within the defense forces. Specifically:

* the Army decreased from 18 divisions to 10 divisions;

* the Navy decreased from 15 carriers to 11 carriers;

* the Navy decreased from 546 ships to 358 ships;

* the Air Force decreased from 24 active fighter wings to 13 wings;

* overall, the military decreased force strength from more than two million personnel to 1.5 million.

Obviously, with such reductions, it also was necessary for the infrastructure to be downsized. But historically, such overhead reductions do not necessarily follow. Parkinson's Law is familiar states, "work expands so as to fill the time available for its completion." Parkinson coined this phrase when he observed that although the troops had demobilized at the end of World War I, the British shore establishment and infrastructure remained essentially the same size. This was not going to happen to the Department of Defense in the 1990s. And so, in the world of finance and accounting, the stage was set for a dramatic downsizing in staff, locations, and systems.

Mission and Challenge

Prior to the establishment of the new finance department, there were almost 300 different finance and accounting systems, including 59 different payroll systems. Work was performed at 330 different locations, there was more than 70,000 pages of policies and procedures in different commands, often in conflict, and, there were more than 30,000 staff. The mission of the new finance department was clear as follows:

* standardize and...