Summary of FMM Levels....

Level 0: TRADITIONAL BUDGETING

Not all costs are to products and services.

Level 1: TRANSPARENCY

Costs are linked to high-level product sets, and the cost model is transparent -- that is, well documented and based on consistent principles.

Benefits:

• Transparency builds trust.

• Everyone understands what the budget pays for, and perceives the value.

• Builds in appropriate reinvestments.

• Staff understand products versus tasks.

• Saves money through frugality: within groups.

• Fosters culture: teamwork

Level 2: FAIR ALLOCATIONS

Products sets are subdivided by client (business unit), documenting utilization as a basis for allocations.

Benefits:

• Allocations are driven by consumption of product sets, and are understandable and fair.

• Some clients support their allocations and defend the internal service provider's budget.

• Fosters culture: customer focus.

Level 3: DEMAND MANAGEMENT

Product sets are broken down into detailed products and services -- specific client purchase decisions -- for the purpose of portfolio management.

Benefits:

• Budgets are justified by deliverables, trust grows.

• Customers' expectations match available resources.

• Strategic alignment is improved.

• A full products and services catalog, produced as part of the process, provides a basis for contracting and portfolio management.

• A detailed operating plan is produced as part of the process.

• Fosters culture: entrepreneurship (external sales).

Level 4: ACCURACY

All indirect costs are amortized to just the right products and services, and accuracy is improved.

Benefits:

• Indirect costs are amortized accurately, producing an accurate budget for all products and services and costs comparable to outsourcing.

• Saves money through frugality: use of internal support services.

• Fosters culture: customer focus (internal customers as well as clients).

• Fosters culture: entrepreneurship (internal support functions).

• Staff learn lines of business, insights on future structural change opportunities.

Level 5: RATES

Costs are portrayed in total for products and services, and unit prices (rates) are extracted from the same data.

Benefits:

• Produces defensible, fair chargeback rates.

• Rates are comparable to outsourcing, saves money through competitive benchmarking.

• Provides basis to estimate costs for new business opportunities mid-year.