Full-cost Maturity Model (version 1.2)

Transparent budgets, fair allocations, managed expectations, portfolio management, accurate rates -- knowing the full cost of your products and services is essential.

Whether you're a shared-services organization, an internal service provider, a budget director implementing activity-based budgeting, service-based costing, or chargebacks, or simply want to run your organization in a businesslike manner, you need a reliable method and capable tools to identify and cost your products and services.

The Full-cost Maturity Model (FMM) is a standard metric of an organization's capability to plan its business (its operating plan) and the full costs of its products and services (its budget, allocations, and rates). It's the result of over ten years of research and the experiences of over 25 corporate, government, and non-profit organizations.

The focus of FMM is on business and cost planning, not tracking. It addresses the processes by which an organization develops its operating plan, budget, allocations, and rates. It is not a metric of financial accounting systems, broader resource governance processes, or billing systems -- although all of these other things are founded on the budget and rates.

FMM defines five levels of capability -- from simple cost transparency to fully burdened rates -- and the essential elements (methods, processes, and tools) required to make each level work. Each level builds upon the last -- adding details and delivering more benefits.

FMM is a practical framework used to help an organization (e.g., an internal service provider like IT) assess where it is in the maturity process, decide the target level needed to support its governance and tracking processes, and guide the implementation of exactly the methods and tools required to attain or fine-tune that target level.

The "Full-cost Maturity Model" report examines the problems caused by traditional budgeting and costing methods. It presents a detailed vision of the solution -- calculating the full cost to shareholders/taxpayers/donors of an organization's products and services. It catalogs the benefits of doing so. Then, it introduces the Full-cost Maturity Model (FMM) which explains the practical challenges of implementing full costing, and a step-by-step path forward.

A set of Appendixes provide all the details necessary to measure the current maturity level of an organization, identify gaps, and plan the implementation of a full-cost model.