Project Management Accounting: Budgeting, Tracking, and Reporting Costs and Profitability, Second Edition

STO Solution Model

In Chapter 1, we mentioned that according to the strategic, tactical, and operational (STO) model, problems often occurred when walls exist in the communications between different levels of a company. If we consider the Marvelous Food scenario, we could say that the supply chain project there is crucial to the company's ongoing success. In order to enhance the chances of success, all members of the project team must understand how their role is crucial to success and to company finances.

So, for example, when working with the internal resources of Marvelous Food to plan for business process engineering, the project manager can make the case by explaining the company's finances to the team and then showing how their efforts (or lack of them) will affect project cost and the company's financial results.

Of course, understanding how the project affects the company finances will be even greater if those financial results have a direct impact on employee income, such as salary increases or bonuses. If many of the employees hold company stock, they will certainly see the wisdom of improving company finances.

Now that we have examined a company's finances in order to understand how the project manager can judge projects based on those finances, we turn to how a company can put in place decision processes to ensure that all projects are judged by their effect on company financials. Here we examine the STO solution model and describe the process for implementing the model ...