Conscious Asset Management

Productivity Improvement made simple

Wed, 30 Jun 2010 08:22:14 -0700

There is so much about "productivity" and "prosperity" in the news these days. The Canadian Institute for Competitiveness and Prosperity's Report on Canada 2010 shows us trailing the US on many measures - and yet our economy is supposed to be in better shape. We have a $9,300 annual per capita prosperity gap there - 17% of the US GDP. The Globe and Mail's Report on Business is running a series, "More with less: The Productivity Challenge" and this week they wrote about "Reinventing the Factory". They give examples of companies that are trying (not necessarily achieving) "more with less".

Here's a simple answer. Go after work management and reliability improvements - you'll gain loads.

The average maintenance workforce is around 15% of the total workforce in most industrial facilities. Through work management alone, you can gain labour productivity in that group that effectively doubles the work accomplished. If 15% of your workforce is getting almost twice as much done there's a gain in productivity.

Now, in addition to getting caught up on all that work they aren't doing (e.g.: your PM program that keeps getting put aside so you can fight fires), you can now focus on doing the right work. Improving your PM program, solving some of those nagging reliability problems and generally keeping things running longer (more Uptime). With that you get more produced with less effort. That doesn't mean you should go out and lay off people - you will defeat yourself with that idiocy. No, do more with less.

The world of lean talks about "the hidden factory". It is real. I see it every day - sadly, it's a vision for most companies because they are not making the choices necessary to realize it. Stop looking through the lens of a cost accountant - it's looking backwards. You know what's right. You know the right things to do. What's holding you back? Just choose. You won't be punished for doing the right things, and if youi do, get in touch with me. I know plenty of companies that want to do the right things who just might welcome you with open arms.

Who are we kidding?

Tue, 22 Jun 2010 05:56:29 -0700

This morning I was inspired by death. There was an article about a young girl - a teenager who lived near Toronto who hanged herself after taking drugs. The drugs were meant to deal with "depression" - a diagnosed condition being treated by a doctor. Yet it is clear from the outcome that her treatment only dealt with the symptoms, not the causes of the depression. What is depression? Along with a variety of geological, economic, climactic and other uses for the word I found (in Google's online definition):

a mental state characterized by a pessimistic sense of inadequacy and a despondent lack of activity
sad feelings of gloom and inadequacy

And I asked myself if a drug can possibly deal with these. Of course not. Mental states are brought on by the mind, not by chemicals. We can all smile when only thinking about something that makes us happy, or we can move ourselves to tear by thinking of something sad. Actors do it all the time to give us those tears on screen. Sad feelings, indeed feelings of any sort, are brought on by the mind judging the body's reactions to events it perceives. All of this is the mind's doing. Drugs can only alter our ability to perceive, not what we perceive.

Doctors prescribe drugs all the time. But do they deal with problems or symptoms? Even drugs that help with clogged arteries - they may deal with the clogging, but they don't deal with the source of the clogging - often an unhealthy life style.

OK - this is an asset management website. Why is this relevant here? We are often moved to solve "apparent problems" - realy the symptoms of some deeper underlying problem. Underlying most of our problems are deeper issues just presenting themselves for solution. They present themselves through lesser yet more immediately evident problems on the surface. And our corporate culture, indeed our entire western civilization, seems to value the short term fixes over the longer term solutions. We seem to be afraid to dig deeper and really deal with the deep underlying issues. And that applies in our businesses as well as in our lives. That young lady who took her life would very likely have been far better served to dig deeper into the causes of her depression rather than taking a drug to hide it. She got the short term fix and the long term sentence.

What is it about our consciousness that takes us down that short term path to a quick fix that only hides the real problems? Perhaps we just don't love ourselves. Oh, we say we do, but do we really. Did that young lady really love herself. Did her family really love her? Did her doctor really love her and her family? Did he / she have a real love of helping, or only creating an illusion of helping?

And that happens in our businesses too. Perhaps we don't really love what we are doing as a business. We may love our work (our job) within that context of the business, but do we really love the business? Do we see the deeper contribution we are making to society, to humanity by doing our job? Just as your heart is a part of supporting what you choose to do with your live, you are doing something in your business that contributes to whatever the business chooses. That business is, after all, just a collection of individual people all choosing something together. If we do see that deeper contribution, then are we inspired by it? Do we really love it? If not, are we really loving ourselves by being there and doing it?

Tough questions to ask and tough questions to answer. Look at the implications. You've just read those questions and come up with quick answers. Don't go back and over think this. What are you going to do now, if you got an answer that truthfully reveals that you are not doing what is most loving for yourself? Continue to do it? Why? Because you have a family to support? We are masters at justifying what we choose after the fact. Why not choose to love yourself first? It starts there. That simple choice will open you up to further answers that are more loving to yourself. Being conscious of your choices is like the solution to a problem - a large part of the solution is in merely identifying the problem. Then we are open to a solutioon. And why not being with a choice to find a loving solution?

This applies at work too. Let's say we answer the above questions with "yes". We are inspired by what we do and the contribution we make at our work. It is meaningful. Terrific. Yet you have problems at work - equipment that continually breaks down. Underlying the technical problems are people problems. Perhaps problems with the design, the installation, the quality of parts used, the rush to put it back into service the last time it broke down... These are all people problems. And underlying those are deeper systemic problems in the business. Repeated problems are a chronic condition of the business, not just the equipment. You can not solve these with the industrial equivalent of a drug - the rapid repair. You are only making it go away for a short while. It's time to dig deeper.

Can our businesses make that leap? Can they encourage long term solutions and digging deeper into the tough issues that are not amenable to short term fixes? My answer is "yes". But it will take a shift in consciousness on the part of all of us as individuals. As each one of us shifts our consciousness, others around us will notice.

I'll use myself as an example. If you have read this far and if this has touched you in some way. I've started that shift in those around me. I'd apprecaite it if you would just let me know that you felt something here. With your help that can spread. You have influence over those around you. Collectively, our consciousness can shift to one that is truly loving to the self and that will spill over into our families and loved ones, our workplace and companies, eventually into all of society.

Love, Jim

Leaders don't let fear stop them

Mon, 21 Jun 2010 06:07:43 -0700

Leaders are people we can always remember as those who "just do it". They make things happen. They never seem to have excuses to explain why they are not doing something. They don't see problems, they see opportunities. They feel fear, just as we all do, they don't operate from it. They don't let fear get the better of them and prevent their progress. Are you a leader? Or do you let fear (even small fears and hesitations) get in your way?

How do you view training? Most of us probably don't fear training, especially when it's training that is aimed at improving our level of knowledge, skill or ability. Many of us welcome it, but we all fear the work load we will face when we return. That can turn a pleasant expansive experience into something that bogs us down. What about training for your people - those who make you a success?

A leader does whatever possible to enhance those who work for himself. A leader surrounds herself with people who are better and more capable, who make up for the leader's own shortcomings. A leader is aware of his shortcomings and actively seeks to balance them with strengths or improve. Are you a leader who helps your people be better than you? Or are you a leader who must grab the glory? Are you one of those so-called leaders who must know it all, must control it all, must be the one calling the shots?

General George Paton, the famous US tank commander in WW2, once said words to the effect of, "never tell people how to do things, tell them what you want and let them surprise you with the results". He knew that people, relieved of controls and bindings, would be creative and productive, often delivering more than you expected - to your delight. He was considered to be a great leader. And he didn't control - he was not a micro-manager. He made sure his people could shine - and they did.

If you truly want your people to experience expansion and glory, why not encourage and support their training. You may be well qualified and experienced. Are they? Can they outshine you? If not, then you are missing an opportunity.

We hear many excuses for not doing training. They range from just plain, "not interested," through "oh, there's no budget for that" and "that doesn't fit our program" to "I'm already qualified".

Why are you not interested? Is there nothing to gain? Are you and your people already doing perfectly? Or are you afraid that someone might outshine you?

Why would you let a budget stop you from doing something that will likely have the effect of saving you money, or even making more for you? Do you fear that you would choose training that is not going to be of benefit? Do you fear that your employees are just out to cheat the company (their livelihood) and pick training just for fun? Do you fear that you can't turn new knowledge into something that drives value for your company?

Is your "program" perfect? Has it considered all the possibilities? Is is perhaps too conservative and you fear that someone may return from learning something new and raise the bar? A bar that perhaps you set too low in the first instance?

And so what if you are already qualified. What about your people? Do they know as much as you? Are they as capable as you? What do you fear if they gain what you already have?

These, and many more, are just a few of the excuses we hear when people resist training suggestions. Admittedly, not all training is beneficial. Is an immediate and outright dismissal of an opportunity, without even exploring it more fully, really doing it and yourself justice? Are you shutting out opportunities that are being placed before you?

We often resist what is good for us. If you look around yourself in your workplace and see a situation that could be improved, know that you were a part in creating it and allowing it to exist. You and others co-created it. And you and others can co-create what it takes to set it right. Resisting is only perpetuating the situation as it is. Why not be open to ideas that can help you? Why keep shooting yourself in the foot?

You may fear your own company bureaucracy. We see a lot of that, particularly in larger companies with headquarters offshore somewhere. The system won't allow it or the red tape is too excessive or it will never get past the purchasing process. With a bit of insight we can all see that we create what we fear by the mere act of giving it energy. Resist something and you invite it in. It's as if the universe, like a dog, doesn't understand that no means no. Our excuses about never getting approvals, etc. are all about giving in to something you see as being more powerful Henry Ford has a great saying - "whether you think you can or you think you can't, you're right". He knew that the attitude you bring to a problem will reveal the direction you will take.

And if you are too beaten down by past experience to be positive, then dig back into those past events and really ask yourself honestly how you approached them. Were you defeatist? You probably were. And you probably sustain that today too. You've been giving your fear too much power. And it's been bringing you exactly what you don't want.

Be positive and face those fears - do not give them power over you. You choose. You can see the cup as half full or half empty - which is your preference?

On choosing mediocrity

Fri, 12 Feb 2010 08:29:07 -0700

Businesses today are struggling with their costs and capabilities because of past "sins". It may not be evident in the board room either - executives just don't seem to get it. But on the shop floor, in the field and in factory settings around North America we hear a similar story. It goes like this; "about 10 years ago we did all that but we stopped". So what happened?

In case after case we hear that past practices were quite successful. The sort of methods and techniques we teach in our Uptime Training and in our Asset Management training were being done in the past. Yet along the way, "resources" (usually meaning people) were cut. In the early '90's we saw the emergence of the "re-engineering" craze. Companies went overboard with staff reductions in the interest of cutting costs. Somehow the original intent of re-engineering - to eliminate waste and streamline, was misunderstood and interpreted as an opportunity to shed staff and hence cut costs. People became more of a commodity. Loyalty plumeted - it's almost non-existent in some industries today. The manufacturing sector got the "lean" craze. It was similar to "re-engineering" in its attempts to get rid of waste and excess. Both are valid and excellent concepts when properly applied. But application was anything but "proper". Consciousness had shifted in the direction of short term profit taking, get rich quick, don't worry about the future, selfishly make profit today and hoard it for yourself, don't worry about the future security of our children - they can take care of themselves. We had set ourselves up for failure and it is our children that must now deal with the legacy being left.

Two years ago a colleague, Art Rice, CEO of Maintenance Technology, made a statement about "lean" at the IMEC 2008 conference in Toronto. I don't have the exact quote but he said something to the effect that "lean" has become "anorexic". And he was so right! Companies had slimmed down, cut staff, cut training budgets, stopped investing in their own future to the point of becoming diseased shadows of their former selves. And all in the interest of short term cost cutting.

And where are they today? Baby boomers are retiring now. Experience and the knowledge of the methods used to keep things running smoothly is disappearling. Replacements are coming from a younger and very different generation - the children of the baby boomers. Some older workers lament their poor work effort, lack of dedication and focus. Although the numbers of boomers can be replaced, one for one, their work ethic (live to work) is being replaced with "work to live". I for one think the younger folks have it right to a degree - perhaps it is a bit overboard though. Life is give and take, not all take. We have yet to reach a happy medium. Anyway, workforce experience, knowledge of the "plant" and well-honed skills is diminishing. The replacements are often better educated, they lack experience, know only the theory of how the "plant" works and they are quick learners. However, in the endeavor to cut costs, training and development spending was reduced to a bare minimum or even less. Exploration of up to date methods stopped. The methods through which knowledge (real useful knowledge, not just data and information) is transferred from experienced to younger are seldom exploited. The result is that as boomers retire, the numbers of people needed will have to grow. The very thing that the bean-counting types feared, is exactly what they are bringing on. And the timing could not be worse.

We are headed towards mediocrity at an alarming pace. The developing world with its well educated, less expensive and harder working workforce is catching up on our technological lead. We are heavily reliant on technology and we've probably gone beyond our own ability to manage and leverage it fully. We are slipping. The developing world is catching up and surpassing us. Only high fuel prices are keeping shipping costs high enough to protect North America from a flood of cheaper imports of equal or even better quality. We are on a very slippery slope and we've done it to ourselves - we've chosen mediocrity.

The developing world is choosing expansion. They have a lot to gain, little to lose. They can take advantage of our technology and do so with cheaper resources. And they started off doing it in companies that were originally North American based but looking for a cheaper source of labor. That has helped the developing world - but it has done so at our cost. While we were spending there, we stopped here. We've helped others but drained our own capability. We did not fill their cups from our overflow - we filled them from our lack. We've reduced, they've expanded. Good for them. Yet who will help us? Here we cannot rely on others - we must do it ourselves.

We need to work smarter. Stop cutting costs in the relentless pursuit of short term gains to satisfy shareholders' who have no real interest in the company other than it's profits. If businesses are to be sustainable they need to think and act sustainably. Shed the short-termism. Choose excellence. Choose sustainability (and I don't mean just green). A major shift in business consciousness is needed - it is almost too late.

Feedback:

After reading this, a colleague who works for a large company provided the following feedback. It's so powerful, I've included it here to underscore the message:

Great article on Mediocrity, James, and as a Zoomer I totally agree. There's a middle ground between us (the boiled frogs) and the younger generation. They have watched their parents give up life to keep that almighty job afloat. They have seen their parents be downsized (or whatever term they are using these days) and witnessed the devastation this had caused their parents' sense of identity. The middle road has to be where family and self gains the footing to reclaim their sense of empowerment over their destination. Actually, more then ever, it is time for spirituality (might have to call it something else, so it gets a chance) in the workplace to be offered to employees, to assist them to see themselves as the main priority in their own masterpiece of life. Just started a class at work called "Sharing and Caring" which is gaining traction. It starts with me presenting an idea like; "learning to disappoint people" and then the class contributes to the solutions. It's a small thing, but for me it helps a little bit with the suffering that I'm seeing all around me. It pains me to see how people struggle to hang onto a job, with a boss who has no commitment to hanging onto them. Comments coming from bosses like, "Even though you are a good performer, I know you're the mother of two children and a husband who works shift, which makes you the centre of their universe; you need to let that go!" Wow where can you go from there as an employee?

Just had to vent, thanks so much for this timely message, which I have passed along.

Creating downtime through Shutdowns

Mon, 14 Dec 2009 13:52:56 -0700

At the Shutdowns SuperConference in Calgary (8 & 9 Dec 2009) I presented a paper entitled, "Do As Little As Possible, Why Shut Down At All?" The premise is that we often create more work and more downtime that we need to. We do it through poor work identification, doing the wrong type of work and by adding work scope that does not need to be in a shutdown.

The presentation was given to over a 120 maintenance professionals who focus most of their efforts on shutdowns. In the presentation I asked several questions and got some very interesting results. An automated response tracking system provided the statistical results for the questions. Those have been added to the presentation (after the event) and included in the copy you can download at the above link, as well as below.

1. Does you plant or facility schedule work that does not really need to be done a shutdown just because it is convenient?

Always	15	15.96%
Often	33	35.11%
Sometimes	25	26.6 %
Rarely	19	20.21%
Never	2	2.13 %
Totals	94	100%

2. Have you experienced forced outages within one week of a plant shutdown?

Yes	60	60%
No	32	32%
Not sure	8	8%
Totals	100	100%

3. Was the cause of the forced outage directly related to the work that was done?

Yes	49	53.85%
No	21	23.08%
Not sure	21	23.08%
Totals	91	100%

4. In your opinion, are you more likely to experience forced outages after doing "break in" work or work that was already planned into the Shutdown?

After "break in" work	54	55.66%
After "planned" work	21	21.65%
Don't Know	22	22.68%
Totals	97	100%

5. What does downtime cost your company per hour?

$1M or more	16	17.39%
$500k to $1M	9	9.78%
$100k to $500k	20	21.74%
$50k to $100k	12	13.04%
$10k to $50k	17	18.48%
Don't know	18	19.57%
Totals	92	100%

From the statistics gathered in this small survey we can see that shutdowns are quite expensive for most companies (at least those who attended the conference - largely oil and gas companies). We can also see that most add work for convenience, most experience failures shortly after the shutdowns are over, most of those can be attributed to work that was done and that it is most likely to happen with the work that was added to scope after the shutdown began.

It seems evident that we do ourselves a big disservice by adding work to a shutdown that doesn't really need to be there. We do further harm by increasing scope with new "break in" work. That work is a result of a lack of diagnostic scoping work before hand - otherwise most of it would have been identified and planned well in advance. Most companies do an excellent job of planning shutdowns but clearly they are only planning part of what they need to plan and not planning for work

A lot of the post shutdown forced outages are due to work that was done in the shutdown. That points to a couple of factors - quality of the work is one possible culprit. Of course much of the work is done by armies of contractors - people who, almost by definition do not know your plant as well as you do. Perhaps your own oversight efforts to watch them are not working. Quality of work is something to look into here. Another possible culprit is that you are disturbing equipment and systems that are best left alone. Yes, some work must be done in a shutdown because there is no other way that we've thought of yet, but not all of it. If you disturb systems there is a high probability that you'll make mistakes that lead to infant mortality failures. A good analysis using techniques like RCM2 can go a long way to avoiding this.

You put a lot of money into planning and executing these shutdowns; they cost a lot in lost revenues and we add hundreds of thousands, if not millions to their costs by sticking with traditional approaches. RCM2 is far less expensive and will save you a great deal of money. It fits well within our Uptime services offering and is an integral part of it. Why not stop wasting your company's money - get Conscious.

What is sustainability

Mon, 09 Nov 2009 07:29:52 -0700

Sustainability is a word that gets tossed around a lot. All too often it is associated solely with companies' efforts to go "green". And all too often even that is nothing more than "green-wash" a polite was of saying it's nothing more than trendy marketing with no real substance. A lot of money is spent on sustainability reporting, publishing what companies are doing on their websites and in advertising. Of course there's nothing wrong with all that, but "green" isn't all that there is to "sustainability".

Would your household be sustainable if it were only "green"? I suspect not. Something must be done to sustain its cleanliness, habitability, fitness for purpose, payment of taxes and mortgage, etc. Sustainability is more than just one aspect of running a household and it is more than just one aspect of running a business.

Today I read an article in the Toronto Star (newspaper) about cut backs in railroad maintenance in Canada. Not only does the author make an excellent point about the relationship between safety and maintenance, he touches on what is not sustainable in our railroads. Cutting back on maintenance leads to increased future capital spending in major refurbishment and / or replacement. In the long term that will increase rail costs and that may not be sustainable. Rail already loses a great deal of business to trucking for a variety of reasons - including cost. The railroads here are on a path that is clearly not sustainable. And how many other businesses are doing the same?

Times were tight this year. Spending had to be curtailed. Did it get cut in maintenance? Yes, in many cases it did. Deferred maintenance almost never gets done too. How many companies have an abundance of maintenance talent and the manpower to clear those backlogs? Not many. Deterioration accelerates. The situation only worsens. We see it all the time - companies that used to keep up with their maintenance programs suffered relatively few failures for which they were ill-prepared. Their success lulls them into a sense that all is well and they can "back off" of maintenance efforts to save money and increase profits in the short term. Even some airlines have done that with disastrous results. Maintenance is not optional. What is optional however is whether you do the right maintenance. Doing the right maintenance can indeed reduce the amount and cost of it, but that requires a bit of thought up front and that costs money too. What a vicious cycle and it is entirely stoppable.

Sustainability includes those actions required to keep the business going in the long term, not just for the next quarter. That implies keeping your customers and other stakeholders happy. That includes the public, regulators, lawmakers, employees and anyone who might be effected by your operations. We all breath your exhaust, swim in your effluent streams, listen to your noisy operational sites, use your products, etc. Your employees depend on the business to succeed longer than next quarter.

Perhaps it is time for the ultimate choosers to stand up and be counted. Watch for sustainable actions on the part of companies and support those that "walk their talk". Shun those that do not. Don't buy products from companies that use unsustainable practices of any sort. It may mean short term sacrifice because we've become so accustomed to the convenience brought to us through those unsustainable practices. But look where it leads.

The developing world is resisting climate change efforts. The argument is that we in the developed world built our cozy life-style on unsustainable, dirty practices. And they are right - we did. Now they argue that they should be allowed to reach the same standards of living the same way. But if they do, we'll all be poisoned. The earth is a closed system. It can clean itself but not at the rate we are dirtying it up.

Sustainability may mean lower profits in the short term. We need to think in decades. Really appreciate that we borrow the earth from our children and grand-children. We don't pass it on to them. Choose for their benefit, not just our own. And do it in all aspects of our lives. Not just "green". Keep our companies healthy too. Keep our life style healthy. Choose sustainable practices and insist on them at work and from those you support with your shopping dollars.

Are you ready for the recovery?

Tue, 01 Sep 2009 10:18:54 -0700

The recession is over - at last! Whew! Manufacturers are gearing up. The resource sector is coming back to life. Major projects are getting again underway. Demand for consumer goods is growing. But is your company ready for the demands of the new markets we now have? The recession of 2009 has changed the business landscape. Recovery is considered by some to be fragile. All the negative talk and hedging of bets is holding companies and people back. Confidence is shaky. Governments are slow to declare the problems solved. Businesses have cut costs dramatically and now the finance executives are holding onto perceived gains by continuing to reign in spending. And they are missing the opportunity to invest in improved performance.

Business is not the same. Caution is everywhere. It's more important than ever to be cost effective and productive. You can't afford production glitches and excessive downtime. But what you doing to ensure you don't fall back into old habits. Or worse - what if you've laid off maintenance staff and can't (or won't) get them all back. You will be trying to do at least as much as before and with fewer people. Chances are that they were stretched beyond reason before the recession. The "Lean" manufacturing efforts by many companies were poorly executed - they resulted in lean workforces (anorexic as one colleague calls them) and no other changes. Trying to do more with fewer people, companies suffered. Productivity was down, costs were up. Businesses were vulnerable to recessionary pressures.

Now it's imperative to change. If you were struggling to be "lean" before the recession, what's happening now? What changes have you made? Are you ready to compete on a stronger footing or are you even more weak than before?

Before long companies will be humming along again. But production facilities will (in many cases) be hard pressed to meet demands. They've done little to change so they'll continue to get the same old results using the same old methods.

It's time to look at something new. Take bold steps to improve productivity. One of those steps is to improve production capacity. Get that capacity you were struggling with before. Improve reliability - it's the Achilles Heal of lean. Maintenance, materials and engineering management efforts are needed to work together to really position your production capability and capacity where you want it. You can't solve the old problems with the old thinking. Try something new!

Waiting for budget might mean you do not believe you can do it

Thu, 27 Aug 2009 11:45:05 -0700

This year has been a rough one for many industries, especially manufacturing. Training and consulting budgets have been slashed or eliminated over fear that the company won't have enough money, or perhaps a future. Yet slashing these investments in your future reveals a lack of confidence. That arises from fear that you are insufficient to survive the circumstances in which you find your company. Do you really need to put money in the budget for these investments?

If an investment is almost certain to deliver a high payback why not go out on a limb and find the money to pay for it? In the case of your business you know what your capabilities are. You know if you can successfully "pull off" a change that will improve the business performance. Yet time and again companies refuse to invest in the sort of help they need to make those improvements because, "it's just not in the budget this year". I know that finance people and accountants will think me crazy. But give this logic a bit of consideration. They are coming from a narrow perspective that fails to see the big picture. Even the maintenance, engineering and operations people may be doing the same thing. They are thinking like managers not leaders.

Managers maintain the status quo. Leaders rock the boat with change.

Consider that an improvement in maintenance management practices (and indeed in methods being used) in many companies will provide a savings of 10 - 20% of maintenance costs. Much of that can be found in the first year of making changes - often quite easily. The more reactive your approach to maintenance, the greater the potential for benefit and the faster you'll see it materialize. If your maintenance costs are in the range of 15 - 25% of operating costs (which isn't unusual) that translates to a costs savings to overall operations of 1.5 to 5%. Assuming production levels remain constant that's a significant boost to the company's before tax profit margins.

Now consider that you can actually improve production levels with some of these improvements. The figures here will vary considerably but that too will add to profit margins.

So what sort of investment does that require? A maintenance management improvement initiative at a plant can cost you on the order $250k to $500k per year. If that is paid for from the 1.5 to 5% cost savings, your operating costs will be no more than $10 to $16M in order to pay for it on a break even basis. Not many plants and operations work with that small an operating budget, so the opportunity in most cases is huge. The costs to make the changes won't grow much with the size of your operations, but the potential for benefit grows substantially.

If you are afraid you don't have the money in your budget to cover the improvements, then you clearly have no confidence in your ability to make the changes necesasry to gain the benefits. Perhaps past experience has shown that your site can't make change easily. Your consultants can certainly help with that if they are any good. Why not put them to the test - ask them to put some skin in the game. That will separate the wheat from the chaff. The good ones will accept the risk in order to share in your payback.

In any event, the fear that you can't make the changes successfully must be dealt with. You'll need to get to the bottom of why that fear exists. And that must be done at a very senior level. Finance and accounting people will look only to revenues and costs with a primary focus on costs. They tend to be skeptical about claims by others that they can actually reduce costs. Maintenance and operations people tend to look only at their budgets. Their performance many even be tied to their ability to stick to their budget numbers (compliance to budget). That's actually a dis-incentive to taking a risk on something that has a high probability of working. It discourages entrepreneurial risk taking (which isn't gambling as some might believe). The operations manager might want the added security of being able to meet production quotas, but be unwilling to pay for the improvements. His incentives may be in conflict. The maintenance manager may have his budget over-extended - most are these days. That's often due to short sighted cost cutting and failed attempts at "lean".

You'll make no progress until as an organization you get past fears such as these. It often requires a very senior set of eyes to see the big picture. Entrepreneurs think this way. Many others in business do not - that's why they are employees. If you want to show that you are a leader - take some risks. Be smart about it, but take risks. The fears you are feeling about budget, quotas, will it work, etc. are only there to test your mettle. They actually reveal that there are opportunities if you'll accept the fear of the fear you might be creating.

Prove it

Thu, 27 Aug 2009 11:21:28 -0700

We're seeing an interesting phenomenon these days - senior executives actually being taken to task over excessive pay while their companies languish. The US Attorney General, Richard Blumenthal is challenging rate hikes to pay these salaries and named Northeast Utilities, United, Connecticut Natural Gas and Southern Connecticut Gas Company. There are likely more too. We agree that top talent deserves top dollar but is top talent not proven through top results?

Like the US, here in Canada we are seeing the regulators and rate review interveners challenging the budgets being put before them by utilities. Rate increases and requests for funding that generate them are being questioned. It's not enough to say, "trust us" any longer - utilities are increasingly being asked to "prove it". We've participated in two significant studies for large utilities in the past year. Both were aimed at helping the utilities prove what they were doing - either to show, without question, what funding they needed to ask for or to test current practices to make sure they were on the right track. In both cases we found significant reason to challenge the status quo - and both of these were in companies with large and competent engineering staff. Old practices may not always stand up to scrutiny in the light of technological advances and when using optimization techniques. In those cases there were already signfiicant questions being raised and proof beyond, "trust us", was required.

How does a company prove they are doing the right thing? There are many engineering standards around the world. They tend to be highly technical and limited in scope. In most cases they address selection, design and installation but say little about managing the operational phase of the assets' life cycles. There is only one specification that addresses how that is managed today - the UK's BSI PAS 55-1:2008. If you look at an asset from the perspective of optimizing its cost, risk, life and performance you often find yourself making decisions different than those you might otherwise make. The management system (not an IT system) required to deliver this thinking is what PAS 55 describes. It's a way of managing a critical aspect of your business. And in some cases (e.g.: utilities, highways, facilities) it may even be the entire business! Why not manage in way that reflects proven successful practices well thought out by those in similar situations to yourself in major companies? Why not take advantage of an approach to managing that will save you money, deliver improved and sustainable results with minimum risk?

Asset Management a New Meaning

Thu, 09 Jul 2009 06:37:45 -0700

Asset Management is a term used widely in financial circles. An asset is anything that has value - it can be invested in and depreciated in the financial statements. Assets include all sorts of financial instruments, capital equipment, software, some labor required to put those into place, goodwill (an intangible) and more. The financial world puts a lot of effort into managing those assets well - at least as far as the financial accounting of them goes. But what about managing the assets themselves when they are not strictly speaking "financial instruments"?

The financial world relies on the expertise of others to maintain the value of other assets - IT manages software and computers, marketing and legal manage brand image and goodwill, etc. In the world of plant and equipment (physical) assets it's a hodge podge of functional managers - engineering looks after early life cycle decisions and activitiies such as design and build. Operations and maintenance collaborate (or sometimes not) on the management of the operational phase of the life cycle. They get together with engineering to a limited degree to manage upgrades and capacity enhancements. Decommissioning and disposal is often completely forgotten.

The assets that probably consume the most money are physical. Yet they are managed in the most disjointed way. It doesn't need to be that way. There are smarter ways to work in order to deliver superior results. Leaving asset management in the hands of technical people alone, is not working. A change is needed. We need a new breed of "Asset Managers". They already exists elsewhere - the UK for example. In the UK a specification arose, PAS 55, that describes what "Asset Management" is all about and it is pertinent to physical assets and their interfaces with all other types of assets. It's an excellent spec. that is destined to become an ISO. Soon enough it will become the gold standard (actually it already is, but few know it) and companies will all want ISO certification for their Asset Management Systems (and I don't mean IT systems here) so that they can put a banner on the company letterhead and outside the plants. It will be a sign to the world that they are doing things the best way possible.

In a 2006 letter to UK network utilties, the main regulator, the Office of Gas and Electricity Markets (OFGEM), told network utility leadership that PAS 55 was the way to go. They said, "OFGEM beleives that BSI-PAS 55 certification will help provide assurance as regards long term asset stewardship and establish greater clarity of the asset management policy and process that underpins the investment decisions of Network Companies." The UK is way ahead of us here in North America when it comes to Asset Management. They are showing the way. While compliance to a specification like PAS 55 may seem onerous consider that it does what OFGEM described in that sentence. Is that not of value to CFOs, to CEOs, to Boards of Directors?

Asset Management is no longer a replacement term for Maintenance Management. That began about 10 years ago for CMMS (yes software) vendors to make their products seem more "upscale" and "sexy". The products didn't change much and still haven't. It's only the name that got spiced up. Those same vendors (at least those that still exist now) don't offer a lot more than they did back then - it's just packaged differently and running on newer technological platforms. Functionality is still back in the past somewhere. Only a couple of vendors are seriously looking at Asset Management as described in PAS 55.

Become aware of this development. It will shake your world in this domain that we reside. We are the Asset Managers by default - not by design. We've chosen to be relegated to bit parts in a major play. It's time to take center stage with a leading role. Asset Management is redefined - learn what it means and apply it. Become conscious of your world as it is and as it will become. Will you create value or be dragged along by those who would do it for you? It's your choice.