Terry Wireman's Blog

The Empire Strikes Out

I ran across an interesting article on the internet this week that has great application to most organizations.  It was titled “Management Lessons to be learned from Star Wars”.  It can be found at http://www.msnbc.msn.com/id/46482731/ns/business-careers/#.T0ZYJHmibng

The author made some humorous, but insightful observations about the Galactic Empire and business today.  I would like to comment on the first.  It seems that the Emperor and Darth Vader did not have a succession plan in place for their organization.  When they both died, the whole empire fell apart.  They did not structure their organization for ongoing continuity in the case of departure/ retirement of any key personnel.

We see this all too often in companies today.  Instead of building an organization to achieve business goals and then staffing it with the right people, and then mentoring the existing personnel, they try to divide up the roles and responsibilities, based on the existing talent in their organization.  There is no opportunity for advancement, so key people, who want to progress in their careers, leave.  So we end up with supervisors that cannot supervise planners that cannot plan, and managers that cannot manage. All are dead ended in their jobs and are not trained for any further advancement.  So their companies compensate by structuring the organization to the people instead on the business.   The roles and responsibilities are divided and assigned (or not) in a manner that perpetrates confusion and prevents focusing on achieving the necessary business functions.  Instead of a united organization, we have a silo’d organization with everyone focusing on their own department and the final customer (the shareholders) achieve a far lesser return on their investment.

What if companies would take the following steps?

1. Identify their business mission/ visions, their goals/objectives and strategies and tactics
2. Develop the proper roles and responsibilities  that must be executed
3. Develop (or acquire) the right people for the roles
4. Determine the proper staffing levels and resources
5. Determine the proper KPI’s
6. Continuously improve the business

While this simplified, isn’t this what companies are supposed to be achieving the maximum return on investment for their investors?  If companies do not focus on executing the basics of management, they will end up like the Empire: Leaderless, broke, and their greatest competitive advantage destroyed.

Can We Even Spell “Asset Management”?

The current draft of the ISO-55000 standard is being reviewed in South Africa by the world-wide TAGs (Technical Advisory Groups) next week.  While I am not making this trip, I couldn’t help but reflect on the topics that will be included in the discussions.  I also wonder who is really qualified to set an “asset management” standard? 

 Consider the definition of asset management as it currently exists in the draft of the ISO-55000 standard: “Asset management involves a disciplined approach which enables an organization to maximise value (or minimise liabilities) from the portfolio of assets for which it has a responsibility in delivering its strategic objectives.”

 Let’s focus on the “maximizing value” part of the statement.  If we were to actually maximize the value of an asset, we would first have to know why we acquired the asset.  Consider:

• Why was the asset purchased/ built/ modified?
• What business need was it purchased/ built/ modified to address?
• When it was installed and commissioned, did it actually meet the business need?
• As it has aged, has the assets ability to meet the business need diminished?
• Is the asset being operated according to design specifications?
• Is the asset being maintained according to the engineering requirements?
• Is a major overhaul required to restore it to baseline design specifications for it to continue to meet its designed business needs?
• How many companies actually have accurate data to answer these questions?

Can most companies answer these questions about their critical assets?  The answer would have to be a resounding NO!  Consider this quote:

     “The true capacity of companies that make the Business Process Improvements are as if they have invisible factories (hidden capacity).  It is estimated that there is $2 Trillion in additional productive capacity in the United States, which does not show up in GDP statistics or on the balance sheets of companies.” - Professor Brynjolfsson – MIT Sloan School of Management

A second source said the following:

“ARC estimates the global process industries lose $20 billion, or 5 percent of annual production as the result of unscheduled downtime. Drilling down into this number, we estimate that nearly 80 percent of these losses are preventable.” - Passing the Insurance Acid Test with APM  by Steve Clouther, Paula Hollywood and Wil Chin

 If we are currently mismanaging assets to this great of a degree ($2 Trillion in the US and $16 Billion in Global Process Businesses), can we actually expect a group with very diverse perspectives to produce a standard that actually improves how we manage assets?  What organizations can the assembled group of TAGS use as “Best Practice” examples?  Have the TAGS ever seen a true example of a company that is the “Best” at asset management?  Can the TAGS actually produce guidelines that are prescriptive enough to help companies achieve asset management?  Will the ISO-55000 standard be nothing more than a few general statements about the TAGS view of asset management without a roadmap to achieve it?  Will the standard help international and domestic companies reduce the amount of asset related losses we see world-wide? Will there be a “Line of Sight” that connects the standard to true business benefits?  Will the standard make a true business difference?

 These questions along with many others will be answered as the proposed ISO-5000 standard progresses through the development process.  It is only hoped that the TAGs focus on the necessary business reasons for an asset management standard and maintain a clear “line of sight” and connect the proposed standard to the business (financial) impact of asset management.