Uptime: A Top Management Standard — The Missing Link

The term “top management” in the ISO55000:2014 Asset Management Standard is referenced throughout the documents. In fact, top management has the overall leadership responsibility to establish the Asset Management System, as specified in the ISO55001 requirements.

But, the leadership responsibility of the very top of the organization, in pursuit of best-in-class operations and maintenance, is not new by any means. How the business’ equipment, machinery, and facilities operate has a direct impact on the balance sheet. So, why is it so difficult for top management to play a key leadership role?

Maintenance traditions

Maintenance of equipment, machinery, and facilities has been the responsibility of a plant engineering or maintenance department for generations. New maintenance methods and technologies have evolved to solve problems, improve maintenance efficiency, and ultimately keep the physical assets running smoothly. The maintenance department became one of many individual departments—organizational silos—with an accompanying charter and budget. Organizational finance and accounting put maintenance into an overhead expense category.

Traditionally, top management’s responsibility was to boost revenues and reduce expenses to meet the profit goals for the business. Naturally, top management became conditioned to treat maintenance as an overhead expense. As a result, the maintenance department often became financially constrained.

New equipment, machinery, and facilities projects frequently excluded operations and maintenance involvement. Decisions were often made based on functionality and cost trade-offs. Upon completion of the “project phase” the new physical assets were turned over to operations and maintenance. Top management applauded the project that came in under budget and ahead of schedule. Then, top management expected operations and maintenance to control their costs for the remaining life of the new assets.

Life-cycle costs

According to Fabrycky and Blanchard (1991) “A major portion of the projected life-cycle cost of a product, system, or structure is traceable to decisions made during the conceptual and preliminary design.” In other words, a major portion of the maintenance costs and levels of process reliability are established during the design and acquisition phases.

The concepts of physical asset life-cycle cost and total cost of ownership are not new by any means. Military applications were developed back in the 1960s, and industrial models began emerging in the early 1970s.

How often should top management involve operations and maintenance in the new physical-asset project team? How often have operations and maintenance actually been involved? Top management sets the overall project expectations.

Top management and life cycles

Since the introduction of the ISO55000 Asset Management Standard in 2014, a new light has been shed on the subjects of asset management, reliability, organization-wide life-cycle management, and the role of “top management.” But, the topic is not really new. Here are a few historical insights to ponder from an old book in my library (Husband, 1976):

• “There is a glaring need for an integrated approach to physical-asset management.”
• “It requires an appropriate strategy of management, at board level, to make it a success.”
• “It is necessary to lower the traditional boundaries between the design, maintenance, finance, production, and other functions.”
• “At the design stage of the process, the designer is disciplined to design out maintenance and design in reliability.”
• “The designer will also, of course, be encouraged to design in maintainability where maintenance cannot be completely eliminated.”
• “The idea is that communications between design, production, maintenance, and other key functions will be such that ideas and hard results will flow formally and consistently around the ‘system.’”
• “All of the activities involved—specification, design, purchasing, commissioning, operating, maintenance, replacement—are already being carried out in industry. One of the most important tasks… is to show how (these) familiar individual activities can be combined or coordinated to achieve greater overall efficiency in the pursuit of common (business) objectives.”
• “No new component skills are involved. The emphasis is entirely on coordinating the existing skills of a firm’s engineers, accountants, and specialist managers.”
• “Incompetently or badly planned installation leaves a long legacy of operating problems.…insist on the use of systematic methods of managing the installation project.”

These are all insights from what was known as “Terotechnology” in the late 1960s and early 1970s. Then, in the 1980s, life-cycle management with top-management commitment became central to the success of Total Productive Maintenance (TPM).

In the book Introduction to Total Productive Maintenance (Nakajima, 1988), the concepts of life-cycle costs (LCC) are introduced at the onset. Later in the book, Dr. Benjamin Blanchard’s Life-Cycle Cost (1978), principles are cited for TPM Step 11: Develop Early Equipment Management Program—“Virtually 95-percent of life-cycle cost is determined at the design stage.”

Dr. Blanchard further explained the important relationship of LCC principles in the introduction to Nakajima’s book (1989) TPM Development Program. Blanchard stated that upward of 75% of the life-cycle costs are attributable to operational and maintenance activities.

Total Productive Maintenance (TPM), as defined by the Japan Institute for Plant Maintenance in the 1980s, specified that the role of the “top management of the company” was to announce that TPM will be introduced in the plant. “Top management must incorporate TPM into the basic company policy and establish concrete goals. TPM can succeed only with the commitment of top management.”

TPM is yet another example of top management sanctioning an organization-wide initiative to improve the life-cycle effectiveness of their production equipment.

Engaging top management

Establishing an asset-management system must be a strategic decision, a commitment, made by top management. “Top management” refers to the individual or group that controls an organization from the highest level. This could be the board of directors, the chief executive officer, and the other C-level executives.

History has shown that this level of top management often has a difficult time getting behind an initiative that spans the life cycle of an asset, a period of time that typically outlives their tenure in office. History has also shown that top management seems to have difficulty understanding the value of maintenance in the asset life cycle and the impact that the design phase has on maintenance costs.

In this very brief review of asset-management initiatives, known by various names, the ever-present reference to the essential role of “top management” is stressed. We all should know that, without real top-management commitment, asset-management initiatives will continue to be misunderstood as yet another maintenance program, or receive little of the organization-wide, multi-department collaboration required to fundamentally establish a life-cycle asset-management system.

In the absence of an international standard for a “Top Management Management System” we must learn to collaborate, to educate, and to aggressively pursue life-cycle asset management as the right thing to do. It won’t be very long before the traditional approaches to caring for our equipment, machines, and facilities become highly ineffective.

References:

Benjamin S. Blanchard, Design and Manage to Life Cycle Cost, M/A Press, 1978, Oregon.

W.J. Fabrycky and Benjamin S. Blanchard, Life Cycle Cost and Economic Analysis, Prentice Hall 1991, NJ.

T.M. Husband, Maintenance Management and Terotechnology, Saxon House 1976, England.

Seiichi Nakajima, Introduction to Total Productive Maintenance, Productivity Press (English printing) 1988, JIPM (Japanese) 1984.

Seiichi Nakajima, Editor, Total Productive Maintenance (TPM) Development Program, Productivity Press (English printing) 1989, JIPM (Japanese) 1982.