Organizational Issues

Under this element we assess how the organizational structure, roles and responsibilities support the asset management functions.

Sponsor, Structure and Policy

How the organization shows its commitment to asset management through:

  • Policy and corporate intent ("charter") statements
  • The direct sponsorship of the program by a single executive manager
  • Clear budget commitments to asset management.

The organization's policies on life cycle asset management are reviewed.

Best appropriate practice includes:

The organization has a clear set of policy statements about its life cycle asset management policies.

A senior director holds the responsibility for the asset management program.

Roles and Responsibilities

How the organization allocates responsibility for the various life cycle functions.

Best appropriate practice includes:

A senior executive staff member holds responsibility for the asset management program.

Asset Management Steering Committee Make-Up and Roles

How life cycle asset management is coordinated across the organization, through some form of formal asset management team and steering committee.

The key elements of asset management coordination include:

  • The role of the steering committee and its responsibilities and direct authority
  • The make-up of the steering committee
  • How the steering committee is to perform its responsibilities
  • How well it actually performs those duties.

Best appropriate practice includes:

An asset management steering committee with carefully defined duties and authority plays the role of overall asset management co-ordination throughout the organization.

Corporate Asset Management Team

The make-up, role, and responsibilities of the asset management team and the role it plays in:

  • Asset management policies and strategies
  • Asset management analysis and reporting
  • Asset management support services.

The assessment looks at the way in which the corporate team interacts and works with the individual business units and the overall corporate organization, including external reviewers.

Best appropriate practice includes:

Where necessary a corporate asset management team is staffed to provide guidance in:

  • "Whole of organization" policies
  • "Whole of asset portfolio" strategies
  • Detailed maintenance analysis
  • Asset management support services.

Business Asset Management Teams

The way in which individual business units (plant operations, collections, disposal) have structured their asset management activity and the way in which these individual teams operate.

It also assesses how these teams make use of corporate services.

Best appropriate practice includes:

Business unit asset management teams are structured to look at the asset service delivery programs in their areas.

The roles and responsibilities for specific life cycle asset management functions are clearly defined to individual staff.

Commitment to Asset Management & Business Sustainability

The commitment of the organization to appropriate best practice in asset management.

It looks at how the organization is working towards its goals/vision in this area. It looks at the commitment and sustainability of the whole program in "whole of asset portfolio" and "whole of organization" terms.

Best appropriate practice includes:

The organization shows an overall commitment through all levels to apply "best appropriate practice" asset management.

The organization has a fully documented "sustainability program" that includes:

  • Vision
  • Framework/philosophy
  • Minimum standards
  • Guidelines
  • Performance monitoring
  • Rewards and penalty system.

The organization's "Vision or Policy" includes:

  • Portfolio as a whole
  • Business as a whole
  • Confidence level approaches
  • "Best Appropriate Practice" assessments
  • A "commercial" focus
  • "Triple bottom line" (financial/social/environmental) performance assessments.


Case Studies Australia

Changed Management Practices Can Reduce Demand 1

The level of salinity at the end of the major river system had risen to unacceptable levels and the water authority sought solutions.

Many expensive capital solutions were proposed that removed the salt from the river and transported it back inland, but the most cost effective solution was one that simply had the authority adopt a policy of lake flushing by changing the sea water barrier management practices in times of high flow.

Changed Management Practices Can Reduce Demand 2

A port authority facing the need to more than double its lorry holding space sought to reduce demand by changing the lorry pick up practices from lorries collecting pre-assigned loads, to a “taxi” system whereby each lorry in the line picked up the next load ready to be moved, promising speedier deliveries, lower customer costs – and obviating the need to extend its holding space.

The Changing Role of the Field Worker in Water and Wastewater

Matthew Giesmann, Asset Manager of City West Water in Melbourne, is focusing on training and improvement in field personnel.

He argues that field workers used to be given a straightforward program such as "replace x miles of asbestos cement pipe". They were not required to consider what impact that replacement would have on system reliability; it was simply not their task. They were told what to do and they did it.

“We can’t do this today”, argues Matthew, “because we are now focused on achieving system reliability outcomes. Each task, and the way that it is tackled, has to be considered in the light of meeting corporate KPI’s, such as keeping below the maximum number of service interruptions to any individual customer as well as minimizing service interruptions overall (and many other KPI’s as well.) No matter how good asset information is, there will always be more information that comes to light when you get to the job. This is particularly true for buried assets, but it is also true of other, more easily accessed assets too. Practically, as well as cost effectively, we cannot know everything that there is to be known about the asset from some head office computer.”

To achieve required performance, field workers have to be able to assess the situation that they find in the light of corporate requirements. If they don’t understand corporate requirements they can’t do their job.

Matthew Giesmann is addressing this issue by conducting workshops, relating corporate KPI’s to the work that his field maintenance crew are doing – and is finding high levels of enthusiasm on the part of the crew.

What he is effectively doing is connecting the entire agency from top to bottom through the corporate KPI’s.

The Danger of Silo Thinking - An Industry Example

The company kept detailed performance statistics. And the statistics showed that the “V” belt in their washing machine product was the cause of a high percentage of machine failures and call-outs.

The Trouble-shooter went out with the service vans to see the problem at first hand. He noted that the technician was fitting a different brand of belt to that used in the factory.

It turned out that the Service Department found the factory belt extremely unreliable and preferred the brand they used which they called the "fit and forget" belt as they'd used it for 5 years with only one known case of a problem.

A few quick sums showed that the “fit and forget” belt cost 10 cents more than the one the factory used. But in terms of warranty costs the ‘cheaper’ belt was costing an average of $1.10 for every washer produced. Switching to the new “V” belt would thus result in a net saving $1.00 per washer—small enough, but with the company’s production levels this amounted to an overall saving (i.e. direct increase in profit) of over $200,000 each year.

Saving $200,000 per year should have been a "push over ". Right? Wrong!

Let the Trouble-Shooter walk you along the path he trod:

Silo 1 - Engineering

Full of confidence I went to see the washer division's chief engineer and showed him the figures - he'd been aware of the problem but he'd not seen it quantified. I thought he could specify this "fit and forget" belt. But he pointed out that his performance would look bad if he was responsible for increasing “Factory Variable Cost (FVC)” the cost ratio by which he was evaluated. I did get him to add it to the drawings as an "acceptable alternative" - a necessary step if I was to proceed further.

Silo 2 - Purchasing

The purchasing manager was a really get up and go type of fellow. He could appreciate the advantages of the new belt but was also reluctant to take action. He said he could introduce an FVC saving immediately but if the cost of any item went up then he would be grilled unmercifully at the next monthly meeting. Hence he was loath to do it. His primary yardstick was the FVC reduction target. Any saving down the line as a result of lower warranty costs did not reflect to his credit. So the way he figured it, it was all pain - no gain.

Silo 3 - Production Manager

He was also a conscientious operator. The factory belt as it was received had too hard a surface and would slip on the pulleys. Thus the special equipment people had built a machine that wire brushed the faces of the belt – it scuffed them. I noted that the extra labor cost of this operation was about 10¢ per belt! Not only that, but the special machine fouled the air with fine rubber dust with the result that the nearby lunch area was never used.

Hey what an opportunity! Using the new belt would get rid of a particularly messy operation and save the cost of an operator. Great ?? Wrong, wrong, wrong! The production manager had a performance measure and it was the ratio of direct operators (good guys) to indirect operators (bad guys). Removing a direct operator would not allow any change in supervisors, forklift drivers etc. - hence the ratio was going to go the wrong way.

Silo 4 - Divisional Manager

At least the divisional manager would understand! Sure he did. His yardsticks were the collective sum of the other yardsticks - so the below deck logic applied at the top. Now he was also responsible for the warranty cost of the product. But being no fool he knew what his main yardsticks were and it wasn’t the warranty cost.

Silo 5 - Chief Financial Officer

After receiving a half hour lecture on modern costing I knew I was getting nowhere. So I naively asked if divisional managers could increase the FVC and offset this with greater warranty savings. "Well I suppose if a divisional manager actually wanted to increase the FVC he could always come here to Head Office and make a proposal." Bingo! - there it was - this No.1 yardstick - Factory Variable Cost - was all pervading.

At this stage I was quite dejected. Fortunately we had a superb CEO who had the foresight to have asked me to sit with him and his key managers on an irregular basis and advise them on what they could do to improve quality. Hence I had a one -on -one with "God". I raised all this, prefixed by the comment "here's a story that I think might amuse you".


He was not amused. This V belt problem was solved with one very terse phone call and he was justifiably annoyed that such a simple thing had to be resolved at his level.

However when he had time to reflect he realized exactly what the real problem was. By over-emphasis on one of the goals (i.e. cost reduction) coupled with simplistic yardsticks he had unwittingly created a case of totally non-integrated management. Classic balanced scorecard techniques: match your business drivers to your reward system carefully.

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