Strategic management: 8 steps to success
To maximize profitability in a competitive, global environment, organizations are expected to consistently deliver on production demands while maintaining optimal performance. However, maximizing assets and bridging the gap between strategic vision and the tactical planning and execution of activities is a constant challenge.
Often, corporate and asset-strategic vision is considered from a long-term perspective, while the planning and execution of activities are seen as part of a short-term facilitation process. Unfortunately, the separation of strategy from planning and execution in this way means that the potential gains from aligning and managing initiatives between functional disciplines (such as health and safety, asset integrity, operations, procurement, shutdowns, capital projects, maintenance and reliability) are either ignored or not fully exploited.
Buzzwords, such as integration, are often referred to within the oil and gas industry as the solution for attaining optimal asset performance management. However, the challenge many organizations currently face is that they do not fully understand the path, approach, and level of effort it takes to achieve true integration and optimal asset performance.
There are a variety of misconceptions many organizations share which present a continual challenge when trying to implement the best approach. In addition to the previously mentioned mistake of distinguishing between strategic planning as long-term while planning and execution as short-term, another fault is assuming things will just come together on their own.
Many sites believe that multiple strategies or corporate goals for the different functional areas will align naturally, or that if all the major elements are in place within the organization, then processes will integrate on their own. Other sites falsely presume that if the worst performing processes are enhanced, that will be enough to attain the overall asset performance potential.
These misconceptions typically lead organizations to focus all their attention on addressing major gaps within individual functional areas. Unfortunately, monopolizing time and energy in this way does not correct the deficiencies that could still exist between multiple functional areas. While improving performance within an individual area will help the efficiency within the management of an asset, it is not sufficient to maximize the performance across the overall asset.
To be successful, an organization must integrate all the elements that drive optimal asset performance. Fortunately, there are tools and practices to help do just that.
The Integrated Strategic Management model
One such tool, an Integrated Strategic Management model (ISM), can make the unification process more clear and effective. An effective and structured approach is essential for an asset strategy. The plan must account for the organization’s initiatives to ensure that the asset’s long-term strategy and tactical use during planning and execution are aligned and supportive of one another.
Managers can take steps to bridge the gap between corporate goals and optimal asset performance, as shown in the image.
Each step in the ISM model should be considered using the following core criteria:
Step 1 – Define the overall organizational strategy
The long-term strategy must take into account the overall organizational safety, regulatory, production, maintenance and upgrade requirements for the assets.
Step 2 – Outline the roles and responsibilities by functional area
The roles and responsibilities of all functional areas should be outlined clearly, including the newly-defined activities associated with the safety, production, planning, reliability, integrity, and maintenance of an asset.
Step 3 – Set up the structure of the organization
Roles for individuals within the proper functional areas must be aligned so that best practice spans of control and the newly assigned activities are managed effectively.
Step 4 – Optimize the functional areas
A staged approach should be used to identify current gaps and incorporate best practice principles into the design and implementation of processes for all different functional areas (e.g., HSE, asset integrity, operations, procurement, shutdowns, capital projects, maintenance and reliability). This should enable the effective management, alignment, integration, and sharing of resources throughout the entire organization.
Step 5 – Outline the resource requirements by functional area
The milestones, level of effort, and time needed to perform all of the individual tasks within each field must be defined. Functional resource requirements based on activity levels also should be established.
Step 6 – Merge the long-term functional area plans and integrate planning
A Level 2 schedule consists of a clear outline of the timing for all future production goals with major maintenance events for a determined time period. A long-term Level 2 schedule should be developed at five-year intervals. Major milestones dates and the resource and time requirements should be broken down by month for all functional areas to support all the activities of production and maintenance.
Step 7- Implement a long-term, integrated plan
The long-term schedule should be used to manage the activities and resources available to deliver on milestones. Any variances to the plan, with both activities and resource requirements, should be identified to establish action plans and mitigate any gaps between the long-term plan and the delivery of production and the previously agreed-upon asset maintenance deliverables.
Step 8 – Manage and sustain performance
Results must be monitored frequently against the plan to address any variances between expectations and reality. This will help ensure that optimal asset performance and financial objectives can both be attained and sustained.
Put in the work
Successful strategies do not just get executed by themselves. To reach goals, organizations must increase visibility across multiple functional areas and integrate their processes. To be effective, they must adopt a more holistic, tactical, and structured approach focused heavily on integrated planning, so that the large gaps typically found between long-term strategic visions and actual performance can be minimized.
Incorporating a structured approach such as an ISM model allows organizations to engage all the functional area processes and eliminate silos that exist between departments. It also enables companies to take advantage of the synergies within the different functional areas and deliver on strategies that will represent a more profitable and optimal performance of assets in the long-term.
Leveraging the ISM model will ensure the “sum of the parts is greater than the whole” and that real sustainability will be achieved.
Matthew Popovacki is a senior manager with T.A. Cook.