The three laws of asset management
Note: The adoption of ISO 55000 in 2014 provided a framework for the principles and benefits of establishing an asset management system. It has been hailed as one of the most important new standards in years. Terrence O’Hanlon, an asset management expert and a member of the technical committee that drafted the ISO 55000 standard, offers his views on the standard and how manufacturers should implement ISO 55000 going forward:
Asset management is not about managing assets; it is about delivering business value
An asset is something that has actual or potential value to an organization. Asset management is a coordinated set of activities designed to deliver that value in line with an organization’s objectives and appetite for risk.
Business value is interesting at every level in most organizations, and that has created a great deal of buzz about the new ISO 55000 series of asset management standards published in January and available at www.iso.org
Specifically, the standards are a set of three documents including:
ISO 55000:2014: Asset management—Overview, principles and terminology
ISO 55001:2014: Asset management—Management systems—Requirements
ISO 55002:2014: Asset management—Management systems—Guidelines for the application of ISO 55001
To be precise, these standards are not technically asset management standards. In other words, they do not provide technical guidance on “how to” conduct asset management; rather, they express a managing system for asset management—or to use a clumsy phrase, an asset management system.
Like ISO 9001 is a managing system for quality management and ISO 14001 is a managing system for environmental management, ISO 55001 is a managing system framework for asset management.
To achieve asset management objectives, the organization is required to ensure that its asset management related risks are considered in the organization’s risk management approach including contingency planning.
Risk management is the lesser-known cousin of asset management, and guidance is provided by ISO 31000: Risk management and ISO/IEC 31010:2009: Risk management/Risk assessment technique.
Decisions drive value from assets
According to ISO 55000, asset management does not focus on the asset itself, but on the value that the asset can provide to the organization. The value (which can be tangible or intangible, financial or nonfinancial) will be determined by the organization and its stakeholders, in accordance with the organizational objectives.
In many asset intensive organizations, only 25% of the decision to drive value from assets is driven by actions performed directly on an asset. Mature organizations drive value from decisions around an asset. Asset management expert John Woodhouse explains asset decision making based on the recent SALVO research project in the New Asset Management Handbook. Of the list of all possible decisions related to managing value and risk of an asset provided, only one-third are things you do directly to an asset and two-thirds are decisions you make around/about an asset.
Culture eats strategy for lunch
According to ISO 55001, an asset management system is used to direct, coordinate, and control asset management activities. It provides improved risk control and assures the achievement of asset management objectives on a consistent basis. However, not all asset management activities can be formalized through an asset management system; for example, aspects such as leadership, culture, motivation, etc., are not managed through the asset management system, but they can have a significant influence on the achievement of asset management objectives.
Regardless of how good your asset management strategy is, it is your organizational culture that will determine its performance. Culture is built from within and is “cultivated” by leaders who aim at engaging employees in delivering the performance of the organization. ISO 55001:2014 section 5.0 specifically outlines the importance of leadership in delivering objectives.
Uptime Elements provides a map of theory by which to understand a holistic system of reliability for asset performance management. The first step is transformation of the individual. The transformation comes from understanding of the system of leadership.
The Uptime Elements Reliability Leadership framework “enables asset management” by assuring capacity and function of the assets where value is demanded. To create sustainable performance, there is a need to align all activities toward delivery of the organization’s aim or purpose. Top management establishes high-level direction and defines value.
The concept of vertical alignment or “line of sight” establishes the required connection between top management and the assets of the organization to assure value delivery. Operational excellence, asset management, reliability leadership, and effective maintenance deliver the results.