What are the most significant developments in the post-industrial period? What impact have these changes had on managerial issues in both public and commercial organizations?
The industrial revolution in organizations was a watershed moment in the evolution of management in the contemporary era. Management is an ancient discipline that has existed for generations. Changing needs and a changing environment have resulted in the development of management practices beneficial in industrial applications (Frankel, 2000). Management's role in the private and public sectors is to provide value to investors by deploying competencies and resources. Significant changes were experienced over a short period due to the industrial revolution. These changes included cultural, technological and social-economic changes. The industrialization caused changed the handicraft economy and agrarian economy to be influenced by manufacturing of machines (Britannica Encyclopedia, 2017). The new technology and machines made efficiency and productivity of organizations and this lead to other new opportunities thus facilitating production of manufactured goods in mass, and also new factory systems were adopted. Before industrial organizations had simple management structures and managers used to manage their employees daily. Managers controlled the work that employees did and showed them what to do. With the development and growth of industries, the structure became more complex for one person (Frankel, 2008). Everyone was not able to work alone. New management practices had to be used to fulfill the demands such as efficiency, the labor force structure and to manage the increased productivity.
In today’s world, organizations need to have efficient management to become relevant in the business market today and tomorrow. The ancient management by hierarchy is not useful in handling the complex social, environmental and economic challenges today. The management practices of the future are based on teamwork for improvement. The objectives of the top management of an organization are based on long term, medium term and short term goals which will need good concept skills by managers to make sure that the solutions are towards the organization objectives. They need to predict and respond in time to threats that can affect performance. In order to manage changes correctly, there should be participation and collaboration from all workers in the organization to work towards a common goal. Optimal procedures and structures of the organization have to be put in place to keep up with the changes. Organizations need to become lean and support solutions that bring innovation to the complex business environment. New technology has made information readily available through communication channels. Today, organizations must be prepared to handle changes that will arise in the future. These changes might be financial, environmental or social changes (Frankel, 2008). Changes are always taking place every time.
“The future is less and less a reflection or extrapolation of the past” (Frankel, 2008, p. 13)
Management structures have evolved and changed to dividing administrative and management functions into segments (Frankel, 2000). There are new forms of organizations introduced in organizations in private and public sectors due to new relationships. These forms include tendering processes and outsourcing and they require new management skills to handle these challenges. Outsourcing of outside services is nowadays a common practice in industries. Outsourcing has several advantages such as sharing the risks, more capability access, and reduction in cost. Outsourcing is considered staff reduction when they are no longer competitive (Frankel, 2008).
In the past organizations focused on market objectives and profit. Other than business objectives, organizations today have to adapt to social, environmental and human goals to compete with others. Environments that are interconnected and complex are required new standards. Understanding and managing human factors have considerable impacts on organizations overall efficiency and performance. Therefore, several organizations consider humans as their most valuable asset. This has been heard from many CEOs. Management of people is as important as the parts of the organization that is technical. Responsive and flexible management enhances the quality of internal processes of an organization to meet customer requirements. Workers ought to be provided with a sense of responsibility and ownership of their work. To make productivity better, managers must have good communication skills and motivate the employees for the efficiency of the organization (Frankel, 2008).
What is an ‘Asset’? What is ‘Engineering asset management’? What are the practical benefits of engineering asset management approach?
ISO 55000 which was published by International Organization for Standardization, defines an asset as: “an item, thing or entity that has potential or actual value to an organization.” (ISO, 2014, p. clause 3.2.1)
According to ISO 55000, to have value in an organization, risks, opportunities, cost and performance benefits have to be balanced (ISO, 2014). There are different types of assets. PAS 55 which is publicly available is published by British Standards Institute and divides categorize assets into five namely: Financial, Human, Physical, Intangible and Information assets (PASS 55, 2008).
Engineering assets which are physical assets are managed by an asset manager in the industry. Physical assets include equipment, buildings, infrastructure, equipment, etc. These physical assets have a financial value and capability since they can be sold off. Capability is a more of a financial value, i.e. it can provide an amount within a given time frame. Financial value can be represented on an organization’s value sheet. The financial value of physical assets often goes down with time or after being used for a long time (Amadi-Echendu, et al, 2010).
Information asset is data or knowledge with a financial value to others. Examples of information assets include financial information, business strategies, R&D information, manufacturing processes and scientific information. Information loses value with too time. “Knowledge grows, and simultaneously it becomes obsolete as reality changes” (Hedberg, 1981, p. 3)
Intangible assets are not physical and are not easy to measure such as copyrights, patents, morale, goodwill, reputations, social impacts, etc.
In business terms, human beings are referred to as resources creating value. There is a phrase, “People do Asset Management” (IAM, 2012, p. 21). Human assets are responsible for experience, cooperation, leadership and communication within the management structure. These categories are linked and work for hand in hand with each other to obtain the required outcome.
2.1 What is “Engineering Asset Management”?
“Engineering Asset Management” (EAM) refers to the management of physical assets in all life cycle phases. It is a systematic approach involving several disciplinary approaches in order to produce an efficient design, utilization, and performance of engineering systems set up (Liyanage, 2017). PAS55 defines asset management as:
"Systematic and coordinated activities and practices through which an organization optimally manages its physical assets and their associated performance, risks and expenditures over their lifecycles for the purpose of achieving its organizational strategic plan." (PASS 55, 2008)
EAM refers to the total management of physical assets to optimize the delivery of value to all stakeholders. It looks at all life cycle stages, from concept design all the way to disposal. Its approach is multidisciplinary that is which require inputs from all disciplines in the organization, i.e. traditional engineering fields, finance, information technology, operation, and management. Decision-making and risk management is supported by Interdisciplinary collaboration and integration of effective information systems.
In order to manage organizational assets, there should be alignment of operations, tactical and strategic aspects to support delivery of products/services. Because of upcoming and complex challenges in modern business environment, EAM is more important and relevant. Since past years, asset-owners have continued to recognize the benefits of good EAM practices: Straightening of requirements and needs from customer and stakeholders to improve efficiency and effectiveness as a whole. Improvement of technical, financial and operational decisions, plans and activities to improve cost efficiency in short-, medium- and long-term. Remove the traditional barriers and make well-functional interfaces in all disciplines. Organized risk management to lead the decision-making processes. Lower uncertainties through identifying the whole risk picture and manage the risk sources. Resource management and support planning. Better safety and quality control.
Improved reputation and attractiveness by focusing on social and environmental aspects. Better organizational culture. Encourage sustainable and long-term approach over the whole life cycle.
What are the Principal elements of effective Engineering asset management? What are the essential functions designed into engineering asset management?
Procedures, processes, people and assets are the core principle elements of Enterprise asset management (EAM). The EAM activities usually rely on participation from personnel with particular expertise in various disciplines. The fields include information technology, traditional engineering, operation, finance, and management. In overall multidisciplinary teams are to be constructed with identified .purposes over time. Examples are in-service support, support acquisitions and disposal of assets (Hastings, 2010). In EAM, the whole life cycle of an asset is put into consideration. In order to make rational decisions and support the innovative solutions, sufficient knowledge and competence are always considered crucial, and a holistic view is required. Value creation is maximized by each having each team member being given specific roles and responsibilities. EAM is a demanding task when it comes to the modern business where knowledge is vital to cope with growing uncertainties and demands.
The fundamental things in every organization are the policies, strategies and the planning. These are closely linked. The strategy describes the overall organization’s objectives. EAM promotes vision and strategy to show plans and activities. In order to achieve the desired outcome, crucial operational decisions, financial, technical plans and activities should be aligned. Performance and control loop are the important support in ongoing improvements and evaluations.
Figure 1: Elements of effective asset management (BSI Group in collaboration with
Woodhouse Partnership Ltd., 2017, p. 4)
What different disciplines and skills play a significant role towards a successful Engineering asset management approach? How do those disciplines need to be integrated for optimal benefits?
To achieve sustainable performance and support management activities in EAM, a multidisciplinary approach with participation from all the organizational levels is required. It needs cooperation between traditional engineering, information technology, finance, operation, and management.
Figure 2: Personnel roles (left) and factors (right) often involved in asset management processes (Sun, et al., 2012, p. 80)
An adaptation and implementation which is successful needs sustainable and harmonic between different disciplines within the organization. In overall, many organizations struggle to adapt EAM because of lack of managerial and technical skills. Due to deeply rooted organization mentality, many organizations struggle to overcome traditional mindset. This mentality is the primary source of the establishment of functional silos. In most cases, they are unfavorable because of secrecy, internal slavery, reduced overall efficiency, morale and poor cooperation. The Woodhouse Partnership with the BSI emphasizes the importance of avoiding the establishment of functional silos to achieve good asset management.
“[…] the removal of silos and the consideration of assets in systems, along with the cross- functional optimization of their life cycles, that is core principles of good asset management.” (BSI Group in collaboration with Woodhouse Partnership Ltd., 2017, p. 3)
In most cases, a silo focuses on short-term financial profit before financial sustainability. Examples are immediate financial profit before safety and environmental issues. Internal rivalry and secrecy lead to poor communication and information sharing across disciplines. Employees are working in the same direction share common goals more efficiently than those with secrecy and internal rivalry. It is challenging to break out of the traditional mindset but necessary to achieve good asset management practices. If this is not carried out in the right way, this can lead to limited and poor quality of risk assessment due to insufficient information. In a dynamic and more competitive business environment, it’s important to be aware of the risk picture to react to threats and going after improvements.
Figure 3: Functional silos (Wurtz, 2015)
Integration of data, information and knowledge management is required for optimal benefits in EAM. It is important to share information so as to help in the decision-making processes. This is achieved through accurate and high-quality information. The guide of an organization towards chasing improvements and evaluate their condition on a regular basis is through Integration of appropriate key performance indicators (KPI) together with the adoption of innovative tools and techniques. However, in many organizations, the technical part sharing information is not the problem. The bigger challenge and the source of the establishment of functional silos are usually the commercial, legal and relationship aspect (University of Cambridge, 2012).
Modern organizations greatly rely on functional cross-disciplinary teams to achieve objectives and goals. Groups of people with different experience, education, qualifications, and competence working together towards goals that require inputs from various sources are referred to as cross-disciplinary teams.
“None of us is as smart as all of us” (Bennis, 1996)
Teams are always constructed with identified purposes over a period. The process of hiring qualified personnel is done by selecting the most suited candidates based on given criteria. It is essential for that candidate to have sufficient knowledge and expertise within particular area. Other considerations include communication skills, behavior, and attitude. In modern organizations, the ability to work in groups is important criteria. Managing the human factors right is just as important technical issues. At the end of the day, people do asset management.
Yet we often hear the phrase that “people are our greatest asset,” but often see evidence of treatment as just a cost, or source of trouble instead. (Woodhouse, 2007)
In the modern organization, one of the greatest challenges is to invest sufficient effort to identify which resources and capabilities are required to serve all the missions and avoid waste.
References
Amadi-Echendu, J., Brown, K., Willett, R. and Mathew, J. (2010). Definitions, Concepts and Scope of Engineering Asset Management. London: Springer-Verlag London.
Bennis, W. (1996). Why Leaders Can't Lead. U.S.A.: Jossey-Bass.
Blackstone, W., Stern, S. and Prest, W. (n.d.). Commentaries on the laws of England.
Cambridge IELTS 7. (2012). Cambridge: Cambridge Univ. Press.
Frankel, J. (2008). The Internationalization of Equity Markets. Chicago: The University of Chicago Press.
Hedberg, J. (1981). Evaluation basis for instructional methods and materials. 1st ed. Melbourne: Australian Society of Educational Technology (Victorian Chapter).
Liyanage, J., T. (n.d.). Value Networks in Manufacturing.
Woodhouse, N. (2007). Geometric quantization. Oxford: Clarendon Press.
