I have long been interested in one particular aspect of the history of asset management. Why was it that agencies would so often progress to the stage of being the envy of all others in terms of their asset management – only to collapse and have to rediscover everything they previously knew? I suspected that there must be something inherently unstable about asset management – and there is! Here I explain what the problem is and how you can make sure it doesn’t happen to you.
You are going to come across a lot of definitions of asset management. Maybe you already have. All have validity. But the one that I favour at the moment has a focus not on what asset management does – but rather on what we get out of doing it!
I look at asset management as ‘a series of process and information improvements that enable organisations to see not only the likely consequences of the decisions taken today – but also of the actions not taken.’ You can argue with this definition, but bear with me, because you will see how it can help.
When armed with a knowledge of likely consequences you can make better decisions. You may not have enough money to do everything, but if you understand the consequences you can be reasonably confident that the things you are doing are at least of greater value to your organisation or community than the things you are not. Even more importantly, you can demonstrate this to others.
Asset management protects you. If you are a councillor, it protects you from pressure by lobbyists and those who would have you spend council resources in ways which you know are sub-optimal. If you are an administrator, it enables you weigh up different uses of your limited resources. If you are a manager responsible for assets, it enables you to know what to do that will best meet the service needs of the community.The key word is ‘consequences’.
When you can tell what is likely to happen next as a result of the actions you take today – and of your inactions – you are able to make better decisions and make them with confidence. And when you are able to demonstrate this to others and gain their confidence, life becomes much more enjoyable.
Driving in the Dark
Without asset management, you are operating in the dark. It’s like driving at night with your headlights showing you just a few metres of the coming road. You are only able to see a little way ahead, and all of your decision making, whether on short or long term goals, is constrained by having such a limited view. So you have to move cautiously, never quite sure what those shadows mean, or what is coming next. And you can easily miss your turning and have to make time wasting course corrections. Or at worse, run into something with expensive, maybe fatal, results.
Introducing asset management is now like switching on your high beam.
Suddenly, with a better view of the likely consequences of your actions, you can now see a long distance in front. You can move forward more confidently, make better decisions, and avoid potential problems, because you understand the likely consequences of actions and inaction.This is very exciting and it is not difficult to see why asset management creates evangelists. Many of you will have experienced this in the early stages of asset management, when, perhaps for the first time, you now have an overall view of your asset base, a better understanding of what you have, what condition it is in, and what its value is. This gives you a completely different view of what you can do – and it is pretty heady stuff.
But a word of caution!
What I have learnt is that when you reach this stage, you must not stop. The High Beam stage is unstable. When you are on the road, any approaching vehicle can force you to switch them off. Similarly when you are starting asset management, and you adopt generic assumptions about asset lives and desired service levels to get yourselves started, you get a ‘great leap forward’. This is the ‘switching on the high beams’ stage. It enables you to make progress quickly.
As in all things, easy come – easy go!
When things get tough – the asset management equivalent of the oncoming traffic – you can no longer rely on those generic assumptions and service levels. In times of trouble, such as missed grants, unexpected and unfunded asset renewals, in fact any difficulty, your staff and your ratepayers need to have full confidence in the reliability of your system and this means that you need to move on from the generic data and develop information that is credibly yours. In other words, you need to customise, to make the service levels and associated asset lives your own.
To do this you need to work with your community to develop service levels that are widely understood and accepted and can withstand criticisms.
Your asset data needs to reflect these service levels and to demonstrate the reliability that comes from documented, efficient, update mechanisms. Your asset lives need to reflect your own local conditions and known maintenance histories. And you need robust processes to ensure that all new asset acquisition reflects your strategic directions.
This takes effort, commitment – and time.
However, once you have done this, you are largely failure proof. By the time you have developed a good understanding throughout your staff from field staff to CEO, board or councillors, by the time you have good, up-to-date data, and by the time you have the confidence that this brings, then your asset management is secure.
You have successfully navigated the instability phase and come out safely on the other side. This stage of asset management is like adopting a Satellite Navigation System. Now you can analyse all the options and choosing the optimum course is easy.
Moreover, when you get here you won’t want to stop. Now, asset management improvement for the benefit of your community will simply be the way you do business and you will enjoy always seeking to do better. The Road Ahead is now clearer and you travel it with confidence.
Questions?
- Where are you on the road to sound, reliable asset management?
- Are you still at the stage where you are using general purpose asset lives, gleaned from somewhere else? Or have you customised?
- Have you established accountable service levels? And are these service levels clearly and transparently connected to your asset life data? Do they inform your understanding of effective age and time to renewal?
- Have you reviewed, updated and streamlined your asset management practices?
Think this is too much work?
Then be sure to read next week’s post where we look at the danger not only for your assets, but for your staff ,of not getting to this stage of asset management.
Next Week: AM Protects – your staff!
Transparency of government is the greatest tool we have for ensuring the best decisions are made by officials and functionaries and reducing corruption and poor decision making.
Legislation, guidelines and reviews surrounding Public-Private Partnerships (PPP) abound as we collectively try to find a way for government to utilise private efficiency and expertise without exposing the public to risks associated with corruption of officials and contracts that serve the private rather than public partner.
The problem with many PPPs and government business, are poorly constructed contracts. Inappropriate measures, guarantees of returns and unclear maintenance and renewal responsibilities.
In the past it has been difficult for us to measure the use of infrastructure by different groups, the consumption / degradation of infrastructure, the degree of maintenance and renewal required and applied to infrastructure.
This has lead to simplistic drafting of contracts based on unsupported estimates.
Enter micro-transactions and Internet of Things.
We now have the unprecedented ability to measure almost everything, and cheaply. We have technology that allows us to make the recording of these measurements publicly available and immutable, and we have people writing clever contracts based on micro-transactions.
By combining these things there is opportunity for us to include all aspects of infrastructure in government contracts for PPPs. Reward can flow to the Private Partner based on utilisation, maintenance, renewal of the infrastructure as well as other measurable impacts, such as improvement of performance of the infrastructure, or lessening of burdens on society and the environment.
In the last post I took up Eli Goldratt’s contention that most of us are focussed on efficiency (doing what we are currently doing but doing it better) because that is what we feel we have most control over. I asked what was missing. But another way of looking at this problem is not at what is missing – but at what should be! Policies or practices that we have hung onto that are no longer serving us well in the new environment we are trying to instigate. Let’s again turn to Goldratt who argues that
“Technology can be beneficial if, and only if, it diminishes a limitation.”
This may be a limitation that we are so used to we take it as the way that life is. For example 200 years ago, travel was so slow that it was not feasible to work a full day AND also travel ten miles. This meant that if you got a job in another town you moved to that town. Today many travel much further. Workers 200 years ago would likely not have seen travel time as a constraint, it was ‘just the way that life is’. The iPhone and the Ipad were great innovations but many of us were not consciously aware of the limitations they diminished – until we got them!
The importance of limitations is that humans are intelligent. When we have a limitation we develop work arounds, rules that help us manage. But if we do not change the rules (e.g. our work practices, our policies, our regulations) we cannot get the full benefits of the innovation.
Which leads him to ask 4 questions that might be useful for you.
- What is the power of the new technology or innovation?
- What limitation does it help alleviate?
- What is the cost of the work around rule for that limitation?
- What is the new rule? and its cost?
These questions are not easily answered, especially the last one, but the more I look at them, the more critical they seem to be.
Thoughts?
The reason why we focus on efficiency is because we can. Doing what we are currently doing – only doing it better, cheaper, faster – is not only within our capabilities it is also within our responsibility levels. Effectiveness requires going beyond, looking at how what we are doing interrelates with what others are doing. Doing our thing better will fail to achieve real benefits unless we do. So while efficiency is desirable, it is not enough. Here is a case in point.
The asset management team proposed that the government build an asset register that would provide information to enable the transfer of property from departments that no longer had need for the resources to those that did. This, they argued, would enable great savings in both capital and maintenance funds. So the asset register was built. It took a number of years and cost many millions of dollars and when completed it did exactly what it was intended to do – it showed where property was underutilised and where capacity was under strain.
The expected benefits, however – the transfer of surplus property saving both capital and maintenance funds – did not arise. Why not? Because information by itself is not enough. We also need people and processes that want to and can make use of the information.
In this case no department with surplus property was willing to admit it and hand it back to the Treasury. It knew that if their demands should increase in future, getting expansionary funds would be very difficult, so there was an incentive to disguise and minimise the true extent of under-utilisation.
There was no organisational mechanism. Departments needing to expand would make the case to their Minister, usually done by proposing a specially designed facility. On approval, these departments had no incentive to settle for hand-me-down space and there was no organisational means to make it happen.
QUESTION: What project benefits have failed to materialise not because of what you did, but because of what others didn’t?
“We can’t let politicians make decisions, they are so irresponsible!” This was the reaction by a group of academics to the suggestion that politicians should be free to allocate their own weights to various criteria (cf last post on multiple criteria decision making)
I was first introduced to multiple criteria analysis when a UK researcher presented his work on the third Heathrow runway to a university staff seminar. The presentation was enlightening – and so was the reaction of those present. The senior public servants, who needed to get elected members focussed on the issues, were enthusiastic about the potential to present clear information not artificially constrained by dollar equivalents. But the academics were truly horrified when the presenter argued that elected members should allocate their own weights. As the people’s representatives – it was their objectives that were key.
In the last post, I asked who should be deciding on the weights. This is not a trick question but it is a difficult one. It bedevils serious public servants everywhere, staffers who desire to produce good quality ‘finished staff work’, to be able to anticipate all the problems, all the issues, all the questions, that decision makers could ask, and ensure that they have been addressed.
But this can then slip into believing that, having done all the analysis, the staffer now knows best what option should be selected and so we get the three card trick – presenting the decision makers with only three options, two of which are obviously out of consideration for cost or other reasons, so that effectively the decision makers are forced to choose what the staffer has determined.
Multiple criteria analysis, presented honestly without weights, allows decision makers to seriously and knowledgeably to consider the issue. The final decision may not be so predictable but it is likely to have their greater long term support.
On 9 September I wrote a post “Are Politician the real decision makers?” which attracted more comment than most other posts and the commentary was good. Have a look.
Also see Kim Geedrick’s comment on the last post
QUESTION TODAY IS GENERAL – YOUR THOUGHTS?
In our post on May 29 we introduced the problem of finding the best solution to the problem of a high number of road accidents on a certain stretch of road in the Adelaide Hills. The Government had decided to address the problem but what was most important to them – reducing the number of accidents, maintaining speed of traffic without congestion, aesthetics (or the ‘general look’ of the solution), minimising social disruption, or containing the cost?
Multiple Criteria Analysis
In this case a multiple criteria solution was adopted. Each option was analysed by specialists in the particular criteria who estimated the expected outcomes for their criteria, e.g. likely number of accidents reduced, or likely impact on aesthetics, so that each option ended up with five scores, one for each of the criteria examined. No option clearly dominated all others on the five criteria.
To weight or not to weight
At this stage there was a staff debate. Some thought that each criteria should be allocated a weight which would enable them to reduce each solution option to just one score and thus they would be able to rank the options, as is often recommended in the textbooks on the subject.
Others thought that they, the staff, were not the right group to assign weights but rather that this was the right and responsibility of the decision makers themselves (i.e. the government decision group). They pointed out that in previous circumstances where staff had assigned their own weights and ranked the options accordingly, the decision makers frequently ignored their ranking recommendations. Moreover they argued, since the decision makers were unable to see the analysis that had been done on each criteria, it was not taken into consideration and so was wasted. This group argued that the decision makers should be presented with the results and allowed to decide what weights to assign.
Question for today.
Which group has the right of it, and why?
The last post observed that every objective has multiple dimensions or elements. Before moving (as promised) to consider how we could deal with this, it is worth considering that while the main element or ‘what’ is likely to remain constant (although not always, see example below) the other elements, the ‘what else’ can change as a result of external events and other projects being carried out or planned. In addition to the problem of ‘staying on track’, we also face the challenge that some aspects of importance to decisionmakers may be deliberately hidden from us.
Consider the following
Staying on track
A section of road in the council was subject to major flooding with heavy rainfall and repairing the damage threw the road budget into the red. It was suggested that creating a wetlands would enable the water to be drained away removing the repair problems and would also provide an attractive tourist feature and provide a number of other benefits. The council got more and more enthusiatic. However, in the process of considering all the ‘extra’ benefits, they completely lost sight of the original purpose of reducing the costly damage that the regular flooding of the road presented. They decided they would go ahead with the wetlands – but not in the originally suggested location where it would ameliorate the flooding damage, but somewhere else!
Discovering what is really important.
The Police department insisted that they needed to own their own regional housing. There was a ready supply of rental housing in all areas so it was hard to understand why this was important to them. They argued that with their own housing. it could serve as a de-facto second police station. Why was this important? They didn’t want to say. It turned out that police officers are difficult to manage and the ability to send an unruly officer out to a remote regional location at a minute’s notice was a valuable and key deterrent to bad behaviour – but not something that the department was keen to admit to.
Question:
What other elements of understanding objectives have you had experience with?
First, let us get back to basics. We know that
You are being effective, if your activities achieve the objective or desired outcome. You are efficient when you achieve that objective or desired outcome at minimal cost or effort.
So both effectiveness and efficiency require us to be clear on our objective or‘desired outcome’. And that is where our first problem arises, for an objective never has just one desired outcome.
Consider the following example:
A particularly tricky stretch of road in the Adelaide hills was causing serious safety concerns. The government decided to tackle it. But what was the objective? Reducing the number of accidents was obviously a front-runner because it had been what initiated the action, but it wasn’t the only concern. Traffic speed was also important because a growing number of city workers had been moving to attractive locations in the hills so that anything that slowed down traffic could result in major morning and evening traffic congestion. It tended to be the richer and more influential who could afford a hills location and decision makers were quick to realise that inconveniencing them could provoke an undesirable reaction.
The hills were a major catchment area, which presented environmental considerations. They were also a key tourist destination as well as a main entry point for interstate visitors from the east, which meant that aesthetics, or the general look of the solution, was of concern. Of social consideration was the number of businesses along the route that could become nonviable if the solution required extensive deviations or lengthy road closures. Finally, there was cost.
This is true of any objective. It is a composite of features – things we wish to have (in this case safety, traffic speed) and things we wish to avoid (detrimental effects on the environment, on aesthetics, and on the livelihood of businesses along the route) And all must be accomplished within an available budget.
All members of the government’s decision making group agreed that it was important to reduce accidents, but they had different priorities when it came to the other features.
If you have ever proposed what you considered to be the ‘optimal’ solution only to have it turned down by the board or council, this may well have been the cause – your bundle of features and the importance you gave to each was different from theirs.
How do we deal with this problem?
Do ‘efficiency’ and ‘effectiveness’ conflict? Eli Goldblatt, author of the 1983 book ‘The Goal’, which led to the theory of constraints, believes that they do. Goldblatt was a physicist who applied his scientific thinking to manufacturing. (Incidentally, Deming was also a physicist.) In ‘Beyond the Goal’ Goldblatt argues that the objective of every manager is to manage well, but what does it mean to manage well?
“To manage well”, he says, “we have to satisfy two different and necessary conditions. One is we must control costs. If we don’t control costs, costs will go too high and we are bankrupt. This is true for a ‘for profit’ organisation and for a ‘not for profit’ organisation. On the other hand, we must protect sales. Sales are the things (products/services) that we promise to the external world. In business, it is the service or product, if you are in the army, then it is what you promise – defence. Do one without the other, you have done nothing.
To control costs where do you start? Where the costs are drained. In every department! So in order to control costs you must judge according to the local impact. But now look at sales, your impact on the wider world. This is not done by one person, because if it was, you wouldn’t need an organisation. If you look at a for profit organisation, for example, you have people who are designing the product, those who are producing, those who are shipping, those who are billing and receiving the money, those who are marketing and getting the customers. If any one of these links drops the ball, sales fall. Sales are achieved through the synchronised effort of all links.
That means that if you want to protect sales, that is, what you are promising to the external world, you can no longer just look at the local impact, because what may be good for one department may be disastrous for another. So to manage well, I must control costs and to control costs I must look to local impacts, but I must also protect my sales and to protect sales there is no way I can just look at local impacts”. – hence conflict.
Now ‘controlling costs’ is what we mean by efficiency, and ‘protecting sales’ is what we understand by effectiveness. So, in business – and in government – we have a conflict.
TWO QUESTIONS TODAY:
Does a similar conflict arise in infrastructure decision making?
If so, how can it be resolved?
Efficiency is accomplishing something with the least waste of time or effort, or at minimum cost. Effectiveness does not refer to costs but measures instead the extent to which objectives are achieved or problems solved. We are all no doubt familiar with the statement that ‘efficiency is doing the thing right and effectiveness is doing the right thing’. I had an opportunity to observe this in practice over 50 years ago.
When I started in economics I was impressed, as were many others at the time, with the notion of Time and Motion study. a business efficiency technique combining the Time Study work of Frederick Winslow Taylor with the Motion Study work of Frank and Lillian Gilbreth. The Gilbreths were famous for their 1950 film Cheaper by the Dozen and I was very excited to be introduced to Mrs Gilbreth, an elegant lady, then well over 80, when she visited our department. Naturally, this encouraged me to further consider time and motion study as a career. And I might well have continued in this direction had I not gone to India the following year.
My host in Bombay (now Mumbei) was very rich by the standards of the time. He owned numerous large apartment houses in the city and several paper mills in Poona. One day he had work to do in his paper mill and asked me if I would like to come along and see it. While he worked in his office I trailed around the factory and was apalled at what I considered to be waste. I put my time and motion study interest to work and mentally catalogued all the many efficiency improvements he could make. I figured he needed less than half of the employees he had. Well, after he finished his work my host introduced me to the staff – and they were all members of his extended family. He considered it his responsibility to take care of them and he was proud that he could provide an income and a good work life for so many. They loved and appreciated him and he was clearly a happy man so I kept my business efficiency improvement ideas to myself! The business may not have been efficient, but if the goal was to maintain his lifestyle whilst caring for others, you might argue it was effective.
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