and more organizations have increased the number of corporate-level functional managers to exploit potential synergies as part of their strategy. Corporate-level functional managers perform different activities that vary by function, such as the inherent primary (directly related to asset operations) and secondary (supporting operations) functions.”
“Some of the common corporate-level functional roles found in organizations are:
• Chief Financial Officer (CFO)
• Chief Operating Officer (COO)
• Chief Human Resources Officer (CHRO)
• Chief Information Officer (CIO)
• Chief Marketing Officer (CMO)
All the above functional managers report to the Chief Executive Officer (CEO) or the Chief Administration Officer (CAO), who is responsible for the overall management of operations and resources of an organization and acts as the main point of communication between the board of directors or council and corporate operations.”
Jerry looks at Darren with an inquisitive face, trying to figure out where this conversation is going to lead.
“Let us look at an example,” Darren says with a change of tone. “A CMO is a relatively new role in many organizations, whose responsibilities include leading the company’s marketing strategy, coordinating marketing activities, uniting and strengthening various departments’ own marketing plans, directing global marketing efforts, and managing customer relationships. Historically, all marketing activities had been performed within the individual departments, which led to marketing campaigns all over the place, duplication of efforts, and inefficiencies. Similarly, the other corporate-level functional management roles are crucial to coordinating activities and leveraging synergies across different departments and the whole organization.”
Darren starts describing the main duties of some of the C-suite positions:
• “Chief Financial Officer—Accountable for managing the processes for financial forecasting and budgets, and overseeing the preparation of financial plans and all financial reporting. Any organization will have a finance department to ensure that the finances of the organization are in order over the whole lifecycle of financial transactions. This applies to transactions ranging from accounts payable to accounts receivable, from operating expenditures to capital expenditures, through banking and investment.
• Chief Operating Officer—Accountable for the organization’s business operations and ensures effective implementation of operational and financial procedures to deliver business goals. Develops strategies to manage raw materials, supplies, works in progress, and final inventories.
• Chief Human Resources Officer—Accountable for developing and executing human resource strategy in support of the overall business plan and strategic direction of the organization, specifically in the areas of succession planning, talent management, change management, and organizational performance.
• Chief Information Officer—Accountable for the implementation of suitable technology to streamline all internal operations and help optimize their strategic benefits. This includes designing and customizing technological systems and platforms to improve customer experience, data processing, and security.”
“Why are we going through the C-suite roles and responsibilities, and what does this have to do with physical assets?” Jerry asks after listening to Darren with great patience.
With an unhappy look, Darren quickly replies, “What I am trying to highlight is: Do we have such a function for physical assets in modern organizations? Do we need such a corporate-or senior-level function to exploit synergies and coordinate activities related to physical assets?” He adds in a serious tone, “Physical assets are no different from any other assets owned by the organization, where someone has to be accountable for them.”
Then he asks Jerry, “Can you imagine what percentage of an organization’s assets is fixed assets?”
Darren looks at Jerry in anticipation of an answer. But Jerry just shrugs his shoulders and stares at Darren.
“Well, of the 35 billion dollars of assets from municipalities, an average of 28 billion dollars is fixed assets, representing property, plant, and equipment as taken from their financial statements. This is around 80%! For the major companies, of the average 100 billion dollars of assets they manage, 18% are fixed assets.”
“This is quite a significant percentage, especially when you take into consideration how much value those fixed assets bring to the organizations,” Darren adds.
Jerry seems to be now more relaxed as he starts to understand where the discussion is going.
“Historically,” Darren continues, “management of physical assets was dispersed in the operations and maintenance functions. Over the years, the discipline of asset management has evolved from a normal routine set of activities of managing assets into a discipline that is now standardized by the International Organization for Standardization (ISO) and even regulated in some parts of the world. I have to admit that many organizations have come to realize the value that physical assets bring to their operations and are aware of the huge opportunities that exist to capture synergies and harmonize activities. Nowadays we see some proactive organizations already appointing vice-presidents, directors, and executives to be accountable for their physical assets and to lead their physical asset management strategy.”
Jerry’s job is actually a newly created position in Mouroum Inc. He left his job in maintenance and reliability to take on this new job, which is a move up for him in terms of pay as well as status. However, he did not realize that this is a completely different ballgame with a totally different approach. Jerry understands that he has already committed and he cannot afford to go back to his old position. With his current challenging family status—a newborn baby and a recently purchased new home—he badly needs to succeed in this job to make ends meet.
Jerry has been on the job for almost four months now, and he has been struggling—struggling to get an asset management program started, struggling to promote asset management as a priority for the department, and, most importantly, struggling to “fit in” in the organization.
Having known Jerry for quite some time, Darren knows what an intelligent and hardworking young man he is, and that he’s always keen to learn. One of the first things Darren did was to mail Jerry a copy of his book so that he could read it before the meeting.
“Did you have a chance to read the book I sent you?” Darren asks.
“Yes, I read most of it, and I am, I think, on Chapter 7,” Jerry replies.
“OK, that’s good. If you recall, Chapter 2 explores the evolving journey of organizations to better understand and adjust their focus over time, and how they adapted to the ever-changing landscape and requirements. Obviously, the way physical assets are managed has also evolved over the years, driven by new expectations, regulations, demands, and other requirements.”
Darren drinks a big sip of water from his bottle and lowers his voice. “Isn’t it interesting,” he says, “to understand how physical asset management itself has evolved as a discipline and what its roots were? How over time it has reached the level of the much talked about subject today? Look around you. There is not a day or week that you don’t hear about a webinar, conference, or some kind of training or certification in physical
