has come a long way, and, over time, there has been significant development across the globe in the field of physical asset management. It is beneficial for you to understand the evolution of asset management from a simple routine maintenance approach or a simple accounting/financial practice to combine and become a comprehensive field impacting whole organizations and in some areas even legislated (Figure 1.1).”
FIGURE 1.1 Evolution of asset management discipline.
“This is really interesting,” Jerry replies. “I always thought that asset management was a new discipline and never bothered about its roots.”
“Many say the coming together of the physical asset management discipline was triggered in the finance sector. Physical assets were engineered, installed, operated, and maintained since the beginning of time to support operations. On the other side, accounting and finance were reporting on physical assets in the balance sheet. At some point, organizations were required to provide more accurate reporting on tangible capital assets in their financial statements under the International Financial Reporting Standards (IFRS). With accurate reporting on physical assets in the fixed asset sub-ledger, we start seeing a disconnect between physical asset condition, consumption, and betterment and physical asset valuation and depreciation.”
“I think this is the situation currently prevailing at Mouroum Inc., where there is poor alignment between accounting data and technical data in the field. I notice multiple inaccuracies and data gaps when I work with the finance team!” exclaims Jerry.
“This is common in many organizations,” Darren continues. “This misalignment makes it very difficult for everyone to come up with a decent capital forecast and investment plan. Organizations need to improve planning for capital investment for their budgeting process. Private-sector companies need it to remain competitive and get the best returns on their investments, while the public sector needs to implement a rigorous process for asset management planning to forecast future expenditures. For example, municipalities in many countries are required to develop accurate asset management plans to be eligible for grant funding opportunities.”
Jerry sits up and, with a happy voice, says, “This is actually one of my main mandates at Mouroum Inc.: to develop accurate asset management plans to meet the strategic objectives.”
Darren nods his head to show agreement. He clears his voice and adds: “While considerable progress has been made by many organizations with respect to developing accurate asset management plans, there is still quite a lot to accomplish in terms of implementing the plans. We all know very well that ‘A plan remains a plan unless it is put in action,’ i.e., unless it is operationalized. In many organizations, the asset management plans are not being used in the operational and capital budgeting process, and, worse, they are not used to inform the decision-making process. By definition ‘operationalizing’ means setting something up (your asset management plan) so that it can be used, not only by a few functional areas, but across the whole organization.”
Darren looks up Jerry and continues in a somewhat gloomy voice: “Unfortunately this is where we are nowadays in many organizations: stuck with executing the plans and operationalizing them organization-wide. This means getting all the functional areas dealing with physical assets in one way or another to fully understand, endorse, and implement the asset management plans in their respective areas. As you can imagine, this is not an easy feat, because we are now dealing with the whole organization: the governance, the different functional areas, the people, the culture, etc.”
“I can see how difficult and challenging this will be,” Jerry concurs. “Without any asset management plan to implement at Mouroum Inc., I am already getting pushback. Pushback in even understanding and embracing the physical asset management philosophy.”
“I hear you,” Darren says. “No wonder why, in some industries and countries, physical asset management is now regulated. There are a few good reasons for taking such a stance. The first one is to shift the focus and priorities of many organizations to get them to start thinking seriously about physical asset management. This, in return, will help to clearly identify what their infrastructure needs are and facilitate a more sustainable funding plan. Regulation to operationalize physical asset management planning also helps achieve greater standardization and consistency and reinforces the use of asset management plans as a tool to make better decisions to address physical assets needs and challenges.”
“This is all great information,” Jerry says after listening with attention. “But where do I start with an asset management program in my organization and how? One of the first things I noticed is that people tend to think that maintenance is asset management, and some people were even questioning my job. It is hard for me to explain to them, and they are not even ready to embrace the physical asset management philosophy.”
“Well, the first thing you should start with is educating staff to spread awareness of physical asset management across the organization. There is so much documentation and various literature out there that is really informative. You can use those resources right away to help personnel from different functional areas understand the asset management philosophy. While doing this, I would also suggest you think about setting up a governance framework to launch and support your asset management initiative. Remember, alone you will not be able to meet the goals of an asset management philosophy,” Darren explains.
“What does that entail?” Jerry questions.
Darren chuckles and replies to Jerry: “That can be a lengthy conversation, and, unfortunately, I have to go. Can we continue our discussion sometime next week?”
“Absolutely,” Jerry responds. “You tell me when you’re available. In the mean-time, I will search the training/educational materials as well as governance frameworks. I agree there are many resources available on the internet, but I will need your guidance on how to use them.”
“That’s a good idea. But I would caution you that ‘how’ to use the information is not enough. You also need to understand ‘why’ to use those resources and ‘when.’ Picture it as a recipe with all the ingredients. There is a particular order and timing at which each and every ingredient is added. There is a specific reason for this.”
“Think about it, and I’ll see you next week,” he adds with a smile.
Darren gets into his car, takes a deep breath, and starts checking his phone for any missed calls, especially from Debbie. There are none. Darren and Debbie have been happily married for twenty-seven years. As in any couple’s life, there have been ups and downs. Most of the time the sources of conflicts have been due to Darren’s busy schedule at work and his other activities. For the last few years, Darren’s involvement in the triathlon and, just recently, his decision to take early retirement to pursue his academic dream have not eased the situation. He knows he has to give Debbie more of his time. Darren puts on one of his favorite tunes and drives away. He is feeling so tired and just wants to get home for some rest.
It is a beautiful Wednesday evening, and Darren drives into the parking lot of the coffee shop. He has just finished a busy day at work reviewing a few draft papers that his students have been working on. Darren knows that Jerry is desperate to talk to him. It’s been two weeks now since they last
