There is no time like a global economic slowdown to test the true capability of a senior
management team. When times are good, it doesn't take much for the senior team to ride the
wave and steer the company to some reasonable level of success. But in an uncertain economy,
many senior teams panic. In the name of cost reduction, the 'C' office may begin a downward
spiral where hatchets begin cutting into bone or muscle instead of simply trimming the fat.
Excessive or poorly targeted cost cutting can lead quickly to poor morale, a mass exodus of the
better resources, tightening of credit, and even reduction or elimination of key customer accounts.
Effective Asset
Management in an
Uncertain Economy by David Berger, Director Western Management Consultants
INTRODUCTION There is no time like a global economic slowdown to test the true capability of a senior management team. When times are good, it doesn't take much for the senior team to ride the wave and steer the company to some reasonable level of success. But in an uncertain economy, many senior teams panic. In the name of cost reduction, the 'C' office may begin a downward spiral where hatchets begin cutting into bone or muscle instead of simply trimming the fat. Excessive or poorly targeted cost cutting can lead quickly to poor morale, a mass exodus of the better resources, tightening of credit, and even reduction or elimination of key customer accounts. One of the more prevalent victims of misguided cost-cutting initiatives is the physical assets of the company. Poorly planned or executed reduction in spending on the management of assets may lead to accelerated deterioration of assets, product quality problems, and the inability to meet delivery commitments due to excessive downtime. The ever-growing swath of damage that results may take many years and dollars to undo, if at all salvageable. This white paper describes 10 ways senior executives can more effectively manage their assets in an uncertain economy in order to not only avoid any damage, but more importantly, enjoy substantial improvements in productivity and profitability.
Effective Asset Management in an Uncertain Economy 2 TABLE OF CONTENTS Motivation Pg 4 The Plan Pg 5 Metrics Pg 6 Transparency Pg 8 Strategic Asset Management Pg 8 Asset Integration Pg 9 Total Lifecycle Asset Management Pg 10 Risk Management Pg 11 Supply Chain Optimization Pg 11 Lean Green Pg 12 Conclusion Pg 13 About the Author Pg 14 About the Sponsor Pg 14 LIST OF TABLES Table 1: Key Asset Management Measures & Benchmarks Pg 7 Table 2: Achieving Effective Asset Management Pg 13 Effective Asset Management in an Uncertain Economy 3 MOTIVATION A lack of motivation leads to a decline in productivity, as well as negative or even destructive behaviour. Most people assume that motivation decreases during an economic downturn, reflecting the level of uncertainty over meeting personal and company goals. But surprisingly, as demonstrated in previous recessions, a poor economy can actually be an effective motivator with the right leadership. A good leader can rally support at all levels within the organization in dealing with the common goal - remaining viable and profitable despite economic hardship. For senior management, buy-in can be maximized using profit as a motivator. The difficulty lies in clearly linking profit with asset management, especially in quantifiable terms. However, this can be explained successfully as follows: Profitability = profit / net assets = profit x sales sales net assets = profit margin x capital turnover Thus, profit can be linked directly to assets by showing how getting more sales output from your assets with less input can be highly profitable. For obtaining the buy-in of the front line, good leadership is critical. This is especially true in tough times. Leadership consists of the following key attributes: - A clear vision and plan for asset management - Consistency over the long term - Support through action - Realistic performance measures & targets that define success - Recognition, rewards & consequences aligned with success - Managed expectations for each stakeholder that answer the question "what's in it for me?" - Clarity of roles and responsibilities at all levels in the organization - Constant and meaningful two-way communication - Flexibility to handle the inevitable changes that will occur Without the buy-in of the front line, there is no hope of effective asset management. Moreover, the front line supervisors, who are sandwiched between senior management and the front line, have enormous influence over whether the front line is motivated to change their behaviour, such as adopting new processes or asset management systems. Any ch... [download for more]
