Asset Management Culture: The “Missing Link”?
Published: 2015 in Uptime magazine
By: By Stuart Grant, Global Solutions Architect
With the advances that science, technology and regulation have brought, many companies today have excellent engineering capabilities, a fantastic technical framework and good governance. In theory, they should therefore function reliably and also achieve great value. But often, that is not the case. What is going wrong.
The answer is that many companies take too narrow an approach when implementing improvement methodologies or become overly dependent on elaborate procedures that do not lead to sustainable results. The clue to extracting maximum value from productivity improvements lies in an integrated approach. Put differently, the key is operational excellence, defined as “the application of principles, systems and tools to engage and focus everyone’s efforts on meeting customers’ needs and continuously improving process performance”.
According to a 2013 CEO Challenge study conducted by the Conference Board, operational excellence is today one of the top three most important issues for CEOs globally. It is widely recognized as one of the most important contributors to a company’s sustainable performance and growth.
Businesses today face global competition and are part of global supply chains. Social and environmental regulations and expectations are becoming ever more stringent. Investors expect companies to pursue lower-cost and higher-value products with existing assets. To survive, organizations have to adapt rapid and efficiently to changes in market demand and competitive pressures at plant level. They need to find and pursue synergies to drive productivity and efficiency. All these external drivers exert pressure on companies to improve their overall operations performance. Those that manage to do so reap the benefits of a productive workforce, increased value and sustainable growth.
So, what are the key elements to achieving operational excellence? At DuPont, we have found one of the key steps is to create an aligned and productive culture. DuPont is a 212-year-old chemical-based manufacturing company. Through our history, we have learnt many safety and asset management lessons. Over the years, we have come to understand that the often-hidden influence on safety performance – the people part – is also key to operational excellence and asset management. We found that in fixing the safety culture and setting the right mind-sets and behaviors for safety, we not only improved our safety performance in the long run, but also our productivity and operations excellence in asset management. This paper outlines the main features of this cultural journey and can be applied to any organization.
Getting the balance right
All companies want to create value: for society, for the customer and for the stakeholders. As companies strive to create value, they have to strike a delicate balance between risk management and driving profit. There are two main strategies for achieving this. The first is to reduce risk to an acceptable level (protecting the asset). The second is to increase profit in a sustainable way (optimizing the asset). Everything we do in Asset Management stems from those two clear business imperative. The ideal scenario is for a company to mitigate risk while achieving ever-rising profits. That may sound utopian, but is in fact linked. DuPont recognized this and therefore set out to establish a sustainable model, as shown in quadrant 1 of the diagram below (Fig. 3): Profit is balanced by risk mitigation to a “tolerable and acceptable” level.
So far, so good. But how to achieve this status?
Like many other companies, DuPont has worked with numerous systems from Six Sigma to LEAN, and other logical tool-sets that support technical models. One of the aims has, of course, been to improve asset productivity and eliminate waste. Many of these are excellent tools and we still use and establish competencies in them. However, the trap that can be easy to fall into is the illusion that these systems alone will transform asset productivity. The same holds true for PAS55 and now ISO55000 or ISO55000 in conjunction with ISO31000 for risk management. These standards provide an excellent framework for asset management and help companies to develop their internal strategies and standards to support value creation from and asset. However, as important as these systems are and however much they appeal to those of us who are engineers and scientists, they are not enough on their own.
In fact, recently the International Association of Oil and Gas Producers OGP2 produced a report into asset integrity failures across the industry and found that, among the top causes of incidents, were human factors, competencies and failures to establish technical and capability programs in a sustainable way. As we will discover further on, these company behavior patterns are set at leadership level. Culture and mind-sets are engendered from the top. As another report by Oil & Gas UK3 in 2009 highlighted, the number one underlying cause for asset management events is poor leadership. Culture and mind-sets are engendered from the top.
At DuPont, we recognize that leadership and other human factor influence outcomes. It is therefore people’s behavior that is the focus or our safety performance, production system and other management models.
Over the years, we have developed a safety assessment tool called the DuPont Bradley Curve4, based on the book The Seven Habits of Highly Effective People by Stephen R. Covey. This model allows us to assess where we are in our safety culture. It has become clear that there is a “tipping point” in an organization when the culture becomes much more effective and develops its own momentum. This critical point of transition lies between the ‘dependent’ and ‘independent’ phases shown on the Bradley Curve. Once employees cross the cultural bridge from compliance (force) to choice, they become supremely motivated – not just for safety, but also for operational excellence.
The reason for this lies in people’s innate attitudes and behaviors. The following explains how employees are likely to act and react in the different phases of the Bradley Curve, particularly as it applies to operations, as illustrated in Figure 4 on the PDF.
An organization that finds itself in the reactive phase is in a vicious cycle of one action resulting in a destructive reaction. Behavior is based on instinct. Compliance is the goal. People follow the rules because they have to. The “law of the jungle” prevails. The attitude is likely to be: “just get the day in”, do whatever it takes to get through it fast and out the other end. Reactive behavior often manifests in people taking short-cuts, schedule busting, little discrimination in prioritizing work (everything is urgent), little or no schedule backlogs etc. This is where we encounter “silos” and a notion of “the enemy”: operations versus maintenance versus reliability. This is the worst place to be and it is often reflected in safety performance too. It is not a good environment to work in!
Dependence is a little better, but employees will still do things only because they are told to, or because there is an implied threat. Fear and discipline are the motivators. In this organizational culture, people leave their brains behind in the works car park and let their boss decide for them. If the boss gets it wrong, there can be big implications. If the boss is not there, employees tend to slip back into reactive behavior. In this environment, there may be a focus on training, but not necessarily on competence.
In this quadrant, there is a subtle, yet significant mindset-change. People follow the rules because they want to, because they see the sense and benefits in doing so. That makes for a much better place to work. In this environment people know what is the right thing to do and they do it. They often understand that their role is directly linked to business results. Applied to asset management, this means the culture of maintenance and reliability leadership has changed from a cost-focus to a value focus. As a matter of fact, this aligns with the ISO55000 Asset Management Standard. In an independent behavior phase, you begin to see individual recognitions, and adoption of good and best practices because everyone knows the goal. However, there is still room for improvement.
Once organizations attain a culture of interdependence, things are done for the greater good. Organizations are in a virtuous cycle of one action affirming a new, better action. Everyone is aligned with a joint goal. Operations work as equal partners with maintenance and reliability. People cross boundaries without being asked to do so and proactively help each other. There is collaboration. Knowledge is codified and shared. Mentoring and coaching is the norm. We have team recognition, but not just of “Purple Heart Heroes” variety for those responding to an out of hours production incident. In this environment, a planner or planning team that quietly and methodically extracts value and eliminates waste by superior planning, will be recognized and receive acclaim. Thus, the virtue of proactivity trumps reactivity.
The best things about the interdependent quadrant are that:
The same quadrants of the Bradley curve that we use at DuPont to monitor and assess safety culture also apply to other management systems. If an employee acts independently and responsibly, because they see the value for themselves and for the business in doing so, that not only benefits safety, but also maintenance, reliability, performance, output and quality, all of which contribute to creating value and improving operational excellence.
But what makes people want to become that interdependent? It is quite a leap from reactive behavior to independence and interdependence. At DuPont, we believe the clue is in visibly demonstrating leadership commitment so that people see and feel that senior management is doing exactly what it also expects from all employees.
Achieving sustainable asset productivity
Driven by an imperative for asset productivity sustainability in a period of intense business challenges, DuPont has developed its own DuPont Production System (DPS) which is based on a four-strand approach:
DuPont has transformed its own business model in the past seven years by working with this four-strand approach. We have found from our work with other companies through our consulting business, DuPont Sustainable Solutions, that companies tend to concentrate on the technical, capability or governance processes. These are very important. However, in order for a business and asset management processes to succeed and to thrive, it is equally important to promote the right culture.
Once we applied our Bradley Curve culture assessment learnings coupled with the right leading indicators to operations excellence, maintenance, reliability and other capabilities began to flourish. Technical and capability models will not work without understanding the true culture of an organization, and what needs fixing. And to fix, you start with Leadership.
We have found that a sustainable solution to operations excellence, which includes an asset management program, is only viable if the right governance, technical model, capabilities and, critically, a supportive culture are in place. If any one of these elements is weak, the whole program is likely to fail.
As an owner-operator, DuPont is uniquely placed to assess and guide other companies through its consulting business, DuPont Sustainable Solutions, using real-time experience. With a toolbox of “Mind-set and Behavior” resources, we have worked with clients in a variety of industries including oil & gas, petrochemicals, energy, mining, agriculture and food to assess where they are and to help them move, as we have had to do, to the right side of the Bradley Curve.