New Content Updates
Educational Webcast Alerts
Building Products/Technology Notices
Access Exclusive Member Content
By Bruce Wesner
February 2010 -
Facilities Management Article Use Policy
Knowing the many financial difficulties that 2009 brought for maintenance and engineering departments, most of us are glad to have the year behind us. The new year brings fresh challenges and opportunities. Competition is fiercer than ever, and as with consumer buying habits, business cycles have changed significantly.
In this rapidly evolving business environment, how can managers build an effective budget that will make or keep their organizations competitive? Maintenance and engineering groups have always been challenged to operate better and faster, delivering services at a lower cost.
What issues should managers focus on to achieve financial objectives sooner and maximize budgeted funds?
Throughout my career, I have been fortunate to be part of business turnarounds. I jumped into companies and business units that were on the brink of closure. My mission was to get them back on their feet, and budgeting was a struggle because of the state in which the businesses found themselves.
I have helped organizations achieve budget targets in tough business climates by driving survival, stability, and success into the organization. The process is tough, but managers can achieve success by keeping the process simple and concentrating on three areas:
Failing to align priorities often has the greatest impact on whether a maintenance and engineering department budget works as a plan for success.
After organizations work through a sometimes exasperating budgeting process, one common mistake often occurs when functional groups isolate themselves to execute their plans individually. This step is the first point of failure.
As each group builds its own plan apart from other entities, their actions create communication gaps and strained relationships. Acting in this kind of silo adds significant risk to the possibility of success in any group's efforts.
An alternative strategy is to create a partnership agreement that aligns all the groups' actions with the organization's priorities. Organizations often use a centralized-planning, or master-plan, approach to link the efforts of individual groups and create a common foundation on which to act.
To succeed, managers need to make the plan formal, which requires support from the top of the organization. It also requires aligning the efforts of the maintenance, engineering and operations groups. To gain trust and ensure engagement and success, managers need to make the plan highly visible and communicate it often to all immediately affected parties.
Many departments make the mistake of getting out of the blocks too slowly when implementing a budget. Organizations tend to spend a great deal of time developing a plan, but they are slow to roll it out and act on it.
I recently visited a plant in which a machining center, critical to the success of the organization's highest-end product, was causing problems for the operations side. The machining center did not reliably produce products as promised to customers, impacting service and delivery metrics and causing dissatisfaction.
The machining center also created significant process scrap and defects, driving up the amount of rework and the cost of production. The same asset affected engineering and maintenance by creating extraordinary maintenance costs, safety issues, and continual emergency breakdowns.
Still, the company had chosen not to commit resources or attention to address this problem area until later in the year, when budget dollars are more scarce.
My suggestion was to identify the problems — which waste resources and budgets — and focus on the biggest savings opportunities early in the year.
In too many cases, I have seen organizations wait to go after these large impacts on performance or cost. What happens? By the time they decide to act, budgets are locked down, and they cannot invest.
Managers can have the most success in identifying the big opportunities early and jumping into the remediation stage quickly to gain control of the costs.
Many organizations use dashboards that fail to drive business effectively and are phenomenally difficult to maintain. One company's dashboard included 97 metrics.
Having too many metrics or key performance indicators (KPI) is worse than having none at all. If every metric is important, you do not know which metric to focus on first.
When I think about KPIs and metrics, I recall a quote by management consultant Peter Drucker: "If you want it, measure it. If you can't measure it, forget it." This quote says a great deal about keeping the process simple and focusing only on key metrics. I recently saw an even better version of the Drucker quote from Dr. John E. Jones, past president of Organizational Universe Systems: "What gets measured gets done. What gets measured and fed back gets done well. What gets rewarded gets repeated."
This quote identifies the truly important issues — identifying the right metrics, continuing to communicate clearly, and focusing only on key metrics — that show the organization which metrics are most important.
The icing on the cake is building the metrics into the performance-management system and rewarding the right behavior. These steps ultimately will ensure managers' budgeting efforts are successful and sustainable.
Managers who avoid the mistakes — creating silos, getting out of the starting blocks too slowly, and getting lost in too many metrics — will be well on the way to planning and living by a budget aligned around shared priorities and focused on meaningful success.
Agree? Disagree? Have something to say?We want to hear from you. Visit myfacilitiesnet.com/members/Bwesner/default.aspx, and "Start a Conversation."
Bruce Wesner is a managing principal with Life Cycle Engineering, www.lce.com. He has more than 25 years of maintenance, engineering and management experience.