Do those that manage the performance, understand the measures?
This article is authored by Leonard G Middleton
As noted in other articles, performance measures are used to drive behaviors to make positive organizational changes in support of the organizational strategy and goals. However how well the performance measures may be developed and defined, if they are not effectively communicated to those individuals whose behavior is important to achieve the strategy and goals, then the performance measures have little value.
A number of years ago while working at coaching and mentoring some maintenance supervisors, attended a regular bi-weekly shutdown meeting. At the end of the meeting, the performance measures for the various areas they were responsible to manage were reviewed. However, during that part of the meeting, they all had a blank look that indicated little understanding of the topic.
To address the situation, developed a presentation using their performance measures to improve their understanding and make it more relevant to them. The presentation described the performance measures in terms of:
- their definition;
- why they are important enough to measure;
- how they are calculated;
- their target; and
- factors impacting the performance measures.
Let us look at these viewpoints and illustrate them using “MTBF” (Mean Time Between Failure, i.e. reliability) as an example of a performance measure.
Performance measures should be defined and communicated so that it can be clearly understood by the intended audience. No need for a detailed academic or formal description, knowing and understanding the audience is key to effective communications.
For MTBF, it was defined as: “How long on average can a section or equipment be run without a breakdown.”
The performance measures should link to the organizational strategy and goals, and the “why measure” topic should indicate its importance to the organization. Knowing “why” is important as it provides opportunities to consider alternate ways to make improvements that will support the desired outcome.
For MTBF, the “why measure” was: “A lagging measure of equipment reliability.” Maintenance supervisors understand the importance of reliability to the organization’s operations. Identifying it as a lagging measure indicated it was a measurement after the fact, and would not be useful in forecasting future performance, although trending could indicate whether they were improving.
For an example of a leading measure, the “why measure” for PM / PdM (Preventive Maintenance/Predictive Maintenance) Schedule Compliance was: “It is a leading measure that can forecast future equipment performance.” If PM and PdM maintenance is done right and when it is supposed to be done, then there is an expectation of improved equipment reliability.
The calculation is useful in showing all information that is input into the calculation, but it is also useful to show the source of the information, as it can have an impact as well. For example, if operations managers are compensated or their promotions based upon inputs to the calculations, then the ability to manipulate those inputs can have a significant impact on the performance measures.
For MTBF, the calculation was stated as: “Uptime Duration divided by Total Number of Breakdowns (failures), based upon information received from Production / Operations report.” In this situation, Maintenance had suspicions that Operations under-reported losses in starting up after repairs were complete, but thought instead that time was applied to the maintenance downtime and made suspect the value of the MTBF as a valid performance measure by Maintenance.
A target value including direction (greater than, less than, etc.) is needed to provide some context to the current value relative to the desired level of performance.
For MTBF, the target (excluding the value to maintain confidential client information) was stated as: “Greater than XX hours.”
Relevant factors are sometimes overlooked when performance measures are developed. The result is potentially individuals get measured, then rewarded or admonished by outcomes outside of their control. If rewarded, then may not understand that the outside factors had greater relevance than their efforts, and may not retain the desired behaviors. If, however, negatively impacted and they understand that the outcomes are outside of their control then could result in cynicism about the organizational performance measurement efforts.
A comment made by my former consulting practice partner many years ago was “The definition of a good mine manager is a good ore body and a good commodity price.” His point was that the externalities related to the quality of the ore body and the current value of the commodity price which the mine manager had no control over, had more impact than anything the mine manager could control.
For MTBF, the factors were given as:
- “Suitability of asset and its installation to its application.
- How well it is operated.
- Maintenance effectiveness
- e.g. effectiveness of tactics; effectiveness of the execution of tactics; quality of parts; etc.”
For the above situation, there were a number of factors outside of their control and influenced more by the projects group, Operations, and Purchasing / Stores. However, there would likely be little change in some of those factors, and monitoring the trend should give some indication of how they were performing. For any large change that cannot be explained by their efforts, then they might then look at some of the factors outside of their control.
Impact on Asset Management, Maintenance, and Reliability
Performance measures communicate what is important to the organization. Done well, they help to drive behaviour to make improvements in organizational performance. Effective communication of the performance measures and all the relevant topics will reinforce that effort. The alternate is then they may not drive behaviours due to lack of focus or knowledge.
Can your organization afford not to improve its performance?
This is intended to be an overview of the subject written in common language with the minimal required finance and accounting jargon for asset management, maintenance, and reliability practitioners to understand how their efforts contribute to the performance of the organization. It is intended to help them communicate that message within the organization and for the maximum benefit for the organization and its stakeholders.
Leonard G. Middleton is an experienced professional with many years of broad professional experience, in Canada, the US, and internationally, He has worked in a number of different roles related to maintenance, reliability, and asset management, program and project management, contracts management, outsourcing, and engineering, in industry and in his consulting roles.
His experience in asset intensive industries has reinforced his perspective on the importance of the physical assets on the operational cost structure, and with that the need to get the assets appropriate to the organizational objectives through projects, and then operating and maintaining them effectively.
Leonard has an undergraduate engineering degree (B.A.Sc.), a graduate business degree (MBA), and holds professional designations in engineering (P.Eng.), project management (PMP), and in Maintenance, Reliability, and Asset Management (CMRP, MMP, CAMA), and is an RCM Practitioner.
Leonard is a long-time member of PEMAC, having served on the national Board of Directors for multiple terms. He is an instructor in both the MMP and AMP programs and is a subject matter expert responsible for the content of two MMP modules.←