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Maintenance and finance – partners

This is a 2-minute read! CFO – you need to know that maintenance can help you be very strategic in achieving greater outputs, at low cost, and for a minimal investment. Maintenance and Asset Management managers, you need to enlist Finance as your ally. Both Finance and Maintenance / AM are after the same results. Understanding this is key to becoming partners in sustaining our businesses. After all, we both have the same goals in mind.
I first published this about a year ago and received a comment about it on LinkedIn from a colleague – consultant Gary Dobson. It was powerful and very telling – he said,

“Interesting but unfortunately true! I recently had a neighbor who was a retired CFO of a company with about a dozen plants in the US and South America. He often used to brag about the methods he had used to save his company money. When I explained to him the role of Effective Maintenance Management, the “Value” of “Uptime” and that “Maintenance was an Investment, Not an Expense” he started to realize that what he thought had saved his company hundreds of thousands, had in fact cost them millions!”

To begin with, we physical asset folks restore and sustain the functionality of our physical assets. Accountants keep all of the business keep score by tracking what has happened with the business money.

They log the financial transactions we’ve already done and shown us, via the balance sheet, income statement, and statement of cash flows, what our “score” is. They can analyze the past, as it is a reflection of our past behavior, and to project where we might be headed if that behavior continues. Inherently, accounting is backward-looking, but without a change in behavior, that view is a good predictor of future performance. Accountants who truly understand the business you are in, can also help by suggesting future courses of action that might prove beneficial to the business.

They are helping to preserve the financial integrity of the company and ensure its assets are valued properly so that shareholder value is maintained. However, while they understand the business, much the way any business school graduate would understand it, they do not always understand all that it takes to make it work. They are not experts in human resources, IT, operations, production methods, engineering nor maintenance. Sadly, maintenance is one area that is sadly misunderstood or even largely a mysterious unknown to many. It is little more than an expense on the income statement to many accountants, yet it is truly so much more!

Maintenance produces sustainable Uptime (asset availability). That Uptime enables you to produce both goods and/or services, which in turn, generate revenue. When you are “down” (unavailable) you stop generating revenue and your costs per unit of output go up. When your production is “down”, you are spending more on maintenance and earning nothing. When you are “up” you generate revenue, and you have the opportunity to spend the least amount on proactive maintenance to generate more Uptime. That proactive maintenance costs 1/3 or less than the cost of repairs. But we don’t always use our available Uptime so wisely and invest in proactive work. That makes our business as a whole, less sustainable.

By “sustainable Uptime” I mean that the Uptime you’ve achieved will last. Some physical assets are intended to be used for a short time only but many, particularly those in which we invest the most capital, are intended for use over a very long time (decades at least). Maintenance is the function that sustains them in a functional state. As we produce, we consume asset functionality very slowly and we have an opportunity to monitor that degradation, then act proactively to restore it without production disruptions. Maintenance (the department) has the primary responsibility for doing this IF WE ALLOW IT.

Production produces, accounting keeps score, purchasing buys new stuff, marketing and sales generate product or service orders from customers, logistics moves the physical product to those customers, finance keeps the wheels greased with cash, executive management decides on the future. Everyone contributes to generating value, but it is only maintenance and finance that have a role to play in sustaining the value of the company’s assets – finance looks after financial assets (including the functional value of its physical assets), while maintenance looks after physical assets in the physical sense. Maintenance needs sufficient investment in its capability and capacity to fulfill its role. It may show up as a business expense on the income statement, but it requires investment itself to sustain company asset value.

At times, the views of finance and maintenance are at odds, but that is neither necessary or productive. Maintenance may be treated as an expense but cutting it, while it can save money in the very short term, will damage productive and revenue-generating capacity badly. Cutting costs is not always the right decision – after all, you cannot “cut” your way to prosperity. Even if revenues are down due to loss of productive capacity, you need to invest in maintenance to restore it. Failure to invest in proactive maintenance is a massive mistake. It is the least expensive form of maintenance and it produces the most Uptime. Both groups need to fully appreciate that and work together to ensure it is realized.

Finance and accounting seldom forget their role and they understand how money makes a business work well. Give a CFO or a controller a convincing business case that shows what you want to do adding substantial value and you’ll usually get the green light. I’ve often found the financial people within my customers’ businesses to be very helpful. However, as employee Maintainers, many forget their role in making the business profitable.

Maintainers and asset managers are usually technical people who like to do things that are technical, often with our hands, and we like to get absorbed in the details. We are in a forest and looking at the leaves, but we forget that we are in a forest. Our forest is our business and by working with the leaves (our physical assets), we sustain it in a very physical sense. We do need to remain cognizant of our business role – manage to the benefit of the business, not just the maintenance. Doing what’s “best practice” may actually be too expensive for the business and harmful. Ignoring “best practice” is even worse – it is being irresponsible.

In fairness to maintainers the world over, there are many accountants and finance people who get wrapped up in the details also. Accuracy is important but it is not always material (as they say it). They too must keep out of the leaves, but we are not here to tell them how to do their job, we are here to understand it and interact with it in ways that benefit our businesses.

Recognize that we have these similar roles of sustaining the assets of our companies, learn to speak the language of business, go beyond the purely technical, and your job can be a lot easier.