One of the most important things that enterprises today need to understand about asset management—as both a concept and a practice—is that it’s about more than simply maintaining and caring for physical assets. In fact, the scope of asset management is in many ways closely aligned with an organization’s central purpose. Like other operational aspects of an enterprise, asset management must consider and optimize a number of conflicting priorities, including asset utilization versus asset care, and short-term opportunities versus long-term sustainability.
In order to differentiate between the practice of asset management and simply managing one’s assets, the Institute of Asset Management (IAM) has developed a set of seven vital identifying principles that underlie all truly effective asset management systems. According to the IAM, good asset management must be:
Holistic
Looking at the big picture is critical in asset management. Rather than taking a compartmentalized approach, asset management must take into account the combined implications of managing everything together. This means that an organization must consider the combination of its different asset types. An organization must look at how assets are functionally interdependent and what contributions they make within their own asset systems. They must also understand the life cycle phases of distinct assets and their corresponding activities.
Systematic
Rigor and method are important when it comes to asset management. In order to be effective, asset management must be applied within a highly structured framework. This allows decisions and actions to be consistent, repeatable, and transparent.
Systemic
In order to properly establish total net value, assets must be examined within their system’s context. If assets are only examined in isolation, then it is difficult to correctly assess and optimize their performance, cost, and risks.
Risk-based
Making risk transparent is essential to an organization’s survival. Enterprises that do not adequately account for risk in their asset management threaten not only the assets themselves, but the organization’s overall operations. Thoroughly identifying potential risks and their associated costs and benefits will help organizations to set priorities and allocate their resources and expenditures appropriately.
Optimal
Optimization, or seeking and implementing the best possible value compromise between competing objectives and factors, is the ultimate goal of effective asset management. Asset management takes into account all costs, benefits, risks, and performance factors associated with assets throughout their life cycle and weighs them against each other to make decisions about how the assets should be used.
Sustainable
When an organization embraces good asset management, they are also embracing long-term thinking—something that is not always a business priority. However, in order for assets to give their best to an organization, they must be sustainably managed. What this means is that asset management must consider the long-term effects of short-term activities and ensure that future requirements and obligations (such as ongoing systems performance, societal responsibility, and environmental or economic sustainability) are adequately provided for.
Integrated
All these asset management principles will be fully effective only if they are working together. Integration means that asset management is more than just the sum of its principles. It’s a recognition of interdependencies and combined effects, as well as the need for a joined-up approach to delivering optimal value.
In order to successfully apply these asset management principles, it’s important that a number of enabling elements be present. They include:
Proper organizational structure
The organizational structure must facilitate, rather than hinder, the implementation of the asset management principles. This requires strong leadership from top management, who must provide coherent direction and clear guidance.
Aware and empowered staff
An organization’s staff members are the ones charged with delivering the asset management principles. They must therefore be aware of the goals of the asset management system, competent and committed in their implementation, be able to coordinate cross-functionally across departments, and be empowered to make decisions.
Adequate information
Possessing a full knowledge of the condition, performance, risks, and costs of an organization’s assets, as well as the interrelationship between these factors, is essential in order to determine how the assets can best be managed.
These three enablers can make all the difference to an organization’s success—or lack thereof—in implementing good asset management. Without a clearly articulated direction and set of priorities from the top of the organization, appropriately empowered employees, and the right information to allow good decision-making, it can be very difficult to determine an appropriate asset management strategy. Complicating factors such as conflicting priorities or mixed messages, a lack of staff understanding about the objectives of asset management, and inadequate collaborative efforts to realize those objectives can result in wasted time and resources, as well as overall frustration. Enterprises dealing with these organizational challenges may wish to consider further enabling strategies, including staff training, communication and consultation from top management, or outsourcing asset management activities.
