Managing Assets or Asset Management?

 Written by: Heather Himmelberger
Heather Himmelberger is the Director at the Southwest Environmental Finance Center

When you think about your facility – be it water, wastewater, stormwater, or any other set of assets – are your assets managing you, are you managing your assets or are you practicing asset management? The distinctions between the latter two ideas may not seem all that important, but these differences are quite important to achieving your goals.

In the beginning, before you learn about asset management at all, you may be letting your assets manage you. What I mean by that is that you wait until something happens and then react to it. You do maintenance only when you notice a problem or only according to the manufacturer’s recommendation or based on “it’s the way we always do it.” You do not plan for asset replacement proactively and have no shared vision or strategic direction with regards to your assets. The assets just do what they do until they don’t. You replace them when they no longer work the way you want them to. This is a very unsatisfying way of running your facility and, although it may not initially seem like it, a very costly way. Customers are unlikely to be satisfied with the performance and employees will have very unstructured, unplanned days as they react to each failure. Overtime pay may be quite high and financial resources are unlikely to keep pace with the needs.

You may decide to move away from letting your assets manage you to a better way of doing things. You read about asset management or take a training and you decide to begin your asset management journey. Sometimes this process gets derailed and instead of looking at the program as strategic and overarching, it becomes focused on what you are going to do to individual assets – how you will manage them, what the best maintenance strategy is, when to intervene with preventative activities, etc. You may feel that you are practicing asset management, when what you are really doing is managing assets. Managing assets is certainly important, but it is not synonymous with asset management.

With asset management, the organization considers its overall strategic direction, the goals it is trying to achieve, its overall business risk and how it intends to manage it. The organization adopts a common terminology and practices asset management at all levels throughout the organization. Rather than looking at what is done to a particular asset, the organization looks at how all its assets as well as business practices fit within the overall goals, objectives, and strategic direction of the organization.

This topic came up a couple of times recently which led me to want to write this blog. First, there is a great video from Terrence O’Hanlon describing the difference between managing assets and what we mean by asset management.

The video discusses in very clear terms the need to be more precise with our language as well as the concepts of asset management. As an example, Terry describes how talking about the purpose of the organization is part of asset management. Talking about maintenance and reliability is part of managing assets. Organizational value, purpose, long-term outcomes, and understanding business risk are part of asset management, while understanding the risk of a particular asset and managing it to reduce that risk is managing assets. These two ideas merge, intersect, and overlap at various points but they are distinctly different meanings. It is crucial to understand the difference or you will not develop an asset management program that is robust and able to achieve the benefits you want. I recommend that you take a look at Terry’s video as it is very well done and educates in an entertaining way.

The second time this came up was at an infrastructure conference in Perth Australia in August 2017 (The Institute of Public Works Engineering Australasia Conference). I had a fantastic opportunity to talk with Dr. Penny Burns, who is someone I met many years ago when I was first beginning my asset management journey. Penny, from Adelaide, Australia, is one of the founders of the modern asset management movement that essentially began with Australia and New Zealand 20 years or so ago. She coined the terminology asset management to describe the approach they wanted to use. I was talking to Penny about this idea of “asset management” vs. “managing assets.” She described a similar dynamic in Australia to the one which Terry describes in the U.S. She noticed that communities were telling her that they were doing “asset management” when what they were really describing was managing assets. They were talking about maintenance and reliability-centered-maintenance and better ways to replace individual assets rather than focusing on the strategic vision and direction of the organization. While maintenance is an important activity for an organization, it is not by itself, asset management. Penny changed her language to “Strategic Asset Management” in an effort to create this distinction between what is being strategically done at the organizational level from what is being done at the asset level. Over the years, many organizations in Australia and New Zealand have developed and implemented strategic asset management programs but there are still those who are managing assets rather than practicing asset management.

Check out Penny’s organization TalkingInfrastructure.com to join the Asset Management conversation.

Next time you think about asset management, stop for a moment and think about what you really mean. Do you mean “asset management” or “managing assets.” If you happen to still be in the stage of letting your assets manage you, seek out assistance and resources on asset management to help you move along the journey. Some resources are available at the Southwest EFC website here. Please leave us a comment to let us know what you think of this topic.