In many asset intensive companies around the world, corporate executives are more focused on achieving financial results than the technical aspects of running a company. They know they have highly talented, technical people who will worry about that. What they often don’t understand is the impact that asset management practises have on the financial performance of the company at the enterprise level, as well as all of the other benefits that executives tout as a high priority and important to the company such as safety and quality.
In my 40 plus years in the asset management world, I’ve worked hard to elevate the importance of asset management and help corporate executives understand why they should be concerned and interested in these traditionally very technical aspects of running an industrial company. It’s something I am very passionate about and I’m looking forward to sharing this knowledge at Mainstream Conference 2017.
Can You Read a Corporate Financial Statement?
I’ll be the first to admit that in my first 20 years as an engineer, I didn’t know how to read a corporate financial statement. I didn’t think it was my job to do so – I was a technical guy. And although I knew from my own experience how critical maintaining assets in a particular way was to the business being able to perform its goals, I wasn’t talking in the right language because I didn’t understand the financial side of the business. So needless to say I hit a lot of barriers when trying to drive this point home.
It took me many, many years to learn this lesson. I thought that these guys should understand my technical language because it’s strategic to the business. I’d bang my head up against the wall for 20 years before I realised that I needed to learn their language and make the connections for them so that the business value can be put in terms that they understand more naturally. That’s their world. That’s their language.
When you have an opportunity to present to executive management, you simply cannot go in there talking about technical things. You have to go in there speaking the language of the C suite, which is really financial language. That means you have to be able to understand how to read a corporate financial statement and how to interpret it and how to show the executives that the metrics that they are concerned about can be improved via these asset management programmes.
During my presentation at Mainstream Conference, I will show people how to dissect a corporate, financial statement, including an income statement balance sheet, to show how shareholder value is directly impacted by the technical aspects of running an asset intensive company.
The Good News… Corporate Executives Are Becoming More Receptive
There was a time, (well most of my career to be honest) when asset management was seen as a liability. This was before the term asset management had been adopted in a broad sense.
The good news is that a shift is starting to happen. The publication of the ISO 55,000 standard was a tipping point – it elevated asset management a level of importance that the executive level couldn’t ignore. The need for it to be standardised meant that it started to be seen as an important strategic aspect of corporate management.
So today, it is much easier for somebody to bring a business case argument to the executive management level because there’s much more awareness about this thing called asset management. If I’m up at that level, I may not understand the technical aspects but I do know enough to know that it’s probably very strategic to my business. Most executives now appreciate the fact that they can’t allow plant manager full autonomy when it comes to making strategic decisions about its assets.
Here in the US, a lot of international companies are required to answer to Wall Street analysts about the performance of their organisations. Unfortunately, those analysts are not asking any questions about the physical asset management practices of the company, which I think is a big mistake. How many times do you hear on the business reports that X stock took a hit on the stock price because it missed expectations of Wall Street? Well to me, these analysts should be asking questions about how these guys are maintaining their assets. In my view, there is no greater indicator of a company’s ability to perform financially and reliably in the future than its physical asset management practices.
In the future I think we’re going to see the linkages between financial performance and asset management become more and more mainstream. 10 years from now I’ll be very surprised if any quarterly conference call with a financial analyst would go by without the majority of the questions being related to asset management.
It’s why I call it a moral imperative. I think if a CEO in a company doesn’t recognise this, I think they’re derelict in their duty and they ought to be removed from their position.
That’s my opinion, albeit a strong one. It may be one you don’t agree with but I wholeheartedly invite you to join the discussion. I am looking forward to sharing these and more insights with you at Mainstream Conference in March 2017.
You can hear more from Bob DiStefano at Mainstream Conference 2017 [Perth 20-21 March & Melbourne 27-28 March]. He’ll be presenting on “How to Move the Right Reliability and Asset Management Levers to Significantly Enhance Shareholder Value” where he will dissect a company’s financial statements to expose the direct connections between asset management measures and strategic measures of shareholder value.
About the Author
Bob DiStefano is widely regarded as one of the world’s foremost Asset Management thought leaders. He was formerly the VP and General Manager of Emerson Reliability Consulting. He has authored countless articles on reliability and asset management and a text book on Asset Data Integrity. Bob was the top rated speaker at Mainstream North America. He also had the honour of delivering the keynote at the American Society of Maintenance & Reliability Professionals (SMRP) Conference 2016.