Peter Drucker once said, "What gets measured gets managed." Balanced Scorecard Systems (BSC) are a tool that seeks to incorporate some non-financial aspects into traditional measurement systems for maintenance management, which condition the achievement of economic results. This was the first attempt to design indicators not previously considered in a company’s financial statements, with the aim of improving decision-making processes. BSC includes non-financial measurements to determine if the company is using the right processes and people to achieve optimal business performance.
Peter Drucker once said, "What gets measured gets managed." Balanced Scorecard Systems (BSC) are a tool that seeks to incorporate some non-financial aspects into traditional measurement systems for maintenance management, which condition the achievement of economic results. This was the first attempt to design indicators not previously considered in a company’s financial statements, with the aim of improving decision-making processes. BSC includes non-financial measurements to determine if the company is using the right processes and people to achieve optimal business performance.
BSC is not a software, a spreadsheet application, a tool for formulating strategies, a control instrument, nor a periodic management report presented to the management. BSC is a tool for implementing strategic options, a process that requires the objectives of these options to be appropriately measurable. This means that management’s starting point is not to create a Balanced Scorecard, but first to define the vision for the maintenance organization and then identify the strategic options that will ensure continued success now and in the foreseeable future.
The Balanced Scorecard is, therefore, a tool that helps to turn the vision and strategy of maintenance in the organization into tangible measurements and objectives.
BSC is a communication, information, and learning system. The development of a BSC should originate from the vision and strategy of the maintenance organization within the company, followed by defining the critical factors necessary to achieve business success. The management indicators used by BSC will help the maintenance organization measure objectives and critical areas in the implementation of the strategy. The most accurate answers can be found by conducting a study on the RETURN ON INVESTMENT IN ASSET MAINTENANCE (RIMA) + BALANCED SCORECARD (BSC).
Today, organizations are competing in complex environments, making it vital that they have an accurate understanding of their objectives and the methods they should use to achieve them. Balanced Scorecard Systems (Technical-Financial) translate an organization’s strategy and mission into a broad set of performance measures, providing the necessary framework for a strategic management and measurement system in asset maintenance management.
This comprehensive view of the business allows maintenance organizations to make decisions, monitor progress, and establish action plans to achieve the company’s objectives. Maintenance management through technical and financial indicators in the organization, or KPI (Key Performance Indicator) in English, is a graphical representation of the maintenance status.
INTRODUCTION Maintenance organizations are undergoing revolutionary changes, transitioning from a regulated protection situation to highly competitive open environments.
The nature of business competition typical of the industrial era, where the incorporation of high technology has been paramount, is rapidly transforming. In the current information technology era, asset reliability integration tools can no longer provide sustainable competitive advantages; this is only possible through the integration of tools and adapting them to each company’s needs for excellent asset management.
Nowadays, competitive success is linked to a company’s or business’s ability to exploit its assets. This constant transformation of the business environment makes it necessary for companies, to maintain and increase their market share under these conditions, to have a clear understanding of how to analyze and evaluate their business processes, that is, their performance measurement system with the integration of technical-financial indicators in maintenance.
"If you don’t measure what you do, you can’t control it; if you can’t control it, you can’t manage it; and if you can’t manage it, you can’t improve it."
STRATEGIES The Vision, Mission, and Balanced Scorecard Systems “BSC” lead us to understand that management indicators should be disseminated and will vary at different levels within the organization and, most likely, will also differ for various roles within the organization.
The critical aspect of selecting appropriate indicators in the maintenance function arises when the objectives of these measures aim to motivate those capable of influencing decision-making, leading to improved asset management performance. This is difficult to achieve if there is no belief in the measures.
The appropriate selection of indicators for maintenance management measures “are those embraced with the support of everyone” because they can influence maintenance performance and are effectively used to drive continuous process improvement.
Among the tools and techniques that can be used to select appropriate indicators, the most important factor for achieving good results is having processes with a very high level of participation from the personnel who can influence the outcomes. It is preferable to have a measure with a lower technical level that everyone can understand than one requiring a high level of understanding, which is not considered meaningful by the people involved.
Only if there is a high level of ownership of the selected indicators will there be a willingness for significant improvement. Almost without exception, all indicators can be “manipulated” so that the reported results do not reflect reality. For example, a measure of the percentage of scheduled work to be completed can typically be forced to 100% by closing all scheduled work orders within a week, regardless of whether the work has actually been done. Therefore, it is essential to gain ownership and ensure that people use the indicators as an active tool for improving maintenance management.
Figure 1. Maintenance Management Strategy f1
2.1 A Measure Without a Final Objective is Meaningless
The process of defining and calculating indicators is closely related to improvement. Observations are made to detect technical or organizational weaknesses to strengthen them and, on the other hand, identify strengths to preserve and exploit them. The initial notions can be stressful, so they should be viewed as a whole, a control loop for decision-making and action.
"YOU CAN’T MANAGE WHAT YOU CAN’T MEASURE."
To achieve our goal, we will define an indicator as a variable or a group of variables calculated according to a specific formula, which are characteristics of a phenomenon, allowing us to measure its changes.
“BSC” only makes sense in the broader context as an effort to improve overall performance in a production tool. Therefore, the first objective of the BSC would be to measure the impact of maintenance on the effectiveness of the facility to identify technical and organizational problems. They subsequently make it possible to monitor accumulated progress as a result of the implemented measures.
BSC has many more benefits and can be used as arguments to justify the added value of maintenance when linked to business management and to secure the necessary budgets. They also serve to motivate staff to make precise assignments, qualified, and reasonable production objectives.
The technical-financial indicators associated with the Balanced Scorecard (BSC), Economic Value Added (EVA), Return on Assets (ROA), Return on Capital Employed (ROCE), and Asset Turnover (AT), Return on Investment (ROI), Mean Time to Fail (MTTF), Mean Time to Repair (MTTR), Availability, Utilization, Reliability, Mean Time Between Failures (MTBF), appear as the best measures of financial value creation in a company. According to economic doctrine, a company adds value when the profit obtained is sufficient to cover all costs, including capital costs.
All these indicators are sensitive to variations in assets invested in the production process, whether as operating expenses, capital, or related to fixed assets. Typically, technical-financial indicators are applied in the scope of Operational Units, where maintenance expenditures may be reflected as part of operating costs, capital investment, or even as an extension of the life of fixed assets.
THE IMPROVEMENT PROCESS Improving asset management in maintenance can be visualized as a control system where everything must be carefully controlled and optimized. Just as other functional areas in process control, maintenance management has a direct impact on the execution of overhauls.
The process involves defining and evaluating indicators. Some measure the facility's performance (availability, costs, reliability, utility, safety, people, quality, etc.), while others are specific to maintenance activities (percentage of hours spent on preventive maintenance, outsourcing costs, etc.). Delayed measurement of labor costs and distribution, logistical resources used (materials and human resources), organization, and methods.
However, some activities are not easily measurable, and their qualitative evaluation is done through questionnaires and/or interviews that are useful for obtaining objective qualitative information based on indicators.
It is also worth noting that in current practice, some dissatisfaction may arise when Benchmarking is applied in some areas of the plant, fearing it could escalate to a level that might distort differences in industrial context, indicator definitions, operating conditions, technologies, etc. Furthermore, good practices generally need to be adapted to allow for diversity in the organization and functional culture. Comparing indicators from one site to another should be viewed as an experience rather than a ranking for improving maintenance business.
Finally, it must be stressed that adapting Maintenance activities to market demands, although it is the key to their effectiveness and success, is something to be evaluated.
BEST PRACTICES "BALANCED SCORECARD SYSTEMS" The implementation strategy, Figure 3, represents a new dimension of management control, as it not only focuses on technical and financial indicators but also recognizes the existence of other non-financial factors and indicators that influence the value creation process, such as company process management, and focuses on the basis of achieving proposed objectives.
A periodic balance of weaknesses and strengths is incorporated, a comparative and interorganizational analysis is used, and Balanced Scorecard Systems are employed as mechanisms for asset maintenance management control. The management control strategy aims to highlight the interrelationships between human processes and the control system. Management control processes and systems are characterized by five aspects derived from previous control processes.
Set of control indicators that allow orienting and subsequently evaluating each department’s contribution to the organization’s key variables. Predictive model that allows estimating (a priori) the expected outcome of each manager’s activities. Objectives linked to indicators and the organization’s strategy. Information about the behavior and results of different departments’ performance. Evaluation of the behavior and results of each person and/or department to enable decision-making. Figure 2. Balanced Scorecard Systems Strategy f2
f2
4.1. Balanced Scorecard Systems as a Business Management Tool
The Balanced Scorecard Systems framework links long-term objectives with short-term actions. Combining financial measures that indicate past actions and the results of operational improvements (internal processes, client satisfaction, people motivation, systems capabilities) and their future financial results is expected. The BSC aims to channel the energy, capabilities, and specific knowledge of people at all organizational levels towards achieving long-term strategic goals.
The application of a BSC to the maintenance function contributes significantly to achieving the following objectives:
Link the maintenance strategy with the business strategy and enable communication with the rest of the organization. Integrate financial and non-financial indicators as part of the maintenance function's control. Develop continuous improvement initiatives linked to the processes implemented to maximize plant performance. Contribute to the development of management leadership by creating measures for implementing strategic initiatives in maintenance. 4.2. The 5 Perspectives of Balanced Scorecard Systems
The main challenge when designing a BSC is finding a balance between the financial and non-financial perspectives and the short- and long-term objectives. The different perspectives must be perfectly aligned and linked through cause-and-effect relationships to ensure that improvements in one area lead to the desired results in another.
The most common perspectives used in Balanced Scorecard Systems are:
Financial: Measures such as revenue growth, cost reduction, and return on investment (ROI) are used to assess the impact of the organization's actions on its financial performance. Customer: This perspective focuses on customer satisfaction, retention, and market share. Measures include customer satisfaction surveys, repeat business rates, and customer loyalty. Internal Processes: This perspective examines the organization's internal processes and their efficiency. Measures include process cycle times, defect rates, and process innovation. Learning and Growth: This perspective focuses on the organization's ability to innovate, learn, and improve. Measures include employee training, skill development, and organizational culture. Asset Management: This perspective looks at the management of physical assets and their impact on the organization's overall performance. Measures include asset utilization, maintenance costs, and equipment reliability. Figure 3. Balanced Scorecard Systems Implementation Strategy f3
CONCLUSIONS The Balanced Scorecard Systems framework offers a comprehensive approach to performance measurement that goes beyond traditional financial measures. By integrating financial and non-financial perspectives, organizations can gain a more holistic view of their operations and make more informed decisions. The application of BSC to asset maintenance management can lead to significant improvements in plant performance, customer satisfaction, and overall business success.
To fully realize the benefits of Balanced Scorecard Systems, organizations must carefully select and implement appropriate indicators, involve all relevant stakeholders, and ensure that the BSC is aligned with the organization's overall strategy. Continuous monitoring and adjustment of the BSC are also necessary to ensure that it remains relevant and effective in a constantly changing business environment.