In his perennial best seller Rich Dad, Poor Dad, Robert Kiyosaki made his rule one very clear: “You must know the difference between an asset and a liability, and buy assets.” (p. 58)
Mr. Kiyosaki’s book is not a maintenance or reliability book, but it perfectly illustrates the relationship between assets versus liabilities; and income versus expenses. Consider the next series of figures shown to animate the flow of ‘money’ through an organization, your organization.
Figure 1-4 Assets make income
Figure 1-5 Income is used to pay the expenses
Figure 1-6 After expenses, liabilities are serviced
Figure 1-7 The result is profit
Using information gathered from Figures 1-4 through 1-7, complete the following sentences:
| Only make income |
| Companies take that income and pay their |
| After that is paid, they service their |
| The result is |
I’m extending an author’s prerogative and letting you know that the answer to the last fill-in-the-blank sentence is ‘profit.’ Companies take that profit and reinvest it back into the company. They buy more assets (to quote Kiyosaki, “buy assets”) to make more income. Remember this: only assets make income. Highlight, circle, and cast that last sentence in stone.
Aside from the clear circular reasoning that it is only the assets that can contribute to the fiscal health of the company, it bears mentioning that rolled into the definition of the ‘success of a company’ is the idea that it is through the assets that we also move in the direction of satisfying the corporate goals and objectives. The presumption is that some of these high ideas are fiscal in nature.
Keep that in mind and consider that in the ISO 55000 standards, an asset is any item that has potential or actual value to an organization. The value will vary based on the organization and, what you will come to appreciate later, the organization’s stakeholders. An asset doesn’t necessarily have to be tangible or financial in order to have value or potential value.
A colleague of mine once told me that in his opinion everyone in an organization owes their paycheck to the smooth and reliable operation of the capital equipment of the enterprise. This interpretation lends itself to all facets of industry. A significantly important asset in your company, in some small way, determines if you get paid or not, and oftentimes how much. Extend that idea out and you can see that the operation and continued operation of our plant and facility assets determine where we live (socio-economic), what kind of car we drive, and even where our kids go to college. That is or should be a powerful thought.
I borrowed this idea, and a central tenet of Total Productive Maintenance (TPM), to make this observation in my first book: “Everyone in the organization has, as a responsibility for their role, an understanding that their work should be profitable to the company. On the subject of equipment reliability, everyone has either a tacit or implicit responsibility to make sure the operation runs smoothly and reliably. When capital equipment is involved, everyone is responsible for equipment reliability.” (Ross, p. 49)
Let’s put that idea to the test. In Table 1-4, list the same plant or facility asset you listed in Table 1-2. Get personal now and list one way that you personally ensure that the listed equipment runs reliably. Finish out Table 1-4 by recording how the company benefits from the reliable service of this asset and two examples of the negative effects your fellow associates might suffer if the asset was not running reliably. An example of that last request might be that associates are temporarily laid off without pay while the plant is temporarily shut down.
Table 1-4 Our Role and the Benefit of Reliability
| List one capital asset: | |
| How do you ensure reliability? | |
| How does the company benefit from this asset? | |
| First way an associate suffers: | |
| Second way an associate suffers: |
This idea of being connected to the asset through a shared responsibility is the crux of the asset management concept. Maintenance can’t do it alone, and production and other agencies need to be other cogs in the wheel of accountability.
There was a party game that ran through the United States some time ago called “Six Degrees of Separation.” The idea was that everyone in the U.S. was connected to the actor Kevin Bacon through a series of networking by no more than six degrees, or nodes.
For example, I know Bill, who has a brother in Los Angeles who is a police officer. Bill’s brother Rick worked on a crowd control assignment in downtown L.A. on a film shoot. The actor on set that day was Robert Sedgwick, who is the brother of actress Kyra Sedgwick. Kyra Sedgwick is married to Kevin Bacon.
Bill-Rick-Robert-Kyra-Kevin. Five nodes or degrees.
I was at a major Fortune 50 company in the Northwest years ago teaching a strategic maintenance class and for lunch we all went to the cafeteria. We were at world headquarters, so the spread was quite impressive. I was in the hot entrée line and noticed that the young man serving the main entrée was named (you guessed it) Kevin Bacon. My response was of course, “no way” Way.!
I asked if I could take a picture with him and send it to my family. Now, thanks to this chance encounter, my entire family is one or two degrees away from (a) Kevin Bacon. Ok, not the KB.
If in some crazy, arbitrary way, we are all connected to someone as random as Kevin Bacon by no more than six degrees, can’t we somehow also be purposefully connected to the reliability of the very ‘thing’ that generates our paycheck?
We are connected to our equipment and we have real reason to have great expectations from the continued service of our machinery.
Assets are expected to perform at a predictable level to ensure a predictable return. In the development of our capital assets, there is an expectation for a return on investment, or ROI. It is very likely that through some acceptable financial and production calculations a company can estimate with a degree of precision exactly how long it will take to make its money back on new equipment purchases. These calculations include assumed levels of productivity and also should account for operating and maintenance costs. These calculations result in an ideal value and may include some contingency planning.
The projected value of an asset to the company, for its ability to produce the product or service, is primarily how an asset contributes to the success of a company. The proper operation of an asset, not only now but in the future, is what quite frankly pays all the paychecks in your organization. Does it seem to you that people know that?
Keep in mind that it’s