ISO 55000: Ticking a box or bottom line value driver?

Understanding the importance of Asset Management (AM) and where ISO certification fits into the chain is critical to ensure a sustainable bottom line. Not only is this know-how important, it is essential that accessors with an AM track record are employed with the necessary accreditation.

It is a common occurrence for organisations to chase ISO 55000 certification for the sake of marketing prestige or to comply with their clients’ requirements. It is easy to mistake ISO certification as the end goal, instead of seeing it as a milepost midway on the Asset Management (AM) roadmap to sustainable bottom line value add. In line with this, there is a concerning trend currently where a few consulting ventures offer ‘ISO 55000 Certification’ without the needed accreditation or by using assessors that do not have a proven AM track record. This is one of the topics currently under focus in AM circles such as the Southern African Asset Management Association (SAAMA) and the GlobalForum on Maintenance and Asset Management (GFMAM).

To be clear, it needs to be stated that ISO 55000, as it is commonly known, refers to ISO 55000:2014 and provides an overview of asset management, its principles and terminology, and the expected benefits from adopting asset management.

The ISO 55000 series comprises of three standards. ISO 55000 provides an overview of AM and the standard terms and definitions, while ISO 55001 is the requirements specification for an integrated, effective management system for asset management. ISO 55002 guides the implementation of such a management system with practical examples.

In 2015 the South African Bureau of Standards (SABS) adopted ISO 55000 as a national standard (SANS 55000:2015), but it is important to note that SANAS (South African National Accreditation System) is still busy developing the accreditation programme for SANS 55000 and as such cannot accredit a South African based assessing entity, known as a certification body, yet. In short, you need to verify that the entity assessing you for ISO 55000 certification has the proper accreditation, otherwise, the certificate will have no standing. It is, however, possible for a certification body that is accredited abroad to certify a South African based company, but usually it proves to be a costly exercise.

The next element that you should consider before embarking on the certification process; the individual running the assessment to obtain certification. It is possible for an assessor to certify against ISO 55000 even if he/she is not an AM expert, but has the needed ISO assessment credentials. This means that the true value that can be derived from AM is not necessarily tested, but rather the compliance against the systems implied by the standard.

Although ISO 55000 is not merely focused on the management system, many companies reduce it to a systems approach and even an Enterprise Asset Management (EAT) software approach. The software a company uses is an enabler and most definitely not the complete solution. Many companies end up going through a very rigorous software selection process, or maybe even various iterations of this process, but spend far less time on maintaining the needed skills, business processes and discipline to generate the actual value from AM, while using the EAT software as a support tool. As a result, the software often gets blamed when the true problem lies in the way that the company runs its business and in particular the human effect on the value add process.

I keep on referring to the value of AM and thus it’s probably prudent to quickly pause and unpack it slightly. The quickest reference would be a document that was published by GFMAM called “The value of Asset Management to an organisation”. This document refers to ISO 55000 and describes the benefit of AM as enabling organisations to realise value from the use of assets in the achievement of their organisational objectives. What constitutes value will depend on these objectives, the nature and purpose of the organisation, and the needs and expectations of its stakeholders. AM is important to organisations as effective control and governance of assets is essential to realise value to achieve the desired balance of performance, cost and risk. The potential for value creation is thus linked to the AM maturity of the organisation and hence the link to ISO 55000 certification.

Key to communicating the potential value of AM is the detailed understanding of asset related risk.

In general, what actually creates value are the value drivers, which can be any strategy, system, process, asset or another element of asset management that affects performance, cost and risk. Value drivers are normally supported by value enablers and distinguishing these from another will assist an organisation to prioritise and focus on the correct areas. The key is to achieve the optimum balance between performance, cost and risk in pursuit of achieving the organisational objectives. It is important to note that ‘balance’ must also be seen in the context of time, where short and long-term objectives might differ and thus have an effect on the required ‘balance’.

Key to communicating the potential value of AM is the detailed understanding of asset related risk. AM investment decisions often get confronted by the dreaded question from the organisation’s CFO: “So what is the Return on Investment (ROI) for this AM project?” It is important to understand that AM implementations typically lead to additional CAPEX and OPEX expenditure in the first year or two of the project, hugely depending on the maturity of AM in the organisation and the condition of the actual assets. Once the balance between asset associated performance, cost and risk has been achieved the organisation should see big relative savings to the way it ran before (again depending on the level of maturity). Often organisations try to answer the ROI question with the potential savings that will be made and in most cases it is sufficient to justify the initial project stages, but it is potentially damaging to try and justify the continued cost of an AM programme using year on year savings.

This could lead to a point where the engineering team is forced to reduce cost beyond the point of balancing the performance, cost and risk equation. As the AM programme starts maturing, it has to use the potential risk amount that is being managed as the base for justifying the cost associated with continuing the programme.

Let’s get back to the AM resources and their skills level. To generate sustainable bottom-line value for your organisation through the implementation of an AM approach, it is important that you use reputable and skilled resources. Similarly, you want to ensure that the assessor that conducts the ISO certification is skilled in the field of AM to properly assess your ability to generate sustainable value from AM as opposed to having the needed management systems in place and not necessarily performing to its optimum.

About the author
Johannes Coetzee, is the President of the Southern African Asset Management Association (SAAMA), Vice-Chairman of the Global Forum on Maintenance and Asset Management (GFMAM), Non-Executive Director of Martec, and Executive at Pragma Africa.

First published in the July 2017 edition of ESI Africa magazine.