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Results

Within a year, the new ways of working were firmly in place. The mind-set and expectations of staff were radically different from those seen just a year earlier. After three years, using an international four-quartile benchmarking scale, the maintenance performance of the refinery moved up two quartiles, and thus became a leader.

Learning Points

Importance and Power of Benchmarking

With the help of benchmarking, the new GM quickly came to realize that one area with poor performance was maintenance. The benchmarks he used were developed by an international petroleum company, also one of the partners in this refinery (see Chapter 8 for additional details). These were used to compare the performance of its numerous child companies all over the world. That maintenance performance needed improvement will be clear from the following popular benchmarking factors:

• Annualized Total Maintenance Cost (TMC) as % of Total Operating Cost, excluding fuel.

In a petroleum refinery, most cost elements are independent of the activity level, i.e., the throughput. These cost elements add together to account for the fixed cost. Of the elements which are dependent on activity level—accounting for the variable cost—the cost of fuel is the most significant. Others, e.g., process chemicals, have a negligible effect in the context of this benchmark. Therefore, if the cost of fuel is removed from the total, the proportion that various cost groups such as production, maintenance, technology, and administration form of the total is nearly constant from year to year. The proportion of the annualized TMC should be about 30%. The GM noticed that in this refinery it was about 45%.

• Annualized TMC as % of Asset Replacement Value.

As the replacement value of an asset varies with inflation and other market forces, so does the cost of maintaining that asset. This ratio, therefore, is quite a good indicator of maintenance effectiveness. When the new GM arrived, this ratio for the refinery was 2.5% as against 1.4% for an average performer and 0.9% for the best performers. [1]

The lack of focus on maintenance was not hard to recognize. I asked the refinery economist to relate the direct and indirect effect of maintenance on the refinery bottom line. When I revealed these numbers to the shop floor level, maintenance suddenly acquired a new glamorous high profile. This also led to maintainers talking to operators on equal terms.

Providing Leadership and Expertise

It is not enough to have a group of competent people in an enterprise. Their efforts will be wasted unless there is a leader with relevant expertise who can give direction to their individual efforts. High-visibility direct contact with the rank and file, easy accessibility to them, and leading from the front speed up the rate of progress towards the goal. Daily walks through the plant, shop- floor meetings, an open-door policy, and one-on-one debates with the rank and file help re-establish the focus.

Principles

Leaders need to understand the true state of affairs and, when necessary, have the courage and energy to take corrective actions. Lack of focus is a fairly common problem and sometimes happens over time due to the plethora of emerging ideas, projects, or external pressures.

The first step is to take stock and unambiguously define the purpose of the enterprise and the philosophy guiding its conduct. Good communication will ensure that every one concerned with the enterprise understands the issues.

  • [1] Maintaining Focus Keeping an enterprise or an initiative in focus is a major factor for its success and good performance. It has been experienced over and over again that an initiative or enterprisewill fail unless it is kept in focus by people responsible for it. This focus is often expressed as ' keeping your eye on the ball.' Focus is a top-down thing. Unless the top management sends clear signals of interest, the organization below will not respond. In this refinery, the glamorous thing was to build newplants and then commission them, thus being in the limelight. The mundanetask of maintaining the existing and the newly-acquired assets was out of focus—and rightly so because there was no reward for good performance inmaintenance.
 
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