Ryan's Thoughts

Ryan’s Thoughts: Maintenance is Actually a Production and Revenue Machine

Ryan Chan

Ryan’s Thoughts

”Ryan’s Thoughts” is a blog series created by UpKeep CEO and Founder, Ryan Chan, where he will be sharing his insights and knowledge of the maintenance and reliability world.

Stop looking at Maintenance as an Expense

Maintenance today is often seen as a necessary evil by most businesses and would choose not to do it if they could. Instead, they do it because they have to and someone told them they should or “you will pay the price for it later”. In that sense, we’ve been conditioned to think of maintenance as an expensive cost-prevention tool and as an insurance policy for all the assets that generate revenue for the business today.

This perspective, however, creates conflict. Operations and maintenance teams tend to clash. There is an inherent challenge where one team wants to keep things running for the day’s productivity and revenue. Meanwhile, another team wants to shut the production line down for maintenance and longevity. Two different sides of the same coin, is it ever possible to get them to meet? Well, to anyone reading this I’ll let you in on a secret: maintenance is actually a production and revenue machine.

Maintenance is an Investment

Most teams don’t see maintenance as a center for productivity and revenue. Consequently, teams have misaligned goals and begin to infight (similar to what’s typically the case between ops and maintenance/reliability). If businesses don’t change their perspective on maintenance now, they will optimize for the wrong metrics and lose revenue.

I dove into maintenance KPIs and found two things at odds. Here’s an article where Hedding emphasizes that 30% of maintenance work hours should be spent on performing routine maintenance, whereas this article emphasizes that operations should maximize uptime for revenue and production attainment. Naturally, revenue and production from assets are going to lessen the more time is spent on maintaining these assets and shutting them down for maintenance.

With that said, these goals seem to be at odds. The important question to answer now is: how much is that misalignment costing us? Here’s research by the Harvard Business Review & Detecon Consulting that shows a glimpse of the millions being lost every year because of misaligned goals:

That needs to be alleviated now. The solution to misalignment is alignment. But how do we find a resolution to a problem that’s persisted since the inception of the maintenance and reliability industry?

The Answer: Grounding your teams with a North Star goal (Objectives and Key Results)

I believe the solution is to create a system of “objectives and key results”, also known as an OKR system. The OKR system has been making waves in the tech industry, but has yet to ripple into the maintenance and reliability industry. The entire goal of this system is to align incentives through cascading goals that support one north star objective.

Right now the maintenance world thinks of goals from the ground up. Teams measure preventative maintenance compliance, number of work orders completed, and mean time between failure as numbers to hit to signify successful maintenance. Here, we are celebrating inputs and not outcomes.

Establishing an OKR system flips this methodology on its head. The maintenance industry would have to think of a singular goal and cascade from there. In this situation, maintenance teams would be measured on an “objective” like production, a top-down approach. Here, we celebrate outcomes.

With this methodology, all teams within the company would be unified under a single north star goal, like “production and revenue”. From there, individual goals of different departments will be set to reach that outcome. For instance, a maintenance team would be given individual goals, like tracking uptime versus downtime. While a production team could be focused on measuring materials cost per unit produced.

In theory, these goals should contribute, in tandem, to the overall goal. If equipment is maintained, it should be consuming materials more efficiently. On the other end, if one machine is consuming more than another, it’s a signal that the maintenance team should inspect it and see what could be done to boost production. The takeaway here is that these key results are measured based on how they are contributing to the overall goal: production and revenue (or any north star goal you decide on). In an OKR system, no objective stands alone.

The Impact of a North Star Goal – Why do OKRs Work?

According to the research by Detecon and the Harvard Business Review cited above, the average company is expected to accrue a cost of failed projects of $11.8m per year, and millions in cost accrued from employee churn. Their research finds that this can be consistently alleviated by orienting goals around outcomes: alignment. When teams are not fighting over goals, these findings suggest that employees are happier, more productive, and retainment increases. In the process, this generates more revenue for your company.

Essentially, alignment alleviates petty conflict and supports successful projects. That in turn, increases productivity and revenue. If a team is aligned together heading on a path toward a single goal, then every single team/department understands the impact that they each have to reach that goal at the highest level. There’s a compass now. Consequently, this also gants teams more autonomy and clarity to make tough decisions more efficiently.

Let’s say that a team finds that they have to decide that they have to sacrifice an hour of productivity for advanced employee training. If we’re not measuring teams by their daily goal, it’s easier for management to sacrifice that time knowing that it will contribute to their overall production north star goal for the year.

How do we establish an OKR system?

Start today. Gather your team, put your business hat on, and ask everyone collectively, “If we had to do ONE thing, have ONE goal this entire year and nothing else mattered, what would that one goal be?” That is your north star goal and everything else should be built around that.

From there, sit down with your teams and think about what each department needs to accomplish to reach that north star. Set those objectives and cascade individual goals from there. Afterward, analyze key results weekly, quarterly, and yearly. Adjust throughout the year and see where you end up at the end of the year. From there, set a new north star or adjust the new one and start the process over.

If you want to take a deeper dive, here’s a Beginner’s Guide to OKRs.

Final Thoughts

In hindsight, measuring maintenance based on how well they can hit 100% PM compliance while measuring operations based on how well they can hit 99%+ uptime should have led us to believe that it would 100% result in conflict – you can’t have both to their fullest. What teams can do is optimize. Set one goal for all teams to hit, let your quarterly/weekly/daily goals cascade from there.

Today, I believe businesses are often celebrating the wrong things. Too often we celebrate the inputs rather than the outputs and the hours worked instead of the outcomes and milestones achieved.. Ultimately, what we should be focused on is celebrating the outcomes, like the output of critical assets. From there, the focus should be on optimizing the key results that led to that.

For example “We hit our goal of X output, these are the objectives each department accomplished to get us here: X% pm compliance, X% uptime, etc… What do we need to tweak to hit our next output goal of Y?” It’ll be different for every team, but that’s the point: this system is a balancing act.

The Caveat

One possible downside is that this system requires consistent trial and error to test how each individual key result is contributing toward the greater whole. Teams will have to figure out this question, “How do we optimize short-term vs long-term goals?” There’s a balance between doing both, you can’t put all your eggs in one basket or you’ll tip the scale. It has to be somewhere in the middle.

With that said, the OKR system is great for annual goals. The method involves setting an annual north star goal and working down from there. The goal tracking lasts long enough, where a team has a full year to build a plan, but also short enough where it’s not stretched out over 10 years, because who knows what curveballs could happen then – yes, this is a dig at 2020, a year that subverted almost all of our expectations.

Community Thoughts & Inspirations

I realize that I notated “final thoughts” two sections ago, but I wanted to have a section dedicated to a highlight a thought from our maintenance & reliability community. Here’s some really engaging food for thought from @Erik Hupjé:

Maintenance has a critical role to play in ensuring the availability and reliability of production capacity. And in doing so it directly influences the bottom line both as a major cost, but also by enabling higher production and therefore higher profitability. Couple of problems (1) not enough senior leaders understand maintenance or reliability (2) not enough maintenance & reliability leaders understand business and can express the contribution makes to the bottom line (3) maintenance is often not efficient, both in terms of relatively low productivity as well as wasteful PM programs and (4) in most cases you can cut maintenance without getting penalised in the short which means that in a world driven by quarterly share market targets maintenance can be an easy target. But the thoughtful leader (not enough of those!) will realise that those businesses that simply cut maintenance and don’t invest in reliability never become top performers. As Ron More said “A reliable plant, is a safe plant and a cost-effective plant”

Here’s the link to the post it’s from, I really appreciate the engagement from the community – let’s keep this going!

About the Author

Ryan Chan is CEO and Founder at UpKeep Maintenance Management. He is a Chemical Engineer from UC Berkeley and was named one of Forbes 30 Under 30 for Manufacturing in 2018. Ryan started UpKeep out of passion and frustration by the lack of mobility in today’s maintenance management software. UpKeep has now been deployed to over 1,000 businesses and is a leader in mobile-first maintenance management software.

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