8

Definition of Maintenance Objectives and Strategy

8.1 Introduction
The Balanced Scorecard (BSC) proposed by Kaplan and Norton [1] is a model that
translates a business unit's mission and strategy into a set of objectives and
quantifiable measures built around four perspectives:

1. Financial (the investor's point of view);

2. Customer (the performance attributes valued by customers);
3. Internal processes (the long and short-term means to achieve the financial
and customer objectives); and
4. Learning and growth (capability to improve and create value).

It directs managers towards focusing on a handful of measures that are most

critical for the continual success of the organization. The BSC has been
implemented in a number of major corporations in the engineering, construction,
microelectronics and computer industries [2]. Experience in these pioneering
organizations indicates that the Scorecard will have its greatest impact on business
performance only if it is used to drive a change process. Countless times the BSC
has allowed the development of strategic management systems that link long-term
strategic objectives to short term actions [3].

8.2 BSC and Maintenance

The BSC approach provides a holistic framework for establishing performance
management systems at the corporate or business unit level. When the approach is
applied to managing the performance of maintenance operations, a process
involving the following steps can be followed [4]:

1. Formulate strategy for the maintenance operation. Strategic options such as

developing in-house capability, outsourcing maintenance, empowering
102 The Maintenance Management Framework

frontline operators to practise autonomous maintenance, developing a multi-

skilled maintenance workforce, and implementing condition-based
maintenance are considered and decisions made through a participative
process;
2. Operationalize the strategy. The maintenance strategy is translated into
long-term objectives. The relevant Key Performance Indicators (KPIs) to be
included in the BSC are then identified and performance targets established.
The measures are designed to pull people towards the overall vision. They
are identified and their stretch targets established through a participative
process which involves the consultation of internal and external
stakeholders, senior management, key personnel in the operating units of
the maintenance function, and the users of the maintenance service. This
way, the performance measures for the maintenance operation are linked to
the business success of the whole organization;
3. Develop action plans. These are means to the ends stipulated in the targets
established in step (2), taking into account any necessary changes in the
organization's support infrastructure, such as structuring of maintenance
work, management information systems, reward and recognition, resource
allocation mechanisms, etc.;
4. Periodical review of performance and strategy. Progress made in meeting
strategic objectives is tracked and the causal relationships between
measures are validated at defined intervals. The outcome of the review may
necessitate the formulation of new strategic objectives, modification of
action plans and revision of the scorecard.

Strategic Measures Targets Action Perspective

Objectives (KPIs)
Financial

Customer
Mission
& Internal
Strategy Processes

Learning &
Growing

Figure 8.1. The Balanced Score Card

 Definition of Maintenance Objectives and Strategy 103

8.3 Proper Selection of Maintenance KPIs

KPIs selection is an important decision making process that may have many
potential implications. In order to reinforce positive implications of our
measurement system and to reduce the negative ones, a set of suggestions [5] are
as follows:
The role of KPIs should be forward-looking prediction and insight, rather
than backward-looking record keeping to forward-looking prediction and
insight;
Use KPIs to provide feedback, build understanding and encourage intrinsic
motivation, rather than as a tool for top-down management control;
Focus on systematic thinking, fundamental structural change and
organisational learning, instead of mindless target-setting, continual fire-
fighting or the rigorous allocation of blame;
Make KPIs become a framework for everyone to understand and align with
the top-level objectives of the organisation, and enable them to participate
actively and enthusiastically in continuous improvement.

Strategic Measures Targets Action Plans Perspective

Objectives (KPIs)
Improve - Maintenance - Current: 10% - Ensure proper Financial
maintenance cost (%) per - Target: 7% data acquisition
cost unit produced - Criticality
effectiveness analysis
- PM compliance
Improve - MTBF - 20% MTBF - RCM Program Customer
equipment - MTTR - 10% MTTR - Improve
availability maintenance
Mission materials
& management
Improvement - ISO 9001 Maintenance - Develop all Internal
Strategy of compliance certification before remaining
maintenance 31.12.2007 procedures and Processes
process & technical
documentation specifications
Ensure - Training level Definition of the - Definition of the Learning &
suitable per each precise training level per
training levels maintenance maintenance Growing
maintenance
to fulfill the level training level per level
mission maintenance level - Training level
assessment

Figure 8.2. The Balanced Scorecard for maintenance. An example

Taking into account these suggestions, KPIs should be developed in areas where
improvement is desired. Each KPI should have a targeted performance level. The
KPI and target should, where possible, be specific, measurable, achievable (but
require stretch), realistic and time-based (i.e. can track performance improvement
over time). The frequency at which the KPI is measured will be determined by the
realistic amount of time that it would be expected for a corrective action to have an
104 The Maintenance Management Framework

impact on the performance level. Thus, one does not want to measure and analyse
the parameters when there is no change from one measurement to the next, but this
needs to be balanced against not regularly measuring those parameters that can be
out of control for long periods. Time, cost and resources necessary to develop,
maintain and manage the KPIs must be considered as this will also determine how
many robust KPIs need to be used.
In Figure 8.1 we present an example of BSC development for a certain
maintenance department. The mission of this department is to provide very high
value oriented assets maintenance; non competitive maintenance sections could be
later outsourced. With that purpose, the mission has been translated into action
plans according to the table in Figure 8.2.

8.4 From Key Performance Indicators to Functional Indicators

Let us now look at the table within Figure 8.2. The financial perspective key
performance indicator is “maintenance cost of unit produced”. With this KPI we
are trying to find out how we are doing with respect to achieving our goals in the
area of cost effectiveness [5]. Notice that we may have a range of additional
metrics in the areas of maintenance planning, scheduling, quality or learning,
supporting this indicator (see Figure 8.3). Therefore, if we notice a problem in cost
effectiveness, we can easily drill down to see what else is going on. In the real-
world, more functional level indicators would even support these further.

Maintenance
Cost Effectiveness

Maintenance cost (%)

per unit produced (7%)

Maintenance
planning Quality Learning
and scheduling

PM Accomplishment
Data integrity
Compliance of criticality analysis
(95%)
(98%) (Every 6 months)

Figure 8.3. From KPIs to functional indicators

 Definition of Maintenance Objectives and Strategy 105

Another example could be the development of performance indicators to improve

time to repair (MTTR) through a better maintenance materials management
process, according to Figure 8.2. The design of maintenance indicators could be as
in Figure 8.4 where the assessment of the maintenance support program is obtained
through audits to suppliers, suitable spare parts levels design, improved
maintenance materials requirements planning and better maintenance planning.
Performance indicators to monitor these action plans could be: supplier lead time
and lead time variability, spare parts service level, spare parts turnover and urgent
purchase orders released, respectively. These functional indicators allow drilling
down further into the real causes of the problems [6].

Maintenance
Materials Mngmt.
Performance

Average delay
due to lack of materials
(% MTTR - 50%)

Spare parts
Supplier Spare parts Maintenance
requirements
assessment levels design planning
planning

- Average Urgent purchase

Service level Stock turnover
procurement delay orders released
(95%) #10
(x days). (5%)
- Delay variability
(y days)

Figure 8.4. Indicators to improve maintenance materials management performance

Note that when drilling down in maintenance KPIs to obtain functional

performance indicators, it is important to make sure that all action plans within the
maintenance scored card are reasonably taken into account.
In a third example we show possible indicators to consider when measuring
performance of an action suggesting the implementation of RCM to ensure time to
repair and equipment reliability improvements. Indicators in Figure 8.5 are
examples of those suggested by Wireman [7] to help monitor RCM. In our case,
extra attention is paid to the maintenance effectiveness through the RCM program.
Therefore, we will follow the permanent assets criticality assessment and root
failure cause analysis, together with the preventive maintenance effectiveness and
the prevention of maintenance activities. These actions will be monitored through
the follow-up of the number of critical assets, the number of repetitive failures for
those assets, the total number of failures and the reduction in preventive
maintenance tasks.
106 The Maintenance Management Framework

Performance
of the
RCM program

Availability, MTBF and MTTR

Preventive and Preventive

Criticality Root cause failure
predictive maintenance audit
analysis analysis
maintenance design and re-design

Effectiveness of Reduction in # of
Number of selected Number of preventive
preventive maintenance.
critical assets (x%) repetitive failures maintenance
# Failures tasks (20%)

Figure 8.5. Indicators to improve RCM program performance

8.5 References
[1] Kaplan RS, Norton DP, (1992) The Balanced Scorecard - measures that drive
performance. Harvard Business Review, 70(1): 71-9.
[2] Kaplan RS, Norton DP, (1993) Putting the Balanced scorecard to work. Harvard
Business Review, 71(5): 134-42.
[3] Kaplan RS, Norton DP, (1996) Using the Balanced Scorecard as a strategic
management system. Harvard Business Review, 74(1): 75-85.
[4] Tsang AHC, (1998) A strategic approach to managing maintenance performance.
Journal of Quality in Maintenance Engineering, 4(2): 87-94.
[5] Meekings A, (1995) Unlocking the potential of performance measurement: a practical
implementation guide. Public Money and Management, October-December: 5-12.
[6] Mather D, (2005) The maintenance scorecard. New York: Industrial Press, Inc.
[7] Wireman T, (1998) Developing performance indicators for managing maintenance.
New York: Industrial Press, Inc.