Recently, Dr. Monique Beedles and a colleague conducted research on business objectives as they relate to asset management. The subsequent abstract – Defining Organizational Performance: An Asset Management Perspective – will be presented at this year’s AMPEAK Asset Management Conference. The following interview was conducted in relation to her recent research…
Dr. Monique Beedles is a Principal Strategy Advisor at Teak Yew and holds a PhD in Corporate Strategy. She has worked with some of Australia’s leading organisations, is the author of Pivot Point: Making the Decisions that Matter in Business, and is a frequent speaker at conferences, workshops, and industry events.
Could you give us a background of the project’s purpose and intent?
Our goal for this project was to look at the link between company performance and asset management. From our research around ISO55000 and asset management in general, in most literature we observed, people focus on measures relating only to asset performance and not to company performance. Our project was to measure physical asset management as it relates to overall company performance.
How did you go about the research process?
Because we wanted to look at companies that are asset intensive, we started with the top 100 all-industrials as published by the Australian Financial Review. We excluded some companies that didn’t generate their activity from physical assets (superannuation funds, banks, etc.), and in total we researched approximately 60 companies. By studying ASX (Australian Stock Exchange) -listed companies we could make some assumptions as to their objectives. Of course, we couldn’t assume all companies had the same strategies or objectives, but we know ASX-listed companies have a requirement to provide a return to their shareholders. That’s why we chose not to study Government entities or private companies.
Overall, our list of companies researched had a common set of parameters and reporting requirements, which gave us some consistency in the data. For these 60 companies, we studied their annual reports over a five year period and focused on two aspects:
1) Their growth in equity.
2) Their operating cash flows.
Normally, research would look at the companies’ assets as a whole, but we looked at their property, plant, and equipment as an indicator of their physical assets to see what sort of returns they generated.
Did you have any expectations or hypotheses going into the research?
This first stage of the research was exploratory. We didn’t have a prediction about what we might or might not see, but we wanted to observe the data and analyse the results from there. We didn’t pre-empt a particular hypothesis, but instead wanted to see whether our measures were indicative of company performance from an asset management perspective by choosing to analyse measures based on standard indicators of public company performance.
Looking at the data, a majority of the companies that performed well in both equity growth and operating cash flows were service companies (airlines, mining contractors, etc.), could you elaborate on why these companies, in particular, performed so well?
Obviously we could only speculate at this point because we haven’t examined those companies in detail, but what we hypothesise is that those companies are value-adding to their assets.
Service companies generate value from assets, in that, they maximize the way their assets are used. Their strategies are not purely about whether their assets are reliable, available, utilized, etc., it might be one of their strategies, but each singular parameter, on its own, does not comprise overall business outcomes. For example, someone could be using an asset 24 hours a day, showing a high-utilization rate, and still not generate good cash flow returns from it.
Business performance is dependent on a lot of factors, but what we tend to do in asset management is focus on singular engineering parameters, rather than on the overall business outcomes, which is what we wanted to focus on for this particular project – a larger business perspective.
What can an engineer or asset manager expect to gain from attending your presentation at the AMPEAK Conference?
At the conference, I hope to communicate our research concepts in a way that lets everyone understand what we’ve gathered and how it impacts asset managers. Our purpose is to generate discussion around organizational objectives and asset management. We’re not saying we have all the answers, as this is the exploratory stage of our research, but I hope someone will walk away from the presentation asking, how should we think about our performance? How should we measure it and improve it?
I hope people will go back to their companies and have another look at what their measures focus on and how they track those measures. I hope it will generate discussion outside the technical area of asset management and into finance-, executive-, and board-level discussions, in terms of what needs to be focused on from the overall company performance point of view. I hope it will raise awareness of asset management and how important it is to achieving overall company objectives, particularly in the industries that we have looked at.
Monique’s full research will be presented at this year’s AMPEAK Conference, held in Sydney, Australia from 24-28 May. For more information on AMPEAK, including the full list of presenters and keynotes, please click here.