Outsourcing maintenance – is it time yet?

Finance and operational leaders are aware of problems with maintenance are not going away. The availability of skilled workers is a massive problem globally. The loss of experience, as baby boomers have/are retiring, has resulted in a lot of guesswork and re-learning of old lessons. It has also left the workforce with less experienced middle management, who learned management from that older cohort. Those old school management techniques are not working well with the younger workforce, and the work ethic is different.

Management techniques and provisions to accommodate it, have not adapted par ticularly well. Maintainers are often unhappy that they are treated as low value expense items and unworthy of investment. They are unhappy with inexperienced leadership that doesn’t listen. They do feel a sense of ownership, but seldom get the feeling that everyone who manages them shares that feeling. They want to see things improve but lack confidence in their management ability to affect it.

If we ask maintainers and their leaders if they want to be outsourced, the answer is invariably no. Outsourcing has negative connotations that are not necessarily valid. For one, there is a perception that it isn’t core, meaning the function being outsourced is not important to the business. Core business functions are those that generate revenues, and in that sense, maintenance isn’t. Maintenance is neither core to most businesses, nor is it truly unique, with relatively few specialty activities that might be unique to the business (e.g. industry or asset specific skills and knowledge).

Another connotation is it will result in lower pay, worse working conditions and it could result in the loss of employment.While this has happened when other functions such as IT, HR, accounting and marketing have been outsourced, that does not set a precedent for maintenance.

Firstly, it is important to understand that outsourcing is not the same as contracting out.With outsourcing, the service provider becomes a business partner with the owner. A well-constructed outsourcing agreement will lower costs through efficiencies, but it will also result in enhanced revenues through improved asset performance. Both the asset owner and the service provider can benefit if the owner’s revenues improve because of performance improvements.

To achieve that, it is imperative that the workforce be motivated to perform. That is not achieved through reductions in pay, working conditions, job losses, or any other disincentives. Unlike IT, HR and accounting, skilled maintainers are not available in big numbers at relatively low cost. They are valuable, difficult to find and difficult to retain.

While the maintainers an owner already has would be valuable, it is fair to say that they may also require additional training, particularly in processes (such as work management) that would change. They may require skills upgrading to use technologies that they were not using before, and to enable them to participate in determining what are the best maintenance tactics to be used in the systems with which they are already familiar. One thing a smart service provider would want to do, is to capture the lessons learned and use them.

The sense of ownership over problems and performance could be enhanced as that would become the focus of the outsource service provider. A lot of the concerns about the cur rent state can be addressed and indeed removed in an organization that made reliability and maintenance its business.

If outsourcing were used, the service provider would need to have control over the maintenance that is done, how it is done, and how it is supported. Successful proven practices in those areas would need to be brought to the table. Relying on the owner’s stores and purchasing could be a huge mistake, especially if it is not working well before outsourcing.

At PEMAC’s MainTrain conference earlier this year, MRO did a roundtable discussion of the subject to see if perceptions could be shifted and to find out what concerns might exist. We had some very interesting feedback.

We found that negative perceptions of risk were largely based on the perception that outsourcing would be like contracting out. In outsourcing, the contractual focus is on outcomes, not activities. In contracting, the scope is well defined, and often very prescriptive. Outsourcing should be based on a clear definition of the desired outcomes and leaving the “how to” to the creativity of the services provider. Imagine the potential if your service provider was specialized in delivering highly reliable equipment, rather than merely fixing something that has broken. Concerns about work quality and control over what is being done should disappear as results begin to materialize. Invariably, if the business case for outsourcing is substantial, there are very likely some quick wins that can be used to dispel some of these concerns.

A concern was raised about the ability to meet collective bargaining agreement terms, which often include provisions for contracting. Without question, that will be a challenge to deal with, in most cases, but if the overall package, as experienced by the union member is an improvement, the hurdles become much easier to overcome.

We heard that communications between maintenance and operations/production departments are already difficult and sometimes almost non-existent. There’s legitimate concer n about whether a contractor could achieve better communications or worsen an already bad situation. Often this stems from unprofessional behaviors on the part of the operations departments. There would be a need to have an enforceable contractual requirement and mechanism (based in good work management practices) to ensure the customer communicates. If problems arise, contractual remedies will need to be enforced. If that had to happen, the pressure from contracts on operations would likely be substantial and their ability to behave badly curtailed.

If maintenance, reliability, condition monitoring, engineering, stores, and other personnel, were moved from the “owner” to the “service provider”, there would be a substantial change management challenge. They’d need to learn new ways of working and new systems. Training and coaching would be needed, and all while continuing to deliver the work they were doing before the transition. Both those who are, and are not outsourced, may feel a sense of loss that will need to be dealt with. On the part of those leaving, the overall conditions must be seen to be improving. The owner may need help in dealing with the feelings and motivations of those who are left behind and that should be built into the agreement.

Business processes that may require participation of both parties will require attention. For example, if stores are outsourced but purchasing are not, then how will communications work. Many companies unknowingly rely on informal relationships and methods that “make up for” the inadequacies of their business processes and systems. Those need to be identified and managed in more for mal ways if the full scope of what is needed to be done is not entirely outsourced.

If things go wrong, particularly with asset performance, there would be tendency for finger pointing and defensive behaviours. The agreement must make provisions for what happens when performance isn’t up to expectations, including defining what that performance should be. Failures are often caused by human error, both on the part of maintainers (outsource service provider) and operations (owners). Dealing with failures and their causes must be done with an open mind and willingness to accept that the causes could be on one or both sides. More importantly, actions to eliminate causes must be mutually agreed and executed.

In the short-term, costs could rise. Where there is likely to be a substantial business case for outsourcing, under performance is probably a big problem. A lot will need to change in processes, practices, and training, to turn that around with the same personnel who have just moved from the owner to the service provider.That has a cost. It is likely to be lower than the cost of the owner obtaining help to fix it themselves and deal with all the change management issues that will arise. Most operating companies are bad at that and tend to go far too slowly. They are not consultants, trainers, and masters of managing change; they are not set up to deal with it. Making the changes to gain the business benefits will be slow, much slower than with a competent outsource service provider that can bring experience and those skills to the table from the outset.

Intellectual property could be a concern, in cases where production processes or formulations are secrets. Those would need to be dealt with in the agreement and through initiating controls.That said, it is worth pointing out that most maintenance skill and activity does not require knowledge of those secrets and that noting in terms of maintenance skills, knowledge and practice is unique. The equipment itself doesn’t know the secrets, but it does respond to good maintenance practice when it is applied.

Eventually, all equipment will reach the end of its useful life and become uneconomic to repair and maintain. Provisions will be needed for demonstrating where that is a concern and for handling of the capital investment. It would be unreasonable to expect a service provider to commit to reliable performance from equipment that has been under maintained, abused and allowed to deteriorate through continual deferral of needed maintenance. It would also be unreasonable to expect that all equipment be renewed frequently.

These are some of the concerns and issues that will need to be dealt with. The challenge is substantial, but it is not impossible. Hurdles can all be dealt with intelligently and with feeling. The benefits that can be realized in the long term, could be well worth the pain of transition in the short term.

James Reyes-Picknell iis President of Conscious Asset and the Author of Uptime –Strategies for Excellence in Maintenance Management (Productivity Press, 2015). Reach him by phone at 705-719-4945, e-mail him at james@consciousasset.com or visit www.consciousasset.com.