Assets / Operations
Managing Organizational Assets
The dictionary suggests that an “asset” is “a resource controlled by a person, a group, an organization or even a government, from which future economic benefits are expected.” In commercial enterprises assets are purchased to increase the value of the organization as it can generate future cash flow. Having bought or invested in them, organizations clearly need to ensure that they use their assets as effectively as possible, in order to supply the goods and services their customers require and make the return from the assets that are expected.
Although the particular assets (or what some organizations sometimes also call resources) that one enterprise will have versus another will vary considerably, they typically fall into the following categories:
- The people the organizations employ;
- The tools, machines, plant vehicles and other equipment those people use;
- The materials, parts, components, power and other consumable items they need to use; and
- The premises, buildings, sites and land where this all happens.
Thinking in asset terms as a leader
Once we start to think about organizational assets as being an investment upon which we need to get a reasonable return, every leader should be thinking about how to use the assets at their disposal effectively. In practical terms that usually means thinking about every job to be done individually.
Each job or task to be performed is different of course. It is different because of the way that the organization is structured and the way that work is divided between people and teams. It is also different because the people who work in the organization have varied contributions to make and have a range of skills and knowledge, and may work in different ways. That’s why the assets a given team needs to think about in order to perform a job, task or project will vary.
Managers at many levels of an enterprise will make the decisions about what assets are to be acquired, used and disposed of (sometimes on their own and sometimes with help of people in professional teams such as purchasing, contracts, legal or finance). Acquired means bought, hired or, in the case of employees, recruited. ‘Disposed of’ means to throw away, sell or get rid of in some other way. The most important thing for any team leader to remember about assets therefore, whether it is people, equipment, premises or materials—is that they cost money. They cost money to acquire, to maintain and even to dispose of, which is why so much care and attention needs to be given.
Additional cost of assets
The cost of acquiring assets includes more than the wages or price of the resources themselves. It also includes the time spent deciding who to recruit or what equipment to buy. Some organizations have a high turnover of staff. This means that people leave their jobs frequently. It may cost the organization large amounts of money simply getting enough people to keep the organization going. In addition, most equipment needs regular servicing or maintenance, computers often need upgrading and even people need to be ‘maintained’ or to be trained and have their skills updated. In fact, the cost of training staff in using new computer software is often far more than the cost of buying it in the first place!
Even physical assets that are bought as a capital item have long terms costs over their life. Premises need to be maintained and if they are left alone, factories, offices, warehouses and shop fronts will start to deteriorate quickly. It also costs money to clean, redecorate and repair buildings. In the modern world, increasingly more stringent environmental regulations also make it expensive for organizations to get rid of waste products, and they are encouraged (and in some cases incented) to “clean up” their operations and recycle materials if possible so as to reduce their “carbon footprint.”
In summary then, today’s organizations, large and small and in all sectors and industries have no choice but to manage all of their assets carefully and to do so over their entire life from acquisition to final disposal.