Fifty thousand dollars in fire damages because someone didn’t check the oil in a transformer. A $100,000 loss because no one ever cleaned the switchgear. A plant shuts down for 12 days because of dust. An improperly used extension cord results in an employee fatality and monetary losses that climb into the millions of dollars.
It doesn’t make sense. With these types of numbers attached to poor or improper maintenance, why do so many employers underestimate the value of proper maintenance of their facilities and the training that goes along with it?
Unfortunately, maintenance work is invisible unless something is broken, and the value of training is hidden until someone makes a costly mistake. Maintenance employees go unnoticed when all is working smoothly, but all too often, if one small step is forgotten or one tiny error is made, the entire organization instantly notices and blames the maintenance staff for the failure. More often than not, the problem is not their failure at all, but a failure of the organization to support them in their critical jobs through proper training.
The True Cost of Downtime
The true cost of downtime due equipment failures related to a lack of traning can be 10 times or more than what is determined in cost justification reports. This is due to the fact that downtime eventually weaves its negative effects throughout everything an organization does. There are a variety of methods and calculators for determining downtime. In general however, you need to consider the following if you want to understand your true loss potential:
• Calculate how many employee hours are lost to unproductivity while the system is down, and then convert those lost hours into dollars.
• Add up the hours maintenance and other personnel spend repairing and getting the system back up and running, and convert those lost hours into dollars.
• Determine how many hours the facility or unproductive machinery is burning up energy and other resources, and convert those lost hours into dollars.
• Calculate how many hours management and administrative employees spend researching replacement parts, expediting orders or doing other rush-related work, and convert those lost hours into dollars.
• Add in the number of hours customer service or sales personnel will spend explaining the downtime to customers and the effect it will have on them, and covert those hours into dollars.
• Figure out how many sales are lost due to the downtime, and convert those lost sales into dollars.
• Estimate how many customers are lost due to the downtime, and convert the future value of those customers to dollars.
Add all these figures up and add 10 percent to 20 percent to account for the less visible or intangible damages associated with downtime, like lower employee morale, stress-related unproductivity, negative publicity, etc., and you arrive at a minimum cost of downtime.
Resolve to Change
Changing your mindset and departmental culture is the first step you can take to help prevent losses at your company. Compared to a reactive maintenance program, studies have shown that proactive thinking in maintenance can reduce overall maintenance costs by as much as 20 percent, and increase productivity as much as 15 percent, not to mention the potential savings of life, limb and finances through prevention of a catastrophic failure. Those are huge savings and benefits for any organization.
Ricky Smith, a CMRP and author of several books on maintenance operations, provides guidelines for determining whether maintenance is being conducted with a reactive or proactive mindset. Smith says that employers know they are in a reactive mode when:
• Their second- and third-shift labor hours stay the same (or increase) and emergency labor hours trend upward.
• Second- and third-shift work orders lack specifications, procedures and other data.
• Yesterday’s maintenance problems and reliability issues consume 90 percent of daily maintenance meetings.
• The maintenance supervisor is a hero one day, a goat the next.
• The maintenance supervisor must work late at least twice a week.
• Maintenance crews don’t know what equipment they’ll be working on tomorrow.
• The maintenance supervisor routinely expedites parts for emergency work.
• Equipment reliability issues prevent the plant from operating at targeted capacity.
In short, being reactive means performing preventive maintenance on equipment that continues to fail, or worse yet, not knowing what preventive maintenance to do at all. Quick fixes repeatedly are implemented and Band-Aids are put in place, but these solutions never “fix” anything. Knowing the real reasons why equipment fails, and how to prevent it from failing in the future is the first step in changing from a reactive to a proactive mindset. Gaining this knowledge requires education, and the most efficient, least costly and time-saving form of education is training received from others who already have been in your shoes.
Training as a Key
Training is a proactive solution to a reactive problem. Knowledge gained today saves the heavy costs of tomorrow. But did you know training also is a defense against a difficult economy?
During the recession at the outset of this decade, high-achieving companies like Southwest Airlines, Viacom and Dell not only survived, they thrived. All of them credit training as a being significant factor in their success during a period in which many of their competitors were struggling to survive. Rather than cutting their training programs and budgets, they increased them.
Each year, American Society for Training and Development (ASTD) provides a state of the industry report, which demonstrates the clear link between learning and performance in successful enterprises. One international study showed that staff who receive formal training can be as much as 230 percent more productive than untrained colleagues who are working in the same role.
Companies that monitor their training results have found direct links to performance in their business and spend 31 percent more on training per employee than the average company. Top-producing companies that are part of the ASTD benchmarking studies for training spend 52 percent more than the average company, and average over 40 hours of training per employee, per year. Nearly 40 percent of all training expenditures are used for external training services, and the trend towards outsourcing has been increasing since 2006. The leading types of training companies seek are for profession-specific or industry-specific skills for their employees. Less than 11 percent of training curriculum developed is for mandatory or compliance type issues, meaning most training is done for general improvement of the company. So, the benefits of training go far beyond an individual just being able to do his job better or to comply with law. Training is a vital cog in the wheel of economic success for employers.
Calculating the Return on Training Investment
How can you tell if your training program is paying off? National and international research alike indicates that the increased productivity resulting from targeted training of specific employees yields a return on training investment of more than 30 percent on average. Many complex and sophisticated techniques can be used to evaluate the precise benefits of training, but in general there are a few simple steps to determine the cost effectiveness of your training.
Know your “cost of failure.” How much downtime do you experience each year, at what cost?
Know the “benefits of success.” What additional benefits and cost savings will you gain with the successful operation of your department, and what dollar amount does that represent?
Determine the cost of training. Include instructor/facilitator fees or salaries, course materials/videos/workbooks, equipment rental/use, facility rental/use, the cost of employee “time off” for training, travel if required, administration costs and training design or curriculum development if required. In the case of outsourcing your training, many of these costs already are included in a fee for attending a public seminar or in the charge for bringing training for your group directly to your facility.
To calculate actual dollars saved, take the cost of failure, add the benefits of success and subtract the cost of training. If your training program was successful, you’ll find that the cost of training is a small percentage of the total cost of downtime, employee injuries and illnesses and product losses.
John G. Schuster is president and CEO of American Trainco Inc.