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Social Responsibility as anOrganizational Capability: TheCase of Building Maintenance
John LyneisMIT-UAlbany-WPI PhD Colloquium
April 25, 2008
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Copyright John Lyneis, 2008. All rights reserved. 2
When and how do organizations adoptsocially responsible practices?
A large amount of work: should organizationsengage in CSR?
Friedman (1970): The social responsibility of
business is to increase its profits
Others: CSR does increase financial performance need to consider all stakeholders
Many large, empirical studies
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Copyright John Lyneis, 2008. All rights reserved. 3
Another approach: issue selling withinorganizations
Rather than study the logic of top managers,look at how individuals advance issues from
the ground up
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Copyright John Lyneis, 2008. All rights reserved. 4
An ExampleMITs buildings
One important socially responsible practice: reducingbuilding energy use
Here, I study one organization where leadership agreesthat emissions are important Website displays clear goals: reduce GHG emissions, invest in
energy conservation
Analogous to CSR, such investments are not directly related tothe Institutes mission of education and research
There are also many employees that champion this
cause internally Facilities employees have made progress on small issues
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Copyright John Lyneis, 2008. All rights reserved. 5
CSR as a Capability
Even with strong support, reducing energy use isextremely difficult
Hart (1995) suggests a natural resource based view ofthe firm
In a world with limits to growth, sustainable organizations willhave a competitive advantage Sustainability is a capability: it is valuable, rare, and difficult to
imitate Hart argues that pollution prevention is one such capability
But why exactly is pollution prevention so difficult to
implement and maintain? Hart says only that firms must possess an effective quality
management process
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Copyright John Lyneis, 2008. All rights reserved. 6
An example Existing buildings
Nine Month Study of Repair & Maintenance departmentat a large organization
Data Collected: Interviews with 30 individuals including managers, supervisors,
mechanics, senior facilities people Work order and financial data from computerized system
How strong is the state of buildings?
How strong is the maintenance organization? Would it be difficult to make improvements to reduce
energy use?
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The Expanding Campus
The last seven years has seen a
21% increase in the number ofsquare feet maintained
Yet spending on R&M has
not increased
Gross Square Feet Maintained
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
10,000,000
2000 2001 2002 2003 2004 2005 2006 2007
How is this possible?
Total Maintenance Spending
2000 2001 2002 2003 2004 2005 2006 2007
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Deferred Maintenance
Facilities greatest challenge: DeferredmaintenanceAccording to managers & mechanics, a great deal of
equipment is running past manufacturersrecommendations If its meant to get 20 years, we get 30 years. Once its in
you know its going to be in for a long time, [so you need to]get the best you can. Employee on Bu i ld ing Design &Construct ion side
Over the years, buildings have undergone manysmaller, uncoordinated renovations without attentionto the overall design and use of mechanical systems
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Deferred Maintenance can be represented as astock of Defects
Over time, new defects flow into the stock(Defect Creation) and are removed as they areresolved (Defect Resolution)
As the campus ages and expands, more defectswill flow in
DefectsDefect
CreationDefect
Resolution
Size of
Campus
+
Age of
Buildings
+
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The balancing feedback loop Planned Maintenanceillustrates how the stock of defects can be controlled:
Currently, defect Resolution is limited by resources;meanwhile the campus continues to grow and age
Therefore, as long as Creation>Resolution, the stock ofDefects will continue to rise
DefectsDefect
CreationDefect
Resolution
Defect Resolution
through Planned Repair& Replacement
+
Desired EquipmentRepair &
Replacement
+
+
Size ofCampus
+
Age of
Buildings
+
B
Planned
Maintenance
+
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Copyright John Lyneis, 2008. All rights reserved. 11
Reactive vs. Proactive Maintenance
A second challenge: Maintenance is mostly reactive On average, over a two year period:
25% of closed work orders are emergencies or requests that mustbe resolved that day Leaks, Alarms, Heating and Cooling
55% of work orders are responses to less immediate requests forrepair work Examples: Replacing light bulbs, replacing ceiling tiles
20% of work orders are planned preventive maintenance
Work hours are more skewed towards emergencies given thatPM work orders on average take the least amount of time.
Were just running around, were the firemen. Were not even thefire chief. Were the firemen, running around trying to put out fires,and cant see past that next call. R&M Employee
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Reactive Maintenance can also be expressedusing a causal diagram.
Work OrderBacklog
Opened Work
OrdersClosed Work
Orders
Work Pressure
Labor Hoursper WO
+
-
+
Staff Level
-
B
Reactive
Maintenance
+
Hours Spent on
Repair+
+
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Reactive Maintenance
Regression Results also confirm a modest negativerelationship between Work Pressure and time per workorder
Model:LHWO = Normal LHWO*(Backlog/Normal
Backlog)a
Estimate:a = -.149
Significant at the .001 level
Interpretation: A 10% increase in backlogyields a 1.5% decrease in time per work order
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Copyright John Lyneis, 2008. All rights reserved. 14
Reactive Maintenance
Why is reactive work dominant?
Work orders are driven by defects and we
know already that defects are rising!
Managers must wait until something breaks inorder to fix it
If it breaks, then youre lucky. Then, you have to
have the money.- Facil i t ies Emplo yee
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Copyright John Lyneis, 2008. All rights reserved. 15
DefectsDefect
CreationDefect
Resolution
Work Order
BacklogOpened Work
OrdersClosed Work
Orders
Breakdowns
+
+
Work Pressure
Labor Hours
per WO
+
-
+
Fraction of Work OrdersResulting in Defect
Resolution
Staff Level
-
Defect Resolutionfrom Repair WOs
+
+
+
B
Reactive
Maintenance
Size of
Campus
+
Age of
Buildings
+
+
Hours Spent on
Repair+
+
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Copyright John Lyneis, 2008. All rights reserved. 16
Adding Planned Maintenance
Adding time on Preventive and PredictiveMaintenance forms the familiarreinvestment feedback loop
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Copyright John Lyneis, 2008. All rights reserved. 17
DefectsDefect
CreationDefect
Resolution
Work Order
BacklogOpened Work
OrdersClosed Work
Orders
Breakdowns
+
+
Work Pressure
Labor Hours
per WO
+
-
+
Fraction of Work OrdersResulting in Defect
Resolution
Resources Available for
Preventive and PredictiveMaintenance
Defect Resolutionthrough Planned Repair
& Replacement+
+
Staff Level
-
Defect Resolution
from Repair WOs
+
+
+
Desired EquipmentRepair &
Replacement
+
B
Reactive
Maintenance
+
Size of
Campus
+
Age ofBuildings
+
B
Planned
Maintenance
Reinvestment
R
+
+
Hours Spent on
Repair+
-
+
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Copyright John Lyneis, 2008. All rights reserved. 18
Proactive vs. Reactive Maintenance
To its credit, R&M is currently not responding to workpressure by cutting back on preventive work
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
0.4 0.6 0.8 1 1.2 1.4 1.6
Backlog/Normal Backlog
FractionofClosedWorkOrders
Reactive
Although the amount ofpreventive work is small, PM
work orders are consistentlycompleted
Therefore, theReinvestment loop has the
greatest potential to be
virtuous in the future.
Chart As backlog increases, emphasisdoes not shift to reactive work
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DefectsDefect
CreationDefect
Resolution
Work OrderBacklog
Opened Work
OrdersClosed Work
Orders
Breakdowns
+
+
Work Pressure
Labor Hoursper WO
+
-
+
Quality ofDiagnosis and
Solution+
Fraction of Work OrdersResulting in Defect
Resolution
+
Staff Level
-Resources Available
for Planning andDiagnosis
+
Defect Resolutionfrom Repair WOs
+
+
+
B
ReactiveMaintenance
Budget for Materialsand Replacement
Equipment
+
Size of
Campus
+
Age ofBuildings
+
R
Rework
+
Hours Spent onRepair
+
-
+
What about quality and rework?
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DefectsDefect
CreationDefect
Resolution
Work Order
BacklogOpened Work
OrdersClosed Work
Orders
Breakdowns+
+
Work Pressure
Labor Hours
per WO
+
-
+
Quality ofDiagnosis and
Solution+
Fraction of Work OrdersResulting in Defect
Resolution
+
Resources Available forPreventive and Predictive
Maintenance
Defect Resolutionthrough Planned Repair
& Replacement
+
+
Staff Level
-Resources Available
for Planning andDiagnosis
+
Defect Resolution
from Repair WOs
+
+
+
Desired EquipmentRepair &
Replacement
+
B
ReactiveMaintenance
Budget for Materialsand Replacement
Equipment
+
+
Size of
Campus
+
Age of
Buildings
+
B
Planned
Maintenance
R
Rework
Reinvestment
R
+
+
Hours Spent on
Repair+
-
-
+
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Copyright John Lyneis, 2008. All rights reserved. 21
This is the capability trap (Repenning &Sterman, 2001)
This organization is already in a reactivemode with high defects and very little timespent on improvement
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Copyright John Lyneis, 2008. All rights reserved. 22
Effort Effort
Defects Defects
Work Order Backlog Work Order Backlog
Time on ReactiveWork
Time on Reactive Work
Time on Improvement
Time on Improvement
Working Harder Working Smarter
Time
Time
Time
Time
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Copyright John Lyneis, 2008. All rights reserved. 23
Maintenance and Energy Use
Why does this impact efforts to reduceenergy use?When all of your time is spent firefighting, its
hard to keep the buildings running efficiently,or think about new investments that are notrelated to minimum building performance
For example, many dampers are not
operational, and as a result outside air is notused to help cool buildings
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Copyright John Lyneis, 2008. All rights reserved. 24
Maintenance and Energy Use
Real cost savings are available fromimproved maintenance
During March 2007, a commissioned
analysis of one building found $400,000 inannual savings from issues such as:
Simultaneous heating and cooling
Using mechanical cool instead of an economizer
Heat wheel not working
Running systems in occupied mode 24/7
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Copyright John Lyneis, 2008. All rights reserved. 25
Conclusions
The current capability trap makes reducingenergy use extremely difficult
A proactive maintenance department is anorganizational capability that is difficult todevelop and maintain
Without this capability, buildings are lessefficient
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Copyright John Lyneis, 2008. All rights reserved. 26
What can be done?
Specifically: To capitalize on the Reinvestment Loop:
Make funds available for needed upgrades to equipment,before equipment breaks
Invest in predictive and preventive maintenance
To capitalize on the Rework Loop: Invest in engineers and experienced staff at the managerial
level to improve the way that problems are diagnosed
Emphasize the quality of solutions, even if work orders
initially are not closed as quickly Ensure that mechanics understand new buildings completely
following the Design & Construction phase
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Copyright John Lyneis, 2008. All rights reserved. 27
And pass on energy savings
DefectsDefect
CreationDefect
Resolution
Breakdowns
+
Defect Resolutionthrough Planned Repair
& Replacement
+
+
Defect Resolution
from Repair WOs
+
+
+
Desired EquipmentRepair &
Replacement
+
+
Size of
Campus
+
Age of
Buildings
+
B
Planned
Maintenance
Budget for Materialsand Replacement
Equipment
+
Energy Use of
Buildings
+
Overall Facilities
Budget
Spending on
Energy+
+-
R
Energy
Savings Pay
Price of
Energy+
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Copyright John Lyneis, 2008. All rights reserved. 28
What can be done
The presence of an additional reinforcingloop makes the period of higher costs fromany improvement strategy milder
Total Costs Constant Energy Costs
Energy Savings Reinvested
Time
Initially, investment increasescosts, but total costs fall oncedefects are eliminated, reducingbreakdowns and the amount ofreactive maintenance
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Copyright John Lyneis, 2008. All rights reserved. 29
DefectsDefect
Creation
Defect
Resolution
Work OrderBacklog
Opened WorkOrders
Closed WorkOrders
Breakdowns
+
+
Work Pressure
Labor Hoursper WO
+
-
+
Quality ofDiagnosis and
Solution
+
Fraction of Work OrdersResulting in Defect
Resolution
+
Resources Available forPreventive and Predictive
Maintenance
Defect Resolutionthrough Planned Repair
& Replacement
+
+
Staff Level
-Resources Available
for Planning andDiagnosis
+
Defect Resolutionfrom Repair WOs
+
+
+
Desired EquipmentRepair &
Replacement
+
B
ReactiveMaintenance
+
+
Size ofCampus
+
Age ofBuildings
+
B
PlannedMaintenance
R
Rework
Reinvestment
R
Budget for Materialsand Replacement
Equipment
+
+
Hours Spent onRepair
+
-
-
+
Energy Use ofBuildings
+
Overall FacilitiesBudget
Spending onEnergy+
+-R
EnergySavings Pay
Price ofEnergy
+ The FullConceptualModel