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What constitutes a rare event is often in the eyes of the beholder.
What constitutes a rare event is often in the eyes of the beholder.

Unlike many risk managers, engineers, and other technical professionals, social scientists have a long-held belief that risk is more subjective than objective.  “Risk does not exist ’out there,’ independent of our minds and cultures, waiting to be measured.”[9]  Instead, risk is a concept human beings invented to help understand and cope with the dangers and uncertainties of life.  

 

Social scientists would say that, although these dangers are real, there is no such thing as “real risk” or “objective risk.  “Subjective judgments are made at every stage of the assessment process, from the initial structuring of a risk problem to deciding which endpoints or consequences to include in the analysis, identifying and estimating exposures, choosing dose-response relationships, and so on.[10]

 

“Danger is real, but risk is socially constructed. Rare events expose how psychology, perception, and power shape environmental risk far more than technical models alone.”

 

Risk perceptions and risk attitudes play a large role in the psychology of risk, risk treatment, and risk communications.  One finding is that laypeople typically prefer to have more governmental regulation when confronted with risks, which are deemed to be beyond their control, catastrophic, or whose consequences have an inequitable effect.  On the other hand, a more laissez-faire attitude results when risks are perceived as unnoticeable, longer term, or new.

 

Danger is real, but risk is socially constructed.[11]  To many social scientists and psychologists, risk analysis, risk treatment, and associated communications are a blending of science with social, cultural, and political factors.  And those who hold power also control the communication; winners write history.[12]  This is particularly true in the case of rare events.

 

An example of the scenario discussed in the aforementioned paragraph could be climate change.  Climate change is considered a rare event, and therefore risk communication requires a four-fold approach: scientists and engineers to attest to its accuracy; decision scientists to attest to its relevance; social scientists to attest to its clarity; and communication designers to attest to its format.  The accuracy, tone, and comprehensibility of any communication can be undermined if any of these four cannot be attested.[13]

  

 References

[9] Paul Slovic and Elke U. Weber, “Perception of Risk Posed by Extreme Events,” Presented at the conference “Risk Management Strategies in an Uncertain World,” Palisades, NY, Apr. 12-13, 2002, available at https://www.ldeo.columbia.edu/chrr/documents/meetings/roundtable/white_papers/slovic_wp.pdf

[10] Ibid.

[11] Paul Slovic, “Trust, Emotion, Sex, Politics, and Science: Surveying the Risk-Assessment Battlefield,” Risk Analysis 19, no. 4 (1999), available at http://chicagounbound.uchicago.edu/cgi/viewcontent.cgi?article=1224&context=uclf.

[12] Analogous to the statement that “history is written by the victors,” attributed to Machiavelli, Winston Churchill, Walter Benjamin, and others.

[13] Baruch Fischoff, “Nonpersuasive Communication about Matters of Greatest Urgency: Climate Change,” Environmental Science & Technology 41, no. 21 (Nov. 1, 2007), 7204-7208, available at https://www.cmu.edu/dietrich/sds/docs/fischhoff/NonpersuasiveCommMatters.pdf.

  

This article is an excerpt from:

Solomon, J. D., & Vallero, D. (2016, June 1). From our partners – Communicating risk and resiliency: Special considerations for rare events. Center for Infrastructure Protection & Homeland Security. https://cip.gmu.edu/2016/06/01/partners-communicating-risk-resiliency-special-considerations-rare-events/


 

Additional Resources on Rare Events from JD Solomon



JD Solomon champions practical communication skills that help technical professionals convey complex ideas clearly and confidently. Learn more at www.jdsolomonsolutions.com and www.communicatingwithfinesse.com.

Human judgment, organizational maturity, and organizational capacity are three essential factors in prioritizing capital projects.
Human judgment, organizational maturity, and organizational capacity are three essential factors in prioritizing capital projects.

“Why do you think these two projects rank so much higher in this method than the first method?” the facilitator asked the director of reliability.

 

“Because those two projects are the ones that Jack (the engineering director) and I are going to do,” an always blunt Cathy replied. “I don’t give a damn about those points in that one method with all the criteria. Jack and I will do the projects that we think need to be done."

 

“Well, that explains why the senior management team has been frustrating Mary so much by redoing the criteria and the weightings,” the facilitator replied.

 

“You bet!” smiled Cathy. “We told her. She did not want to listen. We will change the criteria until we get the projects we need to do. We are going to do those two projects.”

 

This exchange is an example of harsh reality from the real world. Despite all the theories on both prioritization and decision-making, this conversation is more common than it is uncommon. You need to know three things about capital project prioritization to make you more effective (and less frustrated).

 

1. The Method Must Commensurate With Maturity

Multiple criteria and ranking approaches are the most common capital program prioritization methods. Multiple criteria approaches involve developing a handful of criteria, weighting each criterion, and assigning scores to each criterion. The projects with the greatest number of points become the preferred projects. This approach is based on the solid foundation of problem disaggregation.

 

Ranking approaches involve establishing a hierarchy of projects, usually from most important to least important, through some form of ballot. Consistent with the theory of choice, several management science methods exist for establishing the final ranked lists from multiple participants.


“Capital project prioritization often breaks down long before the scoring starts. Maturity, human judgment, and organizational capacity ultimately determine whether the process succeeds or frustrates everyone involved.”

 

Most academics and consultants consider ranking approaches less refined than multiple criteria approaches because the logic behind the participants’ preferences is unclear. However, a multiple criteria approach takes more time because of all the work needed to develop the criteria, establish importance weighting, score the projects, and analyze the results and sensitivities. Another underappreciated aspect of a multiple criteria approach is that all participants must have, or rapidly develop, a common understanding of the many granular details.

 

So which approach is better? The short answer is it depends on organization maturity. Ranking approaches are best for initial efforts or when there is a lot of new staff. Multiple criteria methods are better for mature organizations with seasoned teams. Among many, there is a preference to do both so that teams can see which method works best for their situation. After all, when done correctly, both approaches should yield similar prioritizations.


2. Human Judgment Is Required

Figure 1: Regardless of the capital improvement plan (CIP) prioritization approach, human judgment is needed when selecting capital projects.
Figure 1: Regardless of the capital improvement plan (CIP) prioritization approach, human judgment is needed when selecting capital projects.

Prioritization is not optimization. Optimization incorporates values and trade-offs more robustly than prioritization. In many cases, business case evaluations (BCEs) are needed to evaluate the trade-offs of the status quo, doing everything, or doing something in between. In nearly every case, the final resource allocation decision comes down to one individual.

 

The reality is that a single prioritization approach cannot be developed to address every component or type of project within an organization’s portfolio. Human judgment is needed; prioritization should be considered a good starting point, but not the final determination of which projects are in or out of the capital program.

 

3. Organizational Capacity Is Essential

Most capital improvement projects and programs fail because of organizational capacity. The types of projects, the size of projects, the complexity of the projects, the capabilities of internal staff, and the availability of key staff are all important aspects that should shape the prioritization process. Unfortunately, organizational capacity is not considered until the capital projects are selected.

 

Organizational capacity can be evaluated through three components:

  • Secure harbor includes having and maintaining a secure or safe place ripe for change and continual improvement.

  • CID nexus involves the capability (C) of staff, how information (I) is shared within the organizational structure, and how decisions (D) are made.

  • Personality is the long-term culture (e.g., commitment to initial costs or lifecycle costs) shaped by the short-term climate (e.g., financial stress, mergers, or changes in market share).

 

Organizational capacity is a governing constraint. Considering organizational capacity before diving into prioritization often reduces the need for complex approaches. If resources are limited, only a limited number of projects should be attempted.

 

Summary

Three of the essential things to know about capital project prioritization are:

  1. The selected approach should be consistent with the maturity of the organization.

  2. Human judgment is required, regardless of the approach that is used.

  3. Organizational capacity provides a governing constraint that often simplifies the approach.

 

 


Resources

Adams, Tim; Rider, John; and Solomon, J.D. “Ask the Experts: Prioritization.” J.D. Solomon, Inc.: May 21, 2020. https://www.jdsolomoninc.com/post/prioritization

 

Solomon, J.D. “CIP Prioritization: Where Master Planning and Asset Management Meet.” The Wave, Volume 39, Number 4, 2018.

 

Solomon, J.D. (2022). "Five Ways to More Effectively Facilitate Capital Program Prioritization.” J.D. Solomon, Inc.: April 4, 2022. https://www.jdsolomoninc.com/post/five-ways-to-more-effectively-facilitate-capital-program-prioritization

 

Solomon, J.D. and Wojak, Rebekah. “Implementing Asset Management: Organizational Capacity as the Primary Challenge." Proceedings from the International Maintenance Conference (IMC), Bonita Springs, FL, December 14, 2016.


 

This article is a reprint of Solomon, J. D. (n.d.). Three things you need to know about capital project prioritization. Reliabilityweb. https://reliabilityweb.com/en/articles/three-things-you-need-to-know-about-capital-project-prioritization



Need help getting started? JD Solomon Inc. provides solutions for program development, asset management, and facilitation at the nexus of facilities, infrastructure, and the environment. Visit our Program Development page for more information on capital project prioritization, business cases, third-party assessments, project phasing, and related services.


Organizations often lose their way when daily work management overpowers long‑term asset management frameworks and decisions.
Organizations often lose their way when daily work management overpowers long‑term asset management frameworks and decisions.

The difference between work management and asset management matters more than most organizations realize. One delivers disciplined execution while the other drives strategic clarity. Leaning too far in either direction can quietly derail long‑term outcomes. The real opportunity (and challenge) is keeping both aligned enough to deliver today’s results while building tomorrow’s resilience.

 

From the Real World

The water utility had been on a revived effort at enterprise asset management, including purchasing a new EAMS just three years before they hired a firm to work on their internal practices. A big step in our contract was taking key staff to visit with peer utilities. One of those utilities had been instrumental in driving the revived asset management effort.

 

“I was really disappointed,” stated Charles as we were having dinner. “They have digressed away from asset management to simply doing work management.”

 

“I agree,” chimed in Tony. “They are not assigning the motor re-builds to the assets. They are now just depending on searching through the old work orders to figure out when and how much rebuild [re-winding] work was done to any one motor. They will never look that up.”

 

It’s definitely not good practice, but it’s also certainly not uncommon,” I explained to the group. “Programs seem to evolve every three to five years. The line between asset management and work management tends to blur. You don’t want to find yourself there.”

 

What Asset Management Is

Asset management is the coordinated activity of an organization to realize value from assets. ISO 55000 defines an asset as any item with potential or actual value. Asset management balances cost, risk, and performance across the asset life cycle.

 

Common activities include:

·     Developing asset management policies, strategies, and long‑term plans.

·     Maintaining a current list of assets.

·     Assessing asset condition.

·     Maintaining replacement asset values.

·     Forecasting lifecycle costs and determining optimal financing options.

 

Asset management is strategic and tactical. At its highest level, asset management sets direction for how assets should perform, how risks should be managed, and how money should be spent over time. At a tactical level, it tracks what the organization owns, its condition, and the cost to replace it.

 

What Work Management Is

Work management is the discipline of clarifying, coordinating, and completing organizational work predictably and effectively.

 

Common activities include:

·     Regularly clarifying goals, priorities, ownership, and expectations.

·     Having weekly planning and scheduling meetings.

·     Implementing an effective work order quality control program.

·     Tracking preventive maintenance separately from corrective maintenance.

·     Utilizing an effective tracking system or dashboard that is used from bottom to top.

 

Work management is tactical. It ensures the right work is done at the right time with the right resources. The outputs of the work management system can be used strategically by the asset management program.

 

How They Fit Together

Asset management sets the strategic priorities. Work management carries them out. Asset management determines what work should be done to achieve performance and risk objectives. Work management ensures that work is executed efficiently and consistently. When aligned, organizations make better decisions and reduce reactive activity.

 

Signs You Are Leaning Too Much on One

One sign that an organization is leaning too much towards work management is that daily O&M tasks run smoothly (or at least as they have in the past), but asset lists, asset attributes, long-term financial forecasts, and condition assessments are lacking.

 

A sign that an organization is leaning too much towards asset management is that it is having many meetings and strategic asset management plans exist, but work execution is inconsistent and documenting the work is not getting done in a meaningful way.

 

Balanced organizations connect strategic asset decisions with disciplined work execution.

 

More From the Real World

The organization had been trying to convert to a new enterprise asset management system (EAMS). The Board of Directors was driven by a desire for the asset management program to help them understand their long-term financial needs for refurbishing and replacing facilities and infrastructure. However, some of the key staff had a different take.

 

“We need to unify our work order processes across the different divisions,” stated the director of asset management. “It’s going to take a lot of time to do this.”

 

His deputy added, “We can’t really do asset management until we understand all of the costs against our assets. The work order processes must be completed for preventive, corrective, and emergency maintenance. Do you have any ideas?”

 

“Well, all of that needs to be done at some point. On the other hand, I am not sure you have enough time to do it if you want to meet Board expectations this year,” I gently explained. “There is a difference between work management and asset management.”

 

Work Management versus Asset Management

Work management and asset management overlap and are complementary. However, they are not the same thing. And doing one is not a requirement for doing the other. Remember, both take time, and context matters most. Ideally, do both well, but the key is to deliver short-term desired outcomes to provide time to perfect either (or both).


 

More On Work Management

 

More on Asset Management



Need help getting started? JD Solomon Inc. specializes in asset management systems and work management support—bringing clarity to what you own, its condition, and its value.

JD Solomon served in senior leadership roles at two Fortune 500 companies before starting JD Solomon, Inc., just before the pandemic. JD is the founder of Communicating with FINESSE®, the creator of the FINESSE fishbone diagram®, and the co-creator of the SOAP criticality method©. He is the author of Communicating Reliability, Risk & Resiliency to Decision Makers: How to Get Your Boss’s Boss to Understand and Facilitating with FINESSE: A Guide to Successful Business Solutions.


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