[NEW] M&A: The One Thing You Need to Get Right | get right – Vietnamnhanvan

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Idea in Brief

The Problem

Although M&As are a tempting strategy for fast growth—and psychologically gratifying for CEOs—most of them are extremely expensive mistakes.

Why It Happens

Companies tend to look at acquisitions as a way of obtaining value for themselves—access to a new market or capability, for example. But if you spot opportunity in a company, others will too, and the value will be lost in a bidding war.

The Solution

Look for ways to give value to the acquired company rather than take it—by being a smarter provider of capital, offering better managerial oversight, transferring a skill, or sharing a resource. These approaches have been behind the handful of deals that have succeeded.

The financial world set a record in 2015 for mergers and acquisitions. The value of such deals eclipsed the previous record, set in 2007, which had surpassed an earlier peak in 1999. This is perhaps not auspicious: It seems (pace the late Prince) that we are partying as if it were 1999—and 2007 to boot. The headiness of those years didn’t bode well for either 2000–2002 or 2008–2009.

It’s far too early to know how the newer deals will work out, but the seemingly ageless pattern of giant failures continues apace. In 2015 Microsoft wrote off 96% of the value of the handset business it had acquired from Nokia for $7.9 billion the previous year. Meanwhile, Google has unloaded for $2.9 billion the handset business it bought from Motorola for $12.5 billion in 2012; HP has written down $8.8 billion of its $11.1 billion Autonomy acquisition; and in 2011 News Corporation sold MySpace for a mere $35 million after acquiring it for $580 million just six years earlier.

To be sure, we’ve seen successes. The purchase of NeXT in 1997 for what now looks like a trivial $404 million saved Apple and set the stage for the greatest accumulation of shareholder value in corporate history. The purchase of Android for $50 million in 2005 gave Google the biggest presence in smartphone operating systems, one of the world’s most important product markets. And Warren Buffett’s rolling acquisition of GEICO from 1951 to 1996 created Berkshire Hathaway’s cornerstone asset. But these are the exceptions that prove the rule confirmed by nearly all studies: M&A is a mug’s game, in which typically 70%–90% of acquisitions are abysmal failures.

Why is that so? The answer is surprisingly simple: Companies that focus on what they are going to get from an acquisition are less likely to succeed than those that focus on what they have to give it. (This insight echoes one from Adam Grant, who notes in his book Give and Take that people who focus more on giving than on taking in the interpersonal realm do better, in the end, than those who focus on maximizing their own position.)

M&A is a mug’s game: Typically 70%–90% of acquisitions are abysmal failures.

For example, when a company uses an acquisition to enter an attractive market, it’s generally in “take” mode. That was the case in all the disasters just cited. Microsoft and Google wanted to get into smartphone hardware, HP wanted to get into enterprise search and data analytics, News Corp. wanted to get into social networking. When a buyer is in take mode, the seller can elevate its price to extract all the cumulative future value from the transaction—especially if another potential buyer is in the equation.

Microsoft, Google, HP, and News Corp. paid top dollar for their acquisitions, which in itself would have made it hard to earn a return on capital. But in addition, none of them understood their new markets, which contributed to the ultimate failure of those deals. Other take-based market entry acquisitions, such as Microsoft’s $1.2 billion purchase of the social networker Yammer, at 40 times revenue, and Yahoo’s $1.1 billion, 85-times-revenue purchase of Tumblr, haven’t yet played out—but it’s hard to imagine that either will earn a favorable return over the long term.

If you have something that will render an acquired company more competitive, however, the picture changes. As long as the acquisition can’t make that enhancement on its own or—ideally—with any other acquirer, you, rather than the seller, will earn the rewards that flow from the enhancement. An acquirer can improve its target’s competitiveness in four ways: by being a smarter provider of growth capital; by providing better managerial oversight; by transferring valuable skills; and by sharing valuable capabilities.

Be a Smarter Provider of Growth Capital

Creating value by being a better investor works well in countries with less-developed capital markets and is part of the great success of Indian conglomerates such as Tata Group and Mahindra Group. They acquire (or start up) smaller companies and fund their growth in a way that the Indian capital markets don’t.

Further Reading

  • The Big Idea: The New M&A Playbook



    Why you should pay top dollar for a “killer deal”—and other new rules for making acquisitions

    • Save

It’s harder to provide capital this way in countries with advanced capital markets. In the United States, for example, activists often force diversified companies to break up because the companies’ corporate banking activities can no longer be shown to add competitive value to their constituent businesses. Big companies such as ITT, Motorola, and Fortune Brands, and smaller ones such as Timken and Manitowoc, have been broken up for this reason. Even GE has slimmed down considerably. One of the biggest deals of 2015 was the proposed $68 billion merger and subsequent three-way split of DuPont and Dow, which resulted from relentless activist pressure on DuPont.

But even in developed countries, being a better investor gives scope for creating value. In new, fast-growing industries, which experience considerable competitive uncertainty, investors that understand their domain can bring a lot of value. In the virtual reality space, for example, app developers were confident that Oculus would be a successful new platform after Facebook acquired it, in 2014, because they were certain that Facebook would provide the requisite resources. So they developed apps for it, which in turn increased the platform’s chances of success.

Another way to provide capital smartly is to facilitate the roll-up of a fragmented industry in the pursuit of scale economies. This is a favorite tool of private equity firms, which have earned billions using it. In such cases, the smarter provider of capital is usually the biggest existing player in the industry, because it brings the most scale to each acquisition (until returns on scale max out). Of course, not all fragmented industries have the potential to deliver scale or scope economies—a lesson learned the hard way by the Loewen Group (Alderwoods after bankruptcy). Loewen rolled up the funeral home business to become the biggest North American player by far, but its size alone created no meaningful competitive advantage over local or regional competitors.

Further Reading

  • The Dubious Logic of Global Megamergers


    Magazine Article

    It pays to be big in a global economy, right? Wrong. The rush toward huge cross-border mergers is based on a faulty understanding of economics. There are better ways to address globalization than relentless expansion.

    • Save

Scale economies aren’t necessarily rooted in operating efficiencies. Often they arise through the accumulation of market power. After eliminating competitors, the big players can charge higher prices for value delivered. If this is their strategy, however, they inevitably end up playing cat and mouse with antitrust regulators, who sometimes prevail—as they did in the intended mergers of GE and Honeywell, Comcast and Time Warner, AT&T and T-Mobile, and DirecTV and Dish Network. For two of the biggest proposed deals of 2015, however, the jury is still out. Dow’s merger with DuPont and AB InBev’s with SABMiller would represent major consolidations in the companies’ key product markets.

Provide Better Managerial Oversight

The second way to enhance an acquisition’s competitiveness is to provide it with better strategic direction, organization, and process disciplines. This, too, may be easier said than done. Supersuccessful, high-end, Europe-based Daimler-Benz thought it could bring much better general management to modestly successful, midmarket, U.S.-based Chrysler and learned a painful $36 billion lesson. Similarly, GE Capital was certain it could bring better management to the many financial services companies it bought in the process of ramping up from a small sideline into GE’s biggest unit. As long as the U.S. financial services sector was growing dramatically relative to the nation’s economy overall, it appeared that GE was right—the company’s approach to management was superior and value-adding for those acquisitions. But when that sectorwide party came crashing to a halt during the global financial crisis, GE Capital nearly brought the whole of General Electric to its knees.

Stuart Bradford

Better management is more likely to result from PE buyouts, such as 3G Capital’s acquisitions of Burger King and Tim Hortons and—with Berkshire Hathaway—Heinz and Kraft. Berkshire Hathaway has a long track record of buying companies and boosting their performance through its management oversight, but not many other convincing corporate examples exist. Danaher may be the best one. Since its inception, in 1984, it has made more than 400 acquisitions and has grown to a $21 billion company with a market capitalization above $60 billion. Observers as well as Danaher executives attribute its nearly unbroken record of success to the Danaher Business System, which revolves around what the company calls “the four P’s: people, plan, process, and performance” and is installed, run, and monitored in every business without exception. For the system to be successful, Danaher asserts, it must improve competitive advantage in the acquired company, not just enhance financial control and organization. And it must be followed through on, not just talked about. Despite this outstanding growth and performance, Danaher is in the process of splitting into two separate companies under the baleful eye of the activist hedge fund Third Point.

Transfer Valuable Skills

An acquirer can also materially improve the performance of an acquisition by transferring a specific—often functional—skill, asset, or capability to it directly, possibly through the redeployment of specific personnel. The skill should be critical to competitive advantage and more highly developed in the acquirer than in the acquisition.

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A historical example is Pepsi-Cola’s transfer to Frito-Lay, after the two merged in 1965, of the skills for running a direct store delivery (DSD) logistics system—a key to competitive success in the snack category. A number of PepsiCo DSD managers were assigned to head up Frito-Lay’s operations. PepsiCo’s 2000 acquisition of Quaker Oats was less fulfilling, however, because the majority of Quaker’s sales involved the traditional warehouse delivery method, in which PepsiCo had no skill advantage over Quaker.

The 2006 acquisition of Pixar by Disney for $7.4 billion (actually, a net cost of $6.4 billion, because Pixar came with $1 billion of excess cash) after their joint venture expired is typically regarded as highly successful and credited with turning around Disney’s flagging animated film business. A closer examination, however, suggests that thus far it has been a pretty expensive mistake.

As usual, it’s hard to calculate the true return, given that an acquisition is reported on as part of a larger business unit—in this case Disney’s studio entertainment business, which combines animated and live action movies. That business earned $729 million in 2006 prior to Pixar’s integration. Disney’s allied consumer business, which licenses and sells merchandise based on Disney film characters, earned an additional $607 million in 2006.

Let’s make a madcap assumption: that 100% of the incremental operating income for both the studio entertainment and consumer businesses from 2007 to 2015 can be attributed to the Pixar acquisition. That would mean, among other things, that the acquisitions of Marvel Entertainment in 2009 and Lucasfilm in 2012, each for $4 billion, contributed 0%. Furthermore, let’s ignore any capital charge Disney incurred for carrying that additional $8 billion of acquisition costs. Even under such laughably unrealistic assumptions, the Pixar acquisition would have destroyed more than $5 billion of Disney shareholder value through 2015.

The only way to imagine it breaking even is to further assume that without Pixar, Disney’s combined studio entertainment and consumer businesses would have declined by 25% over the period. A more realistic assessment is that by 2015 Pixar, Marvel, and Lucasfilm had destroyed $10 billion of shareholder value.

Pixar didn’t need Disney. It was as hot as a smoking pistol and had many other potential joint venture partners. But Disney needed Pixar: Its biggest successes in animation in the previous decade were its joint-venture projects with that company. It had little to give and lots to take—and paid an extraordinary price for the pleasure.

Google’s purchase of Android provides a modern example of successful transfer. As one of the world’s greatest software companies, Google could turbocharge Android’s development and help turn it into the dominant smartphone operating system—but it fell short with the hardware-centric Motorola handset business.

Clearly, this method of adding value requires that the acquisition be closer to home than not. If the acquirer doesn’t know the new business intimately, it may believe that its skills are valuable when they aren’t. And even when they are valuable, it may be hard to transfer them effectively, especially if the acquired company isn’t welcoming toward them.

Share Valuable Capabilities

The fourth way is for the acquirer to share, rather than transfer, a capability or an asset. Here the acquiring company doesn’t move personnel or reassign assets; it merely makes them available.

Procter & Gamble shares its multifunctional, colocated customer team capability and its media buying capability with acquisitions. The latter may lower the advertising costs of even large acquisitions by 30% or more. With some acquisitions, it also shares a powerful brand—for example, Crest for the SpinBrush and Glide dental floss. (That approach didn’t work for P&G’s 1982 acquisition of Norwich Eaton Pharmaceuticals, whose distribution channel and product promotion differed from P&G’s.)

Microsoft shared its powerful ability to sell the Office suite to PC buyers by including Visio software in Office after it acquired the company in 2000 for close to $1.4 billion. But it had no valuable capability to share when it bought the handset business from Nokia.

Further Reading

  • M&A Needn’t Be A Loser’s Game

    Corporate Communications


    Most takeovers devour buyers’ wealth. But acquirers who understand they’re actually buying customers can avoid disastrous deals and find ones that work.

    • Save

In this form of “give,” success lies in understanding the underlying strategic dynamics and ensuring that the sharing actually happens. In what is hailed as the greatest M&A bust of all time—the merger of AOL and Time Warner for $164 billion in 2001—vague arguments were made for how Time Warner could share its content capability with the internet service provider. But the economics of sharing didn’t make sense. Content creation is a highly scale-sensitive business, and the wider a piece of content’s distribution, the better the economics for its creator. If Time Warner had shared its content exclusively with AOL, which then owned approximately 30% of the ISP market, it would have helped AOL competitively but damaged itself by shutting off the other 70%. And even if Time Warner had limited itself to giving AOL preferential treatment, the other market players might well have retaliated by boycotting its content.

What’s Up with WhatsApp?

All this may lead one to wonder what’s up with Facebook’s acquisition of the messaging service WhatsApp—perhaps the most shockingly priced deal in recent memory. The original agreement, made in February 2014, was for $19 billion. But because most of that was in the form of Facebook stock, which shot up between February and when the deal closed in October, the actual price was $21.8 billion—this for a company that had just lost $138 million on $10 million of sales.

Let’s look at this deal through the giving lens:

  • Was Facebook a better provider of capital?

    Maybe. But WhatsApp already had a terrific one in the VC heavyweight Sequoia Capital, which led all three funding rounds and had reportedly committed $60 million to the venture. Despite that $138 million loss, it’s unclear that WhatsApp would have been capital-constrained without Facebook. This was not like the acquisition of Oculus, in which Facebook conferred singular status on one of a number of virtual reality contenders. WhatsApp was already by far the leader in global messaging, with 465 million users, when Facebook decided to acquire it.

  • Has Facebook provided valuable managerial oversight or transferred skills?

    Maybe. It is, of course, a monumentally successful company. But by all accounts, it has elected to leave WhatsApp to pursue its own strategy—which is dramatically different from Facebook’s. WhatsApp has eschewed advertising and makes its modest revenue on a small subscription fee ($1 a year) after users get the first year free.

  • Has Facebook shared valuable capabilities?

    No. It could have combined WhatsApp and its own application, Messenger, but it has kept them completely separate.

So what’s the logic of this deal? It seems to be based on a fact and a prayer. The fact is simply that WhatsApp is the world’s biggest messaging application, with more than one billion users at last count. The prayer is that Facebook will somehow figure out how to monetize those users. That might happen, but the financial bar is staggeringly high. To earn Facebook shareholders a return on the cost of the acquisition, WhatsApp would have to become one of the most profitable software companies on the planet in less than a decade.

Look at the numbers: At a cost of capital of just over 9%, Facebook’s acquisition cost of $21.8 billion means that WhatsApp must generate $2 billion a year in additional value—or $2 billion in additional EBITDA. But for a company that lost $138 million in the year prior to acquisition, that won’t happen immediately. Facebook shareholders have a right to expect $2 billion of value per year from the start; to them each year’s shortfall feels like an addition to the acquisition’s initial price. And they need to earn an annual return on the shortfalls as well, so the effective cost to them of the WhatsApp acquisition rises with every year that it contributes less than $2 billion in value.

The system in which CEOs operate is biased in two ways in favor of playing the M&A lottery. First, with the rise in stock-based compensation since the 1990s, the value of a successful acquisition bet is greatly enhanced for the CEO. If the acquisition gives the stock price a positive “pop,” the personal benefit to the CEO is huge. Furthermore, compensation packages are strongly correlated with the size of the company, and an acquisition makes it bigger.

Even failed acquisitions can be personally profitable. The Mattel–Learning Company and HP-Autonomy deals are among the most disastrous in recent memory, and they did cost CEOs Jill Barad and Léo Apotheker their jobs. But Barad left with a $40 million severance package, and Apotheker left with $25 million.

The second bias (at least in the United States) comes from an unlikely source: the Financial Accounting Standards Board. Before the dot-com bubble burst, in 2001, intangible assets were written off over a 40-year period. After the burst, assets valued at billions of dollars were seen to be worthless, so the FASB decided that in future a company’s auditors would declare whether or not intangible assets were impaired and, if so, would force them to be written down immediately by the amount of the impairment.

The unintended consequence of this change was to make acquisitions more attractive, because the acquiring company’s earnings would no longer be suppressed every year by an automatic write-off. In the modern era of acquisitions, therefore, all a CEO has to do is convince the auditor that the acquired asset isn’t impaired and that an acquisition will have no negative impact on earnings, even if it’s made at an extraordinary price. Generally, this is fairly straightforward as long as the company’s core business is doing well and its market cap is higher than its book value.

With these two drivers providing the liquid lubrication—and the global financial crisis apparently a distant memory—the party is in full swing.

Let’s suppose that after the acquisition, WhatsApp’s profitability grows at the same rate that Facebook’s did in its first eight years. Facebook lost money for the first five and then ramped up to $2 billion in operating income by its eighth year. If WhatsApp broke even for 2015–2019 and then achieved earnings growth like Facebook’s, Facebook shareholders would see an acceptable return on the investment for the first time in 2022. But to do that, WhatsApp would need the eighth-highest EBITDA in the world of software companies, trailing only Microsoft, Oracle, SAP, Google, IBM, Facebook, and Tencent.

That would be the good news. The bad news would be that on the way to 2022, WhatsApp would accumulate an additional deficit of $18.3 billion in inadequate earnings for the first seven years—the equivalent of Facebook’s paying $40.1 billion to acquire WhatsApp in 2022. That is a gigantic investment. At last ranking, only 266 public companies in the world were worth more than $40 billion.

Right now, CEO Mark Zuckerberg is hailed as a business genius, Facebook has become one of the most valuable companies in the world, and his shareholders are perfectly happy to watch him fork out $21.8 billion for a company with a handful of engineers and $10 million in revenues. As long as the stock price keeps rising because the base business is prospering, acquisitions don’t have to actually make sense. But history shows that when things turn sour for the base business—think of Nortel, Bank of America, WorldCom, Tyco—shareholders start looking more closely at acquisitions and asking, What were they thinking? That’s why it pays to have a strong strategic logic for your acquisitions, even when the market isn’t asking for it. And what the acquirer puts into the deal determines the value that comes out of it.

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A version of this article appeared in the June 2016 issue (pp.42–48) of Harvard Business Review.

[Update] What high-reliability organizations get right | get right – Vietnamnhanvan

As Industry 4.0 continues to advance with breathtaking speed, unleashing new capabilities at equally breathtaking speed, it’s all too easy for business leaders to succumb to relying solely on technology to drive operational improvement. Automation, advanced analytics, digital performance management, cloud computing, machine learning—all offer powerful and game-changing ways for organizations to achieve new heights in operational performance.

Stay current on your favorite topics

But the costs and effort these technologies and platforms entail can often exceed their payoff. The expectations surrounding them, it turns out, are often inflated. Take, for example, advanced analytics-driven predictive maintenance. As a means of boosting reliability, it is not the panacea many think it is. Without engineers who are trained in data analysis and in developing solutions based on those analytics, companies cannot possibly expect to realize the full potential of the technologies. Often, there are simpler, more cost-effective ways to accomplish the same goal.

Moreover, technology alone does not make for excellence in reliability. In industries that live by the laws of science, leaders often underestimate the role of management processes and skills in reliability-engineering success.

Research we conducted in a cross-section of predominantly heavy-asset industries reveals what distinguishes high-reliability organizations (HROs) from the rest. These companies focus as much on the enablers—the rigorous processes, role clarity, and accountability systems—as they do on the Industry 4.0 technologies.

Yet as essential as these enablers are, they’re still not enough. HROs also focus on talent: they put a premium on certain skills that other companies don’t, and they invest more in professional development. Finally, HROs structure their organizations according to how centralized the function and its accountability are. To be sure, advanced technologies can deliver dramatic improvements, but ultimately, it’s the human element that spells success.

The three core business practices that drive reliability

We selected eight best-in-class reliability organizations from a cross-section of industries, based on internal reliability metrics (such as percentage of downtime and overall reliability) and external performance benchmarks and industry awards for operational excellence. We then interviewed in depth a dozen current and former leaders of these organizations to identify the organizations’ key characteristics and practices.

As varied as our study sample was—it spanned the mining, energy, power generation and distribution, pharmaceuticals, airline, and military sectors—all the organizations adhere to three fundamental business practices (Exhibit 1).

Exhibit 1

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HROs implement robust reliability processes.

All eight organizations follow strong reliability processes across their operations, from the ground level up. In this respect, they stand out from the average reliability organization, whose processes are either lacking specifics or inconsistently followed.

For example, HROs clearly define the assets critical to their operations, ensuring that the list is not merely well-understood but also considered in decision making. They are skillful in disseminating the definitions and standards throughout their companies. They create equipment-reliability strategies and execute them by strictly following preventative-maintenance schedules, closely monitoring equipment health, and identifying issues and proactively or promptly resolving them.

HROs also engage in root-cause problem solving to determine underlying issues and implement holistic, practical solutions. Their reliability engineers draw on a variety of data sources, tools, capabilities and subject-matter expertise.

Another common practice among HROs is that they all have robust systems in place for managing, preserving, disseminating, and updating their reliability knowledge base—including both reliability analysis and reliability design standards. For instance, these companies effectively share learnings from every reliability event, and update their equipment-design standards and work processes accordingly to ensure the event is not repeated. Finally, HROs hold other functions accountable to execute the reliability processes they’ve put in place.

One manager from an energy company noted that his organization eschews advanced reliability techniques or “fancy predictive maintenance models,” relying instead on traditional root-cause problem solving and defect-elimination approaches to get results. Another interviewee, a former submarine officer, put it plainly: the reason there’s rarely a failure of critical equipment “is twofold: the design is robust, and things just get done when they need to get done. Period.” HROs employ systematic methods to carry out root-cause problem solving on the front lines.

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They define roles clearly and institutionalize knowledge.

Roles and responsibilities are clearly defined and well understood by operational leaders as well as all those with whom they work: the plant managers, maintenance leaders, operators, technicians, supply-chain managers, and so forth. Each member of the organization has a clear understanding of the role they play in driving reliability, so the guidelines for dealing with and engaging personnel are thus unambiguous. A leading pharmaceutical company in our research, for example, rotates personnel— including reliability engineers—to give them a firsthand understanding of the critical roles in the organization and how they interact.

They set accountability at the executive level and delegate it down.

HROs believe accountability resides at the top. To ensure that, they set executive compensation according to reliability-specific metrics and outcomes. These organizations establish clear corporate reliability standards and communicate them well: for example, they’re included in capability models and reliability metrics, which are tracked publicly on scoreboards. In addition, HROs discuss outcomes at all levels of the organization, from the frontline control room to the boardroom. At a major power generation company, executive sponsorship is considered a key success factor. “Senior executives really bought into frontline support for reliability and communicated its importance for our business clearly and frequently.”

HROs put people first

HROs recognize that it takes more than technical expertise to make a great reliability engineer. Our research revealed that to attract and retain the best and the brightest, HROs follow three specific talent-management practices: they pay higher salaries, emphasize communication and coordination skills relevant to the reliability engineer’s role as cross-functional problem solver, and provide well-defined career options and paths.

HROs offer higher pay than their peers.

We analyzed two years’ worth of job postings from the companies in our sample, comparing their pay levels with those of their competitors. Salaries at the HROs—average, as well as the low and high end of pay scales—were 15 percent higher than those of their peers (Exhibit 2). HROs also reward high performance; several we interviewed have developed specific key performance indicators (KPIs) for performance-based compensation and bonuses.

Exhibit 2

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The fact that HROs pay better is hardly surprising: in any industry, offering a higher salary is an obvious way to attract top talent. But it is by no means the only way. Nor does it guarantee talent retention or reliability success.

HROs prize communication and problem-solving skills.

They appreciate that technical expertise alone is not enough for a first-rate reliability engineer. Knowing how to solve problems and how to communicate— up, down, and across the organization, in ways that earn trust and support—are critical skills. In fact, HROs rank communication among the three most critical skills in job candidates, followed by problem solving—a skill most companies omitted from their top eight (Exhibit 3).

Exhibit 3

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HROs recognize the importance of being able to communicate equally well with the frontline and management; their engineers are adept at translating technical issues into laymen’s terms that their non-technically trained peers can understand. Effective problem solvers are solid conceptual thinkers who can understand a problem or condition by identifying patterns and connections that reveal which underlying issues to address. They’re also leaders: HROs give more weight to leadership skills than the more than 70 other organizations in our comparison set.

Creativity and rigor in problem solving are always valuable, particularly at a time when organizational complexity is growing and the costs of failure (financial, social, and environmental) are ever-increasing. Each day that a plant is sidelined can translate into millions of dollars lost; a malfunction that releases toxins in the environment can cause untold damage and even loss of life. Similarly, today’s higher-stakes operating environment heightens the importance of communication skills: specifically, the ability to engage different teams in constructive dialogue, raise concerns and potential issues proactively, and foster consensus on the appropriate action to take.

HROs create attractive paths for career advancement.

Reliability engineers typically follow one of three main career tracks, each with different rates of retention (Exhibit 4).

Exhibit 4

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  • Field-based engineer to operations manager: Entry-level personnel with technical degrees make up this track. While each organization is different, we see common patterns. Generally, there is little opportunity for advancement in the initial years. Near the five-year mark, field engineers have two options if they want to stay with the company: they can either become a supervisor, or switch career tracks. There is no ultimate role in reliability engineering for reliability-focused personnel. Not surprisingly, this track experiences the lowest retention levels: fewer than one in four remain in it to become field operations leaders.
  • Junior to senior field-based subject-matter expert (SME): These individuals typically have five years of industry experience or an advanced degree (or both), and usually spend the first few years as a functional area expert. At that point, their choices are either to become a senior SME, change tracks—or leave the company. Engineers in this track have greater longevity than the first track; 50 percent remain in the track, most likely because companies effectively prescreen for this role, and senior onsite SME is considered an ultimate role.
  • Site-based engineer to corporate SME: From the get-go, these engineers (either entry-level or experienced technical personnel) know that corporate-level opportunities await them at a specific career milestone. They will be able to choose among different tracks, including corporate-level functional expert. Not surprisingly, employees on this track have the highest retention levels, as they have more opportunity to progress to higher-level roles and influence decision making across multiple sites. However, companies must manage expectations and performance effectively to ensure that the corporate SME stays connected with site operations and continues to deliver value across the network.

HROs demonstrate that they value quality talent by investing accordingly in their reliability bench. They establish well-defined career tracks to give their engineers ample opportunities for professional and personal development. The HROs we studied employ a variety of talent-management and -retention practices. All strive to offer numerous career-path options, even within the technical or managerial ranks.

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Moreover, HROs are committed to training their people on an ongoing basis, whether through internal classroom sessions for professional certification, paid time off to attend industry-sponsored events, on-the-job training, or informal mentoring.

At a major energy company, field-based reliability employees are “truly engineers, closely linked to the equipment,” as a former manager noted. The company considers them high-potential employees and “gives them the option to pursue other technical, commercial, or managerial roles.”

The former head of reliability at another major energy company commented on the multiple career options of field reliability engineers, including moving into operations or risk management. “More importantly,” the leader added, “their career is well-managed from the start, with performance reviews every six months. We tend to keep our good engineers.”

The digital difference in measuring production performance

HROs recognize that form follows function

For all their similarities, HROs vary widely in structure, according to the specific characteristics and challenges of their industry, their overall organization structure and culture, and the nature of their products. Essentially, there are four basic archetypes that vary along two dimensions: the strength of the central reliability function, and how centralized accountability is: that is, who tracks asset reliability and who is ultimately responsible for outcomes (Exhibit 5).

Exhibit 5

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A center of excellence.

With this archetype, the corporate center establishes rigorous reliability protocols, but each local site is responsible for demonstrating its adherence to processes and procedure. This archetype works well for organizations whose assets are uniform and where there is little variability or change in the production process.

At a major airline, each fleet has a dedicated team of reliability engineers who work remotely to monitor equipment and oversee basic maintenance (when heavy maintenance is needed, they travel to sites). The center’s reliability analysts study big data and their analysis informs decisions about preventive maintenance. Reliability engineers engage subject-matter experts from the central corporate-reliability function (along with other technical resources) to help make recommendations. The senior manager of the company’s large maintenance organization reports directly to the COO.


In this model, a central team designs, implements, and enforces the reliability programs and standards throughout locations. This approach works well for industries or companies that are very process-oriented and where there are distinct differences between production or operating facilities. In such companies, strong oversight is needed; there is a high risk of catastrophic failure, and repeat failures are unacceptable. A top-down approach ensures all facilities and businesses comply with corporate reliability standards.

At a third energy company, a functional group sets global reliability strategy, and a small central SWAT team implements procedures throughout the sites. (SWAT, because they are quick, tactical, and execute with precision.) Integrity and reliability teams are responsible for site-level reliability. Each of the company’s business units has a reliability engineer who oversees maintenance and implementation for each discipline (for example, equipment rotation or electrical operations). The functional group works with the local reliability engineer, operators, technicians, operations managers, and vice presidents, all of whom are versed in the reliability standards that apply to their roles.

Bottom-up reliability.

Here, local entities define reliability standards and practices and are responsible for reliability outcomes. Technicians conduct tests and file reports to central reliability teams with the help of process engineers. In some cases, reliability work is outsourced. Such an approach is well-suited to decentralized businesses where no two sites are alike, either in their culture, operating environment, or both.

A major resource company illustrates the benefit of this model, with its dozens of facilities and assets that include all manner of heavy equipment, refineries, and processing operations. Although reliability programs and accountability are decentralized, the company defines metrics for use across different sites—and considers it a priority to make them transparent to the entire organization.

Corporate oversight.

With this archetype, local operations define the reliability program, but the corporate center tracks (and has ultimate responsibility for) outcomes. The central office often develops KPIs for use enterprise wide. This model is effective for businesses whose products vary considerably and which require relatively tailored processes across facilities (such as pharmaceutical companies). The hybrid structure makes sense, given the strong local leadership that can be relied upon to carry out reliability without direct responsibility for outcomes. Crucial prerequisites include either having strong, local reliability processes and capabilities, or having other robust processes and strict metrics that reinforce reliability excellence, such as through quality control.

At a leading pharmaceutical company with dozens of facilities, corporate maintains consistency in reliability practices by establishing clearly defined KPIs, which local sites report on via dashboards. The central team also shares best practices (and failures) companywide. It holds weekly meetings with local facilities to review key topics and issues, and provides resources for major initiatives, such as implementing new technologies.

But it’s field engineers who lead such initiatives. Local reliability personnel also focus on root-cause investigations (RCIs) and failure-mode and effect analysis (FMEAs). Led by a maintenance manager and general manager, the local engineers, maintenance group, project teams, and planning and scheduling teams work in concert with the central reliability function.

A driving principle and enterprise priority

Reliability engineering emphasizes statistical analysis, but experience and history show that quantitative methods alone are insufficient for success. In many of the most dramatic operational failures in modern times, miscommunication or poor decision making exacerbated a fundamental engineering failure—in some cases resulting in catastrophic loss of life that could have been averted. Such events stand as sobering reminders of the importance of rigorous management, transparency, and accountability in reliability engineering.

Today, supply-chain complexity, heightened business interdependencies, competitive and financial pressures, and intensified public and regulatory scrutiny all mean that reliability organizations, regardless of industry, have their work cut out for them. Leaders cannot expect Industry 4.0 technologies alone to be a cure-all. Rigorous reliability processes, role clarity, and clear accountability structures that align with the broader organization—all are essential components of reliability success. So is talent management and development. But high-reliability organizations go one step further: they make reliability an explicit priority, not just an afterthought. As one reliability manager put it: “Everyone at our company takes reliability seriously, not just the reliability engineers. They know that reliability is a top priority, and one of our main criteria for success.”

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Jennifer Lopez – If You Had My Love (Official Video)

Watch the official music video for \”If You Had My Love\” by Jennifer Lopez
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If you had my love
And I gave you all my trust
Would you comfort me
And if somehow you knew that your love would be untrue
Would you lie to me
And call me baby
Now if I gave you me, this is how it’s got to be
First of all I won’t take you cheatin’ on me
Tell me who can I trust if I can’t trust in you
And I refuse to let you play me for a fool
You said that we could possibly spend eternity
See that’s what you told me (that’s what you said)
But if you want me
You have to be fulfilling all my dreams
(If you really want me babe)
Said you want my love and you’ve got to have it all
But first there are some things you need to know
If you want to live
With all I have to give
I need to feel true love
Or it’s got to end, yeah
I don’t want you
Trying to get with me
And I end up unhappy
(Don’t need the hurt and I don’t need the pain)
So before I do
Give myself to you
I have to know the truth
(If I spend my life with you)
JenniferLopez IfYouHadMyLove OfficialMusicVideo

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Jennifer Lopez - If You Had My Love (Official Video)


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GeT_RiGhT BEST Plays in NiP (Tribute)

A project I made together with Ninjas In Pyjamas, GeT_RiGHTs best plays in NiP!
♬ Song name: Fight for Glory FormantX \u0026 Stellar Finale FormantX
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GeT_RiGhT BEST Plays in NiP (Tribute)

Depeche Mode – Get the Balance Right! (Official Video)

Depeche Mode \”Get The Balance Right!\” (Official Video) directed by Kevin Hewitt
Original song from the ‘Construction Time Again’ album (Sire/Mute 1983)
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Written By: Martin Gore
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There’s more besides
The little house in the countryside
Learn to demand
And sometimes lie
Get the balance right
Get the balance right
Be responsible
Stable but gullible
Concerned and caring
Help the helpless
But always remain
Ultimately selfish
When you think you’ve got a hold of it all
You haven’t got a hold at all
When you reach the top
Get ready to drop
Prepare yourself for the fall
You’re gonna fall
It’s almost predictable
Don’t turn this way
Don’t turn that way
Straight down the middle until next Thursday
First to the left
Then back to the right
Twist and turn ’til you’ve got it right

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Video is an integral expression of Depeche Mode’s artistry. The band have released over 50 music videos and multiple criticallyacclaimed concert films, working with awardwinning directors including Anton Corbijn and D.A. Pennebaker. One of the most respected, innovative, and bestselling musical acts today, Depeche Mode have sold over 100 million records and played live to more than 30 million fans around the world. Depeche Mode Martin Gore, Dave Gahan, and Andy Fletcher continue to win critical and commercial acclaim both in the studio and on the road, with innumerable musicians citing them as inspirations. The band’s 14 studio albums have reached the Top Ten in over 20 countries, including the US and UK. Their latest studio album, 2017’s Spirit, debuted at 5 on the Billboard 200 and the UK album charts (becoming their 17th Top 10 UK album), and launched a world tour that saw the band play to more than 3.5 million fans.
DepecheMode GetTheBalanceRight ConstructionTimeAgain

Depeche Mode - Get the Balance Right! (Official Video)

Fabolous – Cold Summer (Audio)

Summertime Shootout 3 is out now! Download \u0026 stream here! https://Fabolous.lnk.to/SS3

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Music video by Fabolous performing Cold Summer (Audio). © 2019 Def Jam Recordings, a division of UMG Recordings, Inc.

Fabolous - Cold Summer (Audio)

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ขอบคุณมากสำหรับการดูหัวข้อโพสต์ get right

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