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The
Future of Asset Management
This article argues that traditional asset management, focused
on accounting and accountability for furniture, fixtures,
and equipment, barely justifies the effort devoted to such
activities. Other business requirements need to be encompassed
within the practice of asset management to derive the full
benefits to the company's bottom line or agency's mission.
Asset management, as practiced today, tends to take two
forms: 1) validating the base of personal property on which
depreciation calculations are developed or 2) making sure
property and equipment are not misappropriated and are reused.
Based on our experience in working with over 100 clients,
we will argue that other needs such as managing: 1) equipment
maintenance 2) interior design standards 3) least cost of
use and 4) personal computer resources should be given attention
equal to the traditional models.
In order to build the case for extending the purview of
asset management, I propose to review the characteristics
of several "models" we have encountered in our
work of developing systems for tracking assets and performing
asset inventories for 100's of clients over 15 years.
We use the term model as a set of characteristics that describe
how and why an organization manages one or more types of
assets.
THE NON-MODEL MODEL
To help understand what we mean by a model, lets start by
describing the "non-model" model of asset management.
In this model the organization purchases assets puts them
into a depreciation or insurance schedule and pretty much
forgets about them.
The payment voucher or actual check for the amount of purchase
puts the item into the payment schedule. The schedule is
devoted to recognizing the tax consequences of an asset's
existence. At tax time the schedule is used to calculate
depreciation and allocate it in its cost allocation systems.
No planning and no control characterize the "non-model"
model.
THE FINANCIAL MODEL
The financial model takes a step beyond the "non-model"
by creating a system to validate the existence of an asset.
It contains enough information to allow an auditor to test
the validity of the depreciation schedule. This provides
an element of control and accountability.
More importantly for this paper, it introduces some semblance
of management, by providing a system to note when an asset
has been disposed of, so it can be written off and full
value taken of the tax consequences of accelerating depreciation.
The same holds true for insurance schedules. Knowing the
exact replacement value of all assets actually in use can
help reduce insurance costs.
THE CONTROL MODEL
The government follows, and imposes on major contractors,
the CYA (cover your assets) or control model that is also
built into the financial model above. Great pains are taken
to account for the use of assets and who is responsible
for them from procurement to disposal.
Companies who buy assets on behalf of contracts, or are
provided assets as part of providing services to the government,
are subject to another form of control. They must be able
to show that the government-assets have not been used on
"non-government" work-in some cases on other than
the government contract for which they were provided or
procured.
The intent of this model is to assure that assets are not
misused and that they are recycled after they are no longer
needed by the original purchaser. At its best it tries to
save the government money by reusing equipment and furniture
that is excess and, on the flip side, acquiring used assets
rather than buying new ones.
This control orientation becomes part of an intricate charade
to keep an investigative reporter from being able to find
a "useable" item of equipment in a land fill somewhere
or to keep some "libertine" researcher from lending
an instrument to a colleague who is not entitled to it.
Attempts at reuse are a throw back to an age before computers.
Today the process to dispose of a PC takes so long, that
by the time it is free for disposition, it is worthless.
All you need do is to look at the old PCs nearly every large
federal agency has stored someplace in a warehouse or basement
storeroom.
EQUIPMENT MAINTENANCE MODEL
Building engineers in almost any large operation keep track
of assets they must maintain and service. Normally, these
are separate databases thrown together to help them plan
preventive maintenance and track the number of "emergency"
repairs required on the equipment for which they are responsible.
Laboratories and electronic companies will recognize the
kinship of this type of asset tracking to their requirements
to calibrate instruments and test equipment.
There are many highly engineered systems that permit users
to keep detailed records of both labor time and parts associated
with each repair for components (e.g. a cooling compress
or fan) and the system as a whole (e.g. the HVAC for a building).
The most sophisticated systems store and make electronically
available the manual of maintenance procedures for the equipment.
In fact the drudgery involved in keeping these records current
means that many of the features are not used, but it is
important to keep track of maintenance schedules and their
completion.
DESIGNER MODEL
An interesting curiosity we sometimes encounter in professional
organizations, in corporate headquarters, and among interior
decorators is the tracking of furniture and fixtures to
ensure that decor are consistent in like areas and that
no one in the organization gets a desk, chair, credenza,
etc. to which he or she is not entitled. Partners or vice
presidents get one level, directors or associates another,
and so forth. If you are in one department, floor, or wing,
your color scheme may be teal and sand; in another, it is
mauve and gray . . . depending on the creativity of designers.
The concerns protected in this case are status and appearance.
The model is not widely used, but one issue that has plagued
traditional asset managers--how to account for modular furniture--has
been solved by those who manage this type of asset. They
adhere strictly to a limited set of modular configuration
and color schemes and track each of these as a set. Most
offices, of course, are a jumble of pieces, colors, finishes,
and no ability to track or control them.
LEAST COST OF USE MODEL
The least cost of use model involves both procuring smart
and disposing smart. It carefully distinguishes when the
company should purchase, lease, or rent equipment depending
upon the price depreciation and obsolescence curves. Items
with fast obsolescence curves should be purchased new and
replaced with newer technology before the latter precipitously
reduces the resale value of the former. Alternatively, the
company might lease, short term, from the manufacturer with
the option to replace the equipment with the next technology
generation.
Items that become obsolete slowly should be purchased second
hand to let somebody else absorb the first years of price
depreciation. They may be held until they are virtually
scrap.
In either case the goal of managing assets is to plan procurement
and disposition to minimize the cost of using the asset.
It means having the information needed to make replacements
and to place items for resale on the market immediately,
lest delay cut into their resale price. Parenthetically
the CYA model mentioned above, with its cumbersome disposition
regulations, is guaranteed to reduce the resale value as
much as possible, by reason of delay.
COMPUTER EQUIPMENT MANAGEMENT MODEL
One of the newest models to surface deals with managing
PC assets. Its characteristics combine features of both
the least cost of ownership and the equipment management
models.
As we have watched in the last 15 years PCs have become
productivity tools in the office, replacing secretaries,
typists, and stenographers. Moreover, in the last five years
their purchase cost has been overshadowed by the costs of
supporting their use-maintenance of software is as important
as keeping the physical equipment running. The help desk
is a part of every organization.
Their complexity and corporate liability for copyright infringement
have made it necessary to know not only what hardware exists
but what software is running on the system. Unapproved software
may cause problems with the business software and operating
systems. Unlicensed software may expose the corporation
to suits.
Almost every help desk has some sort of system for keeping
track of or trying to keep track of the PCs it must support.
Most are rudimentary. Some, however, are cluttered with
all sorts of detailed data that are not only costly to maintain
but of limited actual value. A clearer management focus
will need to emerge to make management of this asset cleaner
and more pertinent to the business bottom line.
THE NEW ASSET MANAGEMENT
The new asset management is the ability of asset managers
to respond to many possible needs. Not all of the above
models may apply in every business or government agency,
but, to avoid being marginalized, the asset manager would
do well to look at how the function can serve more than
accounting and accountability concerns.
What stands in the way of extending the bounds of asset
management? Two elements are key. One is organizational.
It takes both vision and the ability to coordinate the separate
interests within an organization.
Asset managers who have come from the financial or control
backgrounds will have to learn more about their organizations,
become involved in the strategy and the implementation of
strategy. They will have to learn new skills . . . maintenance
needs, interior design, computers. They will have to use
their personal skills to work with others and help coordinate.
They will have to lead, rather than react and follow. It
is hard but it can be done.
The second barrier to the new asset management is technical.
There is a paucity of software that will permit multiple
type of asset management information to reside in one system.
What is required are databases and software that can be
modified by users to meet the needs for new data that is
different from the traditional make, model, serial number
data.
Copyright QueTel Corporation, 1997
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