1. Social Responsibility as an Organizational Capability: The Case of Building Maintenance John Lyneis MIT-UAlbany-WPI PhD Colloquium April 25, 2008

2. Copyright © John Lyneis, 2008. All rights reserved.2 When and how do organizations adopt socially responsible practices?  A large amount of work: should organizations engage 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…

3. Copyright © John Lyneis, 2008. All rights reserved.3 Another approach: issue selling within organizations  Rather than study the logic of top managers, look at how individuals advance issues from the ground up

4. Copyright © John Lyneis, 2008. All rights reserved.4 An Example – MIT’s buildings One important socially responsible practice: reducing building energy use Here, I study one organization where leadership agrees that emissions are important  Website displays clear goals: “reduce GHG emissions, invest in energy conservation”  Analogous to CSR, such investments are not directly related to the Institute’s mission of education and research There are also many employees that champion this cause internally  Facilities employees have made progress on small issues

5. Copyright © John Lyneis, 2008. All rights reserved.5 CSR as a Capability Even with strong support, reducing energy use is extremely difficult Hart (1995) suggests a “natural resource based view of the firm”  In a world with limits to growth, sustainable organizations will have 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”

6. Copyright © John Lyneis, 2008. All rights reserved.6 An example – Existing buildings Nine Month Study of Repair & Maintenance department at 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?

7. Copyright © John Lyneis, 2008. All rights reserved.7 The Expanding Campus The last seven years has seen a 21% increase in the number of square feet maintained… … Yet spending on R&M has not increased How is this possible?

8. Copyright © John Lyneis, 2008. All rights reserved.8 Deferred Maintenance Facilities’ greatest challenge: Deferred maintenance  According to managers & mechanics, a great deal of equipment is running past manufacturer’s recommendations “If it’s meant to get 20 years, we get 30 years. Once it’s in you know it’s going to be in for a long time, [so you need to] get the best you can.” – Employee on Building Design & Construction side  Over the years, buildings have undergone many smaller, uncoordinated renovations without attention to the overall design and use of mechanical systems

9. Copyright © John Lyneis, 2008. All rights reserved.9 Deferred Maintenance can be represented as a stock of Defects Over time, new defects flow into the stock (“Defect Creation”) and are removed as they are resolved (“Defect Resolution”) As the campus ages and expands, more defects will flow in

10. Copyright © John Lyneis, 2008. All rights reserved.10 The balancing feedback loop “Planned Maintenance” illustrates 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 of Defects will continue to rise

11. 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 must be resolved that day  Leaks, Alarms, Heating and Cooling 55% of work orders are responses to less immediate requests for repair work  Examples: Replacing light bulbs, replacing ceiling tiles 20% of work orders are planned preventive maintenance  Work hours are more skewed towards emergencies given that PM work orders on average take the least amount of time. “We’re just running around, we’re the firemen. We’re not even the fire chief. We’re the firemen, running around trying to put out fires, and can’t see past that next call.” – R&M Employee

12. Copyright © John Lyneis, 2008. All rights reserved.12 Reactive Maintenance can also be expressed using a causal diagram.

13. Copyright © John Lyneis, 2008. All rights reserved.13 Reactive Maintenance Regression Results also confirm a modest negative relationship between Work Pressure and time per work order Model: LHWO = Normal LHWO*(Backlog/Normal Backlog) a Estimate: a = -.149 Significant at the.001 level Interpretation: A 10% increase in backlog yields a 1.5% decrease in time per work order

14. 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 in order to fix it “If it breaks, then you’re lucky. Then, you have to have the money.” - Facilities Employee

15. Copyright © John Lyneis, 2008. All rights reserved.15

16. Copyright © John Lyneis, 2008. All rights reserved.16 Adding Planned Maintenance Adding time on Preventive and Predictive Maintenance forms the familiar “reinvestment” feedback loop

17. Copyright © John Lyneis, 2008. All rights reserved.17

18. Copyright © John Lyneis, 2008. All rights reserved.18 Proactive vs. Reactive Maintenance To its credit, R&M is currently not responding to work pressure by cutting back on preventive work Although the amount of preventive work is small, PM work orders are consistently completed Therefore, the “Reinvestment” loop has the greatest potential to be virtuous in the future. Chart – As backlog increases, emphasis does not shift to reactive work

19. Copyright © John Lyneis, 2008. All rights reserved.19 What about quality and rework?

20. Copyright © John Lyneis, 2008. All rights reserved.20

21. Copyright © John Lyneis, 2008. All rights reserved.21 This is the capability trap (Repenning & Sterman, 2001) This organization is already in a reactive mode with high defects and very little time spent on improvement

22. Copyright © John Lyneis, 2008. All rights reserved.22 Effort Defects Work Order Backlog Time on Reactive Work Time on Improvement “Working Harder” “Working Smarter” Time

23. Copyright © John Lyneis, 2008. All rights reserved.23 Maintenance and Energy Use Why does this impact efforts to reduce energy use?  When all of your time is spent firefighting, it’s hard to keep the buildings running efficiently, or think about new investments that are not related to minimum building performance  For example, many dampers are not operational, and as a result outside air is not used to help cool buildings

24. Copyright © John Lyneis, 2008. All rights reserved.24 Maintenance and Energy Use Real cost savings are available from improved maintenance During March 2007, a commissioned analysis of one building found $400,000 in annual 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

25. Copyright © John Lyneis, 2008. All rights reserved.25 Conclusions The current capability trap makes reducing energy use extremely difficult A proactive maintenance department is an organizational capability that is difficult to develop and maintain Without this capability, buildings are less efficient

26. 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

27. Copyright © John Lyneis, 2008. All rights reserved.27 And pass on energy savings…

28. Copyright © John Lyneis, 2008. All rights reserved.28 What can be done The presence of an additional reinforcing loop makes the period of higher costs from any improvement strategy milder Total Costs Constant Energy Costs Energy Savings Reinvested Time Initially, investment increases costs, but total costs fall once defects are eliminated, reducing breakdowns and the amount of reactive maintenance

29. Copyright © John Lyneis, 2008. All rights reserved.29 The Full Conceptual Model