STOs (Shutdowns, Turnarounds, Outages) are VUCA Environments. So What?
About VUCA Environments
The acronym VUCA is based on the leadership theories of Warren Bennis and Burt Nanus. First used in 1987 to describe the Volatility, Uncertainty, Complexity and Ambiguity of general conditions and situations, it was adopted by the U.S. Army War College to describe what was perceived as the multilateral world resulting from the end of the Cold War. From 2002 onwards, it was adopted in military education and subsequently in emerging strategic leadership ideas relevant for many types of organizations.
Why is this relevant to organizations today? In What VUCA Really Means for You published in the Harvard Business Review back in 2014, the authors note that “… VUCA conflates four distinct types of challenges that demand four distinct types of responses.” Raising the question whether it is possible to prepare for a VUCA world, the article continues with a guide that defines the characteristics, provides an example and presents the approach to be adopted for each VUCA category, thereby ensuring the appropriate response.
STOs are VUCA Environments
STOs (Shutdowns, Turnarounds, Outages) are a consistent and vital integrated component of site maintenance programs, accounting for a large proportion of their annual budget. Since the origin of STOs, they have gradually grown in both size and complexity. Industry statistics state the STO market encounters a 90% failure rate, with 43% of STOs considered to be grossly exceeding schedule and budget. These statistics indicate that the age-old “tried and tested” project management methods and tools are no longer capable of delivering success.
STOs have unique project characteristics – particularly high complexity, pressure and intensity – with many variables and evolving challenges. These project characteristics differ to traditional projects, and are high-VUCA environments typified by:
Direct impact on STO cost and schedule. With STO preparations often starting 1-2 years prior to the planned execution, the STO parameters used for determining the scope are only estimates, constantly changing and extremely volatile. During STO execution, as equipment is inspected, scope uncertainty becomes known and STO execution inevitably encounters scope growth. Decisions for inclusion or rejection of discovery scope are impacted by STO constraints – such as labor, materials, plant, schedule and budget – and the long-term effect on the facility and future maintenance program. This requires the STO management team to make rapid and informed decisions and understand the holistic impact, in order to maintain STO success and the long-term integrity and performance of their facility.
There is a strong correlation between STO cost and the STO scope, schedule and quality. But since cost estimating requires complete and holistic data, cost estimates are often uncertain and unfortunately only realized too late. Furthermore, the calculation and allocation of cost contingencies is a very important factor to determine accurate total STO cost. Such contingencies should be derived from risk analysis and allocated at the activity or work order level, rather than being a singular value calculated as a factor of the total known expenditure.
STO schedules are reliant on scope, constrained by resources, and can have a major impact on quality and cost. Since units are down and not producing products/revenue during an STO, quality schedules are essential to ensure minimum downtime. But STO schedules are highly complex and volatile, because of the sheer magnitude of data involved and the constant changes that require continuous reworking of the schedule and execution plan.
Quality has a major impact on STO scope and cost. Poor work quality typically requires rework, which in turn increases the scope of the STO and impacts the total cost. And if poor quality is not identified and corrected, it can have much more significant consequences, causing unpredicted downtime or worse.
EHS can have a major impact on STO cost and schedule. While the protection of personnel, equipment and the environment should always be the primary focus, as extreme VUCA environments STOs pose enormous challenges. At best, an EHS incident will shut down an STO, directly impacting the STO schedule and cost; at worst, it can result in death, damage or irreversible destruction, and involve associated penalties and ongoing reputational damage. Very similar to poor quality, poor EHS is typically the result of a poor schedule and/or inadequate resources, lack of sufficient supervision or adherence to work procedures.