In today’s world of mega-sized Capital Expenditure (CapEx) projects is an alarming number of projects that fall short of both budgetary and scheduling expectations. At GP Strategies, we have had the privilege of supporting CapEx initiatives for over 50 years with projects ranging from simple line upgrades to highly technical, highly complex, and inherently hazardous CapEx projects. One element of these initiatives that has proved critical in delivering highly successful launches is a prepared workforce.
CapEx statistics, like >60% of all projects exceed their CapEx budget and >70% fall behind their scheduled launch date, are the reasons many organizations are seeking a new strategy to protect their investment. These two statistics alone are the source of many a sleepless night for owners and investors. While there may not be a “silver bullet” solution, focusing on the workforce has delivered far better results than many expect, and as a change in previous practices, it is not overwhelmingly technical or complex as long as you have the right talent, technology, and processes.
Many CapEx projects are losing as much as 25%–30% of their intended value because of delays, rework, and budget overruns. Illustrated below is what GP Strategies typically terms as the CapEx Value Degradation curve.
The value that an owner/investor is expecting is based on being able to achieve production capacity in a designated period of time. Being able to safely achieve that capacity in the shortest period of time yields the highest financial returns. Conversely, if a new startup fails to achieve full capacity in its designated time frame, then every day that the facility continues to underperform, it is costing the owner more money.
Value degradation often occurs at the critical point in time when a CapEx project is nearing its Pre-Commissioning and Commissioning phases along with the transition from construction to operation. Oftentimes, as owners prepare to take possession of the facility during this stage, it becomes clear that the workforce is not adequately prepared to accept and operate the new facility to its design capacity. Too often CapEx projects demonstrate classic tendencies whereby a small handful of highly talented and skilled individuals are the ones holding it all together, but the workforce as a whole is ill prepared and limited in their knowledge of how to optimally run the facility. These scenarios often lead to miscues, safety violations, operations outside of design parameters, and many other undesirable situations. Over time the workforce eventually gets up to speed; however, the cost associated with this can be enormous and it rarely is ever lower than the cost of developing the talent from the start. So why not focus on human capital preparedness?
Human Capital Preparedness
GP Strategies’ experience is that due to the very nature of the capital expenditures, organizations are extremely adept at thorough technical designs, state-of-the-art equipment selection, and optimized process layouts. Unfortunately, the value and impact of human capital seldom receive the same consideration or rigor.
The solution is to focus on the human capital just as you would on the design, engineering, and equipment, and do so at least 18 months ahead of launch. The graphic below illustrates that by starting well in advance of the targeted startup date, facilities have the time and resources necessary to design, develop, and deliver the workforce analyses, learning elements, and documentation.
The key is having the resources necessary to oversee this, and that starts with a Talent Strategy and an on-site Training Coordinator. This is not what most facilities consider until they are in the final 6 months of a CapEx project, and they are working feverishly to secure all the training and certification records prior to the go-live date. That wouldn’t be catastrophic by itself; however, in those closing 6 months, all your strongest talent is being deployed in pre-commissioning, commissioning, and system readiness pursuits. Time is the most precious commodity, and trying to have those same talents now support SME reviews and conduct ad hoc training or documentation support, system walkthroughs, and structured on-the-job training (SOJT) rarely goes well.
Having a Talent Strategy at the early stages allows a CapEx project to address a host of learning and development initiatives and most importantly establish an overarching learning plan that addresses the following:
- Learning strategies
- Qualification and certification plans
- Documentation development
- Simulation development
- Learning management system, and administration and data
- Scheduling and coordination of site resources and facilities
- A host of other responsibilities
So much of this is based on generating a sound Learning Strategy. The graphic below is a high-level Learning Strategy example.
This graphic captures the essential elements of a Learning Strategy from creating an advisory or governance board to ensuring a workforce analysis is in place that feeds to your program design and learning process. Critical elements of simulation and procedural documentation and standards are established and templated. Learning tools and designs are set; all this coalesces into a training delivery and procedural process that best prepares your human capital for the impending launch.
If you are planning or are at the early stages of a CapEx project, give serious consideration to your Talent Strategy. GP Strategies can share a robust roadmap highlighting many of the phases that your Talent Strategy should include along with the process steps necessary to execute on the tactical items. A little more dedicated planning and strategy will pay significant dividends in the future, and in our experience, it is also significantly less costly.
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