Reliability, Risk and Safety Ale, Papazoglou & Zio (eds)

2010 Taylor & Francis Group, London, ISBN 978-0-415-60427-7

Network maintenance contribution in terms of intellectual

capital on distribution network services providers
J.F. Gmez, V. Gonzlez & C. Parra

Industrial Management PhD Program at the School of Engineering,

University of Seville, Spain

A. Crespo

Industrial Management School of Engineering, University of Seville, Spain

ABSTRACT: Maintenance is characterized as a highly complex field inside business and involves various
disciplines: Management, Organization, Human Resources, Company Economy, Safety, Environmental
Management and Knowledge of production throughout the chain. In Distribution Network Services Providers (DNSP), such as distribution companies of water, energy, gas, telecommunications, etc, customer
oriented organizations, maintenance is a key department by its contribution to look after the interests or
satisfy the needs of clients and profits of enterprises. In order to optimize maintenance, the human capital
is one of the best tools through their skills, attitudes and interests. It has to appreciate technical aspects, personal flexibility, changes, adaptation, creativity, learning capacity, willingness to team work in equipment,
ability of decision and easiness to work in multiple and interrelated operations. Therefore, the knowledge
of the maintenance staff is a strategic asset for the company and it can be considered as a competitive
advantage within the service sector. These aspects must be evaluated in order to place correctly the contribution of maintenance within the company valuation and future plans. Thus, in this paper, we will try to
evaluate quantitatively the maintenance organization in a dependability scope, but with the intention to go
beyond the balance score card to understand the capacity and potential to generate present and future value
according to the maintenance management. In this sense, we have to consider the dependability scope as a
measure of the intellectual capital of the maintenance organization.
1 InTroduction
Maintenance is characterized as a highly complex field inside business and involves various
disciplines: Management, Organization, Human
Resources, Company Economy, Safety, Environmental Management and Knowledge of production throughout the chain. On the contrary, it must
be remembered that an activity could possibly only
be noticed for its failures, a situation that leads to
a lot of pressure when it occurs. Theses varieties of
discipline and its concurrence implies that taking
decisions can be influenced by all of the above and
that it can be difficult to determine the appropriate
decision every time:
Economics, lower spending.
Increase in productivity, minimizing the impact
of some affection, then it implies a lower production cost and service price.
Urgency and prioritization, quick decisions.
Quality, maximum achievable for a better service, so major customer satisfaction, to capture
them and improve the image of the company.

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Forecasting that prevents or minimizes damage.

Management of suitable human resources adequate for maintenance with its restrictions.
Another consideration is that the maintenance
activities are always under pressure to cut costs
underestimating the benefits it provides or the damages that it avoids (Carter, 2001; Mitchell etal., 2002),
to other departments or to the objectives of the company. That is to say, it involves an adequate human
capacity with a high professional level of ethics and
deontology in the face of the liability and social
impact of their decisions (Crespo etal., 2004).
But let us now focus on the DNSP sector. Distribution network service providers (DNSP) are companies dealing with network infrastructure, such as
distribution of gas, water, electricity, or telecommunications, and they require the development of special maintenance management (MM) capabilities
in order to satisfy the needs of their customers. In
these customer oriented organizations (Porter, 1980)
(Ishikawa, 1985), maintenance is a key department
(Core ProcessEarl, 1994), see Figure1, by its contribution to customer satisfaction and profitability

Legend (Yourdon notation)

an

en

d
ee

em

pl

ln

ov

ts

Figure1. Earls topology of processes.

sta

Table1. Maintenance costs in DNSP.

s&

rd
da

Produced profit

Productivity
Availability
Cost reduction
Rates reduction
Price increase

3%
3%
0,53,5%
0,71,2%
0,50,9%

(Murthy etal., 2002) (Zhu etal., 2002). Not only does

it contribute to the service quality, but also enriches
all the company experience surrounding the service
provided (Kssel etal., 2000). For example, Murthy
etal. (2002) show that any improvement in maintenance activities implies larger improvements in the
organization, see Table1.
Knowledge management is critical in DNSPs.
Their maintenance departments hold an important number of operational relationships, having intense internal and external information
exchange, see Figure 2 using Yourdon notation
to model this information exchange. Therefore, the need to update and share maintenance
knowledge (Wireman, 1991) (Nakajima, 1992)
(Nonaka & Takeuchi, 1995)which is many times
tacit, empirical and dispersed among technicians
working in different shifts, 24 hours a day, 7days
a weekbecomes a key topic. Also, to make
explicit knowledge out of tacit knowledge requires
training on the job (Peele & Chapman, 1987)
(Swanson, 1997) (Pintelon & Gelders, 1992), coaching, mentoring and producing books of knowledge for each maintenance activity (Hansen etal.,
1999). These are activities difficult to accomplish
due to the fact that many procedures and technical instructions refer normally to equipment under
laboratory conditions and not to real equipment
operating conditions. Obviously, when equipment
is distributed in the field, it suffers of very diverse
environmental effects.
The human capital is crucial for continuous
improving and decision making (Fowler, 1987)
(Edwards, 1987) (Deming, 1989), and according to
our point of view, this is especially true in this type

technical
feedback

technical feedback
& perfective proposals

Engineering

1% of improvement in each area

ds

tho

me

performance

technical
feedback

rove
m en
ts

an
ce

imp
rn

ing

en

ss

e
sin

ns

tio

tric

res

bu

services & incidents

guaranteed
services

services,
incidents &
activities

Network
Construction

t&
os

em

ov

pr

im

,c

wa

technical assistance Maintenance

Suppliers

Low

ts

rm

&

ri a

pr

rfo

an

ce

im

Business Strategy &

Management

pe

s&

performance

lem

rm

e
at
m

are those by which firms plan,

organise and control resources

rfo

&

exist beyond the boundaries of the

enterprise and include suppliers,
customers and business partners

MANAGEMENT
PROCESSES

pe

ob

es
vic

BUSINESS NETWORK
PROCESSES

secondary activities of the value

chain that have internal customers
and backup core processes

Human Resources,
Security & Law

Purchase & Logistics

pr

An external entity
is a component
outside the model
boundaries.

An arrow represents a data

that flows between functions,
data stores, or external
entities. If it is dashed, it is not
pertinent to the model.

r
se

primary activities of the value chain

and affect the central objective of the
organization in connection with the
customer satisfaction

High

SUPPORT
PROCESSES

Process Structuredness

CORE
PROCESSES

A function identified with a

name and a number. The
number represents an
identification of the data
model hierarchy level.

Secondary

lem
s&

Value Chain Target

human & learning needs

Primary

prob

Earls Topology of Processes

pe
rfo
rm
a
services,
incidents &
activities

Customers

nc
e

Quality

Figure2. Information flow of maintenance with other

entities.

of companies. The main source to create competitive advantages lies primarily in their knowledge, in
what it knows, in how it uses what it knows and in its
capacity to do new things Laurence Prusak (1996).
For that reason, in order to optimize maintenance in DNSP, the human capital is one of the
best ways through management of their knowledge, skills, attitudes and interest, managing by
competences (Smith & Kelly, 1997). This has to
appreciate technical aspects, personal flexibility,
changes, adaptation, creativity, learning capacity, willingness to team work in equipment, ability
of decision and easiness to work in multiple and
interrelated operations.
Consequently, to evaluate the value generated by
the maintenance department is not an easy task,
and different perspectives have to be considered. In
order to quantify the evaluation of any maintenance
department, the presented work proposes a methodology to measure the goodness of the maintenance
management in services companies which are based
on a network infrastructure. Then, the methodology
is reflected through intellectual capitals, considering
not only the produced profits, but also the avoided
risks in a dependability scope.
To illustrate the evaluation in DSNP companies,
we have organized this document into three parts.
In the former part, we will investigate the maintenance contributions in different areas of the company. In the second part, we will present a basic
revision of intellectual capitals. In the latter part,
we will develop the proposed methodology and we
will finish with a case study and conclusion.
2 MAINTENANCE CONTRIBUTION
TO THE COMPANY
In this section we evaluate maintenance impact in
different areas of the company, considering internal
and external visions (EN 15341, 2007). Different

1303

authors have summarized maintenance contributions

in the following domains (Campbell & Jardine, 2001)
(Pintelon & Van Wassenhove, 1990), see Figure3.
Management and Organization. In the maintenance context, the management is a compulsory
discipline that consists in the aptitude of leading the activities and involved resources (ability,
knowledge, skills, responsibilities, etc) towards
the defined objectives, in order to facilitate their
control and the knowledge management.
FinanceEconomics. From a practical point
of view of the business, maintenance involves
techniques to generate significant savings in the
companies, reducing the consequences of the
failures and pursuing the business effectiveness
(Moubray, 1997).
Business and Function. Maintenance aims at
maintaining the functions to keep the equipment working as much as possible.
Quality and customer relations. Maintenance
can strongly contribute to customer capture, satisfaction and retention (Deardeen etal., 1999).
Security impact (including safety, confidentiality and integrity). Maintenance actively plays
an important role in the protection of the internal resources of the company as well as in the
protection of the external resources. Moreover,
nowadays, a growing interest of the society to
the environment protection exists (Weule, 1993)
(Furlanetto etal., 1991). Then, among the maintenance objectives, the assets conservation in
safety condition for the environment and people must be considered according to legal norms
and restriction.
Development and improvement. From the maintenance experience, products and services can be
improved, through the continuous improvement
of processes, continuously looking for the value
generation and the capability to quickly react to
changes.
In order to evaluate maintenance contributions
to all the above mentioned fields, we need historical data and coherent aggregation of indicators
(Kaplan & Norton, 1996). By this way, the change
management in the companies is facilitated. Then,
indicators can be utilized as support for deci-

FINANCE-ECONOMICS

BUSINESS-FUNCTION

QUALITY

SECURITY

OMC=CPlanned+CCorrective+CProduccin.Risks
+CSecurity.Risks+CDependability.Risks
+CQuality.Risks

1. Direct costs including the planned and corrective costs.

2. Risk costs quantifying the consequences of non
reliability in safety, environment, production
and quality.
The risk costs could be expressed as:

DEVELOPMENT-IMPROVEMENT

Figure3. Maintenance contribution in all the company

contexts.

(1)

In summary, we could classify the maintenance

costs due to its impacts in two categories (Yaez etal,
2002) (Moubray, 1997) (Nowlan & Heap, 1978):

Risk (R)=i=1,.n (PrCConsequence)

COMPANY STRATEGY

MAINTENANCE

MANAGEMENT-ORGANIZATION

sion making and to guide the development and

improvement of processes.
In DNSP companies, due to their special characteristics, mainly for their high interaction with
the customers and the large number of dispersed
elements, the maintenance contribution will be considered measuring the performance of maintenance
activities plus the analysis of their impact (failures).
The maintenance contribution in a failure analysis context could not be considered from a deterministic point of view, due to the uncertainty of fault
occurrence, so it must be handled from a probabilistic approach (Avizienis etal., 2001) (Crespo etal.,
2004), based on the study of random variables as
MTBF and MTTR which are characterized with
probability distribution functions (parametric estimations, Greves & Schreiber, 1993).
The importance of the failures is not only relevant in terms of operational performance, but
also in terms of cost (Woodhouse, 1993), as it is
shown in the Figure4 on the phases of the lifecycle of the equipments, where according to Wilson
(1986) the cost of the failures could even reach ten
times the purchase cost.
The Risk-Cost model (Woodhouse, 1993) makes
easier the decision-making towards the maximum
profit with the minimal impact. So adopting the
study of Woodhouse (1993) for a dependability
context, the Overall Maintenance Costs (OMC)
are the sum of costs due to planned, corrective and
perfective activities, plus the costs of risks in production, security (including safety), dependability
and quality:

Figure4. Lifecycle costs of equipments.

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(2)

 Pr is the probability that a given failure occurs.

CConsequence is the resulting cost from a given
failure.
i are the possible failure types (1, 2, ..., n).
Then, to know all the possible costs of maintenance, we have to measure the direct costs and the
quantification of the risks by non reliability. These
types of costs could symbolize the real and potential capacity of the maintenance organization to
create profits and savings for the company, that is,
we could use these measurements to value the intellectual capital of maintenance.
3 MAINTENANCE CONTRIBUTION
AS INTELLECTUAL CAPITAL
It is been previously introduced the importance of
the Knowledge Management for maintenance and
the value of the experience and the skills in order to
improve the maintenance on the six defined categories: by improving management and organization,
by optimizing the production, through cost reduction, by contributing to quality and environmental
awareness, and by contributing to continuous learning. Therefore, the knowledge of the maintenance
staff is a strategic asset for the company and it can
be considered as a competitive advantage within
the service sector. These aspects must be evaluated in order to place correctly the contribution
of maintenance within the company valuation and
future plans (Thompson & Walsham, 2004). By the
year 1977, the American Accounting Association
(AAA) described the utilization of non financial
indicators to facilitate the decision making on the
assessment of the human capital.
There are many documents on the assessment
of knowledge showing the difficulty of this practice when it is applied to intangible issues which
are hard to measure and reproduce, speaking
on the measurement of the Intellectual Capital
(Stewart, 1999, 2001) as a valid (explicit) knowledge that generates a competitive advantage for
the company (Edvinsson & Malone, 1997) with the
potential of yielding future profits. The intellectual
capital has been defined by the Euroforum (1998)
as the set of intangible assets of an organization that, despite of not being taken into account
in traditional financial statements, at the present
time indeed produce value or have the potential to
produce it in the future. It can be shown that the
intellectual capital is present besides the physical
assets in three ways (INTELECT, 1998):
Human Capital or due to the employees of the
company such as knowledge, experience and
creativity.
Structural Capital which considers the organizational skills to perform its function, such

as information sources, technological and

systems capital, industrial properties, government franchises, organizational culture,
process efficiency, quality of service, innovation capability, etc.
Relational Capital of the company with agents
of its environment (customers, suppliers, public
organizations, etc.) as trademark valuation, clients portfolio, customers relationships, etc.
According with this classification: How could
be assessed the contribution of maintenance to
intellectual capital?
The International Accounting Standards Committee (IASC, 1998), the International Federation of
Accountants (IFAC), and the Asociacin Espaola
de Administracin y Direccin de Empresas (Spanish Association of Business Management, AECA,
1997) have submitted reports on the accounting of
the intellectual capital where in order to asses the
intellectual capital there must be a transaction and
the value to consider must be the purchase price
and that they are going to produce future profits for
the company and therefore could be amortized or
depreciated. But these reports are not dealing with
the accounting of the industrial properties, organizational cultures, customer portfolios, etc, when
these are generated inside the company.
Most of the consulted methods for the valuation of the intellectual capital (Stewart, 1999, 2001)
(Edvinsson & Malone, 1997) (INTELECT, 1998)
(Riesco, 2007) use as reference equation the sum
of different types of capital weighted by some efficiency indexes.
According to this, and aligned with the calculation method developed by Edvinsson & Malone
(1997), in order to get the valuation of the intellectual capital of an organization, this can be
expressed as the sum of the human capital, the
structural capital and the relational capital multiplied by some efficiency indexes specific for each
type of capital.
CI=iHCH + iSCS+iRCR

(3)

Where:
CH, CS and CR stand for the economical value
of human capital (CH), the structural capital
(CE) and the relational capital (CR).
iH, iE, iR stand for the efficiency indexes of the
intellectual capital, and in the case of existing
more than one index in each type of capital,the
index to be used in the calculation will be the
arithmetic mean or average ((i1+i2+ +in)/n)
of all of them.
Consequently, we could support on the different
types of maintenance costs to value the intellectual
capital of maintenance in DNSP companies.

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4 METHODOLOGY
In many companies, it is important to define the
mechanisms to facilitate and guide the improvement and the decision making on the right way. In
this document, we will focus on the development
of the methodology towards the efficiency, trying
to combine operating criteria with the department
strategy (Pall, 1987) (Pintelon & Gelders, 1992).
Some questions arise:
How can we quantify all the maintenance contributions due to the internal knowledge and the
network reliability? Which is the value of the intellectual capital of maintenance?
Maintenance department, changing by nature,
needs a quantification of the maturity of its evolution which reflects the organization and its capabilities. It is necessary not only to measure before the
adoption of any maintenance management, but
also to measure the effectiveness of its application.
It is necessary to challenge the present situation,
making decisions to lead the evolution towards
a continuous improvement and minimization of
risks.
The goodness of the maintenance management,
due to its evolutionary nature, should be measured
as a quantitative value that reflects the produced
improvements in network reliability and service
quality.
Maintenance contributes in different areas to
the excellence due to its internal intellectual capital,
see Figure5, therefore we could express its contribution based on terms of costs and dependability
indicators.
From the strategic point of view it is important
to clearly discriminate not only the efficiency in
management, but also: Where does maintenance
generate value for the company? Which difference,
positive or negative, has a maintenance department
compared with another? Which consequences may
the operation of a maintenance department cause?
In line with the ideas of Crosby (1979) and
Dale & Plunkett (1991), it is important to answer
to these questions in a quantitative way, so that
the managers could know the actual situation
and could make their decisions easier to exploit
the competitive advantages of maintenance. The
knowledge of quality costs aid to managers to jus-

tify the investment in improving the quality and

assisted them in monitoring the effectiveness of the
effort made, (Dale & Plunkett, 1991).
In order to evaluate the contributions of maintenance, they must be quantified considering the
relations between effects and causes, and including the potential to produce value in the future.
Therefore, indicators about network reliability and
intellectual capital can be utilized as support for
decision making and to guide the development and
improvement of the maintenance.
This section aims at showing, in quantitative
values, that the establishment of any maintenance
management in the DNSP creates value for the
organization. Thus, we will try to evaluate quantitatively the maintenance effectiveness in a dependability scope.
It is worth mentioning what stated by Becker
(1964) the human capital is the most important factor to explain and predict the economic
growth. That is, considering the potential of the
maintenance department through its:
Effectiveness in the processes.
Quality of its activities and of its maintained
services.
Attention to customers.
Utilization and development of technologies.
Capacity to improve and innovate.
Then the proposed methodology will allow us
to measure the evolution and the comparison with
other companies of the sector (in accordance with
Svantesson, 2008), competitors, standards and regulations. Then, to determine the maturity we need to
employ external references as objectives (Campbell,
1995) (Tsang, 2002). In this sense, we must accomplish
with what indicated by Murthy etal., (2002): The
effective management needs to be based on quantitative business models that integrate maintenance with
other decisions like production, etc.
Consequently, measurements of dependability
in maintenance and measurements of company
performance will be utilized to characterize the
efficiency of the maintenance management. In
summary, using maintenance results in a dependability scope, we will measure the effectiveness in
the achievement of the objectives.
According to Campbell (1995), some main
measurements of maintenance, and accepted as a
reference, are:
Reliability.
Availability.
Maintainability.
Resources efficiency.
Percentage of un-planned activities.

Figure5. Maintenance contribution areas.

As example of this, the Table 2 is shown with

some indicators evaluated as a reference by

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Table2. International indicators.

Category
Yearly maintenance costs:
Total maintenance cost/total
manufacturing cost
Maintenance cost/replacement asset
value of the plant and equipment
Hourly maintenance workers as a %
of total
Planned maintenance:
Planned maintenance/total maintenance
Planned and scheduled maintenance
as a % of hours worked
Unplanned down time
Reactive maintenance
Run-to-fail (emergency +
non-emergency)
Maintenance overtime/total company
overtime
Work orders reworked/total work orders
Turns ration of spare parts
Training: for at least 90% of workers,
hrs./Year
Spending on worker training
(% of payroll)
Safety performance:
OSHA recordable injuries per 200,000
labour hours
Housekeeping
Monthly maintenance strategies:
Total hours pm/total maintenance
hours available
Total hours pdm/total maintenance
hours available
Total hours prm/total maintenance
hours available
Total hours rem/total maintenance
hours available
Total hours rnem/total maintenance
hours
Available time/maximum available time
Contractors cost/total maintenance cost

Benchmark
<1015%
<3%
15%
>85%
8595%
0%
<15%
<10%
<5%
0%
>23
>80hrs/yr
4%
<2
96%
20%
50%
20%
2%
8%
>97%
3564%

Mitchell (2007) in a study about different companies. This table is presented in MARCON
(University of Tennessee College of Engineering), A Maintenance Improvement Program
Benchmarking of Kyoumars Bahrami.
Although, as we have mentioned, we also have
to evaluate the performance of services, including their risks and consequences (Moubray, 1997)
(Nowlan & Heap, 1978).
According to the Woodhouses Risk-Cost model,
the Overall Maintenance Costs (OMC) are the sum
of costs due to planned (as preventive, predictive and
monitoring), corrective and perfective activities, plus
the costs of risks in production, security (including
safety), dependability and quality. In a given period,
it is reasonable easy to calculate the costs due to

planned, corrective and perfective activities, but how

could we estimate the costs of risks? We need probabilistic methods to estimate the costs of risks.
In our analysis, we will focus on the equipments
which will be analyzed from the operational point
of view (producing, distributing, assuring, etc) taking into account particular environmental conditions and context.
For that reason, it is focused on the most severe
failures, the ones that prevent its operation, investigating the causes and calculating the risk of a fault
occurrence. Then, we have to work with probabilities of failures in a RAMS Analysis (Reliability,
Availability, Maintainability and Safety) (UNE
200001-3-11, 2003) (Dekker, 1996) (Wang, 2002).
To quantify the risks and consequences, we could
use probabilistic tools and methods over probability distribution functions (parametric estimations,
Greves & Schreiber, 1993).
Therefore, we will evaluate the failures impact
on the operational point of view (producing,
distributing, assuring, etc), safety and economical
efficiency.
Also, the different methods of evaluation
about intellectual capital (Stewart, 1999, 2001)
(Edvinsson & Malone, 1997) (INTELECT, 1998)
(Riesco, 2007) employ some indicators as reference
as personnel motivation, customer satisfaction,
personnel performance, rate of training, grade
of ICT implementation, un-planned activities,
efficiency in the use of resources, etc
We will develop a methodology of evaluation,
integrating the effectiveness in dependability from
different categories and, at the same time reflecting the generated value of the intellectual capital.
We will integrate the intellectual capital and
dependability indicators in fraction numbers in
the three categories of capitals, but to simplify we
will sum up the security and customers results into
a single category about relational capital, linking
the society perceptions that have influence over the
customer perception.
In this line, we have to measure not only the
negative impacts or consequences of a poor
maintenance, but also the positive impacts or
consequences of a good maintenance, particularizing on the most relevant categories of
intellectual capital:
Human capital or related to people, through
efficiency in personnel investments and human
reliability.
Relational capital or related to quality, through
efficiency of quality investments and consequences in customer satisfaction.
Structural capital or related to company structure,
through efficiency of structural investments, equipment conservation and losses of production.

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Consequently, in DNSP companies, indicators

of effectiveness should be linked with indicators
as network reliability, availability, reestablishment
time, etc, and their affection in service quality, production and customer satisfaction.
4.1 Generated value in relation to people
In this section, in relation to people and intellectual
human capital, the main investments in human capital, from the accounting point of view, are two:
Investment in salaries.
Investment in learning and training.
Then, the efficiency of these investments could
be represented by the following indicators:
Investment in salaries (CHsalary).
- Personnel motivation (iH.motivation). This indicator
is the internal rate of personnel motivation.
- Personnel Performance (iH.performance). From the
internal performance management system the
present indicator is deduced.
- Productivity of labor (productive hours/total
hours) (iH.productivity).
Investment in learning and training. (CHlearning).
- Rate of covered personnel for learning and
training plans (iH.learning).
- Rate of covered personnel with competences
to develop the activities (iH.competences).
- Personnel efficiency according to the standard (implemented work orders according to
standard time/total work orders) (iH.efficiency).
Also, from a dependability point of view, people before circumstances of stress, limit time, worries, etc, could provoke errors and failures with
important consequences in the business, and then
it always exists a probability of human errors
(Human Error Probability, HEP) (Bley, 2002)
(Hollnagel, 2006). The contribution of human
capital in a dependability context has to be quantified in order to know the real personnel potential.
As a sample of the importance of the human
errors there are studies as the developed by Dhillon
(1989) in different sectors with the result that at least
between 20% and 30% of failures in equipments
were produced by human errors; also according to
the Institute of Nuclear Power Operations, human
errors could provoke up to 70% of atomic plant failures (Williams, 1988); and according to the MHLW
in its Annual Report on Industrial Health and Safety,
in 2004, 80% of failures which affected to people
security where they provoked by human errors.
The majority of reviewed studies (Dougherty,
1990) (Swain & Guttman, 1983) about Human
Reliability Analysis (HRA) deals with Probabilistic Risk Assessment (PRA). So, we could employ
HEP as indicator, and it affects to the number of
corrective activities, because as there is a bigger

HEP a great number of errors could be produced

and consequently, the cost in corrective activities
could increase. So the iH.reliability will be multiplied by
the mean cost of a corrective activity (costa) and
the number of all types of activities (na) in the evaluated period. Thus, the contribution of this impact
is negative inside the global intellectual capital.
iH.reliabilitycostana=HEPHcostana

(4)

Therefore, the human capital has to be reduced

in accordance with the human errors, due to they
provokes extra corrective activities.
(iH .motivation + iH . performance + iH . productivity )
3

CH salary

(iH .learning + H .competences + H .efficency )

+ i
learning
i
i
3
CH
(5)
cos t n
H .re
a
a
i eliability

4.2 Generated value in relation to quality

In relation to customers and intellectual relational
capital, companies invest in customer attention,
from an accounting point of view.
Investment in customer attention (CRcustomer).
Then, the efficiency of this investment could be
represented by the following indicators:
- Rate of customer satisfaction due to the
maintenance service (iR.satisfaction).
- Rate of customer net incomes which are not
affected by any maintenance failure (1-[sum
of net incomes of affected customers by any
failure/sum of total customer net incomes])
(iR.income).
From a dependability point of view, the
maintenance contributes to the customer perception,
that is, because the better reliability the better service and therefore the better customer satisfaction.
There are many methods for quality measurement according to the attributes of the service,
considering its importance or considering the contribution of the company to provide value (Johnson
etal., 1995). So the quality measurement in a service has to be carried out by evaluating the feasible
requirements from the customer about it, such as
those related to maintenance, capability of answer
against contingencies, reliability and security of the
service. Nevertheless, about the difficulty in measuring the quality perceived by the customer, there
are authors that focus the objective in evaluating
significant interactions, either positive or negative,
for this relation with the customer. These interactions are called critical incidents (Bitner et al.,
1990) (Zeithmal et al., 2002) as could be considered in our cases the complaints of customers for
failures in the service.

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Then, the maintenance influences customer

perception through service quality, increasing
the satisfaction with a high quality and quick
resolution and decreasing the satisfaction with
failures and bad resolution of incidences. We will
confine the maintenance effects in service quality
through two criteria:
A poor maintenance provokes more failures
than a good maintenance and, for each failure
the customers modify their perception about the
service quality and transmit bad propaganda in
the market.
It is crucial to relate the failures to the possible
level of affections in customer relationship, and
to measure these with the service level agreements (SLA), established with the customers and
determined by the market as standard. According to Keaveney (1995), service failures provoke
44% of customers abandons.
Besides this, the behaviour of the customer could
be different; the customer can wait (asking for a
monetary refunding) or could not wait, starting
legal actions. In both situations, the customer could
stop buying our services or do negative propaganda
or keep the bad experience in mind to remind us it
when of its convenience. And sometimes, the customer could remain (Goodman, 1986) (Keaveney,
1995). Every customer perceives service quality
differently (Tom Peters, 1987), that is to say in his/
her own terms by a series of conditions that he/she
determines them. So, in maintenance, it is necessary to measure the critical incidents due to failures
in services.
We could estimate service quality and relate
it to the maintenance indicators (service level
agreements, SLA), using statistical methods of
Analysis of Survival data. This analysis studies a
group of individuals and how they react to failure
after a length of time (Parmar & Machin, 1996)
(Cox & Oakes, 1984) (Kleinbaum, 1996) (Klein &
Moeschberguer, 1997).
In the sector of DNSPs where contracts and
standards spin around of service level agreements
(SLAs), it would have to align the estimated costs
with these service features. This is because the quality measured has to be the perceived and demanded
quality by the customer and not from internal performance. Thus, the service quality could be measured according to the fulfilment of the service level
agreements as delivery date, response time, recovery time or re-establishment time, precision in the
level of service, etc.
For this, we will apply that the non-performance
from target values produces quality losses financially due to customer dissatisfaction. The quality
is accepted by the customer when it is maintained
inside a level of tolerance, but how could we know
this level? The level of tolerance could be defined

through the Pa(tr) probability to abandon that

depends on the re-establishment time (tr). Therefore, we could use the mean probability to abandon
in the sector or to estimate it based on historical
data from systems.
The study about the probability to abandon
related to the re-establishment time is an Analysis of Survival data, which focus on the survivor
customers before a failure. There are different techniques to solve this type of analysis (Andersen,
1993) (Blischke & Murthy, 2000) (Hosmer &
Lemeshow, 1999) (Hougaard, 2000) (Lee, 1992)
(Harrell, 2001).
Now, we could obtain the losses of non-quality
per each failure. The presented probability affects
to the total incomes from customers for the company. The individual income per customer is a
known variable in DNSP companies: The Customer Net Present Value (CNPV), which is the
updated benefit per customer. It is the total income
from a client obtained during its relationship with
the company, less direct costs of sale, acquisition
and customer loyalty, discounted according to the
interest rate of reference at the time of the study.
So, the risk due to losses of customers is calculated multiplying iR.reliability by CNPV, the mean
number of affected customers per failure (nc) and
the mean number of failures (nf). Thus, the contribution of this impact is negative inside the global
intellectual capital.
iR.reliabilityCNPVncnf=PaCNPVncnf

(6)

Therefore, the relational capital has to be reduced

in accordance with the customer probability to
abandon, due to this provokes losses in the total
incomes.
(iR.satisfaction + iR.income )

CRcustomers
iR.reliability CNP c f
PV n n
2

(7)

4.3 Generated value in relation to company

structure
In this section, in relation to the society and the
intellectual structural capital, the main investments
in structural capital are two from an accounting
point of view:
Investment in standardization, prevention and
evaluation of the performance (CSprocesses).
Investment in ICT (Information and Communication Technologies) and innovation (CSICT).
Then, the efficiency of these investments could
be represented by the following indicators:
Investment in standardization, prevention and
evaluation of the performance (CSprocesses).

1309

- Rate of planned activities (planned activities/

total activities) (iS.planning).
- Rate of used capacity against maximum
capacity of the network to support services
(iS.capacity).
Investment in ICT (Information and Communication Technologies) and innovation (CSICT).
- Rate of covered personnel by ICT (iS.p.ICT).
- Rate of covered equipments by ICT in monitoring or prediction tools (iS.e.ICT).
Once, we will focus on the generated value due
to the reliability of the company structure, the network in the case of DNSP companies. For this aim,
we will study the equipment reliability (Modarres
etal., 1999) (Jardine & Buzacott, 1985).
Therefore, we could deduce indicators of the
network as a token of equipment conservation. As
in previous sections, now we deal with reliability.
Although, from a reliability point of view, we need
to evaluate the impact due to the losses of production. To represent this impact in DNSP companies,
the best and regulated by public administrations
indicator is the Availability of the network. Then,
it will be the availability of the network through
the average of the MTBF of the critical equipments and the average of the re-establishment
time (MTTR), considering constant both values to
deduce availability.
In DNSP companies, the indicator of equipment
availability (Ae) affects to the total income from
customers as losses of production. So we will multiply the indicator of equipment unavailability by
the CNPV and the total number of customers (nc).
Thus, the contribution of this impact is negative
inside the global intellectual capital.
iS.e.availabilityCNPVNc=(1Ae)CNPVnc

(8)

Therefore, the structural capital has to be

reduced in accordance with the network availability, due to this provokes losses in the total incomes.
It is important to increase the availability in the
services in DNSP companies, because the customers complains, in addition to the probability to
abandon, it implies to return the portion of the
CNPV which is not provided.
(iS . planning + iS .capacity )
+

ICT

2
CS
2
S .e.availability
c
i
CNPV n

The structural capital is mayor in company B than

in A due to the investment in ICT.
The relational capital is mayor in company B
than in A due to the customers satisfaction is
higher because the affected customers by failures are less.
The human capital is the same for both, while
the company A is more efficient due to the
motivation.
In addition, if we evaluate the reliability impacts,
these values of intellectual capitals will be reduced
depending on the possible risks in the network:
Considering the impact of human errors and,
supposing that the mean cost of an activity
and the number of activities is the same for
both, the negative contribution due to the
human reliability impact is greater in the company B, due to the HEP is higher in company
B than in A.
If the re-establishment time is different in the
two companies and the CNPV is the same, the
impact in terms of costs is greater in the company A because the probability to abandon is
higher.
To end, we will deduce the impact regarding the
equipment availability. If the type of equipment
supports 200 customers and the CNPV is 3.000
/year, then the negative contribution is higher
in company A than in B.
Now, the difference between the two companies
is increased. The value of the company B is higher
than A, mainly due to the minor level of risks
(human errors and network failures).

CS processes

2
(iS . p.ICT + iS .e.ICT )

The maintenance contributions and impacts will

be carried out on two DNSP companies of water
that work in the same area of distribution, and we
will pretend to compare both in an annuity period.
In the Table3, the implemented investments and
the main KPIs are presented for both companies.
So, the intellectual capital and impacts are calculated to compare the companies.
As we can see, the investments in both companies are the same, 900,000 /year; although if we
only consider the capitals equations, the worth
of intellectual capital is less than the investments
in both companies, 695,417 in company A and
770,417in company B.
Also, you can distinguish that:

(9)

5 CASE STUDY
To show the advantages of this methodology, we
will present the following case that it will deal about
intellectual capital and dependability indicators.

6 CONCLUSIONS
Companies could systematically lead the management and also gives attention to impacts, it provides a clear self-diagnosis of the maintenance and
the fulfillment of its objectives in a culture of continuous improvement. This methodology measures

1310

Table 3. Intellectual capitals and dependability

impacts.

Summary

Investments

Company A

Company B

a. Salaries
b. Investment in learning
& training
c. Investment in customer
attention
d. Investment in quality
& processes
e. Investment in ICT
& Innovation
Total

300.000
50.000

250.000
100.000

100.000

100.000

300.000

250.000

150.000

200.000

900.000

900.000

KPI

Company A

Company B

1. Personnel motivation
2. Personnel performance
3. Productivity of labour
4. Personnel with learning
5. Fulfilment of personnel
competences
6. Fulfilment of efficiency vs.
standards
7. Customer satisfaction
8. Customer incomes affected
by failures
9. Planning
10. Capacity
11. Personnel with ICT
12. Equipments with ICT and
optimization
13. HEP
14. Mean cost of activity ()
15. Number of activities (na)
16. Pa (Re-establishment time)
17. CNPV
18. Number of affected
customers (nc)
19. Number of failures (nf)
20. Availability
21. Unavailability

90%
75%
90%
85%
95%

80%
85%
90%
90%
90%

85%

80%

75%
80%

85%
95%

60%
75%
75%
80%

80%
85%
95%
80%

0,25
150
589
0,0013
3.000
200

0,28
150
589
0,0005
3.000
200

30
85%
15%

30
95%
5%

Capitals equations

Company A

Company B

a average (1 + 2 + 3)
b average (4 + 5 + 6)
c average (7 + 8)
d average (9 + 10)
e average (11 + 12)
CI_human (a (1 + 2 + 3)/3 +
b (4 + 5 + 6)/3)
CI_relational (c (7 + 8)/2)
CI_structural (d (9 + 10)/2 +
e (11 + 12)/2)
Total

255.000
44.167
77.500
202.500
116.250
299.167

212.500
86.667
90.000
206.250
175.000
299.167

77.500
318.750

90.000
381.250

695.417

770.417

Reliability impacts

Company A

Company B

Impact of human reliability

(13 14 15)
Impact on customers
(16 17 18 19)
Impact on production
(21 17 18)
Total

-22.088

-24.738

-23.400

-9.000

-90.000

-30.000

-135.488

-63.738

CI_human-Impact of Human
Reliability
CI_relational-Impact on
customers
CI_structural-Impact on
production
Total

277.079

274.429

54.100

81.000

228.750

351.250

559.929

706.679

the overall performance, identifying weaknesses,

strengths and also improvement opportunities.
Consequently our valuation will look for obtaining these savings or expenditures, in terms of costs,
whose combination will reflect the generated value
by the maintenance management in a service provider company
As a conclusion, any organization can use one
model or another one to assess the intellectual
capital, but what is important is that the model
allows:
Showing information for the control, measurement and maturity of the organization in a
quantitative way and including intangible costs.
Aligning and leading the maintenance with the
companys strategy and with other departments.
Facilitating the decision-making and its compa
rison with external agents, either with competitors or with regulated values and internationally
accepted.
Detecting the capabilities as well as the weak points
in order to make decisions on how to fix them.
Bringing management and management decisions closer to the client as an improvement in
offered and perceived quality.
Showing up that the organization cares about
her personal and the way the work is done (processes) causing a good impression of safety and
guarantee.
This methodology will allow us, searching for
the maximization the operation of the network, to
prioritize and to make decisions focused on reliability indicators. For example by comparing the
maintenance for different:
Geographical areas.
Technical groups.
Procedures.
Changes in operations or organization.
Equipment from different vendors.
Environmental conditions and operation.
Etc.
Furthermore, the assessment of the real
contribution to the organization, it is an issue of
vital importance in maintenance, giving to it the
responsibility and the importance corresponding to their achievements in order to value main-

1311

tenance correctly, especially by other areas of the

company. Then, quantifying value creation by the
methodology, we show the weight of organizational factors, and therefore it is provided a way to
assess the maintenance for its knowledge, i.e. by its
intellectual capital.
The assessment of maintenance in distribution
companies should not be only made in terms of
budget, but also in terms of real profits directly
observable and those due to the avoided damages.
Therefore, there should be taken into account the
impacts and reduction of implementation risks,
and depending on the confluence of all these contributions, different levels of maturity and excellence will be attained.
With this framework for DNPS companies, we
pursue to increase the collective intelligence of
maintenance organization by expanding, improving and disseminating knowledge in a standardized
manner and with information technology supports.
We seek the constant innovation of maintenance
organization, developing and valuing their knowledge over other organizations in the same sector,
for which we use criteria of intellectual capital in
this continuous improvement.
The implemented criteria for the assessment of
intellectual capital start from a basis more widely
accepted related to accounting values, being developed custom-made for these companies in terms of
impacts. Finally, other different costs could be considered when the application is focused on equipment
level, assessing the impact of maintenance management in terms of dependability leaving out of
the scope issues related to survival against external
threats, confidentiality and integrity of data.

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