Workload-Based Budgeting For Maintenance

EP Editorial Staff | December 22, 2009


Learn why this type of budgeting works and why the traditional type doesn’t.

The maintenance function is an oddity in manufacturing. It is the only core business function that operates without an effective means of budgeting. This takes a toll on the firm’s annual business outcome. Why it does is immediately apparent when we look at the structure of the budgets that are produced within the standard accounting system (refer to the lower part of Fig. 1, “Traditional Budget”).


The line items of the traditional budget are resources—which is a mismatch with what is being managed. What is being managed is all types of work for which resources are engaged. Accordingly, work rather than resources must be the basis of budgeting.

The upper part of the figure is what a budget with work as its line items looks like. The difference is immediately apparent and dramatic—including the fact that it actually has information versus having almost no information. We still see resources, but in the context of work.

More importantly, the difference enables the firm to make decisions for its maintenance function as part of the year’s business plan. In turn, it is the platform that allows the firm to work the plan as the year unfolds.

Before we go further, however, this point must be made: The budget shown in Fig. 1 is not offered as something to ever replace or change your standard accounting system and its budget. Instead, it is intended to operate in parallel to provide what the standard system cannot and, thus, strengthen that standard system.

Three sections of the budget
Some business functions require differently based budgeting methods. Not all functions, including maintenance, can effectively manage with a budget based on the standard accounting system.
The budget in the top part of Fig. 1 is workload-based. It is the basis that works specifically for the maintenance function. Why it works so well is clear if we look at it as three sections: structure, workload and resource strategy.

Structure for the workload-based maintenance budget is set as shown in the left-most boxed area of the figure. It is formed to reflect the many aspects of a firm as a unique competitive, operational and financial beast; striving to win returns above its industry’s average. Accordingly, the structure reflects that a firm has core business strategies and that the firm’s business plan for the year is the sharp pointy end of the core strategies.

Thence, the structure reflects that the year’s plan for the maintenance function must deal granularly with every type of work the firm’s business plan will require of it to succeed. It also will reflect the firm’s chosen strategies for engaging all resources to do the work. The structure will also reflect accountability for work and resources and many other considerations.

Workload is the middle boxed area of Fig. 1. It shows, for each work line item, how much of every type of work will occur during the budget period. Note that the figure shows the case of direct work.
The workload for each line item is determined based upon the year’s business plan. This is done with business-to-workload models in the background of the budget. As the business environment, strategy and year’s plan change, so does the workload for the line items influenced by change: some are, some are not.

Firms have long sought ways to help tie their workload into their business picture. Upon the structure of a workload-based budget, this is finally—and easily—possible.

Resource strategy…
Resource strategy is the right-most boxed area of the figure that reflects management’s final decisions for which resources will be engaged to meet the workload—and how they will be engaged. The important principle is that resources actually engaged are rarely a direct extension of the resources needed to do the work of each line item. Furthermore, single-resource strategies affect multiple work line items.

An example is direct and payroll hours per job. The hours for a work line item will never be a roll up of its collective job plans. Instead, the line-item hours are decided by firm-level strategies for each resource.
Therefore, the right-most section of the workload-based budget is the line-item-level outcome of analyses and decisions for resource strategies. The reflected strategies are the outcome of three questions and a final executive decision. The questions are: What is the best the subject resource can be, what is it now and what will the firm guide it to be during the budget period?

If the firm does not consciously set its resource strategies, those strategies will be set for it by natural forces—almost never a good thing. Without the workload-based budget, this is the normal case.

Yes, this is a big deal
Workload-based budgeting is a big deal. For one thing it allows a firm to finally think out and decide how the maintenance function will operate to the benefit of the year’s business plan. It also lets the maintenance function assure the firm that it will accomplish what has been decided it should accomplish. And, it’s a real big deal that a firm’s traditional budget will now be based on fact rather than conjecture. The door is finally open—let’s walk through it. MT

Richard G. Lamb, P.E., CPA, is president of Cost Control Systems, based in Houston, TX. He has practiced in the field of maintenance and reliability since 1988, after having spent 13 years in the practice of business strategic planning and original design engineering. Over time, Lamb’s expertise has evolved into tapping the business returns possible through maintenance by bringing the classic business disciplines and modern ERP-type technologies to his clients’ problems, rather than limiting them solely to the disciplines and technologies of maintenance and reliability. For more information, telephone: (713) 777-9492; email:
EDITOR’S NOTE: Workload-based budgeting and variance reporting and forecasting is explained in depth in Chapter 8 of the book, Maintenance Reinvented and Business Success: Everything is About Business. As the author’s contribution to advancing the field and the profession, a free ebook version can be found here. A paperback version will soon be available, at cost, through Amazon.




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