Strategic AssetManagementAugust 2012Recommended Practice
About usWe are the independent regulator of social landlords in Scotland. We regulate around 180registered social landlords (RSLs) and the housing activities of Scotland's 32 localauthorities.Our statutory objective is to safeguard and promote the interests of current and futuretenants, homeless people and others who use services provided by social landlords.We were established by the Housing (Scotland) Act 2010 and are accountable directly to theScottish Parliament. Our Regulatory Framework explains how we regulate social landlords.You can download our Regulatory Framework and find out more about us on our website atwww.scottishhousingregulator.gov.uk.About Recommended PracticeOur Recommended Practice publications aim to provide clear, practical, accessibleinformation for social landlords to help them to drive their own improvement and delivervalue for money.
ContentsChapterSectionPage1Executive summary12About this Recommended Practice33Strategic asset management – what it means and why it matters44Strategic asset management in ten strands65A whole organisation approach86Understanding customers97Risk based and proportionate118Good information139Joined up planning1510Looking after core stock1711Compliance with standards2212Dealing with ‘cause for concern’ stock2413New development with a purpose2714Value for money2915Planning a review31Glossary35
1. Executive summaryIn this section we summarise our most important messages about this RecommendedPractice and present an overview of the key points within each section.1.1Strategic asset management – what it means and why itmattersSocial landlords’ ability to deliver good services for customers and provide a solid platformfor improvement depends on their ability to make the most of their property assets. Financialflows in social landlords are dominated by income from assets and the expenditure requiredto look after them. Poor strategic asset management decisions may result in wastedresources and other, often longer term, inefficiencies. Strategic asset management can be acreative process and the best social landlords will be focussed on exactly the most importantasset management issues. Good strategic asset management is core business for governingbodies of Registered Social Landlords (RSLs) and council committees responsible forhousing. It should also be developed alongside and compliment the business planningprocess.1.2Strategic asset management in ten strands1.3A whole organisation approach1.4Understanding customers1.5Risk based and proportionate1.6Good information1.7Joined up planningThere is no universally accepted definition of strategic asset management. Social landlordswill find it useful to develop their own definition that suits individual contexts. The commontheme amongst existing definitions is recognition of the breadth and depth of strategic assetmanagement and a close relationship to organisational objectives. We outline ten strandsthat we consider cover all of the essential elements to strategic asset management. Eachstrand also contains some self assessment questions.Good asset management is core business for all social landlords and requires understandingand ownership right across the organisation. RSLs’ governing bodies and councilcommittees should see it as core business and ensure they are well informed and able to setdirection.A good understanding of who the customers are and what their wants and preferences are isimportant to effective asset management. These can and do change. Social landlordsshould, as far as possible, look into the future and use their knowledge of customers toadapt their approach to asset management.Strategic asset management starts with an understanding of the full range of potential issuesbut will rapidly focus in on the most important. These will vary due to context but many risksare common to all social landlords.It is important to have an up to date, comprehensive and reliable information base. Thisshould inform a clear analysis on performance, value for money and highlight the value thathomes are bringing to the social landlord.A strategic asset management approach needs to complement, not duplicate, otherstrategies and plans. This is especially true of the relationship between the assetStrategic Asset Management Recommended Practice1 of 37
management strategy and corporate planning. The simplest and strongest approach may beto see them as a single strategic plan. Plans also need to reflect on those of otherstakeholders and partners.1.8Looking after core stock1.9Compliance with standardsSocial landlords need to have plans in place that ensure core stock and neighbourhoods arewell maintained and will stay that way. Efficient responsive repairs, effective planned andcyclical maintenance, carefully planned and fully funded life-cycle replacement and goodestate management will also help to support demand.A rigorous approach to statutory and regulatory obligations such as gas safety, asbestos,and legionella are an essential feature of good asset management.1.10 Dealing with ‘cause for concern’ stockAn active, problem-solving approach is required to address challenges from stock that, for apotentially very wide range of reasons, gives at least some cause for concern. Optionsshould be considered and sensible and proportionate measures taken to respond to theproblem. This may result in significant changes if required but more often may involve anadjustment to the current approach to service delivery.1.11 New developmentSocial landlords planning new development, or possibly other forms of growth such asacquisition, need to ensure that these plans fit with business strategy, build value in theasset base and promote successful neighbourhoods.1.12 Value for moneyLarge sums of money flow through social landlords’ assets, and landlords should seek tomaximise the value of this expenditure. Strong procurement processes are important as isthe fostering of a wider performance and value for money culture.1.13 Planning a reviewEvery social landlord needs to think carefully about what it needs to do to ensure it has agood strategic approach to asset management. If a review is required, then it should reflectindividual context, be led by governing bodies and senior management, involve a range ofpeople from across the landlord and provide a challenge to current thinking. We outlinecertain practical review principles but it is for social landlords to make an informedjudgement on the detail of how reviews will be conducted.Strategic Asset Management Recommended Practice2 of 37
2. About this Recommended PracticeWe have produced this Recommended Practice to assist social landlords to review anddevelop their approach to strategic asset management. We want to encourage landlords touse this report to challenge what they currently do to ensure they are making the bestpossible use of their assets.This document gives landlords a framework of Recommended Practice on strategic assetmanagement. The information will be relevant to all social landlords. The level and type ofresources that landlords devote to asset management and the degree of sophisticationneeded to manage asset management functions will depend on the size and complexity ofindividual landlords. It is for each landlord to consider how to use this RecommendedPractice in the context of their own circumstances.This Recommended Practice is intended primarily for decision makers within RSLs and inlocal authority housing services. We recognise that asset management can often beconsidered to be a technical area and usually the preserve of property professionals.However, one of the key messages of this recommended practice is that asset managementis important to everyone in the organisation. For this reason we have produced thispublication without assuming any significant level of technical expertise or knowledge ofasset management.This Recommended Practice was prepared for us by IS4 Housing and Regeneration ltd. Weselected a group of RSLs and local authorities and asked them to contribute to twoworkshops which were held to review current asset management practice.This Recommended Practice should be read together with our business planningRecommended Practice publication. Effective asset management should be seen as anintegral part of effective business planning.Strategic Asset Management Recommended Practice3 of 37
3. Strategic asset management – what itmeans and why it matters3.1A strategic approachSocial landlords’ ability to deliver good services for current and future customers isdependent on their ability to make the most of the homes they own, not only as good placesto live, but as the assets on which the whole organisation is built.To understand why this is important, organisations only have to think about the finance thatflows through a social housing landlord and the way that is connected to its homes. Most ofthat financial flow comes directly, in the form of rent, from homes as assets. Most costs flowout, in the form of management, maintenance and investment, in looking after those homesas assets for the benefit of existing and future residents.This involves a complex range of interconnections, spread over time. Poor investmentdecisions in the past may be responsible for lost rental income and higher maintenancecosts today. Efficiencies in management and maintenance today may create the headroomto fund new homes tomorrow – or maybe it will be more important to renew kitchens moreoften to meet rising expectations – or maybe it would be best to spend more on moneyadvice, to reduce tenancy failure and future rent loss and void costs – or maybe all of thesethings and more.A strategic approach to asset management involves an understanding of this situation, andthe ability to manage the different parts and their inter-connections well; ultimately to ‘getmore out of what you’ve got’ for residents, neighbourhoods and future customers.However, there is no simple blueprint to be applied, nor is a strategic approach to assetmanagement a completely new and different thing to what most landlords are already doing.Good asset management is a creative process. It involves good understanding, goodthinking and effective action, all practically based around the distinctive situation of thelandlord doing the thinking. It is as much an art as a science. There are some basicprinciples for strategic asset management that apply to all social landlords but the practicalway that they should be applied will vary widely across the range of social landlords inScotland. The best organisations will be concentrating on exactly the things that reallymatter for them and putting their energies into those issues.In this Recommended Practice we consider (in section 4) the components likely to be foundin a strategic approach to asset management. We have identified ten strands that we wouldsuggest cover the essential ground. The ten strands are explored in detail in sections 5-14.Then, in section 15, we suggest ways of reviewing your own approach, how to structure areview, who to involve, how to fit it to other planning and review processes you have, andwhat kind of outcomes might be produced by the review.3.2Responsibility, leadership and governanceA strong approach to strategic asset management lies at the heart of a successful sociallandlord. This has implications for where it sits and how it is seen within each organisation.Key aspects of this include:Corporate directionA strategic approach to asset management is core business for the governing bodies ofRSLs and for council committees responsible for housing. Awareness of the subject,Strategic Asset Management Recommended Practice4 of 37
understanding of the issues involved, and a willingness to make decisions that build longterm value in the asset base are an essential combination.Senior managers should be making sure that governing bodies understand theirresponsibilities and have the necessary information to enable them to perform their role.Governing bodies must satisfy themselves that they do have the necessary understandingand information and take action if they feel that is not the case.A whole-organisation approachGood asset management requires understanding and ownership right across theorganisation – not just the ‘property professionals’, as has often been the case in the past.This is explored further in section 5.Relationship with business and service planningA major theme throughout this recommended practice is the importance of the substantialoverlap between strategic asset management and business and service planning.Organisations that understand this will increasingly tend to see strategic asset managementand business and service planning as one integrated subject – the ‘where we are headingand how we plan to get there’ of the organisation. Annual planning cycles and moreintermittent fundamental reviews will tend to cover these together, without duplicating reviewprocesses. Corporate documents, plans and programmes will be kept as simple as possibleand fit together without too much overlap or duplication.ProportionalityAnother major theme within this guidance is the principle of proportionality. Social landlordsshould be concentrating on the things that matter for them, based on a thorough appraisal oftheir own situation. Good understanding and ownership of the importance of strategic assetmanagement by the governing body, housing committee and senior management shouldlead to time and effort well-spent and focussed on the right issues.Strategic Asset Management Recommended Practice5 of 37
4. Strategic asset management in ten strands4.1 PotentialdefinitionsThere is no universally accepted definition for strategic asset management and we do notintend to use this Recommended Practice to propose one. However, an organisationreviewing its approach will probably find it is helpful to have its own overall aim or definitionthat suits its particular context.Some examples from actual strategies include:“Building, managing, maintaining and investing in homes so as to get the most out of them,as homes that people want to live in, at a cost both they and the business can afford.”Or, for a five point version linked in this case to the organisation’s corporate objectives: Use our assets to enhance financial viability.Invest in our assets to meet current and future customer needs.Ensure our people are equipped to deliver the strategy.Have homes and neighbourhoods that are well-maintained and cared for.Use assets to support growth and diversity.Or a third example:“We take a strategic view of asset management to ensure we maintain sustainableneighbourhoods whilst providing value for money. We want to ensure the properties we ownand manage are in good condition, in the right location, and of a design that is fit forpurpose.”Or a fourth:“Investing wisely, making best use of assets.”All of these are good as starting points for an exploration of the subject, and many numbersof variants can be developed. The common theme throughout these different examples isrecognition of the depth and breadth of a strategic asset management approach and a closerelationship with overall corporate objectives.4.2Ten strands of strategic asset managementIn this Recommended Practice, we have set the subject out in ten strands, as a convenient,although not the only way, of breaking it up for more detailed review.We have not attempted to outline a prescriptive blueprint for strategic asset management;this will not work for the very wide range of organisations and operating contexts that exist.Rather, under each strand, we have explored some common issues and then we havesuggested some useful self assessment questions.This is not a simple tick-list and is instead intended to help organisations structure the way inwhich they identify the issues to concentrate on. Some organisations will be able to answermany of the questions with responses like: “That doesn’t apply to us in practice.” “We are confident we are well on top of that.” “We have not focussed on this aspect but are confident that it is not somethingthat has significant implications for us.”Such judgements are fine, provided individual judgements are properly considered, as theyStrategic Asset Management Recommended Practice6 of 37
allow time and effort to be concentrated on the things that matter most.Of course, for some organisations, many of the key questions will raise a wide range ofrelevant issues. Even in such cases, the answer is unlikely to lie in an action plan thattackles everything as though it is all equally important. Some of the issues uncovered willsimply be far more significant than others and consequent action should be prioritised toreflect that. What is important, however, is to be honest, consider the actual evidenceavailable, and self challenge before reaching conclusions.Strategic Asset Management Recommended Practice7 of 37
5. A whole organisation approach5.1Involving the right peopleAlmost everyone in the organisation has some part to play in getting the most out of homesas assets. The history of the development of asset management thinking suggests thatchallenges in working across the organisation is often an obstacle to progress.A whole organisation approach can get you much further. For example, good housingmanagement and good caretaking and cleaning may achieve far more to improve anunpopular building than capital investment.For another, take voids. Homes are usually bringing value to the social landlord when theyare let and usually draining value in several ways when they are void. Rapid, low-costreletting of voids is an excellent asset management approach. It saves on repair costs,management costs, improves rent income, keeps estates looking their best and allowssomeone to get their new home as early as possible. But it involves a range of people withinan organisation working across operational boundaries, many of whom would not in the pasthave realised how important their part of the action actually is.Other examples may lie in front line housing staff’s unrivalled knowledge of whereimprovements can be made to service delivery. Adopting ‘just in time’ measures andreviewing processes to address customer demand can avoid much greater expense at alater date.For these reasons it is worth thinking about how people across the organisation areencouraged to think in terms of ‘making the most of the assets’. A major review of strategicasset management is an ideal time to involve people across the organisation to get themthinking about how their role enables them to contribute to the bigger picture. It can pay tostructure the process so that as many people as possible are involved using interactivetechniques so that they can make a contribution. Tapping the knowledge that front line staffhave about what works is an important part of this review process.Involving a range of staff in option appraisal for problematic stock spreads knowledge. Thiscan encourage new thinking about how adjustments to management and maintenanceapproaches could generate innovative solutions with or without major investment.5.2The role of performance managementMaking sure that asset performance and social housing value (see section 8) form aprominent part of the reporting cycle and the annual service planning cycle, sends a strongmessage that these things are important. Measuring performance, using intelligent targetsand tracking progress should form part of this approach.5.3 Keyquestions Do people across the organisation see the importance of asset management andunderstand they all have a part to play? Does the governing body / housing committee also understand it, see it as part ofcore business strategy and take responsibility for its quality?Strategic Asset Management Recommended Practice8 of 37
6. Under standing customers6.1 Cust
Poor strategic asset management decisions may result in wasted resources and other, often longer term, inefficiencies. Strategic asset management can be a creative process and the best social landlords will be focussed on exactly the most important asset management issues. Good strategic asset management is core business for governing bodies of Registered Social Landlords (RSLs) and council .
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