Investment Recovery professionals are trained to handle an assortment of products and look for the best method to dispose of an asset for a company. When utilized, the IR professional will ensure that a company’s return on investment and total cost/benefit are maximized by evaluating what is the best way for a company to remove an asset. Many times, however, the IR professional is bypassed and others take on the IR role who aren’t trained, oftentimes looking at retired assets as an afterthought and just something to get rid of. This duplicative effort exposes the company to unnecessary risk and loss on investment that the IR professional reduces and eliminates. This article looks at the role of IR at various companies in a recent survey and compares them to Consumers Energy, Michigan’s largest utility.

Earlier this year, I began to look for other areas of total cost benefit that may be occurring within my company involving activities that should involve investment recovery that weren’t currently being handled by an investment recovery professional. By not involving IR, activities may not be getting properly reported in any total cost/benefit or other management goals. During my review, I did find that my company’s IR department does not handle the sale of any fleet asset and is not involved in building demolitions or strip-outs. As a result, I turned to the Investment Recovery Association to help me put together a survey to benchmark my department to see if it is aligned with other utilities and association- member companies’ IR departments.

To begin, I formulated three questions and our association assisted me in delivering these questions to the membership through an email survey. The questions asked were:

  1. Does your organization’s investment (asset) recovery department handle the sale of all fleet vehicles?
  2. Are all sales of salvage, scrap, surplus, used, and unwanted assets and equipment from your company handled by your investment (asset) recovery department?
  3. Does your department get involved with building closings, dismantlements or demolitions including plants, office buildings or other company facilities?

Forty-six companies returned a response to this survey, representing about 14% of the association membership. The majority of the responding companies were in the utility or the energy industries.

Fleet Transactions. Twenty-five respondents indicated that their IR departments handled fleet transactions. There were 13 who said “no” that they did not handle fleet items and eight said “some” to handling fleet. Taking a deeper dive on the eight “some” responses, four indicated that their fleet department handles licensed/titled vehicles and the IR department handles unlicensed/untitled equipment. Two others responded that their licensed/titled vehicles are leased, but that their IR department handles the other fleet-type equipment. The last two responses were that all assets are auctioned and IR manages the auction process; or that the respondent’s company didn’t have a fleet, but assets that are typically fleet- maintained are sold through their IR department. This brings “yes” responses from 25 to 33.

IR handles “all” IR functions. On question two, 30 respondents indicated “yes” that their IR department handled all IR functions, three gave a “no” response for handling all IR functions, and 16 gave a “some” responses. Taking a deeper dive on the 16 “some” responses, seven indicated that other areas in their company handle scrap or small-dollar items with their IR department involved in large-dollar assets or with managing salvage projects. Three responses indicated that their company utilized a third-party resource for salvage and that the IR department managed the transactions by the third party; the remainder were considered “other” that consisted of various approaches to the salvage process by an IR professional. This deeper dive increases the “yes” responses from 30 to 40.

Demolitions. Question three asked about involvement with dismantlements and demolitions, and 20 of the 26 companies responding indicated “yes” that they handled demolitions, three indicated they were not involved and 23 indicated “some” involvement in demolitions. In taking a deeper review of the “some” responses, 17 respondents indicated that their IR department serves either as an internal contractor for their facility’s project team or the IR professional is involved in everything about building closures except demolitions. The other “some” responses indicated that third parties are used or that a plant engineering group handles demos of plants with IR handling offices. There were two “other” responses as well. Based on the second dive at the “some” responses, the “yes” responses increased from 20 to 41.

Survey Analysis: After analyzing the responses it was obvious that my IR department does not compare or benchmark to what the IRA membership respondents indicated were the norm in their company’s organization and function. Changing my organization’s structure will not be easy. There will be considerable resistance to my findings from the fleet and facility groups, as they will look to this study as an attempt to reduce head count or budgets of their organizations.

I believe making a centralized IR department is possible without interfering with the core operations of the other departments. Unless you’re an IR professional, the IR work is a process considered more a secondary task to your core duties and many times results in poor business decisions being made on IR activities.

Going forward, based on the results of this study and the potential sensitive reactions the affected departments have toward change, I’m proposing to my manager a simple plan to achieve a strong centralized IR department that will maximize total cost/benefit opportunities while, more importantly, safeguarding uniform IR compliance to policies and procedures with minimal impact to the other business units.

I’ve presented this proposal that compares the investment recovery function in a manner that serves other internal clients similar to that of a purchasing professional, who processes a requisition from another function area into a purchase order by making sure that bids are received, evaluated and processed while working to achieve supplier diversity and other goals and requirements of the company. This approach I feel will best prevent duplicative roles within our company and allow the investment recovery professional to be the main contact and decision maker for proper disposition of surplus assets within our organization.

– Andrew Frounfelker, Supervisor of Investment, Recovery Consumers Energy in Jackson, Michigan andrew.frounfelker@cmsenergy.com