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Sydney, NSW – Australia, March 8-9, 2010

PLANT TURNAROUND MAINTENANCE IN MALAYSIAN PETROCHEMICAL

INDUSTRIES: A STUDY ON ORGANIZATIONAL SIZE AND STRUCTURING

PROCESSES

Mohammed Halibe-mail: [email protected]

Phone: +6053687732 Mobile: +60125012590

Zulkipli Ghazalie-mail: [email protected]

Phone: +6053687739 Mobile: +60125088171

Shahrina Md Nordine-mail: [email protected]

Phone: +6053687745 Mobile: +60135810656

Management and Humanities Department

Universiti Teknologi PETRONAS

Bandar Ser Iskandar, 31750 Tronoh, Perak Darul Ridzuan, Malaysia

Abstract

Plant turnaround maintenance, a crucial asset management in petrochemical industries is carried out to revitalize, maintain, and improve the plant facilities for

optimal and efficient performance. Large organizational resources comprising

plant and maintenance personnel, technicians, craftsmen, skilled and specialist

contractors and enormous magnitude of inter-related activities marked thecomplexity of the turnaround maintenance setting. The establishment of the

appropriate configuration of organizational size and structuring processes arecritical in organizing and managing the resources to ensure the success of the

turnaround maintenance event. This paper discusses the relationship of

organizational size and structuring processes in plant turnaround maintenance of 30

petrochemical companies in Malaysia. Six hypotheses were tested using bi-variate Pearson product-moment correlation. The test results provide the evidence that

organizational size influences the organizational structuring processes of

turnaround maintenance. The organizations of the turnaround maintenance are featured by high levels of centralization and formalization denoting the

organization’s low level of tolerance on the variability of the behavior and performance of the organizational members.

Key Words: Plant Turnaround Maintenance, Organizational Size, Organizational Structuring

Processes, Formalization, Centralization, Petrochemical Industries, Malaysia

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mailto:[email protected]





1. INTRODUCTION

Malaysia is well endowed with natural resources including oil and natural gas reserves. The

exploitation of the petroleum-based resources has contributed significantly to the

economic development of the country and created significant employment opportunities.The petrochemical companies are primarily found in the East Coast of Peninsula

Malaysia (state of Terengganu) and East Malaysia (states of Sabah and Sarawak) to take

the opportunity of the availability of oil and natural gas reserves. These companiesinclude manufacturers of petroleum-based products, liquefied natural gas, and

manufacturers of fertilizer and nitrogen compound. Huge investments are made by local

and foreign-owned companies in oil refineries, natural gas processing plants, and

industrial petrochemical units.

The oil refineries are featured by large industrial complexes utilizing a broad range of technical

equipment ranging from cooling towers and crystallizers to transformers and storage tanks. These

refineries convert the crude oil into a variety of gasoline, diesel, asphalt, naphtha, kerosene, andliquefied petroleum gas. Plant configurations depend on the range of crude oil gravity being

processed and the nature of the final products. These refineries also produce and supply thefeedstock to the downstream petrochemical plants that are operating at various locations in

Terengganu, Pahang, Johor, Sarawak, and the Federal Territory of Labuan. The natural gas

processing plants, on the other hand, purify and convert raw natural gas into residential,commercial and industrial fuel gas, and also recovers natural gas liquids (NGL) such as ethane,

propane, butanes and pentanes. Similarly, the petrochemical plants are also situated in integrated

complexes to take advantage of centralized utilities, efficient storage services, and transportation

network. In the petrochemical plants, the feedstock from the oil refineries is converted intofertilizers and other intermediate and final products. Ethylene, fertilizer, and methanol are

normally produced by the bigger plants while the production of basic chemicals such as acetylene,

butadiene, sulfuric acid, nitric acid, chlorine, ethylene oxide, and ethylene glycol are carried out bythe smaller ones.

The refineries and plants, which are normally designed to last 25 to 30 years, demand constantmaintenance and upkeep. Apart of the routine maintenance, these facilities are periodically shut

down for major planned overhaul and improvement work, commonly known as turnaround

maintenance. The primary objective of plant turnaround maintenance is to revitalize, maintain, and

improve the plants to ensure optimal and efficient performance. In comparison to the accruedknowledge on turnaround maintenance from the engineering perspective, rather limited knowledge

is available with respect to the management and organization of one of the most important and

critical activity in plant management. The organizational aspects of plant turnaround maintenanceare a little understood subject in management and other social science circles. The dearth in

knowledge regarding turnaround maintenance stood in stark contrast to the mushrooming of plants

in the manufacturing sectors of the fast-expanding Malaysian economy. Indeed, the voluminousstudies in practically all aspects of management and business have failed to attract turnaround

maintenance as a topic worthy of research enquiry. It is the latter situation that constitutes the

driving force behind the present study.

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2. OBJECTIVES OF THE STUDY

The primary aim of this study is to provide a narrative background understanding on some of the

organizational aspects of plant turnaround management and more specifically to ascertain therelationship of organizational size and structuring process of plant turnaround maintenance in the

Malaysian petrochemical industries.

3. PLANT TURNAROUND MAINTENANCE

Plant turnaround maintenance or simply ‘turnaround’ in technical circles is a multi-faceted processcomprising three broad elements of engineering, business, and organization (Lenahan, 1999;

Levitt, 2004). The event is normally carried out during a planned plant shutdown and covers

activities such as inspection, overhaul, modification, and the installation of new parts or equipments. Taking advantage of the plant shutdown, preventive maintenance, corrective

maintenance, and plant cleaning are also carried out. The turnaround event is duration driven and

the frequency is largely determined by variables such as plant technology, the required level of plant reliability, and the legal requirements associated with the operation. In Malaysia, the eventmust comply with the statutory requirements of the Department of Safety and Health (DOSH) and

the Department of Environment (DOE). The duration of turnaround event is short and utilizes

large manpower resources that include engineers, technicians, craftsmen, skilled and specialistcontractors, and other plant and maintenance personnel. The enormous magnitude of inter-related

activities of the turnaround event requires stringent control and coordination. Depending on the

size and complexity of the turnaround tasks, substantial effort and time are allocated for planningand work scheduling.

Plant turnaround maintenance activities, from the engineering point of view, involved the

replacement, repair, or refurbishment of worn, damaged or malfunctioning plant parts. It is notuncommon for plant turnaround events to include project works such as the installation of new

parts or equipment. Other activities which could not be performed when the plant is in operation

are also carried out during the shutdown period. These include tests and inspections, preventivemaintenance, corrective maintenance, and major plant cleaning. The scope of work involved in

turnaround exhibits considerable variations among plants. It is dependent upon, among others, the

age and type of plant technology. Perhaps, the most distinctive aspect of turnaround is that the

scope of work remains uncertain until the actual activities begin. Despite a series of inspectionsand assessments that were carried out prior to the turnaround event, the actual condition of the

equipments simply could not be determined until they are actually opened and inspected.

Consequently, the situation harbors risk of uncertainties with respect to increase of the work scopeleading to the lengthening of the turnaround period and cost escalation. The monetary loss due to

production stoppage is often huge if the planned duration of the shutdown is exceeded.

Viewing from the business perspective, plant turnaround maintenance affects a company’s

business operations in more ways than one. The successful implementation of the plant turnaround

maintenance contributes to the profitability of the company (Lenahan, 1999; Murthy et al., 2002).There are a number of facets to this connection that will serve to set the turnaround maintenance in

a business context. Firstly, assets are critical for business success in the fiercely competitive global

economy (Murthy et al ., 2002). Rapid changes in technology have resulted in equipment becoming

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more complex and expensive. Businesses incur heavy losses when their equipment is not in full

operation, hence, the need for availability and reliability of assets. Financially, the turnaround

event is expensive to execute and it is not uncommon for the activity to be funded by thecompany’s retained earnings. Furthermore, as the event entails plant shutdown, loss of production

is unavoidable. Company’s revenues are negatively affected and consequently its profits. As a

matter of fact, the event has negative impact on the profits of the company in the year theturnaround maintenance is performed. Secondly, plant turnaround maintenance also has a peculiar

impact to the business of a company. The event poses potential hazard to plant reliability, safety,

and harbors the risk of cost overruns and schedule slippage due to technical uncertainties. Inaddition, the turnaround maintenance requires a large number of personnel (maintenance and

support) and requires other costly resources in large quantities such as spare parts, machines, tools,

and equipment. These requirements reach the highest level at the peak of the implementation stage.

Cumulatively, the event drains off a company’s resources. Therefore, plant turnaroundmaintenance is very much a business process and is increasingly explored as an area that can be

enhanced to increase productivity and sustain competitiveness of the company. Plant turnaround

maintenance is considered as a value adding investment. Due to the huge turnover of the operation

and massive capital investment of the assets, it is increasingly regarded as one of the businessstrategies of a company in the highly competitive business environment. How asset and

maintenance management makes good business sense has, of late, become an importantmanagement issue that has drawn attention from various parties of business and industries

(Liyanage and Kumar, 2003).

Plant turnaround is an event that demands huge manpower from internal and external sources on a

temporary basis to execute the maintenance activities. This is essential due to the large amount of

work that needs to be carried out in the face of extreme time constraints. The turnaround

organization brings together groups of personnel who are mostly unfamiliar with each others’skills but have to work interdependently in complex tasks. Plant turnaround involves large volumes

of maintenance work that can be classified into three major categories. The first category known as

major tasks requires engineering inputs such as overhauling of large boilers and air compressors,re-traying of large distillation column, replacing refractory linings of cement kiln, and replacing

catalysts. Small tasks, the second category, include cleaning and inspection of machines and

equipments. The third category of tasks known as bulk work is carried out where the overhaul of large number of small items such as valves, pumps, and motors are performed. All the above

activities require large number of human resource, since they have to be completed within a very

short duration of between 10 to 14 days. Also, as stated earlier, the turnaround event may involve

project work that can only be implemented when there is a complete shutdown of the plant.Projects refer to work packages that are implemented to improve the plant performance or fulfill

statutory requirements. Project work increases the complexity of the turnaround maintenance and

places further demand on organizational resources especially manpower. Hundreds or eventhousands of maintenance man-hours are required depending on the volume of work and the

window of opportunity available. Adding to the complexity, the event consists of multiplicity of

inter-related activities, performed at the same time, in the same place, and at times on differentlevels of the plant. Area congestions increase the chances of potential accidents, conflicts, errors,

and confusion that are greater compared to normal maintenance environment. These depictions

imply that manpower is the most important input to the turnaround maintenance organization.

Undeniably, to contend with the organizational environment and context, turnaround activities

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require efficient organization, coordination, and control to ensure its successful implementation.

This is attainable through the appropriate organizational structure and structuring processes.

The demand placed on management functions in plant turnaround maintenance such as planning,

organizing, and controlling is overwhelming in comparison with those found in “normal” business

operations. Essentially, at least three major aspects of the organization and management of turnaround maintenance differentiate it from ongoing business operations. Firstly, turnaroundmaintenance is usually carried out with the singular objective of restoring plant reliability and

production processes and the result is realizable in a short time period. On the contrary, ongoing

business operations often have multiple objectives and some will only be realized in the future.Secondly, the manpower requirement for turnaround maintenance varies greatly from ongoing

business operations. Initially, a turnaround event requires only a few key personnel for a short

period to identify and finalize the scope of work of the turnaround. The requirement and number of personnel steadily increases as the event progresses to the planning and preparation stage. The

number of personnel reaches its peak during the execution stage, whereby the manpower

requirement may reach to a level of 1,000 or more depending on plant size, plant technology, and

the scope of work. Subsequently, the number of personnel tapers off at the tail end (terminationstage) of the turnaround event. Such a scenario differs greatly from ongoing business operations

where the manpower requirement is relatively stable due to the consistent level of activities over a

considerable period of time. Finally, the temporary nature of the turnaround maintenanceorganization is another distinct feature in comparison to ongoing business operations. In the

organization of turnaround maintenance a team is assembled for the planning, preparing, and

executing the event. Depending on the size of the turnaround, the team may consist of plant personnel, hired specialists and skilled tradesmen. The majority of the personnel involved may be

sourced from contractors. The team is disbanded after the successful completion of the turnaround

event. However, some of the larger concerns retain a few key personnel to plan and prepare for thenext cycle of turnaround event. The temporary nature of the organization is certainly not the case

for ongoing business operations that place heavy reliance on relatively permanent and stableorganizations.

It must be borne in mind that turnaround maintenance, first and foremost, is an engineering activity

responding to technological demand. The turnaround maintenance event moves through a

predetermined life cycle. The actual execution of the turnaround maintenance is relatively short induration and represents a segment of a four-phase cycle. The turnaround maintenance cycle starts

with the initiation phase, followed by planning and preparation phase, the execution phase, and

finally the termination phase. Each phase of the turnaround features a specific set of critical issuesand activities that depend on the complexity of the plant technology and size of the turnaround

event. Even though the time span of the execution phase is relatively short, it comprises the highest

level of activities in the turnaround maintenance cycle. It is featured by the performance of voluminous tasks by large number of specialists and tradesmen from various engineeringdisciplines. As such, control and coordination of the workforce and work activities are crucial.

Literally, the planning and preparation that were carried out in the earlier phase are put to a reality

test during the execution phase. The plant turnaround maintenance activities require efficientorganization, coordination, and control to ensure its successful implementation. Successful

implementation of turnaround maintenance ensures availability and reliability of equipment and

assets (Lenahan, 1999), and thus profitability of the company (Murthy et al , 2002).

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4. ORGANIZATIONAL SIZE AND STRUCTURING PROCESS

Size, an essential characteristic of all organization, has been measured in many ways (Ford et al.,

1988). These include the number of employees, number of products or services, volume of totalsales, revenue, assets, profits, and the number of divisions found in the organization (Burton and

Obel, 2004). Other proposed measurements of organizational size include the use of physical,

fiscal, input, and output dimensions (Kimberly in Burton and Obel, 2004). As such, size of the plant turnaround maintenance is determined by the total number of workers employed to execute

the work, the total cost involved, and the planning duration for the turnaround event. These

measures are adopted in this study. Obviously, size of the plant turnaround maintenance influencesturnaround maintenance organizations in more ways than one. Indeed, size has been considered as

one of the major contingency factors in many organizational studies and a determinant in the

organizational structuring processes (Pugh et al., 1968; Child, 1973; and Marsh and Mannari,

1981).

In relation to plant turnaround maintenance, Levitt (2004) states that “a shutdown is a melting pot

in accelerated time, which means that people will be operating at or near their limits”. Hisstatement implies that human resource issues are crucial in plant turnaround maintenance and that

the necessary priority needs to be accorded in managing and organizing the human aspect in this

fast-track task-oriented undertaking. Lawrence and Lorsch (1967), and Miller and Friesen in Miller (1987) suggested that all organizations must be structured to effectively handle the contingencies

posed by their environment to attain favorable performance. Structural dimensions advanced by

researchers include centralization, standardization, formalization, specialization (Pugh et al , 1968;

Walton, 1981), uncertainty reduction, differentiation, and integration (Lawrence and Lorsch, 1986;Miller and Friesen, 1987). However, the two most studied dimensions are centralization and

formalization.

Centralization refers to the degree to which power is concentrated in organization. The higher the

degree of centralization, the less widespread is decision making power with regard to policy and

task performance. On the contrary, a low degree of centralization exists if power is delegated to people at the lower end of the organizational hierarchy, a situation known as decentralization

(Wetzel and Buch, 2000). Formalization, in turn, refers to the extent where rules, procedures,

instructions, and communications are established which prescribes acceptable or expected action of the employees for the purpose of controlling their behavior (Hall et al , 1967; Pugh et al , 1968;

Child, 1972; Walton, 1981; Ford et al , 1988; Miller and Salkind, 2002). It is illustrated by job

descriptions, codified and written rules and policies, and written communication. Documentation

requirements reflected in an organization’s budgeting processes, planning and control systems aresome of the means of formalization. One of the facts about business organization is that it has a

certain level of formalization in its management process. Formalization reflects the demand placed

on predictability and compliance to standards and specifications in the work activities (Child,1985). Similarly, formalization is established in turnaround maintenance organization. The level of

formalization reflects the extent to which work and activities in the turnaround maintenance

organizations are controlled by the management through indirect mechanisms such as rules,regulations, procedures, and documentation. As a matter of fact, the level of formalization in the

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turnaround organization reflects the way top management manages their relations with the

members of the turnaround organization that includes plant-based personnel and external

contractors. It is the contention of this study that the appropriate organizing of the human resourcein the form of structuring processes such as centralization and formalization are pertinent.

Nevertheless, depending on the size of the turnaround event, the level of centralization and

formalization are different among the various companies in the petrochemical industries.

5. RESEARCH HYPOTHESIS

In view of the preceding discussion, two general hypotheses are put forth that outline the expected

relationships between the organizational size and structuring processes of turnaround maintenance.

The cost of the turnaround event, number of external temporary workers employed for the

turnaround maintenance and the planning duration for the turnaround event are expected to positively correlate with the level of formalization and centralization in the organization of the

turnaround maintenance. The following hypothesis is suggested.

Hypothesis 1: There is a relationship between size and the level of formalization in theorganization of plant turnaround maintenance.

The organization of plant turnaround maintenance is a combined effort of plant personnel,

turnaround personnel, technical personnel, specialists, and contractors. Depending on the size, the

workers strength can exceed one thousand personnel. The increase in size generates greater propensity for a more formalized pattern of administrative control due to the need to cope with the

increased complexity and greater possibility of internal confusion. In such a situation, management

turns to rules, procedures, job descriptions, and other devices that formalize behavior.

Furthermore, the greater specialization of the personnel involved in the turnaround leads to ahigher degree of differentiation. Hence, there is greater need for coordination by formal means and

greater use of formal communication. As such, the following sub-hypotheses are put forth:

Hypothesis 1a: The level of formalization is positively related to the cost of plant turnaround

maintenance event.

Hypothesis 1b: The level of formalization is positively related to the planning lead time of the

turnaround maintenance.

Hypothesis 1c: The level of formalization is positively related to the number of workforceemployed for the turnaround maintenance.

The high volume of tasks of the plant turnaround maintenance has to be completed within a shortwindow of opportunity. Conformity and coordination in the execution of the turnaround

maintenance activities are important. Hence, centralization of authority is mandatory. Furthermore,

the plant turnaround maintenance is a costly event and is a drain on company’s resources. Itinvolves large costs that include labor, material, and the loss of revenue during the plant shutdown.

Therefore, it is absolutely necessary that the turnaround is aligned with business goals of the

company. Therefore, decision-making authority on the operations, budget, recruitment of

personnel, and buying decisions (material, equipment, specialists, and services) are concentrated at

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the top of the hierarchy. Due to the nature of their responsibilities and their perspective from the

top, higher level managers have broader consideration to the interests of the whole organization.

Therefore, the following hypothesis is suggested.

Hypothesis 2: There is a relationship between size and the level of centralization in the

organization of plant turnaround maintenance.

As stated earlier, the high volume of tasks has to be completed in a short time span. Hence, large

number of employees and external temporary workers supplied by contractors are required toimplement and complete the tasks on time. As such, the following sub-hypotheses are suggested.

Hypothesis 2a: The level of centralization is positively related to the cost of the turnaround

maintenance event.

Hypothesis 2b: The level of centralization is positively related to the planning lead time of the

turnaround maintenance.

Hypothesis 2c: The level of centralization is positively related to the number of workforce

employed for the turnaround maintenance.

6. RESEARCH METHODOLOGY

The primary method employed in the data collection is the questionnaire-aided sample survey.

The unit of analysis of the present study is the organization of the petrochemical industries. A total

of 60 questionnaires were distributed to the petrochemical companies. A total of 30 companiesresponded to the questionnaire, notching a 50.0 percent response rate. The respondents are

engineers from the maintenance department who are involved and experienced in the turnaround

maintenance of the companies. Size of the plant turnaround maintenance is determined by the totalcost of the event, the planning duration, and the total number of workers employed to execute the

turnaround maintenance work.

6.1 Total Cost of Turnaround Maintenance Event

Cost of turnaround maintenance generally include turnaround planning and management; local

labor that covers companies’ plant personnel; contractors; specialists; spare parts and materials torepair defects or replacement; equipment purchase and hire; logistics that include temporary stores,

workshop, accommodation, mess room, changing rooms, and site offices; utilities, and other

contingencies. In the present study, the cost is categorized as ‘large-scale’ (more than RM5,000,000), ‘medium scale’ (RM 500,001 to RM 5,000,000), and ‘small scale’ (RM 500,000 or

less).

6.2 Planning Duration of Turnaround Maintenance

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The complexities associated with turnaround maintenance require substantial effort and time on

planning and preparation to ensure smooth execution and timely completion. In fact, planning is

the major phase of the turnaround maintenance process. Stretching the planning duration of theturnaround to two or three years is not uncommon in industrial circles. Nevertheless, the duration

of planning differs amongst the companies. The present study uses five categories of planning

duration is established, namely, Category 1 (six months or less), Category 2 (seven months to 12months), Category 3 (13 months to 18 months), Category 4 (19 months to 24 months), and

Category 5 (25 months and more).

6.3 Number of Workforce for Turnaround Maintenance Event

Plant turnaround maintenance involves voluminous maintenance work that requires large number

of personnel since the work has to be completed within a very short duration. In addition, it is quitecommon for a turnaround event to include new projects that can only be implemented when there

is complete shutdown of the plant adding further demand on human resource. Hundreds, even

thousands of maintenance man-hours is required depending on the volume of the work. In the

present study, the number of workforce is measured by the total number of workers involved in theexecution of the turnaround work.

6.4 The Level of Formalization

In measuring the level of formalization, 19 statements are used for the turnaround maintenanceorganization. The scale is adapted from Duffuaa and Ben Daya (2004). The respondents are

required to indicate the level of formalization of their turnaround maintenance organization in a

possible range of scores from 1 (SDA-Strongly Disagree) to 5 (SA-Strongly Agree). The index

was determined by averaging the scores of individual respondent to each of the statements. Highscores refer to a high level of formalization and vice versa.

6.5 The Level of Centralization

The scale employed to measure the level of centralization is adopted from Kelly (1997) and

Lenahan (1999). The scale consists of 13 activities that are related to the allocation of personnel,financial expenditures, and procurement. The respondents are required to indicate the level of

hierarchy where decisions are made for each of the 13 activities in their organization of turnaround

maintenance. A decision made by the Managing Director/Chief Executive Officer/ General

Manager will obtain a score of 5, a decision taken by the turnaround manager/engineer is given ascore of 4, a decision taken by the area engineer/coordinator is given a score of 3, a decision taken

by the supervisor is given a score of 2, and a score of 1 for a decision made by the

tradesmen/technicians at the work level. The centralization scale for each turnaround maintenanceorganization of the petrochemical industries is represented by the mean response across all 13

activities where 1 indicates a low level of centralization and 5 shows a high level centralization.

7. SALIENT CHARACTERISTICS OF SAMPLE COMPANIES

The 30 petrochemical companies covered in the study differ not only in the plant technology

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employed in conducting their business operations but also in other prevailing characteristics that

include, among others, the size of manpower, the number of years in operation, the frequency of

the turnaround, duration of the turnaround event, costs of the turnaround, planning duration for theturnaround event, organizational structure and structuring processes of the turnaround.

7.1 Overall Size of the Companies

An established indicator of organizational size is the total number of employees in the organization

(Hall and Tolbert, 2005). The size of companies in the petroleum-based sector covered in the studyranges from small (<100 employees) to large (>1000 employees). A total of 22 companies (73.3

percent) employ 500 or less people. There are two companies (6.7 percent) that employ less than

100 people. On the larger end, two companies (6.7 percent) have between 700 and 900 people, five

companies (16.7 percent) employ in the range of 900 to 1100 employees, and one company (3.3 percent) has more than 1100 employees.

7.2 Number of Years in Operations

The plants used by the petrochemical companies have been in operation between two to 40 years.

The majority (70.0 percent) of the companies in the petroleum-based sector have been in operationfor less than 20 years. The remaining 30.0 percent of the companies started their operations more

than 20 years ago. The majority of these plants were established since the Fourth Malaysia Plan

(1981-1985). The latter groups of plants (more than 20 years) reflect the ageing facilities and assetsused in conducting their manufacturing activities. 7.3 Scope of Work of Turnaround Maintenance

The primary aim of plant turnaround maintenance is to revitalize the plant efficiency and

reliability. Since the plant is shutdown for turnaround maintenance, the companies take the

opportunity to carry out other works as well. The typical work scope of turnaround maintenanceinclude maintenance of facilities for statutory inspection, plant preventive maintenance, plant

corrective maintenance, plant cleaning, safety and quality initiatives, and project works for plant

replacement or plant improvement. Table 1 summarized the work scope of turnaround maintenance based on the multiple responses gathered from the survey.

It is observed that among these companies, maintenance work that is organized for the purpose of

meeting the requirements of statutory inspection enforced by DOSH and DOE is ranked first. Thisis followed by the project or plant improvement works that can only be implemented during plant

shutdown. Following that, corrective maintenance work and work related to safety and quality

initiatives ranked third and fourth respectively. Preventive maintenance is ranked fifth among thework scope of turnaround maintenance in the petrochemical industries and finally the plant

cleaning work is ranked sixth.

The survey highlights the components of turnaround maintenance work that include of major plant

overhaul (corrective maintenance), capital projects and modifications as put forth by Kelly (1997).

The project and plant improvement components of the turnaround maintenance increase the

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complexity of the turnaround event. They place high demand on organizational resources that

increases the complexity of the management and organization of the event. Hence, it is discernible

that the turnaround events among the petroleum-based industries are indeed complex.

Table 1: Work Scope of Turnaround Maintenance of the Companies (n=30)

Work Scope of Turnaround Maintenance

Number of Companies(Frequency)

Rank

Statutory Inspection requirements (DOSH,

DOE)28 (93.3%) 1

Preventive Maintenance 17 (56.7%) 5

Corrective Maintenance 20 (66.7%) 3

Plant Cleaning 12 (40.0%) 6

Safety and Quality Initiatives 19 (63.3%) 4

Project or Plant Improvement 26 (86.7%) 2

Source: Survey data

7.4 Frequency of Turnaround Maintenance

The petrochemical industries utilize multi-million dollar facilities and assets to conduct their

business. These facilities demand continuous maintenance and upkeep for optimal performance.

The survey data unveils the various frequency of turnaround maintenance adopted by thecompanies. It was found that 15 companies (50.0 percent) implement their turnaround maintenance

once in three years. There are eight companies (26.7 percent) that plan their turnarounds once in

five years or longer intervals. These are large petrochemical plants, refineries and natural gas processing plants. However, the survey data shows that there are companies in the petrochemical

industries that perform the event more often. For instance, five companies (16.7 percent) planned

their turnaround once a year and two others (6.7 percent) carried out the event once in two years.

7.5 Duration of Turnaround Maintenance Event

The duration of the turnaround maintenance event is dependent upon the work scope. The latter isalmost always constrained by the demands on the production and the availability of sufficient

funds to finance the event. In view of these constraints, the shutdown period must allow for a

minimum scope of turnaround maintenance work to be performed on the plant facilities to ensurethe continuous optimal and efficient plant performance. Based on the information gathered from

the survey, the mean duration of turnaround among the petrochemical companies is 24 days. The

range of duration of turnaround maintenance among these companies is 26 days with a minimumof 14 days to a maximum of 40 days. The survey data reveals that there are 12 companies (40

percent) that allocate 11 to 20 days and another 12 companies (40 percent) carry out the event between 21 and 30 days. Six other companies (20 percent) implement the events between 31 and

40 days.

7.6 Contractors in Turnaround Maintenance Organization

Depending on the size of the turnaround event, a large portion of the turnaround maintenance tasks

is outsourced to contractors. Outsourcing is a common method of acquiring large number of

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temporary human resource for the turnaround maintenance activities, notably in large scale

turnaround undertakings. All the companies included in the present study reported the use of

contractors to execute their turnaround maintenance activities. However, the level of usage of theseexternal workers is highly dependent on the scale of the turnaround activities. On the average, the

companies recorded employing 1110 external workers. The minimum number recorded is 65

workers while the maximum is 3000 workers.

It is evident from the survey that the majority of the companies engaged large number of external

workers. Close to one-half (46.7 percent) of the companies used more than 1000 temporaryexternal workers. It is reported that 10 companies (33.0 percent) used less than 600 workers

including three companies (10.0%) that engaged less than 200 workers. Another six companies

(20.0 percent) employed in between 600 to 1000 external workers.

The turnaround managers that were interviewed during the course of the study concurred with the

view that due to the cyclical nature of the turnaround event, contractors provide the organizational

flexibility in organizing the manpower for turnaround without the necessity of large sum of

investment in permanent employment. The need for specialized services and flexibility in thenumber of employees required during turnaround event constitutes the main motivation for

employing contractors for turnaround events (Abraham and Taylor, 1990; Kochan et al.,1992; andBlake and Uzzi, 1993) .

7.7 Size of Turnaround Maintenance

Organizational size is one of the pertinent characteristics of temporary organizations such as plant

turnaround maintenance. Size exerts influence on the management of the organizational resources

particularly the structuring processes of the organization. The three variables denotingorganizational size are cost, planning duration, and the total number of employees for the

turnaround event.

7.7.1 Cost of Turnaround Maintenance Event

The cost associated with plant turnaround maintenance event can be divided into four major categories that includes (1) administrative and overheads, (2) labor, (3) equipment, fabrication, and

materials, and (4) contingency. Cost of services includes, among others, the cost of turnaround

planning and management, cost of labor that covers companies’ plant personnel, contractors, and

specialists. The cost of materials include spare parts and materials to repair defects or replacement,equipment purchases and hire, logistics that consists of temporary stores, workshop,

accommodation, mess rooms, changing rooms, site offices, utilities, and other contingencies. The

total cost is directly linked to the size of the turnaround event. Large events are portrayed withmore extensive cost profile due to the extensive volume of maintenance work.

The costs are divided and identified according to the three major phases of turnaround namely planning and preparation, execution, and termination. The cost details demonstrate some of the

core functions of turnaround maintenance management that include planning, organizing, and

controlling. It is explicitly clear that large proportion of the cost is focused on organizing resources(human resource and materials) of the turnaround maintenance activities. In the present study, the

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costs of the turnaround maintenance are classified into three categories namely small scale (less

than RM500,000), medium scale (RM500,000 up to RM5,000,000) and large scale (more than

RM5,000,000). The mean value of total cost of the turnaround is RM30,677,000. The data revealsthat the minimum cost recorded is RM1,500,000 and the maximum is RM90,000,000. Results of

the survey shows that large scale turnaround events are carried out by the majority (about 92.3

percent) of the petroleum-based companies. Only two companies (7.7 percent) in this sector perform medium scale turnaround. None of the companies covered in the survey perform small

scale turnaround events.

7.7.2 Planning Duration of Turnaround Maintenance

The complexities associated with turnaround maintenance and possibilities of consequential

monetary loss due to duration overrun have placed planning and preparation a precondition toensure smooth execution and timely completion. In fact, planning is the major phase of the

turnaround maintenance process. Stretching the planning duration to two or three years is not

exceptional in the petrochemical industries. Nevertheless, the duration of planning for the

turnaround maintenance differs among the companies.

The survey data indicates that the mean duration of planning of the turnaround event is 15 months.The data also reveals that the minimum duration of planning is 1.5 months and the maximum is 36

months. Large turnaround events require longer planning duration of more than 12 months. As

examples, MLNG Sdn Bhd and PETRONAS Penapisan (Melaka) Sdn Bhd allocate an average of 15 months for the planning and preparation of their turnaround maintenance. Results of the survey

indicate that most of the petrochemical companies (46.7 percent) allocate between 13 and 18

months of planning for their turnaround events. Eight companies (26.7 percent) require seven to 12

months, while four companies (13.3 percent) require less than six months for the planning work.There are four companies (13.3 percent) that require longer duration of planning that include three

companies (10.0 percent) with 19 to 24 months planning and one company (3.3 percent) that

requires more than two years planning for its turnaround event.

7.7.3 Total Number of Employees for Turnaround Maintenance

Turnaround maintenance involves voluminous maintenance work that requires large number of

manpower. In addition, it is quite normal for a turnaround event to include new projects that can

only be implemented when there is complete shutdown of the plant. Depending on the volume of

work, thousands of maintenance man-hours are required for the event. On the average, thecompanies recorded employing 1199 workers. The minimum number of workers reported is 85 and

the maximum is 3500 workers.

Analysis on the results of the survey illustrates the presence of certain degree of variations in the

number of workforce required for the turnaround maintenance activities among the petroleum-

based companies. It reveals that 20 companies (66.7 percent) in the petroleum-based sector usedmore than 600 workers to implement the turnaround activities. There are eight companies (about

26.6 percent) that employed between 200 and 600 workers to execute their turnaround

maintenance activities. On the other extreme, only two companies (6.7 percent) require 100 or less

employees to execute the event.

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7.8 Levels of Formalization and Centralization

The results of the survey revealed that all the companies have documented and established work

procedures, quality system, safety plan, work specifications and mechanisms of performance

control. The overall mean value for the level of formalization in the turnaround maintenance

organization, on a scale of 1 to 5 is 4.33 (Std. Dev. 0.44). Overall, the result indicates a high levelof formalization in the turnaround organization among the petrochemical companies.

Managing and organizing the resources for turnaround require the clear role of decision makingauthority in committing the resources is reflected by the level of centralization in the

organizational structuring process among the turnaround maintenance organizations. The

centralization that is being considered here is the distribution of authority to commit theorganization’s resources for implementing the turnaround maintenance activities. Analysis of the

survey data reveals that the overall mean value for the level of centralization in the turnaround

maintenance organization on a scale of 1 to 5 is 3.78 (Std. Dev. 0.45) demonstrating a high level of centralization in the turnaround organization among the companies in the petrochemical industries.

The high level of centralization reflects the authority to commit organizational resources such ashuman resource, funds, machines, and materials is concentrated or confined to a few key persons

or group of senior managers of the turnaround maintenance organization. For instance, in MLNGSdn Bhd, the authority rests on a group of senior managers or the policy team and the turnaround

manager.

8. CORRELATIONAL ANALYSIS AND DISCUSSION

The proposed hypotheses are tested using bivariate Pearson product-moment correlation. The

results of the analysis are illustrated in Table 2 below.

Table 2: Correlation between Organizational Size and Structuring Processes

Organizational Size Level of centralization

Level of formalization

Cost (log) of

turnaround maintenance

Pearson Correlation .078 .724**

Sig. (1-tailed) .352 .001

n 26 26

Number of employees

(log) for turnaround

maintenance

Pearson Correlation .118 .343*

Sig. (1-tailed) .267 .032

n 30 30

Planning duration inmonths

Pearson Correlation .471** .512**

Sig. (1-tailed) .004 .002

n 30 30

** Correlation is significant at the 0.01 level (1-tailed).

* Correlation is significant at the 0.05 level (1-tailed).

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8.1 Organizational Size and Formalization

The size-formalization relationship in the organization of turnaround maintenance is evident fromthe bivariate Pearson product-moment correlation coefficients. The level of formalization is

positively related with the cost of the turnaround maintenance event. The correlation coefficient (r)

is 0.724 (n=26) with a significant level of p=0.001 < 0.01 (1-tailed) indicating a significantlystrong relationship. The coefficient of determination (r 2) is 0.524, which shows that about 52.4

percent of the variation in the level of formalization is explained by the variation in the cost of the

turnaround maintenance event. Hence, Hypothesis 1a is supported.

Similarly, formalization is positively related to the number of employees for turnaround. The

bivariate analysis shows correlation coefficient (r) is 0.343 (n=30), with a significant level of

p=0.032 < 0.05 (1-tailed). It shows that 11.8 percent of the variation in the level of formalization isexplained by the variation in the number of employees of the turnaround maintenance. Hence, the

Hypothesis 1b is supported but the statistics signifies a weak relationship.

Likewise, formalization is positively related to the planning duration of the turnaroundmaintenance. The bivariate analysis shows correlation coefficient (r) is 0.512 (n=30), with a

significant level of p=0.002 < 0.01 (1-tailed). It illustrates that 26.2 percent of the variation in thelevel of formalization is explained by the variation in the planning duration of the turnaround

maintenance. As such, Hypothesis 1c is supported and the relationship is moderate. The survey

data reported variations in the turnaround planning duration among the companies in the petroleum-based industries. The planning duration depends on the complexity of the turnaround

maintenance works and the risk involved in the turnaround. By and large, plant turnaround

maintenance that is complex and holds the potential of high risk requires more comprehensive

planning and longer time than a plant turnaround that is comparatively less complex and has lower potential of risk. The complexity and risk that influence the duration of planning are closely related

to the size of the turnaround maintenance event. Hence, size explains the variations in the duration

of planning of turnaround maintenance.

The finding that the level of formalization is related to organizational size of the turnaround is

consistent with formalization-size relationship advocated by Pugh et al, (1968), Child (1972), andMarsh and Mannari (1981). As an example, as the number of employees for the turnaround

increases, the need for control and coordination through formal written communication, rules,

procedures, and written instructions grows. The findings from the present study hold that increase

in the size of the organization is accompanied by increase in the level of formalization; greater reliance on formal standard procedures, operating systems and documentation.

In ensuring the turnaround event is completed on time, large volumes of documents are generatedfor planning and organizing for the event which include turnaround objectives, key dates of the

turnaround event, work schedule, working pattern (working hours and number of shifts), work

scope, turnaround maintenance organizational charts, procedures to conduct post turnaroundanalysis to capture lessons learned of every event of the turnaround maintenance, measuring the

plant turnaround performance, establishing the procedures to handle the unexpected during the

turnaround such as emergent work, and procedures for planning the procurement of long delivery,

prefabrication items and services. For instance, in MLNG Sdn Bhd and PETRONAS Gas Berhad,

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these documents are the foundation upon which all other aspects of the turnaround event rest, such

as safety, quality, duration, cost, resource profile, material and equipment requirements. Work

specification, work scheduling, and resource scheduling are documented and communicated to allthe stakeholders of the turnaround event. The stakeholders include higher level management of the

companies, sales and marketing managers, plant managers, engineers, safety officers, supervisors,

workers, contractors, and government authorities namely DOSH and DOE.

Furthermore, in order to complete the turnaround work within the approved plant turnaround

financial budget, the total cost of the turnaround maintenance event are clearly budgeted anddocumented and a formal cost estimate for the plant turnaround maintenance event is prepared.

Daily reports that measure the progress of the event are produced to control the turnaround

execution against work schedule and budgeted costs.

Essentially, rules, policies, procedures, standards, and specifications shape the level of

formalization in the turnaround maintenance organization and act as impersonal devices for

managing the organizational resources. Shenhav (1995) pointed out that organizations featured by

high level of engineering activities were prevailed by systems and standards that serve as basis of formal structuring processes. Turnaround maintenance organization is a case in point. As a matter

of fact, the prevailing high level of formalization is established as a management strategy inorganizing, coordinating and controlling the organizational resources for achieving high level of

performance. It also indicates the tendency of the management to depend on self management

(Hodgson, 2004) and relying less on personnel supervision, in particular with organization that haslarge number of specialized personnel such as turnaround maintenance.

8.2 Organizational Size and Centralization

The statistical analysis shown in Table 2 does not reveal any significant relationship of

centralization and cost of turnaround maintenance. Likewise, there is no significant relationship

between centralization and the number of employees for turnaround maintenance. Hence,Hypotheses 2a and 2b are not supported. However, the level of centralization is positively related

to the planning duration of the turnaround maintenance. The bivariate analysis shows correlation

coefficient (r) is 0.471 (n=30), with a significant level of p=0.004 < 0.01 (1-tailed). It illustratesthat 22.2 percent of the variation in the level of centralization is explained by the variation in the

planning duration of the turnaround maintenance. The Hypothesis 2c is supported and the

relationship is moderate.

Roup (2004) claimed that “turnaround is a top-down intuitive process”. In today’s highly

competitive business environment, the challenges in managing and organizing a plant turnaround

are not the same as managing other business processes. Roup (2004) stressed that turnaroundmanager or the plant manager has to consider economic issues with emphasis on reliability and

cost control, business issues, stakeholders that include community relations, environmental

compliance, and statutory compliance. For instance, in the case of turnaround maintenance of MLNG Sdn Bhd, the focus is given on business issues like production optimization and yield

improvement to meet the international customers’ demand without neglecting cost control, safety

and environmental concerns. The focus and priority of the senior managers towards the turnaround

maintenance provide the evidence that highly centralized and top-down process of the turnaround

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maintenance management and organization is necessary.

The high total costs and potential negative implications on the business operations draw intense topmanagement attention to the turnaround maintenance. Therefore, high level of centralization is not

uncommon in turnaround organization. Furthermore, the turnaround activities are carried out in a

very short duration that allow very little time and opportunity for deliberation, discussion, or getting consensus. Centralization of authority in the decision-making avoids delays that are caused

by debate or deliberation. Fast and accurate decision making are imperative and as such, it is

common for turnaround organization having one person to be in overall control of the event. Thecomplexity of the turnaround environment demands speed and high level of coordination that

compels the turnaround organizations to centralize their structure. Adding to the complexity is the

need to manage a number of internal and external interfaces or stakeholders of the turnaround.

Therefore it is pertinent that the management holds effective means of control of the turnaroundorganization to ensure that the demands and requirements of these stakeholders are satisfied.

Furthermore, as the turnaround manager or the maintenance manager has the overall business view

of the company, his decisions are made in integrated manner with consideration of the engineering,

management, and business perspectives. The large capital expenditure and other large associatedincidental costs of the event attract serious shareholders’ and the top management attentions. In

order to have an effective means of control of the event, it is a common feature to have a group of senior managers (steering committee) or a turnaround manager to be responsible for the turnaround

event. This leads to high centralization in the structuring process.

9. CONCLUSION

The aforementioned discussion has provided some evidence to the variations in the organizational

size and structuring processes of the turnaround maintenance organizations. It is discernable thatdepending on the size of the turnaround event, the structuring processes of the turnaround

maintenance vary across the industries. It is obvious that the companies managed and organized

the necessary turnaround organizational resources differently in accomplishing the turnaroundevents. Indeed the findings of this study support the views put forth by numerous organizational

scholars that size is one of the major determinants of organizational structuring processes (Pugh et

al., 1968; Child, 1973; and Marsh and Mannari, 1981).

Plant turnaround maintenance activities are compressed events that have very low tolerance for

schedule slippage or duration overrun. Therefore, planning is done meticulously and normally

takes a long period. The temporary nature of the turnaround maintenance organization createsgreater challenge to integration and coordination. Hence, high level of centralization and

formalization are seen in the turnaround maintenance organization.

Overall, the organizations of the turnaround maintenance are featured by high level of

centralization and formalization. It signifies the organization’s low level of tolerance on the

variability of the behavior and performance of the organizational members. This is necessary toensure work process, input, and output of the turnaround maintenance meet the statutory

requirements and stipulated standards imposed upon the operations. High level of centralization

implies that the inherent characteristics of the turnaround maintenance demand centralized decision

making to facilitate organizing, coordination and control of organizational resources. For all intents

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and purposes, integrating appropriate structuring processes such as formalization and centralization

facilitate the implementation of the turnaround maintenance activities. It seems plausible to

conclude, based on the findings of the present study that the turnaround maintenance managers candepend heavily on written procedures and rules for coordination and control and simultaneously

centralized the authority for decision making.

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