Are You Gambling with Safety?
How can you achieve good safety leadership?
Are You Gambling with Safety
Archive | July, 2011
Are Audits, Assessments, & Evaluations Just an Intellectual Exercise?
Many Companies Are Having Audits Done – Few Are Ready to Make Changes
Are Audits, Assessments, & Evaluations Just an Intellectual Exercise
Among equals
By Barry Sherriff, partner, Norton Rose Australia*
July 2011 National Safety magazine, Vol 82 No 6
Not universally thought of as an essential element of corporate governance, work health and safety (WHS) will become a significant corporate governance concern for key decision makers and leaders in organisations under the model Work Health and safety act (the model Act).
One of the key changes to WHS laws will be a new duty of care for officers (key decision makers or leaders) to exercise due diligence to ensure their organisations comply with the model Act. This will require officers to be actively involved in WHS in ways that promote and support a positive safety culture.
The clock is ticking on coming to grips with the new obligation because the start of the model Act is now less than six months away.
Businesses must now be gaining a full understanding of the requirements, what their organisations have in place already, the gaps between what they have in place and what they need, and taking action.
Why and what of leadership
For work to be carried out safely and without risks to health, the physical and psychosocial environment and inputs to work must be safe, and safe systems for carrying out the work must be in place that are supported by training and supervision.
Even with these enablers in place, the health and safety of people may still be put at risk if the resources are not used or the systems are not followed. Workers must understand the need to do the work safely, how to do it safely and be required to give safety priority over production.
The business must therefore ensure the provision of resources and policies to provide for WHS in doing the work, while also ensuring that there is a culture and accountability of individuals that promote and verify the use of the resources and policies.
A business or undertaking is not a living being but a legal being (except when it is conducted by a self-employed person). The organisation can only operate through the activities and decisions of the individuals that run it. These people – the leaders of the organisation – not only make the decisions about what the organisation will do, they also determine its values and culture, priorities and accountabilities.
It follows that leaders need to be involved in WHS for it to be managed effectively.
Research in recent years has identified the culture needed for the effective management of WHS being as follows:
• informed – everyone has knowledge of what is needed;
• reporting – where people are encouraged to report errors or near misses;
• just – there is a ‘no blame’ culture of trust and fairness;
• flexible – allowing for input from a larger group of relevant people, without traditional hierarchical constraints; and
• learning – there is a willingness and competence to learn and implement change.
Each of these elements supports the gathering, analysis and use of information, ensuring an imaginative and flexible approach to WHS – that is necessary to meet ever- changing circumstances.
The leaders of an organisation play a significant role in determining and supporting the safety culture. This is in part through ‘transactional’ leadership, which supports consistency and compliance. It is also through ‘transformational’ leadership, which engages the hearts and minds of others, encouraging their involvement in safety, sharing information and ideas, and supporting appropriate flexibility.
Corporate governance and WHS
There are commonly accepted and consistent principles for the proper and effective governance of a business. These are found in various places, such as in AS 8000 – 2003: ‘Corporate Governance – Good governance principles and ASX Corporate Governance Principles & Recommendations and OECD Principles of Corporate Governance’.
In essence, these principles require the leaders of the organisation to:
• ensure the competence and integrity of the Board and Executive, with full disclosure and transparency;
• determine the areas of business and approaches that are consistent with the objects of the organisation and are socially responsible;
• understand the business and the hazards and risks from the operations of the business to people, the environment, financial viability, profitability and shareholder value;
• understand the legal obligations associated with the operations of the business;
• identify what is required (including the structure, resources and processes) to eliminate or minimise the hazards and risks, achieve compliance and generate value (profit);
• make decisions for the development and implementation of processes for achieving those objectives that are clear and capable of being consistently applied and enforced; and
• verify the implementation, enforcement and effectiveness of those processes.
More often than not we find that WHS is treated differently to other aspects of a business when it comes to corporate governance.
WHS is seen as a technical area that is managed by mid-level people with appropriate expertise. It is like there is a glass floor through which the Board and Executive look and say ‘That is interesting, but we have good people looking after that so I don’t need to get involved’. This is not to suggest that the leaders do not care about safety – they do, but will usually believe it is being attended properly and it is not something they need to directly consider.
However, there are many businesses in which the Board takes as keen an interest in WHS as it does other aspects of running the organisation. There are a number of companies that are notable for the focus and prominence they give to safety and strive for continuous improvement. We have found when undertaking gap analysis work, however, that meaningful Board engagement in WHS is more the exception than the rule and limited when it exists.
Duty of officers
The model Act will place a health and safety duty on officers (the key decision makers or leaders) of a company, partnership, association or an entity of the Crown to exercise due diligence to ensure the organisation complies with the model Act. To do so, the officers must take reasonable steps to:
• acquire and keep up-to-date knowledge of work health and safety matters (WHS principles and legal obligations);
• gain an understanding of the nature of the operations and generally of the associated hazards and risks;
• ensure the organisation has available and uses appropriate resources and process to eliminate or minimise risks;
• ensure the organisation has appropriate processes for receiving and considering information regarding incidents, hazards and risks and responding in a timely way;
• ensure the organisation has and implements processes for complying with any duty or obligation it has under the Act; and
• verify the provision and use of the resources and processes.
The elements simply require officers to understand WHS and the model Act, understand the business and the hazards and risks that are associated with it, and to identify, apply and verify appropriate means for management of those risks. This is simply ‘governance 101’, as it is applied to other aspects of the business. Safety should not be, and no longer can be, treated differently. The maximum penalty for failing to meet the duty will be $600,000 and/or five years in jail, in the case of reckless endangerment (or indifference), or $300,000 otherwise. The officers will need information to do this and to make decisions on key resourcing issues. They will need to be inquisitive about WHS. Many throughout the organisation will be involved in the gathering, analysis and reporting of WHS information. Performance will be monitored. WHS will be seen as being important to ‘the boss’ and therefore to everyone throughout the organisation.
This should result in a more positive safety culture, greater accountability and more consideration of WHS in the provision of resources. Health and safety will be brought in out of the cold when it comes to corporate governance.
Keys to compliance
For its officers to meet the due diligence requirements a business must have:
• a structure through which information can be gathered and analysed, and information and advice reported up through the organisation to the officers. This must include the right people with appropriate roles and expertise, involved
directly and in committees. Position descriptions and committee charters must clearly identify their roles in WHS governance;
• a process that provides for the gathering, analysis and reporting of information and advice up through the organisation. The process should include auditing and reporting that is independent of the area of the business to which it relates; and
• reports that provide information and advice on each of the elements of the due diligence definition. This must include information about hazards and risks, resource and policy requirements and compliance activities.
This may require significant changes to current structures and processes. The required changes need to be identified, developed, introduced, reviewed and revised as necessary.
Experience tells us that initial development and implementation typically takes at least six to 12 months, with the embedding and effectiveness of the new processes taking up to 18 months.
*Barry Sherriff is a Partner in the OHSS team of Norton Rose Australia. He was a member of the panel that undertook the National Review into Model OHS Laws, on whose recommendations the model WHS Act is substantially based. Barry is the author of ‘Sherriff’s Work Health and Safety Law Guide’, an online subscription service published by SAI Global. He regularly advises business and undertakes governance gap analysis projects.
A solution to measure and improve safety culture
A Solution to Measure (and Improve) Safety Culture
Finding and fixing is the measurable heart of safety culture improvement.
By John Easton Apr 01, 2011
Safety culture is a hot topic for many of today’s organizations. A positive safety culture
helps organizations achieve their ultimate goal of achieving better safety performance
However, the process of understanding and improving a safety culture can be daunting. It
is not uncommon for a company’s leadership to look at their safety culture and ask:
Do we have a good safety culture?
How do we improve it?
How do we measure it?
These questions can be difficult and elusive to answer because, like any culture, safety
culture is built around many factors, including attitudes, accountability, leadership, and
other “soft” components that cannot be easily measured. However, it is also strongly
defined by another, more measurable factor: finding and fixing problems. By focusing on
this key element, organizations can gain meaningful insight into the health of their safety
culture. Why? Because when you measure your finding and fixing performance, establish
accountability, and take action on findings, you are demonstrating commitment to
providing a safe workplace. This in turn leads to positive employee attitudes toward safety
and a healthier safety culture.
How a Single, Automated Database Improves Finding and Fixing
Finding and fixing is not complicated. It is identifying problems or hazards and then
figuring out a way to fix them. The best way to do this is by tracking the right data
efficiently, which is best achieved by using an automated safety data management system.
Many organizations, however, still employ any number of systems to track finding and
fixing activities. These could include paper files, spreadsheets, home-grown databases,
and other potentially cumbersome systems. When data is stored in such a disparate
manner, it is difficult to obtain the “big picture” needed to assess progress. While
management may feel as if it is promoting a positive safety culture within an organization,
the inability to effectively manage findings can have a detrimental impact on an
organization’s safety culture.
The data management system you utilize should allow for efficient data entry, seamless
workflows, configuration that can align and change with your business processes, and
strong reporting capabilities that will allow you to extract and analyse information as
needed. Such a system will prove to be an invaluable tool for effectively managing safety
data, and thus, enhancing your safety culture. (Some organizations choose to build such a
database in-house but these projects can often become delayed, cumbersome, and
draining on resources. An off-the-shelf system is usually a much more efficient solution.)
Let’s evaluate the ways in which an automated safety system can be leveraged to support
the main components of good finding and fixing. These components are:
Understanding the Healthy Balance
Standardizing an Effective Hazard Identification and Correction Process
Effectively Prioritizing Actions Based on Risk
Understanding the Healthy Balance
It is important for an organization to balance its tendency to find problems with its ability
to fix them. If the scales tip too much one way or the other, the effect can be detrimental
to the company’s safety culture. By placing too much emphasis on finding problems, and
not having the appropriate resources to fix them quickly and effectively, an organization
will likely find itself with an apathetic and disengaged workforce. In such environments, it’s
not uncommon to hear workers say “Why suggest that safety enhancement, nobody will
ever fix it” or “It takes forever to get anything fixed around here.” Each time a negative
statement like this is uttered, the safety culture foundation suffers another crack.
On the other hand, not placing enough emphasis on finding hazards can also tip the
scales. You may be familiar with the saying, “If we have no problems, then we have a
problem.” An organization needs standardized programs and systems to identify hazards in
the workplace and then subsequently mitigate them. Solving problems is the essence of
improvement. Furthermore, if employees see action being taken on problems they’ve
identified, they will feel engaged and confident about their company’s dedication to worker
safety and will be encouraged to continue actively participating.
To understand what the balance is at your organization, it comes down to having reliable
information on your inputs and outputs. By using a single, automated safety data
management system, you’ll easily be able to extract information that will tell you how
healthy your balance is. Some key metrics you can use to track your finding and fixing
balance are:
Inputs:
Number of items found at each risk level
Number of audits performed vs. targets
Number of audits by area, auditor, and/or topic
Number of safety observations
Outputs:
How long items took to fix
Number of open/overdue corrective actions
Number of open/overdue corrective actions by area
Total number of safety corrective actions by area, time range, etc.
Standardizing an Effective Hazard Identification and Correction Process
Most large organizations use various methods to identify hazards, including incident
investigations, audits, inspections, and suggestion programs. However, the data collected
is often stored in different places and formats, which leads to poor data integrity and
inconsistent business processes being used by your OHS team.
With one automated safety data management system, organizations can streamline and
standardize workflows and data collection. As a result, you’ll be able to extract better
information and make more informed business decisions. Here are some of the benefits of
using an automated safety system for your hazard identification process:
Standardize the collection, storage, and retrieval of hazard information
Allow employees to anonymously report incidents from stand-alone stations placed
throughout the workplace to kick start the incident investigation process in the main
database
Conduct causal analysis of the hazard so preventative or system-wide actions can be
considered along with more immediate corrective actions
Automate e-mail notifications to ensure responsible individuals and departments are
aware of their assigned actions and the corresponding completion status
Generate reports to monitor completion statuses and ensure fixes don’t fall through the
cracks
Effectively Prioritizing Actions Based on Risk
No organization has the resources to fix all of its hazards immediately. The key to good
risk management, then, lies in prioritizing actions based on risk and allocating resources
accordingly. But how do you identify risk priority if your data is being tracked in various
places and formats? It likely takes hours, even days, to organize the information that will
tell you what actions to take and when.
Using an automated safety system, hazards can be easily prioritized to ensure resources
are used to fix highest risks first. You’ll be able to generate reports that feed into your
own standard reporting methods, making it easy for you to communicate risk information
to your team. Whether you use bulletin boards, structured weekly meetings, company
dashboards, etc., you’ll be able to effectively share information that will help your
company prioritize risk. With a good automated system, you’ll be able to:
Compare all data at once, within one system, instead of comparing inputs that come
from across different systems and formats
Sort and group risks as needed in order to identify and list risks by area, department,
time frame, hazard type, etc.
Use a dashboard to highlight the reports that are important for your specific business –
an effective reminder that keeps priorities front and center. The dashboard can be
configured to pop-up every time you log-in to the system.
The Bottom Line
Organizations will always be talking about safety culture and how to improve it. As we
have established, however, understanding the state of your safety culture is not the
unattainable “white elephant” it is perceived to be. Through a well-organized approach to
finding and fixing, facilitated by an automated safety data management system, an
organization can effectively set targets for safety performance and monitor progress. This
will go a long way towards promoting a healthy safety culture. Your automated system will
help you improve finding and fixing and will give you the tools you need to make informed
business decisions. Your safety culture will be all the richer for it!
About the Author
John Easton is a CRSP and MHSc (Industrial Hygiene). He currently works as the Safety
Product Manager at Medgate Inc., a leading provider of integrated Health and Safety
Software Solutions. He previously worked for 12 years at Toyota in various Health &
Safety roles including Industrial Hygienist, Safety Specialist, Project Lead for Toyota Safety
Management System, and Assistant Manager. He can be contacted at
jeaston@medgate.com or 519-304-3471.
2011 Supply chain review and comment
GILMORE SAYS:
“The Japan earthquake gave us another lesson to absorb in our on-going supply chain risk management education.”
Every six months, we review the supply chain world that was, and today I have a look back on the first half of 2011 in supply chain. It’s amazing how easy it is to lose track of news and events even just a few months back, and we get good feedback from readers on these pieces which help them remember the news that was.
As unfortunately has been the case now for nearly three years, the dominant supply chain story was really the economic backdrop, with a sluggish economy in the US and much of the developed world, which impacts supply chain strategies, investments and more.
US GDP grew at just 1.9% in the first quarter, with about the same expected for Q2 when the numbers are released in a few weeks. This is very anemic for an economy that should be charging out of recession, and obviously is not enough to add jobs both in economic theory and in fact, as job growth is barely moving and the unemployment still over 9%, dampening demand.
Meanwhile, the Euro zone was fighting fire after fire with the sovereign debt crises in Greece, Ireland, and Portugal, somewhat in Spain, and maybe now most dangerously in Italy. There is a real chance these crises could take down the Euro and result in a return to country-specific currencies again, and worse, create a new financial debacle that will have a huge impact on the global economy. Keep your fingers crossed, but it doesn’t look good.
To keep some economic spark going, the US Federal Reserve in effect printed a bunch of money (quantitative easing), which is far more than just a financial concept. Many have shown how this easy money policy has led to a devaluing of the dollar, which would have been worse if not for the Euro’s troubles. Since most commodities are priced globally in US dollar denominations, that is the key factor in why oil and many other commodities rose sharply in price during the 1H, despite tepid overall global demand (see below).
It also led China, Russia, Brazil and others to further plot how to eliminate or reduce the role of the US dollar as the world’s “reserve currency.” We’re trying to find someone who can explain exactly what impact this would have on import costs and other matters should it occur, but until we do, I will just say it cannot be good.
China, meanwhile, says it had GDP growth of 9.7% in Q1 and now 9.5% in Q2. But there are some dark signs on the horizon, including growing inflation that the government is trying hard to fight. That could mean slowing down growth, which will impact global exports to China, and perhaps increasing the value of its currency, which might increased costs on Chinese sourced goods (though the government clearly won’t go too far in that direction). More worrisome is what some say is a gigantic real estate bubble and huge debt incurred by many local Chinese governments. Some say there will a huge crash there, while others predict a soft landing. Everyone seems to believe there will need to be some sort of reckoning coming up.
Manufacturing through most of the first half was seen as the engine that was carrying the US economy. Capacity utilization continued its slow rise from the 2009 depths, rising from 73.8% in December to 74.5% in May, well above the disastrous 65% or so seen in June 2009, but still well below the 79% overage over the last 40 years.
But there are some worries that the manufacturing sector is now again slowing. The Purchasing Managers Index was roaring along early in the year, with levels above 60 from January to April, numbers that point to strong growth. That has changed in May and June to 53.5 and 55.3, respectively however, still indicating growth (any number over 50) but clearly decelerating the past two months.
Though it might be hard to perceive from the relatively modest month over month numbers, total retail sales excluding automobiles were up 8.5% in the US for 1H of 2011 over 2010. However, much of that was due to rising gas prices. Retail sales barely budged in the just released numbers for June, and some analysts have now pushed down their estimates for Q3.
Top Supply Chain Stories
Clearly the top story for 2011 thus far was the devastating earthquake and tsunami in Japan March 11. The event showed that even in these days of hyper-supply chain risk sensitivity, it turns out there are many of them lurking out there that companies may not realize. Apple, for example, developed a huge backlog for iPads because of shortages of some needed components coming out of Japan. It turned out there where many such vulnerabilities, especially in electronics and a few little know chemical products that represented tiny but essential parts of many recipes and caused production slowdowns and rising prices in many product markets. Another lesson to absorb in our on-going supply chain risk management education.
The second top story was the rapid rise in global commodity prices, echoing the story was saw in the first half of 2008 – and which was followed by the economic crash then. Prices for West Texas Intermediate started the year at about $88.00 per barrel, rising continuously in the next few months to a peak of around $113 by late April. Diesel prices naturally rose with it. WTI prices have now pulled back to about $95.00, up about 10% on the year.
The prices of many other commodities also rose sharply, leading to global concerns about “food inflation,” and causing many US companies to reduce earnings estimates based on rising input costs.
Other supply chain news worth noting:
• The US EPA, in the absence of any climate change legislation, started issuing its own regulations for greenhouse gas emissions, under a controversial authority it gained from a Supreme Court decision several years ago. The first rules are not too burdensome, but have left some concerned about how far this will go amidst “separation of powers” arguments.
• In other government-related news, the National Labor Relations Board caused quite a stir by: (1) suing Boeing over its plans to open a nearly complete airplane factory in South Carolina over unionization issues, saying the company broke the law by opening the factory in retaliation for strikes in Seattle, the first ever such move; (2) proposing changes in the process from the time a unionization drive begins until the voting, which many believe will favor the union activity.
• Proposed changes in hours of service (HOS) rules in late 2010 led to a number of hearings and other matters before the Federal Motor Carrier Safety Administration, with much evidence showing the changes would have little safety benefit, and the FMSCA itself saying the move was mostly driven by “driver health issues.” No final decision yet, but it could come any day, and we believe the HOS will change.
• There was much discussion about whether rising wages in China would soon reach a tipping point and cause the US to become very competitive if not even advantaged with China within a few years. Studies from The Boston Consulting Group and Accenture both reached similar conclusions on this issue, predicting a rebound in US manufacturing and giving companies something to think about when making network plans.
• There was much genuine excitement and some of the usual hype over item-level RFID in apparel retail as the year started, coming off the announcements of WalMart and others in 2010, but data has showed activity slowing by mid-year, for reasons that are not clear.
• In February, Maersk announced it was pushing the envelope again by ordering several new 18,000-TEU megaships, with delivery of the first in 2013.
• In what could presage future action, a GAO report tells Congress freight carriers, especially truckers, are not paying their fair share of full transportation costs, notably “social costs” from pollution and congestion.
• Seeing its same store sales slipping, in April WalMart announced it is reversing course on SKU reduction and bringing 8500 previously cut items back to its shelves.
• The battle over efforts in California to basically eliminate independent drayage drivers continued, with the Port of LA winning a legal battle in May that would allow the new regulations to be implemented, defeating (for now) the ATA lawsuit. But the battle isn’t over, in what could ultimately have big implications across the US by bringing back local regulation of the freight transport industry. Stay tuned.
• The Annual State of Logistics report finds logistics costs in 2010 rose 10.4% to 8.3% of GDP, a reversal of direction from 2010 but still well below the 9.9% seen in 2007.
• Supply chain pioneer and thought leader Dr. Don Bowersox of Michigan State, one of the most important men in the history of supply chains, dies at age 79.
That’s our 1H 2011 wrap-up – what did I miss?
Any reaction to our 1H 2011 summary? Did we miss any other important stories?
Dan Gilmore
www.scdigest.com
The Missing Pieces
It is often said that reform moves slowly and laws reflect community
values and consensus. While this is true, the draft Model Work Health
and Safety Regulations largely reflect the community values of the
early to mid-1970s, not those of the 21st century. So what current
thinking is missing from the retro model WHS Regulations?
2011Missingpeaces
A greener supply chain starts at the dock
More and more companies are becoming aware of the need for a greener supply chain. A recent Material Handling Institute of America survey of material handling and logistics management found that 79 percent of facilities have instituted or are planning to institute sustainability goals for their operations….
