Based on years of industry experience, E.Vironment provides this benchmark of leading-edge thinking related to driving performance improvement through specific and direct performance management practices.
An effective Environmental, Health & Safety (EHS) Performance Management Process drives optimum performance by aligning organizations to execute work according to established EHS strategy. Companies with successful Performance Management Processes consistently communicate their EHS strategies. They motivate their workforces to focus on each element needed to improve EHS performance and use metrics to measure the processes essential to enhanced EHS functionality – including “outcome” (lagging) as well as “in-process” (leading) indicators.
If your EHS management system is the car you’ve built to take you to your chosen destination (improved and systematic performance), the Performance Management Process is its engine. This process must meet your company’s specific needs. Just as you can’t use a motorcycle engine to power your SUV, no one process will fit every organization.
A Performance Management Process that incorporates both leading metrics and lagging metrics is the most evolved method of EHS management and delivers the highest-value impact. Effective implementation of a Performance Management Process strengthens your overall control of EHS issues. Yet, benchmarking shows few companies have successfully adopted these fully evolved processes. Benchmarking also reveals the four basic levels at which companies are currently operating. They are:
- Reactionary companies. These companies simply respond to events as they happen. They lack a formal EHS management system and they spend little on prevention efforts to drive perfomance improvement. The major EHS cost components are due to failure and loss "incidents" – always unpredictable and often high.
- Compliance-oriented companies. These spend somewhat more on prevention and quite a bit more on audits and assessments. Their management system efforts focus on meeting the minimum requirements of compliance and often exclude other value-adding components. EHS failure costs drop, but normally less than expected. Overall EHS performance and costs may change slightly, if at all.
- Companies with EHS management systems. These fare better. They spend quite a bit on EHS prevention and audits, and their failure costs drop accordingly. Most of these companies, however, are still disappointed with their overall EHS performance, including the total cost of EHS.
- Companies with integrated EHS management systems that incorporate comprehensive Performance Management Processes with leading performance metrics. These companies are most successful in driving long-term performance improvement. EHS prevention costs and audit costs can be reduced as prevention becomes part of the normal way of doing business. For these companies, failure costs plummet because activities that might lead to failure no longer take place. Overall EHS performance improves significantly, meeting the expectations of management, shareholders, the community and environmental watchdogs.
There are three basic components of an effective Performance Management Process. They are:
- Development of a strategy for improving EHS performance. This strategy should include the deployment of initiatives that directly affect performance outcomes. The strategy should also define a “cause-and-effect” relationship between the initiatives and desired results.
- Development of metrics to measure the processes or initiatives.
- Using the metrics to successfully manage the processes or initiatives and confirm they have the required effect on performance.
Yogi Berra once remarked, “You’ve got to be very careful if you don’t know where you are going because you might not get there.”
Bottom line: you can’t control events just by measuring results. To arrive at your desired destination, you must always look ahead – recognizing where you are and where you want to go.
Outcome (lagging) metrics are frequently linked to bad news. Besides being depressing, such indicators may not even be accurate – there is a human tendency to withhold bad news. Certainly, lagging metrics should be tracked, because they are generally the outcomes you are trying to achieve: fewer and less severe injuries, fewer environmental releases, etc. But EHS outcomes are difficult to control.
To better manage the processes that improve performance, you must link cause-and-effect strategies to your leading – or “in-process” – performance metrics. Not only do leading metrics help you manage processes as they take place, they also confirm that the systems you have implemented are meeting your desired performance goals.
The key point is: every EHS performance improvement strategy should be written as a cause-and-effect relationship and implemented with performance metrics that track progress. Such Performance Management Processes serve two purposes:
- They communicate and align the organization to your company-specific EHS goals.
- When the metrics are communicated effectively, all employees know where the company is going and how they can support the strategy.
“If you can’t measure it, you can’t manage it” says quality guru Edward Deming. E.Vironment likes to fine-tune his model by saying: “If you can’t measure the process while it is happening, you can’t manage it.” This concept is fundamental to a successful Performance Management Process.
Companies with strong EHS Performance Management Processes use metrics to track the progress of systems and work practices designed to achieve their EHS objectives. These companies know when you control “the process,” the outcomes take care of themselves.
Creating the appropriate leading and lagging metrics to drive EHS performance improvement is not as easy as it sounds. If the metric is not aligned with the desired outcome or behavior, you may achieve the wrong result. For metrics to be effective, they must measure the processes being implemented as well as the outcomes of related business activities.
To ensure usefulness, metrics should be precise, accurate, realistic and difficult to manipulate. They must provide practical data for making decisions about managing the various business processes. EHS metrics should also be consistent with other essential business and operating metrics and linked to individual performance. Metrics must communicate the strategy the company has developed to improve EHS performance and be delivered through the overall EHS management system.
Figure 1 graphically demonstrates the relationship between leading and lagging metrics. This diagram shows the interdependence of Performance Management Processes with the overall company EHS management system. Business systems, operating practices and work performed are precursors to EHS performance outcomes. To control the outcome, you must manage all the interdependent systems and processes that control these precursors. Figure 1 also offers examples of commonly used measures for both leading and lagging metrics.
Each metric should be an integral part of the processes that support your strategy for improving EHS performance. Since it typically takes 12 to 18 months to implement a new strategy, your metrics should change as implementation proceeds and the processes mature. Long term, a typical EHS-related process will mature to the point that specific leading metrics might be reduced to just one or two key metrics that can be used to monitor ongoing process performance improvement.
Virtually every organization has a management-by-objectives (MBO) process, yet few successfully tie their EHS goals and objectives into this process. Instead, the Human Resources department usually manages MBO objectives with financial and operating goals and – perhaps – a few injury or incident outcome metrics.
There must be a rock-solid link between the MBO process and the EHS goals and objectives of the company. In addition, EHS performance should be a significant part of employee compensation. This will ensure that every employee is aligned with the company’s EHS goals and strategies and is taking the actions necessary to achieve them. Building such a link is only possible if leading EHS performance metrics are in use and tied to other key aspects of the EHS management system.
Monitoring performance is key to measuring EHS improvement. It’s not unusual for companies to have some metrics in place, but they often fall short when using these metrics to manage their improvement strategies. It is critical to institute a comprehensive performance metric tracking process to confirm the strategies and improvement processes are functioning properly, and that responsible individuals are held accountable for their success. Industry benchmarking also reveals that monthly performance review and accountability meetings provide the best opportunity for managing EHS performance.
For example, supervisors get together once a month with their managers to discuss performance metrics and trends. Specific performance objectives will be assessed, and supervisors will be held accountable. Supervisors who have failed to meet performance objectives must be prepared to present root-cause analyses and corrective action plans to get the processes back on track. These corrective action plans will also be monitored to verify closure.
Department managers then meet with their bosses and engage in a similar process of reporting and discussing performance metrics. This same model cascades up the organization all the way to the top executives.
This MBO process is the “fuel” that drives the engine of the Performance Management Process, since performance review meetings where individuals are held accountable are conducted at every level of the organization.
Done correctly, a Performance Management Process can do much more than simply improve the EHS numbers. A properly designed EHS Performance Management Process, as a critical component of the overall EHS management system, can improve morale, reduce EHS costs and enhance productivity. It can also significantly enhance business and operating performance by reducing production costs, improving company image with stakeholders and the community, and making your company a more desirable place to work.
About E.Vironment, LLC
An experienced management systems consultant, E.Vironment is your partner in the design, development and assessment of EHS and Performance Management Systems. More importantly, E.Vironment leverages our collective brainpower and all of our experience to help guide you to the successful implementation of your business and operating systems.