Optimizing Safety Through Leading Indicators

In the past, the most common way to measure the safety performance of  a business was to look at “lagging” indicators. The number of incidents  and injuries would be metrics tasked with painting a comprehensive  picture of the EHS performance of an organization, even if they entirely  were based on historic data. Lagging indicators are easy to measure,  but typically offer insight into the outcome of a process only after an  incident has taken place. That means they’re rather tricky to influence.

Let’s think about our oldest of EHS friends: the numbers of incidents  and injuries. They’re useful, sure, but only to measure safety  performance to date. Thus, they’re of extremely limited use when  attempting to improve future performance and prevent further incidents  from taking place.

Leading indicators can provide actionable EHS information that can  help reduce risk and encourage teams to be more proactive in preventing  incidents. You therefore can think of a leading indicator as a form of  predictive  analysis. Predictive data can go one step further than the  “what” and “why” of an incident by giving an indication as to what might  happen next.

Research Into Leading Indicators

We recently worked with several companies on a leading indicator   initiative. Each of these companies is applying a common approach to   collect and analyze data from myriad risk-reduction activities such as   incident investigations, near-miss reports, management system audits,   risk assessments, assurance reviews, behavioral observations,   field-level inspection programs, hazard analysis and many other   processes. A recent analysis of a data set spanning 14 companies showed an average of 58 sources of data totaling millions of records over   several years.

On the surface, each of these organizations simply have been using a common “mechanism” to manage their own unique set of environmental,   health, safety and sustainability risk-reduction processes and   ultimately analyze the resulting data, i.e., the “outcome” (EHSS) data. However, at a deeper level, these companies not only are collecting data  resulting from the outcomes (e.g., incident reports, injury details,  spill quantities, near-miss types, root causes, audit results,  assessment scores, inspection findings, etc.) but also the work practice  behaviors reflecting the organization’s tendencies in executing such  processes, such as the mean times between completion of critical process  steps, rate of leadership involvement in nonmandatory proactive steps,  distribution of employee involvement in proactive activities and more.

With such a vast data set from both the outcomes and the work   practice behaviors, these companies created a unique opportunity not  only for themselves but also for anyone in the industry who is  interested in finding the real leading indicators of performance – those   activities, practices, factors, conditions, etc. – that are practically measurable and are proven to have a mathematical relationship to loss  outcomes.[DD1] 

Drawing Leading Data from Lagging Events

It has become common to find companies that have implemented an  enterprise-wide incident database to collect data resulting from the  outcomes of incidents. However, some companies also are executing  corporate-wide incident management process improvement projects along  with an information system that not only collects incident data, but  also enables/facilitates each major step of the business process.

As depicted in Figure 1 below, applying a risk-reduction solution for  managing incident/near-miss events enables the full event life cycle –  from front-line worker reporting events to leadership involvement and the remediation of action items – of the business process.

Sphera

Figure 1

By comprehensively facilitating the entire risk-reduction cycle   business process, the various levels of the workforce simply are   carrying out the routine incident/near-miss work practice using a   business process automation (BPA) tool. However, the byproduct of   facilitating each major step of all near-misses and incident events on   an integrated software platform is the ability to practically draw   measurements from both the incident/near-miss event outcome data and the  data reflecting the workers’ interaction with each step of those   business processes.

By analyzing the business process data to study the organizational  treatment of these lagging events, leading metrics such as the   percentage of the workforce involved in near-miss reporting, the ratio   of near-miss to high-consequence reports, the rate of leadership  participating in nonmandatory events, consistency of manager response to  key steps, and many other potential Leading Indicators of culture and  leadership can be created.

Through this automation of lagging incident/near-miss business   processes, the data for calculating both lagging outcome metrics and   leading indicators is efficiently generated. The companies executing in this manner are achieving the ironic accomplishment of drawing leading  data values from the occurrence of lagging incident/near-miss events.

Sphera

Figure 2 and Figure 3

Integrating Key Work Steps

Most companies deploy a vast array of different proactive business   processes that fit the risk-reduction cycle pattern, ranging from formal  corporate-level auditing processes to more casual field-level   suggestion box/hazard ID type initiatives. Typically, the data resulting  from the outcomes of such proactive activities is scattered throughout  the organization on pieces of paper, spreadsheets, isolated databases  and other nonintegrated systems, rendering broad measurements highly  impractical.

An enterprise-wide risk-reduction solution enables the integration of  the key work practice steps and data elements across a wide array of   different proactive processes.

Per the previously mentioned average of 58 sources of activities  fitting this pattern, [DD2] roughly 90 percent of those activities are  proactive, assessment-based activities. By facilitating a wide array of  processes on a common BPA tool, the data from both the outcomes of the  activities and the work-practice behaviors is available for trending  across previously segregated processes.

With this approach, common measurements can be drawn from processes, which are routinely viewed as dissimilar. For example, the rate of   employee participation per a behavioral-based safety (BBS) process can  be combined with the rate of participation in other dissimilar processes  such as risk assessments, hazard ID reports, inspections,  self-assessments, walk-through audits and many others to calculate a  comprehensive rate of proactive employee involvement, a key measure of  reporting culture.

In addition, the final major step for all risk reduction cycle   activities entails the process of managing the action items required to install protective controls and ultimately reduce the risk. With   efficient access to action item data from so many different processes,   the leading indicator metrics that can be drawn from action item   execution are broadly applicable and readily measurable as well.

The Key: Buy-in From Operational Management

Gaining the support of top management is in the critical path for   leading indicators to capture their fair share of this KPI landscape. In  a recent workshop conducted with leaders in environment, health, safety  and sustainability (EHSS) from several global operator and service  companies in the energy industry, the overwhelming choice as the  greatest obstacle to executing leading indicators was the propensity of  top leadership to use lagging metrics in annual management performance  objectives and in some cases as key components of manager incentive pay  programs.

In today’s cost-competitive marketplace, budgets already are tight.  Therefore, convincing operational management to allocate the necessary  resources for execution of the programs that support a leading indicator  initiative is met with resistance rooted in skepticism. If you cannot  convincingly demonstrate that investing in such “leading” activities  will result in better EHSS performance, they won’t allocate the  resources to execute such a program. To overcome this obstacle, the most  effective leading indicators must meet the two following criteria:

1. Minimize additional resources required for execution.

2. Provide sufficient proof that executing leading indicators will improve EHSS performance.

Practical, usable, efficiently calculated metrics with a strong value  proposition are required to compel top leadership to give leading   indicators a prominent place on the KPI score cards of operational  management.

The key components of leading indicators, which effectively may rival  the practicality and importance of lagging metrics as KPIs to be  executed on an enterprise scale are:

• Simple, close connectivity to the outcome/results.

• Objectively and reliably measurable.

• Interpreted by different groups in the same way.

• Broadly applicable across company operations.

• Easily and accurately communicated.

Why do Lagging Metrics Still Dominate?

Many companies are tracking and analyzing leading indicators in   isolated areas of their businesses but few are applying leading   indicators to rival the age-old incident rate as the primary KPI for   judging an operation’s EHSS performance. One reason for this dominance   is the practicality of having a near standard in producing a normalized  performance metric, which can deliver an apples-to-apples comparison of  loss rates across the enterprise.

Whether a company uses a calculation similar to the OSHA standard or  prefers the more internationally used denominator of 1 million exposure  hours, the two key components of safety loss rate measurement – the  number of incidents and the quantity of work hours – are much more  broadly applicable and readily measurable, thus rendering this type of  lagging indicator a more efficient and practical alternative.

In addition to the convenience of lagging indicators, how many times  have you heard: “It hasn’t happened here, so it is not a problem”? Given  both this human reactionary tendency and the convenience of lagging  metrics, leading indicators have quite a battle ahead if they are to  gain equal share of the KPI landscape for operations management.

about the authors: Carrie Young is vice  president of Consulting Services at Sphera, and is an expert in  providing environmental and safety performance improvement through the  development of integrated management systems, analytics, organizational  capability, enterprise software and governance. She has been helping   companies with business process transformation and insights for over 20 years. Todd Lunsford is director of Process Improvement  at Sphera, and serves operational excellence project advisor to Sphera  customers, enabling them to make critical decisions using the insights  gained from their business process data. Lunsford leads business process  and usage assessments to advance operational excellence maturity,  drawing upon years of experience leading global deployments of operation  risk solutions.

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