The Myth of the Magic List
It Takes Work to Develop Meaningful EHS
BY DAVID DOWNS
Not long ago, a colleague asked me, “Do you know of anyone who has a good list of leading indicators for EHS programs?” The question interested me for several reasons. Certainly, EHS managers have a high degree of interest in developing leading (as opposed to lagging) indicators. Our professions have traditionally used what are considered to be lagging indicators to measure our performance: injury rates, waste generation, illness incidence, workers’ compensation costs, and the like. Now, however, top management is challenging us to develop leading indicators based on the idea that we also need predictors of future performance.
Unfortunately, many EHS managers (and, to be fair, many business managers) don’t understand what leading indicators really are. Evidence of this lack of understanding is the common misconception that there is a “magic list” of leading indicators, which would allow us to simply pick a few we think would work best.
INDICATOR VS. OBJECTIVE Given this confusion about leading and lagging indicators, I’ll begin by proposing some definitions we can use going forward. Part of the confusion likely stems from the term “indicator.” Gauging EHS performance isn’t as simple as the indicator metaphor suggests. We can’t just glance at a dashboard to determine whether our projects are trending up or down. For this reason, I prefer the term “objective” and will use it in place of “indicator” throughout this article.
An objective is simply “a statement of a desired state of performance.” Objectives must meet the criteria described by the acronym SMART: specific, measurable, achievable, relevant, and time-bounded.
So what is a “lagging objective”? It is a statement of a desired state of performance that will be achieved at some defined point in the future. For example, if our goal is to achieve a total injury rate of 1.0 by the end of the current fiscal year, this is a lagging objective: we won’t know whether we’ve met that objective until the end of the defined time period.
A “leading objective,” therefore, is a statement of a desired state of performance that will contribute to the achievement of a defined lagging objective. To understand the basis for this definition, we need to reconsider some ideas that were first proposed by Robert Kaplan and David Norton more than 25 years ago. THE BALANCED SCORECARD As professors at the Harvard Business School and business consultants to some of the largest organizations in the United States, Kaplan and Norton recognized that businesses focused too much on top-level financial objectives, to the exclusion of recognizing and measuring the factors that would lead to the accomplishment of those objectives. In other words, business managers were focusing only on lagging business objectives: profitability, growth, margins, and so on. While businesses had highly sophisticated tools for measuring and tracking these lagging objectives, they had almost no processes for even identifying the factors that would predict the outcome of those objectives.
Kaplan and Norton proposed that in addition to the top-level financial objectives, three other perspectives be used to identify and measure leading objectives: customer objectives, business process objectives, and learning/growth objectives. They called this approach to business management the “balanced scorecard.” The balanced scorecard was widely implemented in the 1990s, and it still influences business management today.
In studying these concepts a number of years ago, I realized that this approach to management could be modified to work for EHS objectives. We will always need to maintain and track our key lagging objectives, just as businesses will always need to manage financial objectives. The challenge we face in EHS is defining the “right” top-level EHS objectives—that is, those objectives most directly related to achieving the organization’s business objectives. The steps and tools to identify the best top-level EHS objectives—which are, by definition, lagging objectives—is well documented in the AIHA Value Strategy Manual.
The main difference between the EHS balanced scorecard and the original version is the idea that we have to identify which stakeholders need to be involved in order to achieve our EHS objectives. The definition of “stakeholder” in this model is “any person, organization, or resource that has to be involved in meeting a defined top-level EHS objective.” A simple example demonstrates how this works.
Let’s say we have identified the following site-level EHS objective: “Reduce the incidence of Standard Threshold Shift (STS) to zero within two years.” This is a lagging objective, because we will not know whether we have achieved it until we measure STS incidence at the end of two years. The question is, how do we get there?
First, we identify which stakeholders are needed to achieve this objective. Figure 1 identifies two of the many stakeholders that would need to be involved. The Engineering group will have to achieve the installation of improved noise controls in at least the top 50 percent of noise-generating machines within 18 months. Since the engineering controls won’t be in place for a while, employees will have to demonstrate 100 percent proper use of hearing protection within the next year. A number of other stakeholders could be identified as well, along with objectives they would need to meet.
Second, we determine which processes stakeholders need to develop and implement so their objectives can be met. The Engineering group may need to retain a noise control consultant, assign an engineer to the project, and work with a design/build firm for the noise enclosures. For the employees, we will implement an observation system that will help reinforce the use of hearing protection. Note that these objectives need to be completed earlier in the plan.
Finally, we establish which “learning and growth” objectives need to be met so that the processes can be effectively implemented. Our engineer in charge of the project may need to go to a short course on noise control engineering so that she can communicate with the consultant and the design firm. Employees need to understand the mechanisms of hearing loss and how PPE can help protect their hearing. They may also need training on the observation system and how they will participate in that process. Again, these objectives have to be accomplished even earlier in the process.
As you can see from this example, all levels of the organization now contain objectives that contribute to the accomplishment of the top-level EHS objective. These contributing objectives are our leading objectives. While this example illustrates the process for a simple site-level initiative, the same concepts can be applied to any organizational level, including enterprise-wide risks. TOWARD MEANINGFUL OBJECTIVES Our profession needs to stop seeking a “magic list” and realize that the process of developing meaningful EHS leading objectives is unique for every organization. It requires that we first work to develop the top-level EHS lagging objectives that support the organization’s business objectives. Then, using the EHS balanced scorecard, we can define the stakeholder, process, and learning/growth leading objectives necessary to achieve the top-level objectives. DAVID DOWNS, CIH, CSP, QEP, CPEA, is president of EHS Management Partners, LLC in Excelsior, Minn. He can be reached at (952) 474-4132 or firstname.lastname@example.org.