Putting Performance Measurement Tools to Work at Maple Leaf Foods

Transcription

1 Putting Performance Measurement Tools to Work at Maple Leaf Foods Robert Frank, CSP, CPEA Director, Safety & Risk Management Maple Leaf Frozen Bakery Des Plaines, IL Andy Wilmer Manager, EHS Maple Leaf Frozen Bakery Roanoke, Virginia Maple Leaf Foods is a leading consumer packaged food company headquartered in Toronto with operations located across Canada, the United States, United Kingdom, Asia and Mexico. Canadian national brands include Maple Leaf, Schneiders and Dempsters. The organization employs approximately 21,000 people and is comprised of 95 manufacturing facilities, the majority of which are the result of acquisitions occurring in the late 1990 s and early 2000 s. During the early 2000 s, the organization had, and was continuing to experience significant loss and financial cost as a result of work-related injuries and illnesses. In 1997, Lost Time Injury Frequency (LTIF) was chosen as the primary metric to measure safety performance. An appropriate choice, at the time, given the organization s LTIF was 7.71 as compared to the blended industry average of In 2008 the standard for measuring safety performance was expanded to Total Reportable Frequency, or TRIR as commonly known in the United States. LTIF can be influenced by factors other than prevention activities, primarily aggressive claims management, return-to-work programs and legislative differences in the Canadian provinces and US states where the company operated. Total Reportable frequency was thought to be a better measure of safety performance as it measured total employees requiring medical treatment for occupational injuries and illnesses. The author needs to point out to readers the differences in Canadian and U.S. reporting regulations. In Canada, a work-related injury that requires health care treatment is classified as a medical aid, somewhat akin to the U.S. recordable injury. Per Ontario Workplace Safety and Insurance Board (WSIB) requirements, employers must report a work related accident or illness within three days of learning that the worker required health care and/or was absent from regular work, earned less than regular pay for regular work, or required modified work at less than regular pay. In the author s opinion, there is significant reporting differences in what is considered first aid treatment in the United Sates versus first aid treatment in Canada. As most readers attending this conference are aware, the first aid treatment definition per U.S. OSHA recordkeeping requirements is fairly well defined. In Canada, and specifically Ontario which is the benchmark adopted by Maple Leaf Foods as the basis for their safety metrics, the WSIB lists some examples of first aid, but includes the clause not limited to, leaving minor incidents to varying degrees of interpretation. Consequently the Canadian medical-aid definition is much broader than the U.S. recordable definition. Maple Leaf Foods achieved success using LTIF as the primary safety performance metric. The LTIF reportable ratio (company performance divided by industry standard) was 0.61 at the conclusion of 2008, or approximately 40% better than industry average. However the reportable ratio for Total Reportable Frequency was 1.14, or approximately 14% above industry average. Achieving a ratio of less than 1.00 would require a greater focus on prevention efforts as opposed to claim management, and perhaps a different way of measuring safety performance and thereby motivating prevention-oriented behaviors. One of the primary behavior-driven motivators of improving safety performance in the line organization is the company s Rewards For Excellence (RFE) program. This bonus program is the primary short-term cash based incentive program which is designed to provide opportunities for additional, variable pay based on individual and company performance and other commitments made to the Board of Directors.

2 The program was established to reward and recognize eligible employees who have contributed to company financial performance and who have made significant individual contributions to the bottom line. Relative to safety performance, the RFE component has typically been the LTIF, and more recently, the Total Reportable Frequency metric. The question posed -- will use of these outcome-oriented measures (lagging indicators) continue to drive and sustain performance improvement, or should more pro-active leading measures be considered? What tools could be utilized to take the organization to bestin-class safety performance? Lagging vs Leading Safety Metrics Much has been written and presented on leading vs. lagging metrics over the past 15 years. The distinction between leading and lagging indicators may not be readily evident. Some safety scientists and practitioners suggest that the before and after metrics are really more of a continuum rather than two separate entities. Others (Hale, 2009) suggest that the distinction between leading and lagging is not that important. If available to the safety professional, many practitioners advocate incorporation of financial metrics such as workers compensation costs, overall cost-of-risk (fixed plus loss costs), insurance premium dollars, etc. should be included into the safety performance equation. What We Did at Maple Leaf Foods Year One Many readers have heard of and/or are familiar with the Balanced Scorecard originated by Drs. Robert Kaplan (Harvard Business School) and David Norton in the early 1990 s. It was developed as a performance measurement framework that added strategic non-financial performance measures to traditional financial metrics to give managers and executives a more 'balanced' view of organizational performance. Within the Frozen Bakery Group of Maple Leaf Foods, safety performance was traditionally measured and evaluated using the aforementioned LTIF and TRIR metrics. The annual expectation was to achieve a 10% reduction of these measures. The accountability for the expected reduction was formulated into participants RFE. As noted above, low-hanging fruit ( high rates ) paved the way toward achieving full and stretch payouts during the early years (Exhibit 1). Maple Leaf Safety Performance TRIR Exhibit 1 1 A fairly simplistic safety balanced scorecard concept was presented to the company s Operations Group for the 2007 calendar year. The scorecard contained three measures: two trailing (medical aid rate, lost time accident rate) + one leading measure the supervisor safety scorecard. The two trailing indicators accounted for 66% of the total score, the leading metric the remaining 34% (Exhibit 2).

3 2007 SAFETY BALANCED SCORECARD Measures Trailing metrics Medical Aid Rate Lost Time Accident Rate Leading metric (66%) (34%) Supv. Safety Scorecard Exhibit 2 The supervisor safety scorecard is an accountability tool the company uses to monitor and measure activities that line supervisors are expected to complete on a daily, weekly or monthly basis, activity dependent. Twenty activities are monitored and measured on a monthly basis using a simple excel spreadsheet. The activities fall under the broad elements of: Inspection & Hazard Management, Tasks, Incident Reporting & Investigation, Safety Committees, Safety Promotion and Communication. Examples of these activities include: Daily shift safety audits Safety crew talks Contractor observations Safety committee action items tracked through closure Near miss reporting and investigation Fall protection observations Exhibit 3 below outlines a partial score sheet. Up to 5 points can be achieved per month for each activity. There is opportunity for the facility to achieve stretch goals via bonus points available through a wildcard cafeteria list. For example, under the Task element, bonus points can be obtained for reviewing and approving existing job safety analyses (JSA s), standard operating procedures (SOP s) and similar safety related documents. Exhibit 3:

4 As Dan Peterson (1996) details in his text, Safety By Objectives, a key towards achieving superior safety performance is that each supervisor performs daily tasks to prevent accidents. The number of activities that can be performed are nearly limitless, but should be aligned with the operational needs of the business, risks and exposures. Peterson suggests that these supervisory activities fall into four broad categories: 1. Things a supervisor should do to identify accident causes. 2. Things a supervisor should do to identify and remove or control hazards. 3. Things a supervisor should do to coach his or her people to improve. 4. Things a supervisor should do to provide a motivational environment for his or her people. What We Did at Maple Leaf Foods Years Two thru Four 2007 was the first year incorporating the Safety Balanced Scorecard concept. A degree of success was achieved, as evidenced by the 11% decline in total recordable frequency year-over-year. More importantly, line operations were given the opportunity to invest in achieving their success through the supervisor safety scorecard. No longer were their bonus payouts solely dependent on achieving an x% reduction in accident frequency. The Frozen Bakery division also departed from the traditional yearover-year baseline rates to a more actuarially correct model of a three year baseline. As readers well know, accident frequency and severity rates are subject to peaks and valley s. One rarely, if ever, see s a genuine continuous decline (or rise) in rates over a several year period. Normalizing baseline data over a three year period smoothes out the road and fosters achievable goal setting. Five year baselines may be more appropriate for other organizations. In 2008 the Safety Balanced Scorecard was expanded to provide more weighting to upstream indicators. The Safety Business Plan model was introduced as a leading metric into the scorecard. Lagging indicators now accounted for 50% of the total scorecard, leading 50% (Exhibit 4): 2008 SAFETY BALANCED SCORECARD Trailing metrics Leading metrics (50%) (50%) Measures Medical Aid Rate Lost Time Accident Rate Supv. Safety Scorecard Safety Business Plan Exhibit 4 In 2011, the leading indicator portion of the Safety Balanced Scorecard was further expanded to include the results of Maple Leaf s Job Safety Chapter audit, a safety management system type protocol. Exhibit 5:

5 2011 SAFETY BALANCED SCORECARD Measures Trailing metrics Leading metrics (40%) (60%) Total Reportable Freq Rate DART rate (severity) Supv. Safety Scorecard Safety Business Plan Job Safety Chapter Category Weighting Exhibit 5 Note in Exhibit 5 the row titled Category Weighting. This is an important feature of this Balanced Scorecard model as it provides the safety professional with a tool to emphasize or give more weight to those elements that need additional attention. The sum of the category weighting factors cannot exceed 1.00 (or 100%). In this example TRIR (0.20) + DART (0.20) + Supv Scorecard (0.15) + Safety Business Plan (0.25) + Job Safety Chapter (0.20) = If an organization is experiencing difficulties with # of lost days, perhaps the result of an ineffective return-to-work program, the category weighting for the DART measure could be increased to 0.25 or Offsets would have to be taken from the other categories to ensure a final weighting sum of This approach will enable the scorecard gatekeeper to create points of emphasis from year to year as the safety process maturates. The authors advise caution in under- or over-weighting a particular category. It may also be prudent to place caps on certain measures. Past experience has found that some operational managers may become a bit aggressive in the submittal of their annual safety business plans and confuse achievable and realistic goals with mission statements (i.e. our goal for 2012 is no accidents, or no recordables ). Setting a cap will temper aggressive plans that do not come close to fruition. There is no limit on the types of leading (or trailing) indicators one desires to incorporate into this type of balanced scorecard model. However, it is critical that the measures incorporated have relevance to the business and align with strategic and tactical goals. Exhibit 6 below offers another example on the safety balanced scorecard concept: As Process Matures... Increase Transition to Leading Metrics Trailing metrics Leading metrics (30%) (70%) Metrics Category Weighting Total Occ. Work Comp # of Near Safety Closure # of JSA s # of Front Line Leader Accidents Cost/Hr Misses Assessment Rate Reviewed One-on-One s Reported Conducted Exhibit 6 Once it is determined what measures or indicators will be included in the Safety Balanced Scorecard, the gatekeeper of the scorecard (usually the safety professional at local, regional or corporate level) compile and communicate baseline data as well as progress on performance versus plan throughout the year or plan period. Plan or safety goals for the year can be determined at the corporate level and rolled out to the various divisional groups or individual facilities. Another approach, which this author prefers, is to allow

6 the individual sites to establish their own plan or goals. Some oversight and dialogue between corporate safety and the divisional or individual site leaders may be in order to ensure goals determined are mutually acceptable. The term sandbagging comes to mind. Once all sites have submitted their plans, the corporate safety function tabulates numbers received which then in turn determines the corporate goal for the year. On the lagging indicator side of the equation, one will typically see a 7 to 15% goal reduction when all plans are rolled upwards. Perfectly acceptable in most cases, basis where the organization is at relative to safety processes. Exhibit 7 outlines one method for communicating performance versus plan using the Safety Balanced Scorecard with weighting factors. We call it a report card : Exhibit 7: 2011 SAFETY BALANCED SCORECARD Trailing metrics Leading metrics Measures Total Reportable Freq Rate DART rate (severity) Supv. Safety Scorecard Safety Business Plan Job Safety Chapter Category Weighting Baseline ( avg) N/A N/A Plan % 100% Performance % 90% 80 SCORE Determining the Final Score of the Safety Balanced Scorecard is relatively easy to perform and simple to explain. For real number calculations (i.e. rates, scores, etc) simply divide the performance number by the plan number and then multiply the result using the assigned weighting factor. In the example above, total reportable frequency rate is measured as follows: 5.95 (performance) divided by 6.40 (plan) x 0.20 (weighting factor) = One will know with a glance that if performance exceeds plan, the resulting score will be below the assigned weighting factor. For percent calculations (supv safety scorecard, safety business plan) the calculation is reversed (mathematical principles apply). The plan number is divided by the performance number with the resulting number multiplied by the assigned weighting factor. Using the supv safety scorecard example above: 100% (plan) divided by 110% (performance) x 0.15 (weighting factor) = 0.14 Again the 0.14 score makes sense as the operation should benefit from hitting a stretch goal. Once all the individual metrics have been determined, the final score is an easy arithmetic sum of each measure: ( = 1.06). Should a facility achieve 1.00 on their final score, essentially the facility has met plan. The author usually gives a plus/minus of 5 to 7% in making the final determination of whether or not a site has achieved, did not achieve or exceeded plan. Exhibit 8 is an example of a quarterly status update provided to the field:

7 Exhibit 8: Q Site A 0.79 Exceeding Plan Site B 0.88 Exceeding Plan Site C 1.06 Meeting Plan Site D 1.22 Not Meeting Plan Site E 1.03 Meeting Plan Site F 1.33 Not Meeting Plan Site G 0.87 Exceeding Plan Site H 1.05 Meeting Plan Group Avg 1.03 Meeting Plan 1.4 OHS Actual Performance vs Plan Qtr Target Site A Site B Site C Site D Site E Site F Site G Site H Group Avg 1.0 = Meeting Plan >1.0 = Not meeting plan <1.0 = Exceeding Plan Tools we used... Safety Business Plan All plants are required to create and submit an annual Safety Business Plan. The Plan is a mix of Corporate mandates (generally 2 to 3 items) and plant specific activities (generally 2-3 items). The corporate items are required across all facilities while the plant specific items vary from location to location with heavy emphasis given to past cause-of-loss issues. The plant items ideally focus on areas which need improvement or can be used to begin a new program for example launching Behavior Based Safety. Plant management should choose plant specific safety items they wish to tackle in the upcoming year. It should not be left up to the H&S representative to decide. The initiatives need to be achievable, understanding some financial resources may be necessary. The plant should not choose an item at the beginning of the year where there is a risk the financial resources may not be available at the end of the year to complete the task. Once the activities have been chosen and agreed to by corporate, each activity should be assigned an expected completion date. The responsibility of the activity should be assigned to different managers and/or departments. Since the business plan plays a role into the managers bonus payouts, they should be given primary responsibility into ensuring the activities are accomplished. As shown in Exhibit 9 below, each activity must have accompanying action steps. For example, what actions are involved in performing arc flash hazard assessments? Each action step should have an assigned completion date and each step should be assigned to a specific manager. You can see that it is possible that a specific activity may require cross functional engagement and cooperation. As shown, arc

8 flash hazard assessments will in all likelihood require the cooperation of the maintenance department and the health and safety function. The plan is reviewed on a quarterly basis and scored accordingly by the H&S representative. If all action items of a specific activity are completed, then the activity scores 100%. If only half the items have been completed, then the item scores 50%. No activity results in 0%. All six scores are combined and divided by 6, in this example, to achieve an overall Safety Business Plan score. That score is then transferred to the Safety Balanced Scorecard discussed above. Exhibit 9: Job Safety Chapter Audit After several years of development involving six-sigma methodologies, the Maple Leaf Job Safety Chapter was launched in 2009 as another tool to improve safety performance & ensure compliance with all aspects of Canadian, United States and United Kingdom safety regulations. The chapter is designed as an internal safety management system audit tool to assess compliance with regulations and company best practices and build action plans for improvement. Elements The chapter is broken down into nine elements that cover all aspects of the facility environment. All aspects of safety culture can be audited/assessed. Each section carries a weighting from 1 to 10. A section weighted 1 has much lower importance than a section weighted 10. For example, everyone would agree that Lock out/tag out or Fall Protection should carry much higher weighting than Housekeeping audits. The nine elements include: Leadership Training Hazard Management Tasks Accident Reporting & Investigation Emergency Preparedness Communication

9 Occupational Health Engineering Requirements Each section is further broken down into several requirements. In order to achieve maximum scoring on a section, each site is expected to have the following: Standard the policy defining the program exists Process the policy is actually followed Frequency the policy is reviewed, e.g. monthly safety talks occur Roles & Responsibility Responsibility for the element is assigned, there is evidence of active ownership Element Approval & Sign-Off review by upper management demonstrates expected management commitment. Content Accessibility - employees are aware and can explain the elements policy and procedure Records Documentation documents are maintained and periodically reviewed Verification elements of the safety management process are validated to ensure they are being followed. Forms standardized forms utilized (e.g. hot work permits) Management of Change modifications or changes to a program/process is reviewed with relevant documents updated and signed-off Scoring The organization chose to develop a scoring system consisting of five ranges. An age old challenge all safety professionals are faced with is to keep management from focusing on the number and re-focus their mindsets on opportunities presented as a result of the audit. Including this score on the Safety Balanced Scorecard as but one component of the overall equation helps to facilitate this shift in mindsets. Each section is scored using the N platform. A score of 9 means everything is in place and correct. A 3 means everything may be in place but perhaps the process is not being followed consistently 100% of the time. If only the minimums of a section are in place, a 1 may be an appropriate score. A score of N could mean Not Applicable or perhaps not enough information is available to determine a score at time of audit. Six The Edge Six Sigma is Maple Leaf Foods approach for driving continuous improvement and management excellence across its business units. First launched in 2000, Maple Leaf Foods six sigma is owned and championed by the Chief Executive Officer, Michael McCain. Front line employees are encouraged to participate in a company program known as Six Sigma at the Edge which provides an opportunity to bring 6S philosophy, tools and methods to all employees. 6S workgroups typically consists of 6-8 employees with a department or line supervisor managing the group and providing direction. The groups meet daily prior to each shift and review the previous day s operational successes and opportunities. The groups follow a very structured agenda at each meeting. Health & Safety leads off each meeting. The groups are a powerful tool to engage when it comes to pre-shift inspection activities. Since these employees are operating the production lines, they will be the first to recognize an unsafe condition or observe an at-risk behavior that could potentially lead to an injury, property damage or quality issues. Several items are discussed during the H&S portion of the workgroup meetings including: incidents, machine guarding audits, housekeeping audits, general H&S concerns, etc. The workgroup leader notes any H&S issues and notifies the appropriate department head for resolution. Concerns and follow-up

10 actions of the workgroups are chartered and monitored. Exhibit 10 is an example of At The Edge tracking. Exhibit 10 Control Charts Statistical software ( Minitab ) is one tool the safety department uses to determine if safety processes are in a state of statistical control (trend) or not. If the observations or number of incidents are currently under control then the data can be used with confidence to reinforce current activities (i.e. inspections, audits, one-on-one coachings, permit reviews, etc.) When data is not in control (a run of 7 or more points above the mean), further analysis is conducted to determine the source(s) of the variation. Action plans are amended and/or created accordingly to bring the process back into control. Exhibit 11 Control Chart: 1/2007 4/2011

11 Risk Assessments The organization utilizes a number of tools to assess and prioritize worker and food safety risks. A risk characterization matrix is used in the company s HACCP and PD processes. Risk Estimation Grids (Exhibit 12) are used to evaluate severity potential and probability factors of job tasks. Tasks scoring in quadrant 4 (high severity, high probability) rise to the top of the control hierarchy. Risk Assessment Grid Corporate Safety Award Program The organization takes pride in its safety and health performance and rolls out the red carpet for those sites that have achieved significant performance improvement. Safety celebrations and events are sponsored at several levels, most notably the Chairman s Awards. CEO Awards are typically based on number of hours worked that have incurred no lost time accidents. At the divisional level, the Frozen Bakery Group recognizes and celebrates those sites that have successfully achieved their annual safety plan. The Safety Balanced Scorecard metric plays an integral part in determining award recipients. Within the Frozen Business unit, awards are structured per the following: Best Performance and Most Improved Awards 25% lagging indicator (TRIR) 25% accident cost 50% Balanced Scorecard Score MLFB Annual Safety Performance Award Balanced Scorecard of 1.00 or below Meeting majority of site safety action plans $10,000 stipend

12 Prove It! Results Since the incorporation of leading indicators as an additional measure of safety performance, the Frozen Bakery Group has achieved a 55% reduction in the number of work related injuries and illnesses. The organizations total recordable rate has declined 47% and as of January 2011 the business unit s reportable ratio has declined from 1.01 ( industry average ) to 0.70 (30% better than industry average). Exhibit 13 charts the TRIR performance of the group over the past 8 years: Maple Leaf Bakery Safety Performance TRIR Beginning of shift to leading indicators Exhibit 13 In addition to the balanced scorecard initiative, other safety program elements have contributed significantly to the organization s reduced cost-of-risk. Continued post-accident and claim management processes, safety management system audits, special emphasis programs such as ergonomics, machine safeguarding assessments, slip, trip & fall hazard reduction, etc. has resulted in a seven-fold decline in days lost and a 70% decline in DART (Days Away + Restricted + Transferred). Actions implemented as a result of employee safety perception surveys have also played an important role in improving morale and overall safety culture. Safety process improvements have also had a significant impact on the company s bottom line as regards cost-of-risk. Exhibit 14 details the decline the company has had to budget for workers compensation costs in Canada and the U.S. as a result of improved experience. Ancillary risk management items such as letters of credit, required collateral, retention limits, etc. have improved the debit side of the general ledger. Favorable renewal terms have been acquired based on the improved insurability of the risk. Workers Compensation Rates per $100 Payroll Exhibit 14

13 Bibliography a. Hale, A. (2009). Why Safety Performance Indicators? Safety Science, 47, b. Kaplan, R.S. and Norton, D.P. Using the Balanced Scorecard as a Strategic Management System: Building a Scorecard Can Help Managers Link Today s Actions with Tomorrow s Goals. Harvard Business Review, (Jan Feb. 1996), c. Petersen, D. (1996). Safety By Objectives What Gets Measured and rewarded Gets Done, 2 nd Edition. New York, NY: Van Nostrand Reinhold d. Minitab Inc., State College, PA

14 Biography Robert ( Bob ) Frank Bob is a Certified Safety Professional (CSP) with more than 30 years of EHS experience. In his current role Bob serves as the Director of Safety & Risk Management for the Maple Leaf Foods Frozen Bakery business unit. Headquartered in Chicago, Illinois Bob s past experiences includes Director level positions at Kelloggs/Keebler, Boise Cascade/Officemax and several years with a large international property casualty insurance company. Bob has also achieved the CPEA designation and completed his Environmental Health studies at Colorado State University. Andy (Kevin) Wilmer An environmental sciences graduate of Virginia Polytechnic Institute and State University, Andy is the EHS Manager for Maple Leaf Foods USA largest facility located in Roanoke, Virginia. Prior assignments include EHS leadership roles at the flooring products conglomerate Mohawk Industries, and as a senior environmental engineer for the State of Virginia. Andy also serves as the security, workers compensation and return-to-work subject matter expert for his facility.

15 Sources of Information 1. Guidance on the Use of Positive Performance Indicators, November 2005 Australian Government, Dept. of Employment and Workplace Relations Link: 43 page pdf: 150/GuidanceOnUseOfPPIs_2005_PDF.pdf Comments: provides information on what health and safety performance is, for what purposes it is measured, and how PPIs can be used to drive and monitor improvements in the management of health and safety at work. 2. Indicators of Safety Culture Selection abd Utilization of Leading Safety Performance Indicators, March 2010 Swedish Radiation Safety Authority Link: 72 page pdf: Comments: Overview of the selection and effects of leading safety indicators for the nuclear safety domain. 3. Measuring Health & Safety Performance, 2010 Jerome E. Spear, CSP, CIH Link: 6 page pdf 4. Leading Indicators Best Practice Presentation, May 2004 Construction Owners Association of Alberta Link: 5. Indicators of Performance in Safety Management, Date unknown Neil Budworth BSc MSc MRSC Cchem AMIEMgt FIOSH RSP Link: 6. Safety Metrics Tools & Techniques for Measuring Safety Performance, 2003 Author: Christopher Janicak, Ph.D., CSP, ARM is a Professor of Safety and Graduate Program Coordinator at Indiana University of Pennsylvania, Department of Safety Sciences Link: 7. Performance Metrics Leading Indicators Deliver Sustainable Results, July 2009 ASSE Safety 2009, San Antonio. Session 612 Link: 8. Setting Strategic Objectives and Measurement Plans Using the Balanced Scorecard June 2001 ASSE 2001 PDC, Anaheim. Session 611 Link: &soc=ASSE&speAppNameCookie=ONEPETRO 9. Proceedings of ASSE s Measuring Performance for Safety Success Symposium March 29 30, 2007, Costa Mesa, CA 10. ORC Worldwide (now Mercer) Occupational Safety & Health Group Link: dc.com/