30 Point Checklist for Preventing Business Disasters
June 2010 by Dr John Sullivan on www.ere.net
every aspect of your business is the result of your people and their performance.
BIR Solutions Editor’s Note: We know that many businesses manage stock, debtors, working capital, machinery and other ‘assets’ to ensure they achieve the maximum productivity. But do you manage your people with the same statistical due diligence? Your people are by far your largest cost and they are also the largest influence on your revenue, your sustainable growth as well as the incurrence of your other costs – in fact every aspect of your business is the result of your people and their performance.
This article is a good summary of all the relevant statistical information which, when looked at in trends over time, can indicate not just ‘policy failure’ as in the case of BP, but a myriad of problems which will adversely impact your business. You might feel far removed from the current oil disaster taking place in the Gulf of Mexico because your firm is not involved in oil drilling or sophisticated mechanical operations. However, assuming that there are not important lessons to be learned from BP s handling of the issue would be shortsighted. Any organization experiencing a critical incident needs to look beyond equipment failures and natural disturbances to determine if human factors or people-management practices were an underlying or contributing cause. Apart from establishing accountability, investigations play a more strategic role in helping identify indicators of impending disaster that could serve as a warning moving forward.
If people management practices play a role in creating situations whereby a disaster is more likely, then it stands to reason that people management metrics (long collected, rarely leveraged) could provide vital insight into disaster risk.
Put more simply, HR functions have a strategic responsibility to determine if measures of overtime, absenteeism, temporary labor use, training hours attended, engagement, etc., can be used to predict potential business problems.
Do People-Management Factors Cause Failures?
In recent years, numerous scandals and disasters have demonstrated the far-reaching impact of corporate policy, and more importantly corporate practice. While firms like Enron, Bear Stearns, and systems best practice icon Toyota had well-documented processes, policies, and procedures, they also all engaged in management practices that led people to make bad decisions that ultimately cost the organizations billions.
Given the spotlight on bad management, it is somewhat disturbing that so few HR leaders are acknowledging their role and stepping forward with solutions to help predict and prevent disasters. Yes, most HR leaders react quickly to assist when disasters occur, but rarely if ever do they step forward to suggest that management systems may have played a major role in causing the disaster, and accept responsibility. Even fewer HR leaders attempt to proactively predict upcoming disasters.
If you were the new general manager of an NBA franchise and were presented with a set of people-metrics that revealed that your average team member is 5 9 , 40% of starters are on injured reserve, team salaries are the lowest in the league, and that scoring attempts per game result in success less than 9% of the time, would you really be surprised that the team lost every game? Would it be news to you that unless significant talent-management changes were made, that you would continue to lose?
While the investigation into the BP disaster continues on, like other recent disasters, it s already clear that human factors played a major contributing role. Employees surviving admit damaging the blowout preventer prior to the incident and indicate that management routinely dismissed warnings and documented procedures to hasten making the well productive. A one-time incident BP could blame on a bad hire, but BP s safety track record is one of the worst in the industry, indicating that a culture (established through management practice) of tolerance for sidestepping is present.
Failure Prediction Checklist
With the list of corporate scandals and disasters growing, it is becoming clear that people-management plays a major role in crafting situations that allow disasters to occur. What follows is a long list of people-management factors that, when modeled, can serve as predictive indicators. Not all factors will contribute to critical incidents in every industry, so investigate the linkage in your own organization and devise an appropriate set of warnings.
Short-Term Indicators (Weekly/Monthly Monitoring)
Longer-Term Indicators (Quarterly/Annual Monitoring)
Review past major incidents in your own organization to determine which factors are indicative of increased risk of incident to come. Rank and weight each, then set a warning threshold based on safe operations. Be conservative as too many warnings are better than no warnings.
While simple analysis and a checklist are a decent start at being prepared, much more robust systems are needed that can analyze thousands of pieces of data in real time to determine where risks exist. The practice of analyzing risk isn t new; many corporations already have a risk management function, but the focus of risk assessment related to people analytics is relatively new and rare. Risk modeling involves gathering massive volumes of data and applying sophisticated statistical models, the latter activity being one that few in HR are good at. As Dan Hilbert, founder of OrcaEyes and a pioneer in the space of risk modeling related to workforce factors, can attest, few in HR get it. When demoing his suite of business intelligence solutions, he often finds that while finance and operations professionals get it immediately, many in HR are overwhelmed and dismissive. The demand for robust workforce risk modeling is most certainly present in organizations, but the interest to fill that demand isn t coming from HR.
All the things that they told us could never happen, happened.
This was the bottom line observation of Mike Williams, the chief electronics technician who was on board the ill-fated Deepwater Horizon drilling rig at the time of the explosion. Take heed of his observation and develop a process to more accurately predict upcoming problems in your organization. Start by realizing that there are precursors or early warning signs to most problems. The key is to develop a process for identifying these precursors and using them to trigger action early enough to prevent minor problems from becoming major problems. Finally develop a checklist of these factors and periodically use the checklist to identify potential problem areas.
Note: What additional people-management factors could serve as precursors and thus should be added to the checklist? Add yours using the comments function.