Connecting EHS and Your Board
How do you gain directors’ attention on EHS before the next serious injury or fatality occurs? Our opening keynote offers insights and examples for making it “real” and getting to the issues that matter with your board, even if your organization is already excelling.
The following questions arose from the audience at the 2017 Campbell Institute Symposium. Unable to attend this year? Join us at the 2018 Symposium for more thought provoking discussions on the future of EHS.
Question: Kirstin, for organizations who already have strong board engagement, what would you recommend as the next evolution for them to address catastrophic incidents?
It is great news for EHS professionals, and senior leaders, when their boards are already engaged in safety. This means you are far more likely to be having high quality discussions in the boardroom and less chance of knee-jerk reactions after an incident. The next evolution for board reporting and board conversations in this context is focusing far less on low consequence high frequency incidents that may have happened in the past reporting period, but rather those high consequence incidents that nearly happened. The shift in focus to considering potential risk can create a significant change in the topics of discussion and highlight those areas where greater attention may be required.
Question: What has been the most challenging EHS situation you have encountered as a board member? How did you react? The rest of the board?
A workplace fatality is the most challenging situation for a board to face in the context of workplace health and safety. Regrettably I have had to deal with a number of different workplace fatalities whilst a board member. Once the initial shock and concern for the family and those impacted in the workplace has passed, it is important for the board to calmly but immediately understand the facts and ensure management is taking all steps to mitigate any further harm. The consequences of a workplace fatality can have a lasting impact on an organisation so it is also important to retain the incident as a standing item on the board agenda for future meetings so that the board is aware of the status of any investigation, the lessons learnt and the changes that may need to be made to ensure such an incident never occurs again.
Question: In many companies performing well, it is the management team that makes the difference, not the board. Is your focus on boards realistic and necessary?
Senior leaders (or management) are absolutely essential in driving effective safety leadership. Without their buy-in and support, it is impossible to effect real cultural change. Boards, while not in the organisation day-to-day, still play an important role because they influence what senior leaders focus on. If a CEO is attending board meetings where safety is not discussed or not seen as important to focus upon but rather the key messages from the Board is to drive production and focus on returning profits, that will lead to a very different set of safety leadership behaviours than a board giving the message of safety first. So while for those employees in the business it is the senior leaders who they see and are influenced by, it is the board behind the scenes who need to be ensuring they are also supporting, role modelling and driving safety leadership behaviours in the boardroom.
Question: What would you suggest to balance upper management between lagging and leading given that often lagging gets more attention and leading is relatively new? Should the board be educated on the difference between leading /lagging indicators and the value they represent? Do you feel that it’s possible for proactive or integrated organizations to completely move from lagging to leading indicators and how valuable is it?
There is a great deal of uncertainty in boardrooms about what makes an effective leading indicator and so boards do, generally, need assistance in understanding the difference. As a result of the lack of certainty with regards to lead indicators, there is a much greater focus on lag indicators because they are familiar and certain – they say what has happened and so give a sense of surety in knowing what has happened in the past reporting period. The challenge is that they are not helping to guide the future outcomes in a business and while lead indicators are by no means a guarantee, they do let boards know that training is being done, for example, or preventative measures are being taken. I think EHS professionals play a key role in introducing to their boards different lead indicators to see what will work best in your organisational context. Test them with the board and see which ones are most meaningful for them and then stick with them until you can develop some kind of trend line to give meaning to whether the situation is improving or declining. I don’t expect we will see organisations moving completely to lead indicators, regardless of the maturity of their safety processes or systems, since it is still important to understand what has occurred within a reporting period. But there does need to be a balance, and only looking backwards (and not ahead) is not giving a full picture of safety performance.
Question: Do you believe that companies should publicly report their safety statistics?
Yes, I do believe companies should disclose their safety results. There should be no secrets in safety – everyone benefits from benchmarking and driving improved safety outcomes across and within industries. The challenge is that for many companies that do report their safety performance, it is often not comparable with other companies due to different measures used. This can also be a challenge in comparing a single company’s performance year to year since they often create bespoke measures that may change frequently. As well as disclosing safety statistics, I think it would be beneficial for companies to be disclosing their commitment to safety from their most senior leaders, cultural and behavioural programs they may have in place, the vision for health and safety in that organisation and how safety successes are being recognised.
Question: How does an integrated organization stay that way?
Integrated organisations are those where safety is completely integrated with the operations of the business. Safety is no longer considered a ‘standalone’ issue off to the side of the main operations of the business. Organisations that maintain this level of integration are able to do so by having senior leaders who are incredibly strong safety leaders generally – they understand that safety performance is merely an outcome of overall business excellence. Strong safety results will generally indicate a more productive organisation generally, one with lower levels of absenteeism and higher levels of productivity.
Question: How do you best demonstrate the value to the shareholder in order to drive board interest?
Engaging shareholders in health and safety is a challenging issue. Many shareholder groups now consider Environmental, Social Governance (ESG) in their investment decisions. In other instances, it is instructive to look at the financial outcomes for those organisations where a significant safety incident(s) occurred. Often a social licence to operate is lost, considerable media attention impacts the reputation of the organisation, morale is low and tenders or clients can be lost. Irrespective of that, the moral obligation of keeping those who come into contact with your organisation safe.
Question: Should the CEO provide an annual “Letter of Assurance” to their Board that the organization is fully compliant?
This would of course be a matter for the Board to determine. While it would certainly be reassuring for boards to receive such an assurance, it could also have the effect of giving board members a view that compliance is the only goal and that no further focus needs to be given to safety. Safety leadership of the senior leaders, the safety culture of the organisation, whether there is a vision for safety in place etc. does not form part of any compliance requirements yet is critical for boards to consider.
Question: What does Australia do better in or around Safety than what you have observed in the US?
Australia has a very different legislative regime than the US with a considerable ‘stick’ which makes board members, senior leaders in a business and other managers personally liable for the health and safety of those who come into contact with their businesses. That immediately provides a heightened level of interest in the issue inside boardrooms. However, it has also meant that senior leaders and board members have come to understand that merely seeking compliance with legislation is the bare minimum standard and that there are many other issues such as leadership and culture that will ultimately drive an organisations safety performance.
Question: Is setting up bonuses for safety performance a deterrent for reporting? In the US OSHA would not consider this a positive move from executive levels.
Bonuses for safety performance are problematic since the risk is always that safety incidents will go unreported or be miss-classified. There are some structures I have seen where a fatality, for example, is a threshold issue and so if there is a single fatality, that executive will not get any portion of their bonus. But overall, while the intent is a good one, I think safety needs to be part of the overall shared goals of an organisation rather than directly tied to an individual bonus.
Kirstin Ferguson is a professional company director with experience on a range of boards including publicly listed ASX100 and ASX200 companies, private companies, government owned corporations, advisory boards and not-for-profit boards. During her executive career, Kirstin was the CEO of a global workplace health and safety organization. Kirstin has also held senior executive roles in an international corporate law firm and the earlier part of her career was spent as an Officer in the Royal Australian Air Force.