MEASURING THE VALUE OF AN EMS AND SCORING THE EMS RESULTS August 19, 2004

EHS AS A “COST CENTER” Most organizations see EHS as a cost center These companies are focused only on regulatory compliance Management initiatives can help move EHS into the core business Lean, Six Sigma, Lean Six Sigma Operational Excellence (Baldrige Model)

EHS INTEGRATION Using quality management as a language for all of the programs OHSAS 18001, SA 8000, AA 1000, ISO 9000 Lean, Six Sigma, Operational Excellence Driving improvements through people and programs Scoring the program using the Baldrige Model

SYSTEMS APPROACH Proven method for improving processes Uses employee-driven “bottom up” approach Provides for management oversight Tools common to all the programs mentioned Links to management information systems ERP, MRP, CMMS, Business Results

MRP SYSTEM Assigns a part number to all resource uses Needs to track resources to a work step in the hierarchical process map You need to assign a part number to all wastes, discharges, emissions, spills, etc. Create a computerized way to track resource use and loss in the operation

CMMS SOFTWARE APPLICATION Assigns a work order number for each activity e.g. Obtain air permit, file manifests, keep records, monitor stack, conduct audit, etc. People charge time to work order numbers Work orders assigned to work steps using the activity accounting sheets

ACTION PLAN FORMAT Alternative Selected Action Date: Purpose Project Benefits Action Responsible Person Performance Standard Completion Deadline Resources Needed 1 2 3 4

ACTION PLAN COMPONENTS First action step is to perform a baseline analysis for weight/volume reduction and cost savings Second step should be the alternative at the top of the prioritization listing Next to the last action step is to repeat the baseline analysis to determine quantitative results

COST ACCOUNTING Link a spreadsheet to the resource accounting sheet Link a spreadsheet to the activity accounting sheet Input cost information from MRP and CMMS Create a Cost Accounting Sheet to combine these spreadsheets

EHS COSTS Traditional Accounting Activity-Based Management Manage activity costs Real Options for Intangibles Delphi group look at EHS issues Cost assigned as an option cost Cost discounted for use by accounting

INTERNAL IMPROVEMENT SCORING Scoring the continual improvement of your EMS (ISO 14001) program Influencing the behaviors that will drive change and success in the program Scoring of the results to focus on areas where improvement is necessary

SCORING AND THE BALDRIGE MODEL There are two parts to scoring true performance using the Baldrige model: True Performance Sustainability Results Scores are issued by trained, third-party examiners Scores can be used to measure and trend sustainability progress and any type of facility and aggregated across the enterprise

SCORING TRUE PERFORMANCE The Baldrige criteria document and it’s State of New Mexico counterpart (Green Zia) have more than 100 questions to answer in a 50-page application Currently used in over 60 countries to measure overall performance of the company Program is transparent, copyright-free and continually improved every year

USING THE BALDRIGE MODEL Some organizations apply for awards in established programs - state and federal level Model can be used as a self-assessment tool Factor analysis can be used to create a diagnostic for surveying employees Each method has a “feedback” report to drive continual improvement Each method scores the true performance of the organization

PERFORMANCE CRITERIA Leadership Strategic planning Influence of other interested parties Use of management information and analysis Employee involvement and well-being Process management

USING A DIAGNOSTIC SURVEY Pojasek & Associates has used factor analysis and reduced the number of questions in the performance criteria to 22 Wording of the questions must address sustainability and the culture of the employees Questions are asked to a random number of employees in the organization

USE OF A DIAGNOSTIC Questions delivered to employees either by a web enabled questionnaire or a paper survey form or both Considered less painful than a 50-page application Diagnostic is handled like a 360-degree performance review Questions can be extended to the “other interested parties” with some revisions to the wording

TYPICAL QUESTION Senior leadership personally and visibly demonstrates its commitment to the sustainability program in this organization Agreement: Indicate how strongly you disagree/agree with this statement. o o o o o o o o 1 2 3 4 5 6 7 N/A Disagree Agree

DIAGNOSTIC COMPONENT Employees can explain their scoring with words to be compiled and used in the “feedback” report. Cite some strengths of the senior leaders in this category. List some opportunities for the senior leaders to improve in this category. All responses are confidential and maintained by an independent examiner.

TRUE PERFORMANCE FEEDBACK The facility will receive a true performance score from the third-party examiner Each question will have a standard deviation calculated Written comments will be be consolidated by the third-party examiner and summarized by question Strengths Opportunities to improve

RESULTS SCORED SEPARATELY Improvement results and indicators can be scored by a third-party examiner just as the true performance was scored Results categories include: Environmental Social responsibility Other interested party involvement Financial Other program indicators

FACTORS FOR SCORING RESULTS Is the result or indicator demonstrated to be important to the organization? Link to performance Was the result planned? Was the plan attained? Did the organization trend the result? Can the trend be adequately explained? Did the organization benchmark the result? How did it compare?

SCORING PROCEDURE Examiners use a transparent scoring matrix and methodology found at http://www.quality.nist.gov Examiners file draft feedback report through the lead examiner to a panel of judges Judges determine if a site visit is warranted to confirm the score (for award program)

USING THE SCORES Some organizations have a single true performance score where the results component score is approximately 40% of the total score Some organizations prefer to have two scores – one for true performance and one for results and indicators There are many uses for these scores as a means to track and improve EHS programs

HOW WOULD YOU SCORE?

Contact Information Robert B. Pojasek, Ph. D. P.O. Box 1333 E. Arlington, MA 02474-0071, USA Phone: (781) 641-2422 Fax: (781) 465-6006 e-Mail: rpojasek@sprynet.com Website: www.Pojasek-Associates.com