Lagging productivity: What British companies may be missing

Posted on 1 Jul 2019 by The Manufacturer

Jerome Hart and Garrett Forsythe explore the correlation between innovative safety management and operational performance.

Despite a strong economy and the lowest unemployment rate in years, ONS figures show that productivity in the UK remains low and lags behind many other G7 nations.

While the causes are hotly debated, there is no doubt that sluggish productivity has a negative impact on salaries, investment, growth and profitability – and morale.

Beyond low capital investment, an aging infrastructure, a skills shortage and lacking innovation, many commentators also cite poor management, poor leadership and a lack of employee engagement as root causes.

Stock Growth Productivity

Safety and productivity

They may have a point. Companies could be looking at the subject from a fresh, innovative perspective, and examine what tools and approaches they can use to drive productivity.

In our history of working with global companies as operations management consultants, we have repeatedly noticed the correlation between risk management and productivity.

Some of our customers, such as German industrial engineering and steel company ThyssenKrupp, claim to have seen a sustainable increase in productivity of 30% after working to innovate and improve safety management.

Lockheed Martin also reports that a stronger safety culture at its Paducah Plant led to an increase in employee productivity of 24% and cut factory costs by 20%.

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These reports are backed by independent research by the Aberdeen Group when it surveyed more than 175 maintenance organisations.

Best-in-class businesses (the top 20%) were the ones that had a very low recordable injury frequency rate of 0.18, ran at 90% overall equipment effectiveness (OEE), and achieved an operating margin vs. corporate plan of 23% or more.

By comparison, those at the industry average for injury frequency rate (1.01) only saw an operating margin of +4%, and the bottom 30% with a 2.21 injury frequency rate reported an operating margin that was down 4% on the corporate plan.

All the companies that experienced zero injuries were best-in-class across all other metrics as well. Why? And how can companies derive productivity benefits from management systems originally designed to address risk and safety management?

The answer may lie in the fact that the processes and systems put in place to ensure a good safety performance can act as a surrogate in other areas, such as quality, efficiency or output.

The root-cause analysis process for safety, for example, is the same as for productivity issues.

Make it personal

Gallup’s 2017 study State of the Global Workplace found that 85% of employees worldwide are not engaged or are actively disengaged in their job.

ValuingYou-Leadership Culture Employee Enagement Stock Image
85% of employees worldwide are not engaged or are actively disengaged in their job.

They also discovered that business units in the top quartile of their global employee engagement database are 21% more profitable than those in the bottom. In other words, senior leaders need to engage employees to achieve success.

Highly effective safety management systems rely on the introduction and application of KPIs, standards and procedures, just like other management systems. Where safety management systems differ is in their direct effect on employees.

Safety is personal. If, instead of just writing a few well-chosen words in annual reports and mission statements, business leaders can visibly demonstrate commitment to employee safety then that will have a tremendous impact on mindsets and behaviours throughout the organisation and ultimately change company culture.

Morale and purpose are likely to improve. All employees in a company should be empowered to take decisions, raise issues, make recommendations and look at operations with a critical eye.

Engagement in safety gives employees the opportunity to have a voice, to feel enabled to look out for themselves and others, and to derive personal benefit from their actions.

That can lead to greater personal investment in the company and a form of ‘self-leadership’, in which employees take on ownership and accountability for their actions. They become people who follow the rules because they want to, not because they have to.

The spill-over effect is a change in attitude to quality, output and productivity. Systems that are in place to share know-how on safety across multiple sites, to track performance, to discuss ideas, to provide and listen to feedback directly between management and the workforce can also be used to track and address other management issues.

Organisational characteristics that foster ‘interdependence’ – characteristics such as stepping outside your own role to help others, becoming a networking contributor by collaborating and sharing knowledge, developing organisational pride, caring for others and helping them to flourish – can help companies not only reduce risks but also improve productivity.

Problem solving, innovation capabilities and risk mitigation

An updated version of the original DuPont Bradley Curve shows this correlation between safety performance and productivity.

DuPont Bradley Curve: operational performance linked to operational risk management

It pinpoints (see diagram above) the four stages of safety maturity: Reactive, Dependent, Independent, Interdependent.

In 2009, the vice president of global workplace safety at DuPont demonstrated the connection between an organisation’s safety culture strength and its incidence rate.

In his study, interdependence was associated with the highest safety performance. An organisation that has reached culture maturity has all the ingredients of an engaged workforce, including the problem=solving and innovation capabilities to achieve the dual competitive advantage of effective risk mitigation and superior value creation.

If improved safety management has such a positive effect on productivity, does the same apply in reverse? If companies focus on achieving productivity gains, might that not lead to better safety?

Experience has shown that this isn’t the case. Many companies develop innovative technologies or introduce a new culture in order to expand. But when the emphasis is more on processes and systems improvements designed to yield growth and less on mindsets and behaviours, organisations often neglect the consequences of a failure to address risk in a holistic way.

The results can be harmful to both reputation and safety performance, as the recent experience of Amazon, Tesla and Samsung has shown.

Poster Health and Safety Warehouse
Weaker safety performance can also have an immensely negative influence on productivity.

In fact, the weaker safety performance can then also have an immensely negative influence on productivity and lead to the exact opposite of what the company initially set out to achieve with its productivity drive.

Tesla, for example, temporarily had to shut down its facility while Samsung had to pay significant worker compensation claims.

Prevention and cure

If organisations want to improve safety and productivity at the same time, they need to start from a good understanding of the current company culture.

DuPont Sustainable Solutions uses an employee Safety Perception Survey to gain a clear picture of the status quo, to identify silos within the organisation and to evaluate leadership mindsets by seniority level.

We overlay the survey findings with site observations to check perceptions against operational reality. Reliable knowledge of the current company culture challenges allows for the development of the most effective, tailored improvement plan.

This always focuses on safety first but provides an extremely sound basis for improvements in other operational areas, including productivity.

Vision and commitment by senior leaders

For companies to identify the opportunities for better engaging the organisation through an effective and holistic approach to safety, there needs to be a clear leadership vision and commitment.

People do what people see. When there is a clear commitment to safety, and the processes, procedures and leadership practices are in place, improvements to productivity naturally follow.

Worker engagement increases, and benefits result in many different aspects of the business.

In other words, performance in all areas is not just down to systems and processes, but to leaders who show they care, who lead by example and visibly follow the culture they want to promote.

For many companies, a strong safety culture is the enabler that allows them also to continually and sustainably improve productivity.

Case study – safety leads to productivity:

“Early in my career, I was given the opportunity to lead the 50-odd person operations and maintenance team of a high-hazard chemical operation. This was my first real operational leadership role. The unit had a recent history of very serious safety incidents and numerous operational challenges.

“My new supervisor, George, gave me some advice that has stuck with me since that day. He said, ‘Garrett, if you focus on safety and your team’s individuals as your first priority each day, you will have fewer and fewer production issues.’

“From his many years of experience, he knew the link. He mentored me in genuine leadership, root cause investigation techniques, improving the unit’s safety practices and compliance, and gaining the commitments of all workers (with me having to be sure my behaviour modelled and led the way).

“We also worked on predictive and preventive maintenance and improving how the shift teams and maintenance group worked together. Not only did our safety performance improve significantly, and the teams better identified and corrected situations before they could escalate, but we began to break daily, weekly and monthly production records as well. Morale improved too, and the turnover of our workers also dropped.

“Thirty-plus years later, the operation is still running strong, production rates have greatly increased, and the safety culture legacy continues, reinforced by the many leaders that followed me.”

Garrett Forsythe – more than 37 years’ experience in various DuPont business, operational and supply chain leadership roles

Jerome Hart – Market Leader UK, DuPont Sustainable Solutions

Garrett Forsythe – DuPont Sustainable Solutions US Consultant & Principal, JGF Performance Consulting LLC