< Back to Previous Page

Let's Talk Business

By Michael Neason, CMSP

Everyone who makes their living in this industry knows that we cannot just sit back and wait for price increases to create our profits. That thin strip of real estate on your balance sheet that sits just north of "costs" and south of "revenue" is the very reason you keep the gates open. Thus, each employee has a single unifying duty that lies beneath whatever is listed in his/her job description. That duty is to protect that margin and to widen it whenever possible.

Since mining generally can't spawn significant revenue by expanding its markets, gross margin is chiefly gained by making the most of the available opportunities and staying as true as possible to the targeted sales price. Therefore, cost control is paramount in maintaining a profitable business.
Those companies that let the cost line creep upward will face some tough decisions. In the mining industry, the ability to control costs will either make or break a company.

That is where safety comes in. It may not be fashionable is certain circles to talk about safety as a function of an organization's profitability. SH&E professionals are generally more comfortable talking about value than they are talking about costs. However, one must remember that the key to a strong, lasting safety culture is commitment from upper management. In the mining industry, most successful managers understand values, but all managers understand costs.

To successfully communicate with the people who will have the greatest impact on an organization's safety culture, SH&E professionals must be able to speak their language. Our ability to demonstrate how we can fulfill our duty to defend the margin is the difference between being seen as a valuable member of the team rather than as a "necessary evil" of the organization.

When an organization takes the time to review its cost control initiatives, certain simple questions invariably surface: If costs can drive us out of business, how much waste is acceptable? How much production equipment can be torn up? How much down time is okay? How many doctor bills should we expect to pay? How many lost workdays can we afford to schedule for injured employees? How much more in insurance premiums can we afford? How many MSHA citations are we willing to accept? In short, how much are we willing to pay for the privilege of working unsafely?

But Aren't Accidents Uncontrollable?

The typical response to this line of thinking is fundamentally defensive. Operators tend to explain that the reason these events are called accidents is because that is exactly what they are-unplanned and undesirable events that can't be controlled.

As a defense mechanism, operators often adopt a fatalistic approach to managing safety. First, they rightly point out that neither employees nor the operation benefit from an accident. Therefore, it stands to reason that nobody wants to have an accident. More importantly, the operators don't want to see anyone suffer an injury. So, if everyone fundamentally has the best intentions at heart, yet accidents continue to occur, they must be uncontrollable.

As a result, the prevailing approach is to chalk them up to as a cost of doing business. Let M&R absorb the costs of property damage accidents. The capital expenditure on that wrecked truck will just have to sit on the books for a few more years until the depreciation is finally used up. Those dips in productivity due to injured employees may necessitate increasing next year's headcount. Finally, of course, rising insurance premiums will continue to be paid. All just the costs of doing business.

The irony occurs when you look for any other example of fatalistic thinking from these operators. Remember, these are the same people who spend hours scrutinizing drilling and blasting costs, carefully chart overtime, and constantly talk about the cost of fuel, steel and tires. What would drive these successful managers to reach the point where they are willing to concede that accident costs are simply uncontrollable?

Take a Different Approach

Fatalistic interpretations are usually attributable to an individual's frustration over time. To identify the cause of the frustration, one must look at the way these managers successfully control other costs in the operation. Typically, managers encounter recurring safety issues because they can't use the problem-solving techniques that they have built their careers around.

To find out what is different about addressing loss control problems, one must first look for the way all other operational problems are solved. Without digging too deep, a pattern becomes readily obvious.

Every other cost can be easily tracked over time. For every production-related cost, there is a simplified tracking system. A manager can track tons per man-hour and look for changes to see how they correspond to the percentage of overtime. If s/he sees an opportunity, an adjustment can be made to reduce costs.

Even smaller issues such as drilling costs can be quickly evaluated. For example, if the costs per foot have increased, the manager can look into the machine, the operator or the bench to determine the difference. Again, if an opportunity to make a positive adjustment exists, action can be taken to reduce costs.

Successful managers are excellent at reviewing trailing indicators to identify opportunities to maximize profitability by minimizing costs. Safety presents a unique problem because it is difficult to drill back into those trailing indicators to find opportunities. Think about it. Trailing indicators for safety might be injury rates, citations per inspection and insurance costs. What systems led to those costs? What flaws can be found that directly led to those costs? Are there clear opportunities to make lasting adjustments to core systems to prevent future occurrences? Probably not.

In the end, safety is a cultural element of an operation. As such, it lacks the straight-line, tangible components that define production-related costs. This means that managers are not able to effectively make tactile adjustments. An example of a tactile correction can be found in the drilling example. Assume that drilling productivity declines. To address this, a new drill bit might be tested. In doing so, the mine is making a tangible adjustment that affects a change. The manager can now continue to monitor productivity and move on to the next problem. Managers are experts in affecting tactile adjustments to their operations.

However, when they attempt to apply the same problem-solving techniques to cultural issues such as safety, they quickly discover that the data they want to track is lacking. Those trailing indicators are harder to come by and don't offer a true straight-line relationship to the core issues that predicated the losses. As a result, it is somewhat more difficult to monitor a correction using trailing indicators.

The typical mining operation has around 20 employees and works less than 50,000 hours a year. As a result, trailing indicators such as incidence rates don't really work in the short term. For example, using those hours, each accident would equate to a 4.0 in the incidence rate for the year. With such a wide swing, those numbers won't mean much in terms of quickly identifying a trend.

Therefore, for a manager to use the problem-solving skills s/he has developed in business, a new set of indicators that have the ability to highlight deficiencies that lead to losses must be identified and tracked. For these indicators to be effective, they must be proactive. Managers must identify activities that have a beneficial relationship to loss control and find a meaningful way to measure them over time. In essence, if they are looking for a new set of indicators to monitor, it is our job as SH&E professionals to give them those indicators.

Finding the Right Mix of Performance Indicators

These so-called leading indicators are made up of the tangible, measurable and definable activities that serve to foster an operation's safety culture. By quantifying and targeting these positive activities, managers will have a new set of recurring data to track that will demonstrate the organization's loss control initiatives. Suddenly, s/he has a method to track safety without counting negatives such as MSHA violations, damaged property or injuries.
These metrics can be defined as any quantifiable activity targeted as having a positive impact on loss control. Tailgate meetings, safety committee inspections, job safety analysis, random drug screenings, formal audits and task observations are all good examples of measurable items that can be easily tracked and reviewed by management. In essence, a supervisor can follow these indicators the same way s/he tracks everything else. As long as these measures help management readily identify the correlation of the activity to an element of loss control, the system will work.

Trailing indicators are still valid. The only difference is that there is now a formalized process by which the manager can drill back into an issue to look for an opportunity to effect change. Then, as in every other cost, s/he can quantifiably track that adjustment over time.

Let's assume that MSHA has just issued two legitimate citations for defects on mobile equipment that were not noted on the pre-operational inspection. As a result, the manager can drill back into the last few formal audits to see whether the issue was discovered in the past. S/he could also review the safety meeting reports to find the last time pre-shifts were discussed. If a problem is discovered, changes can be identified and the process followed until a comfort level has been established.

This is not rocket science. In fact, one might say it is all just common sense or maybe "we would probably do that anyway." Maybe, but the trick is not just to do the right thing, but to have a system for ensuring that the right things are done all the time.

When you give supervisors the tools they need to manage loss control the same way they manage cost control, it becomes easier for them to be engaged in the safety program. This new sense of control will keep them from becoming fatalistic and will allow them to celebrate the "wins" that come with a growing safety culture. All of this emerges from the development of tools that reflect the problem-solving skills managers typically demonstrate in all other areas of the operation.

Often, miners shy away from cultural development issues for fear that they are too complicated. It is critical to understand that these adjustments are not more complicated; they are just less-tangible than production issues and they require a great deal more reinforcement. Another complicating factor is the absence of the straight-line connection. You might define an area of emphasis, enact a change, reinforce the commitment, and carefully monitor it over time only to learn that it has not had the positive impact anticipated.

Managers who successfully develop strong cultures tend to be both vigilant and steady. They understand that making cultural changes is like steering an air craft carrier. The boat will definitely respond to the rudder, just not quickly. There is no shortcut to long-term success.

In the end, SH&E professionals need to respect the successes that these managers have had in their careers and find ways to engage the skill set with which they are comfortable.

Everyone knows that the key element of a loss control program is a strong commitment from management. Management can't simply hire an SH&E professional and hand the reins over. Management's leadership must be visible and "felt" throughout the organization. Therefore, SH&E professionals must find ways to help managers demonstrate their commitment to the program. If cultural changes aren't comfortable for them, we must find ways to make them comfortable.

No one chose the SH&E profession for the money or the glory. In our role, we should never even attempt to be the hero. To the contrary, we should be looking for ways to make heroes out of everyone around us. No matter how hard-nosed or old school the mine managers you deal with may be, it is your job to find a way to tap into the "champion for safety" that s/he is inside. The surest
way to start is to learn to speak their language-business.

Michael Neason, CMSP, is safety director for Hanson Aggregates Mideast, Louisville, KY. He is Administrator of ASSE's Mining Practice Specialty.