Fit for Purpose?

A lot of EHS and Sustainability leaders are quietly questioning their management systems. I’m hearing comments like: “We have a great EHS (or Sustainability) management system.  Don’t get me wrong. It’s really been effective and has great support.  We certainly don’t want to go backward. BUT, maybe, if we could get a fresh look…”

Why are EHS/S leaders questioning their systems? Sometimes corporate events (the “five T’s”) drive a clear need to question what you have:

• Transitions: You’re new in your job with both an expectation that you’ll change things and a short honeymoon period in which to do that.  Or a transition took place above you, and your new boss brought in their expectations from their prior company.
• Transactions: Your company just got spun off from the “mother ship” and you don’t really have any systems (or even staff).  Perhaps you merged with another company and two great but different systems have to be reconciled.
• Transgressions: Something went wrong, leading to NOVs or customer concerns or bad press. That creates a need to do something different, or at least look like you are. (Not surprisingly, transgressions often lead to transitions.)
• Transformations: Management consultants got paid three times your annual budget to play 52 pick-up with your company, and you have to figure out how to live with the results.
• Transparency: Something – going public, increased GRI reporting, a transgression, or simply growth – is opening your company up to more public visibility, and you have to be prepared.

Sometimes the drivers emerge more gradually. Implementation of your management system may have slowed down due to initiative fatigue from too many competing initiatives and systems.  With experience, you may be seeing progress – but it seems to be too slow or too costly for the business. Or even success may be the concern: effective EHS/S systems can lead to management complacency, where business leaders think the work is now done and they can check the box and move on.

Regardless of the driver, the underlying reality is often the same: the management system is no longer “fit for purpose.” The system isn’t necessarily flawed; the target moved. Some recent examples I’ve seen include:

• The management system was designed for a company that was 90% manufacturing and 10% service, with most of the risks inside the factory fence.  Now the company gets 50% or more of its revenue and most of its growth from the service side– with risks out on customer sites, where your control is lower and the consequences higher.
• Due to business changes, operations and exposure have shifted from “intensive” (e.g. a refinery with every risk known to man, in a tightly managed facility) to “extensive”  (e.g. pipelines, terminals, distribution centers or retail outlets strung out over thousands of miles).  In the extensive situation, each site may have less risk individually but has even less management oversight and unique costs, creating large but very different aggregate risk.
• Risks increasingly are created by the business decisions to pursue particular kinds of work or work in particular locations, but the management system still focuses on how the work is performed on-site, not on how the work is selected, bid, reviewed or prepared.
• The company has shifted radically from being centralized to decentralized, or vice-versa – and the management system may need to adjust either to match that shift or to compensate for it.
• Or simply the company has changed dramatically in size and shape – doubled, cut in half, or changed from mostly US and Europe to mostly emerging markets.

Some companies under-respond, tinkering around the edges and hoping they can muddle through. Some focus just on the immediate driver and try to bolt on a fix. Others over-react, junking their system and looking for a magic solution they can cut-and-paste from another company.

EHS/S leaders have found the more effective, practical strategy is to take a fresh look at the management system’s purpose, and see how to ensure that the system is fit for that purpose.  This involves asking a few key questions – and they don’t start with EHS or Sustainability:

1. What is the business you need to support – now and going forward, not in the past?
2. What is that business’ strategy for success – growth, geography, differentiation, branding, repositioning?
3. What does that business need from EHS/S performance to support that business strategy?
4. What systems do you need to deliver that performance?
5. What’s already working that you can ruthlessly leverage, and what needs to be altered or built?

That’s how those leaders have refocused their management systems to be fit-for-purpose.

[Scott Nadler is a Senior Partner at ERM.  To share this post, see additional posts on Scott’s blog or subscribe please go to snadler.com. Opinions on this site are solely those of Scott Nadler and do not necessarily represent views of those quoted or cited, ERM, its partners or clients.]