SAFETY MANAGEMENT 2511BPS ASSIGNMENT BY: ALEX SCHENK (s2802470) ASSIGNMENT QUESTION “Good safety management is more than just a legal and moral requirement. Around the world, there is growing recognition that safety management systems can improve the operating performance and profits of a Company as well as its safety defences. ” ABSTRACT This essay discusses the main aspects of safety management systems and how they are being utilised in various industries around the world.
It begins by defining the main issues of safety and safety management systems, and then discusses the features of a successful safety management system. The legal and moral requirements of safety management are discussed, and then the differing ways in which safety management systems can improve a company’s operating performance and operating profit. A number of case studies are then presented which show that safety management systems are being utilised in different industries around the world, and that they are generating numerous benefits aside from the obvious improvements in safety they are targeting. SAFETY MANAGEMENT AND ITS BENEFITS In many industries around the world, safety management is becoming more and more an integral part of the way business is done. Evidence is building that the implementation of a successful, robust safety management system (SMS) can pay off with numerous benefits to a company’s performance and profitability, as well as providing a safer and more secure environment for workers and the public alike. This essay will define the main issues of safety and safety management, and discuss the main elements of a SMS.
The ways in which a SMS can improve a company’s operating performance and profitability will then be covered, followed by a number of case studies from around the world which show the positive results of the introduction of safety management techniques. Safety management and its application to different industries will be discussed, with a particular emphasis on its application to the aviation industry. Safety is a concept which has many different definitions. To understand the subject, one must have some clear definitions of the important terms.
In the Australian Standards (AS/NZS 4804:2001), safety is defined as: “A state in which the risk of harm (to persons) or damage is limited to an acceptable level” (Bartsch, 2010, p. 548) . According to the International Civil Aviation Organisation (ICAO) Safety Management Manual, safety is “the state in which the risk of harm to persons or property damage is reduced to, and maintained at or below, an acceptable level, through a continuing process of hazard identification and risk management” (p. 2-2).
Safety Management is “the application of business management practices to the management of safety” (International Civil Aviation Organization, 2009, pp. 3-5), specifically using the four management principles of PLANNING, RESOURCING, DIRECTING & CONTROLLING to achieve an acceptable level of safety, as low as reasonably practicable (ALARP). A Safety Management System, then, is “an integrated set of work practices, beliefs and procedures for monitoring & improving the safety “health” of all aspects of a company” (Bartsch, 2010, p. 554). Safety management is a basic legal and moral requirement for employers.
The legal requirement had its origins in Common Law, and is demonstrated in Wilsons & Clyde Coal Co. Ltd v English  AC 57, where the House of Lords determined that employers are required to provide a safe workplace, equipment and systems. This requirement has now been codified in various pieces of legislation in all states and territories of Australia. One of the largest areas of safety management is in Occupational Health & Safety (OHS), and most recently the Safe Work Australia Act 2008 established Safe Work Australia, which replaces several earlier OHS bodies.
One of the purposes of Safe Work Australia was to develop a national policy for OHS and workers’ compensation, to replace the inconsistent legislation of the individual states and territories. Other countries also have legislated OHS requirements, such as the Management of Health and Safety at Work Regulations 1992 in the United Kingdom, which “brought in a new approach to health and safety law, heralding a departure from prescriptive standards of legislation to a more management system-oriented approach by the enforcement agencies” (Stranks, 1994, p. 14).
From an aviation perspective ICAO Annex 6 requires that “From 1 January 2009, States shall require, as part of their safety programme, that an operator (AOC holder) and maintenance organisation (CoA) implement a safety management system acceptable to the State of the Operator” (Bartsch, 2010, p. 554). To comply with this in Australia, the Civil Aviation Safety Authority (CASA) is in the process of establishing Civil Aviation Safety Regulation (CASR) Pt 119 which mandates the 2 introduction of a SMS, and as an interim measure has amended Civil Aviation Order (CAO) 82. to require high capacity airlines to “establish and maintain an appropriate organisation, with a sound and effective management structure that uses a safety management system approved by CASA…” (Civil Aviation Safety Authority, 2011, p. 2). It is therefore quite clear that safety is a substantial and long held legal requirement for employers, and that this requirement has only strengthened in recent years. The moral requirement is a little more difficult to quantify. Safety management is a moral requirement because as a company, we are responsible to many different parties.
We are responsible to our employees to provide a safe working environment, to our customers that our product is safe for their use or purchase and to our suppliers and other stakeholders. We are morally expected to pursue safety. In aviation, it is arguably even more important because of the huge risk to persons and property of aviation accidents and incidents, and their long-ranging effects. We are morally responsible because in a technologically sophisticated field such as aviation, many of the effected people cannot be expected to understand the nature of the risks involved, and they have a legitimate expectation of being kept safe.
Stranks (1994) expresses it this way: “on a purely humanitarian basis, no one wishes to see people killed or injured” (p. 90). From the perspective of the moral responsibility for our employees, he discusses the socalled “socio-humanitarian approach” to health and safety which considers people an essential feature and asset of a business, and “as such, they must be protected” (Stranks, 1994, p. 3). The introduction of an effective SMS has many benefits to the operating performance of a company, aside from the purely financial benefits, which will be discussed later.
Indeed, business management and safety management go hand-in-hand, in that one is good for the other. There is a “real opportunity for a “win-win” outcome throughout the organisation from the implementation of an effective SMS” (Bartsch, 2010, p. 562). From an aviation perspective, the Australian Transport Safety Bureau also has commented on the commonality of business and safety goals: Initiatives aimed at introducing business efficiencies are by no means ontrary to flight safety. Indeed, the systems necessary for good safety mgt and good business mgt share much in common (Australian Transport Safety Bureau, November, 2002, p. 94). Stranks (1994) lists some of the benefits of a safety mgt system as: 1. 2. 3. 4. 5. 6. 7. Improved industrial relations Improved morale and operator performance Reduced labour turnover Reduced absenteeism Reduced error rates Reduced training costs Reduced plant maintenance costs (Stranks, 1994, p. 48) Much of the value of a good SMS comes from the existence of an effective safety culture, and many of the benefits listed above are a direct result of the introduction and promotion of such a culture. An organisational culture can be described as “Who and what we are, what we find important, and how we go about doing things around here” (Rousseau, 1988). A safety culture, then, is an 3 organisational culture which values safety very highly, and indeed places safety considerations at the very heart of all its activities.
A true safety culture is one in which “the value system associated with safety and safe working has to be fully internalised as beliefs, almost to the point of invisibility, and that the entire suite of approaches the organisation uses are safety-based” (Hudson, 2001, p. 21). Reason (1997) describes a safety culture as one which exhibits a number of characteristics, namely: 1. An “informed culture” – one in which management and staff are knowledgeable of the “human, technical, organizational and environmental factors that determine the safety of the system as a whole” 2.
A “reporting culture” – where staff are prepared to willingly report errors and near misses. 3. A “just culture” – where staff are encouraged to report safety issues and incidents without fear of blame or punishment, but where a clear delineation exists between acceptable and non-acceptable behaviour. 4. A “flexible culture” – where an organisation can constantly reinvent itself in the face of changing circumstances, and return to traditional methods when those needs pass. 5.
A “learning culture” – where an organisation learns from its safety information and uses it to make reforms when needed. (Reason, 1997, pp. 195-196) These characteristics of an effective safety culture lead to an environment of trust within an organisation. One of the benefits of this trust is in the amount and quality of communication within a company. Poor communication is often cited as a source of problems within a company, and having a way of addressing these problems is only going to lead to improved company performance.
This “culture of trust” and improved communication leads to many of the benefits cited from Stranks above, such as industrial relations, morale & performance, absenteeism, etc. A true safety culture can also improve a company’s performance by freeing up resources for more productive purposes. Resources which were previously allocated to checking and re-checking basic safety functions and activities (eg. Frequent safety audits), which are now assured through the activities of the SMS, can now be devoted to production activities.
The company can now confidently assume calculated risks to expand the business, or “take (profitable) risks that others dare not run” (Hudson, 2001, p. 29). Other benefits of an effective SMS that are not directly related to profitability referred to by The Civil Aviation Advisory Publication (CAAP) on Safety Management Systems for Regular Public Transport Operations are “safety recognition by the travelling public” & “proof of diligence in the event of legal or regulatory safety investigations” (Civil Aviation Safety Authority, 2009).
Safety recognition and reputation is vital in an industry such as aviation, and any perceived drop in the level of safety would have dramatic ramifications on the ongoing viability of an airline. Even though aviation is widely recognised as one of the safest means of transport in the western (developed) world, a single accident can have enormous consequences in the form of lives lost and property damaged. The events of September 11, 2001 are a startling reminder of the damage aircraft accidents can cause. 4 Reputations, in aviation as in life, are hard won and easily lost.
It only takes a single accident to severely damage an airline’s reputation. The resources that would need to be devoted to restoring an airline’s reputation after an accident would be considerable, and would no doubt impinge on the airline’s ability to direct resources to more profitable pursuits. Proof of diligence would be a distinct advantage when it comes to dealing with regulators and legal bodies. It would reduce the regulatory burden by reducing the time and resources required by the company to address regulators’ queries and complaints.
It would most likely reduce the number of audits they would be subjected to by the regulators, and therefore reduce the paperwork and manhours involved in regulatory compliance. Turning the focus now to company profitability, there are quite a number of ways that good safety management has a direct impact. The most obvious way is by avoiding the costs of accidents and incidents. Bartsch (2010) describes the costs of an accident as the “accident iceberg” because of the potentially huge cost of an accident, much of which may not be initially obvious (p. 62). All accidents & incidents involve some cost to an organisation. These costs can be broken down into Direct costs and Indirect costs. Direct costs are the more obvious and measurable expenses associated with an accident or incident. These are largely made up of insured costs, such as physical damage to equipment and property, and civil and criminal liability claims that arise as a result of the incident. Examples of direct costs are as follows: 1. 2. 3. 4.
Repairs to or replacement of damaged equipment or property; First aid & medical treatment costs for injured staff or public; Legal claims by injured parties settled in or out of court as a result of an accident; & Fines imposed by the courts for breaches by the company. While the majority of these costs can be insured against, the insurance premiums will be somewhat dependant on the claims history and risks involved in the business, and so a higher accident or incident rate will probably translate into higher insurance premiums.
Indirect costs are less obvious, much harder to quantify, can be delayed for some time and quite often exceed the Direct costs. Indirect costs include: 1. Staffing Costs – any staff injured at work and anyone required to assist them will be lost to the organisation for a period of time. These staff will still need to be paid and replacement workers found. Any replacement workers will need extra training and supervision and the staff lost to the organisation may have had special skills which cannot be easily replaced. There will also be costs associated with staffing any investigation into the causes of an accident or incident.
Staff will also need to be allocated to preparing any legal defence and court time, because the company’s interests must be protected. 2. Production Costs – Company output may be affected. In an aviation context, an airline may not be able to carry out scheduled flights for some time if an aircraft has been damaged or destroyed. There will be costs involved in hiring another aircraft and costs to ferry the aircraft in and back out again before and after the hire. There may be a loss of morale among staff which could lead to a drop in production or increase in sick leave. These factors would also affect production levels. 3. Loss of Business – A company may lose business if they are seen as having a questionable safety record and contracts may be jeopardised if a company cannot fulfil contractual obligations. Reputation and goodwill can be the first casualties of an accident. 4. Insurance Costs – An increase in insurance premiums referred to above. 5. Miscellaneous Costs – These could include incidental costs incurred by people involved in an accident, ex-gratia payments to the family of victims, etc. 6. External Costs – These are costs borne by parties other than the organisation itself.
These could be expenses incurred by the State or by persons involved in an accident. These can be quite extensive and varied and range from state funded hospital costs to the costs borne by injured persons and their families. These costs can add up to a significant impost on society. The Bureau of Infrastructure, Transport and Regional Economics (2003) found that “the industry/social cost of aviation accidents in Australia was $114 million made up in large part by the “loss to society of the productive capacity of the victims of aviation accidents” and “family and community loss. (Civil Aviation Safety Authority, 2009, p. 51) As demonstrated above, the impact of accidents and incidents on a company’s profitability can be substantial. A company’s investment in an effective SMS can be a win-win proposition in increasing the safety of workers and the public and increasing the bottom line of the company by avoiding these costs. ADAMUS RESOURCES LIMITED Adamus Resources Limited is an Australian listed company which owns 90% of the Nzema Gold Project in Ghana, West Africa, which is expected to produce 100,000oz of gold per year for at least ten years.
The board has instituted a Risk Management Policy which is the driver for their safety management system, and its purpose is to “both minimise uncertainty and to maximise its business opportunities” (Adamus Resources Limited, 2011). The benefits of this policy are listed as: 1. 2. 3. 4. 5. 6. 7. More effective strategic planning Better cost control Enhancing shareholder value by minimising osses and maximising opportunities Increased knowledge and understanding of exposure to risk A systematic, well-informed and thorough method of decision making Minimised disruptions Better utilisation of resources The Risk Management Policy is published on the group’s website, and the Board of Directors takes responsibility for identifying the risks facing the company, assessing these risks and implementing suitable controls to mitigate these risks.
They state this policy “gives stakeholders confidence to deal with or invest in the business” (Adamus Resources Limited, 2011) The resources industry, like aviation, is a high risk area and it can be seen from the above that a safety or risk management system driven from the highest levels of management and committed to by them, is seen as a vital part of the ongoing viability and profitability of a mining company. 6 STERIS CORPORATION STERIS is a healthcare company based in the USA specialising in infection prevention, decontamination and health science technologies, products and services.
In 2002, following a period of record growth, the company experienced a huge increase in safety issues in many of their locations. In 2004, STERIS implemented its Safety Management System under the title of the WorldClass Safety Excellence (WCSE) program. Senior management were committed to changing the safety culture of the organisation, and they had the belief that “accidents result from unsafe acts or conditions, both of which are preventable” (Du Pont, 2010).
Among a range of activities, the company established safety committees, conducted training for staff up to and including senior management, implemented routine safety observations and published regular safety scorecards. The company’s safety culture was transformed and became part of the orientation of new employees, as well as being reinforced during regular refresher training. The results showed a huge improvement in a number of metrics. ‘Days Away’ cases dropped from 128 in FY2003 to only 14 in FY2009, with associated costs dropping from over US$3million to US$352,000.
The US Occupational Safety and Health Administration (OSHA) recordable incident rate dropped to 1. 29 (against an industry average of 3. 2), and days away dropped from work dropped from 2. 9 to 0. 26 days away (OSHA industry average 1. 12) (Du Pont, 2010). MTA METRO-NORTH RAILROAD The Metropolitan Transportation Authority is The USA’s largest transportation network, and MetroNorth Railroad (MNR), one of its operating agencies, is a business leader in American railroads. Despite having some elements of a safety program in place, MNR leadership was concerned about its lost time injury rate.
They sought out a way to “not only improve their employee safety record, but also establish a safety system that would change the basic safety culture, enable continuous improvement and substantially reduce injuries. ” (DuPont, 2007) MNR implemented a SMS which began by training safety leadership skills to their line managers because changes in safety culture are impossible without the whole-hearted commitment of management. The training then worked its way down through the organisation, training staff, identifying hazards and enhancing safety processes. Employees at all levels were engaged in this process.
Safety observation and auditing procedures were then developed together with methods of providing feedback to staff on any safety issues. The end result of the five year implementation of the SMS saw the following improvements: 1. 2. 3. 4. A 60% reduction in Lost Time Injuries from 2002-2006 An 81% reduction in Lost Work Days from 2002-2006 Increased On-Time Performance from 96% to 98. 7% A significant decrease in Rider injuries (DuPont, 2007) This case highlights how implementing a SMS can improve not only the safety of staff and customers, but also business performance and profitability. QANTAS AIRWAYS Qantas has an enviable safety record in the airline industry of having no accidents causing passenger fatalities since its inception in 1920. Senior management recognised that their record in employee safety was not so good, however, and committed to implement a system to address the shortfalls. Among the issues faced by Qantas were: 1. 2. 3. 4. More than 7000 employee injuries occurring every year; High loss of productivity due to more than 40,000 lost work days per annum; Unsatisfactory workplace afety audit results by Government agencies; and High costs in equipment damage directly related to workplace safety incidents. (DuPont, 2005) Qantas implemented a program called “be safe! ” with the goal of “No Injuries to Anyone at Any Time”. This commenced with thorough training of supervisory staff, from senior executives down to leading hands. A new management structure incorporating a Safety Review function was implemented, to report safety issues directly to senior management. Indicators were developed to show progress, and safety news was communicated to all staff through newsletters, forums and the company intranet.
In less than 3 years, “be safe! ” delivered substantial improvements, including: 1. Lost Time Injury Frequency Rate reduced by 70% across the organisation, and by 100% in some departments; 2. Over 20,000 lost days are being saved annually. $11 million of workers compensation provisions have been removed from the company’s books in the past year alone; 3. Workers compensation claims costs have reduced from 1. 5% of wages to 1. 0%; 4. A 500% return on investment; 5. Direct cost savings of $500 million predicted over 5 years; 6.
Process improvements & efficiencies in workshops and significant reductions in solvent use; 7. Qantas was named “Airline of the Year” (2003) by Aviation Transport World magazine. (DuPont, 2005) The effect of implementing the “be safe! ” program was summed up by Margaret Jackson (thenChairman of Qantas) and Geoff Dixon (then-CEO of Qantas) in their statement that: “a great deal of pain and suffering, as well as millions of dollars associated with rehabilitation, equipment damage, reduced productivity and other incident consequences, have been saved. (DuPont, 2005) There are tangible benefits to be gained from the introduction of Safety Management Systems. They provide a systematic, explicit & comprehensive process for managing risks which pays huge dividends for the safety and well-being of staff and customers. The case studies discussed have shown that there are also positive impacts on the performance and profitability of a company, and that this is not restricted to a particular industry or part of the world. Safety Management is a business imperative.
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