1 / 49

Brian B. Bethel, CIH Sikorsky Aircraft

Using Business Metrics To Engage Leadership Connecticut Valley Chapter – ASSE NAOSH PDC May 8, 2013. Brian B. Bethel, CIH Sikorsky Aircraft. Key Success Factors Unchanged Over The Years. Management commitment Employee engagement Making employees agents of change not change responders

vernon-aguilar
Download Presentation

Brian B. Bethel, CIH Sikorsky Aircraft

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Using Business Metrics To Engage LeadershipConnecticut Valley Chapter – ASSE NAOSH PDCMay 8, 2013 Brian B. Bethel, CIH Sikorsky Aircraft

  2. Key Success FactorsUnchanged Over The Years • Management commitment • Employee engagement • Making employees agents of change not change responders • Effective risk engineering • Recognition • Evaluation • Control - The TRICK - The ART - The SCIENCE

  3. Is This The Commitment Your Used To???

  4. The Times They Are A Changing Why Are We Here? • Decisions to move forward with EHS projects are no longer based solely on sound technical judgment

  5. Lets Build Some Commitment Their Language Our Language

  6. The Times They Are A Changing • Decisions to move forward with EHS projects are no longer based solely on sound technical judgment • What do we need to Change? • It is time to start thinking more like businessmen and less like scientists

  7. Lets Build Some CommitmentBridging EHS & Business

  8. GenericallyWhat does Return On Investment Mean? • A measure used to describe the efficiency of an investment over a set period of time • Often 7 or 10 years • In may corporations the time frame is 3 years • A tool used to compare the relative efficiency of investment choices

  9. Building Management Commitment • Every organization emphasized their own set of financial metrics • Learn which financial metrics are important in your corporation • Common financial metrics include: • Return on Investment • Net Present Value • Internal Rate of Return • (Discounted) Payback Period • Meet with Finance / Cost Accounting / IE

  10. Return On InvestmentROI • Ratio of money gained to money invested • An ROI of 100% would mean you recovered all the money you invested •  An ROI >100% would mean you gained MORE than you spent

  11. Payback Period(Simple Payback) • Measures how long something takes to "pay for itself" • For example a $1000 investment which returned $500 per year would have a two year payback period • The time value of money is not taken into account • Payback period is widely used because of its ease of use despite recognized limitations

  12. Discounted Payback PeriodDPP • Similar to payback period in that it measures how long something takes to "pay for itself“… BUT: • Takes into account: • The time value of money (inflation) • The cost to borrow the money to make the investment • The loss of income you would have had if you invested in a very secure security (Think T bills) • DPP is a VERY common financial metric

  13. Internal Rate Of ReturnIRR • IRR is an indicator of the efficiency, quality and yield of an investment • Used to measure and compare the profitability of investments • An IRR of 100% would mean you recovered all the money you invested •  An ROI >100% would mean you gained MORE than you spent • IRR is a VERY common financial metric

  14. Net Present ValueNPV • NPV compares the value of a dollar today to the value of the same dollar in the future • Takes into account inflation and the increased revenue gained through the investment • Reduced by the financial benefit gained by investing that same money in a stable investment (like T Bills) • Reported in $

  15. Using Financial Data To Your AdvantageMake It About Value Not Cost “Does your boss know those numbers” “Which one of us wouldn’t invest in a 90% payback” “That’s the case you have to make” Jeff Pino President, Sikorsky Aircraft 2008 AIHce - Minneapolis

  16. Using Financial Data To Your AdvantageMake It About Value Not Cost • Learn how to mine cost data • Direct costs are important But • Indirect & hidden costs usually are the make or break data

  17. Mining Cost DataDirect Costs • Cost that are easily identified • Injury costs (work comp loss data) • PPE Costs (Procurement) • Cost to purchase and install controls • Consultant fees • On and on

  18. Mining Cost Data Indirect Costs • Medical costs • Medical Lab fees • Employee time • Medical screening • Fit testing • Training • IH sampling costs • Labor (in house) • Lab

  19. Mining Cost Data Hidden Costs • Time to administer a program • Time to administer a medical program • Time for supervisors to schedule medical monitoring / training / fit testing • Time of employee covering when employee is undergoing medical screening • Often at overtime rates - Hidden costs in spades!!! • Cost to operate local exhaust ventilation costs • Power to run the fans • Energy to condition makeup and exhausted air • Labor for housekeeping

  20. Other Hidden Costs • Quality & labor improvements? – Cost or benefit • Review process with • Industrial engineering • Cost accounting • Quality engineering • Time study data • Monitor material costs • Cost of Poor Quality (COPQ) data • Indirect time charging (DOI) • Rework reduction (quality engineering)

  21. Using Financial Data To Your AdvantageMake It About Value Not Cost • Learn how to calculate the financial metrics that are important to your organization

  22. Calculating Financial MetricsIsn’t There A Better Way? • Incorporate a financial person on your teams • Buy them coffee • Order them plush “ergonomic” office chairs • ….Go to the internet

  23. Using Financial Data To Your AdvantageMake It About Value Not Cost • Various IH / EHS specific tools are available • ROHSEI – ORC Product • AIHA Value Proposition Tool Or not! • Chances are your organization has a program or a tool to do these calculations for you • Enlist financial or IE resources

  24. Case Studies • Two hearing conservation cases • Why hearing conservation case studies?? • Because hearing conservation programs don’t work!

  25. Some Of The Reasons Hearing Conservation Doesn’t Work

  26. Some Other Reasons Hearing Conservation Doesn’t Work

  27. The Change In Social Noise Exposure Is Very Far Reaching

  28. Case Study 1Machine Shop Noise Control • Machine shop environment • Dosimetery Indicates That Exposures Ranged From 84 – 87 dB(A) For A Majority Of The Employees • As A Result, This HEP Was Enrolled In The Hearing Conservation Program • Sound Mapping Indicated That Most Point Noise Sources Were < 83 dB(A)

  29. Typical Sound Map DO NOT UNDERESTIMATE THE CONTRIBUTION OF COMPRESSED AIR NOISE TO THE NOISE PROFILE OF A MACHINIST

  30. Control Hierarchy – Substitution • Substitute low noise air nozzles where possible • Reductions ranged from 8 – 15 dB(A) • Average machinist used compressed air for 8 – 12 min a day • Expect to remove 75 employees from the HCP • Expect an initial investment of $12K for nozzles

  31. Cost - Value • $12K Cost Vs • Value

  32. Mine Direct Cost Data • Hearing testing service reduction • $1,200 • Hearing loss awards • At risk of 2 cases @ $25K • Direct cost savings expected - $1.2K • Cost avoidance - $50K • Total savings expected ≈ 52.2K • ?? Why no hearing protection costs savings??

  33. Mine Indirect Cost Data • Program administration annual costs savings • HCP Program Admin (IH) – 40 Hrs • Medical Admin (Medical) – 20 Hrs • Supervisors Time – 75 Hrs (1 Hr per employee ) • Employee Time – 131.25 Hrs (1.75 Hrs for exam) • STS Retests Labor – 9 Hrs • How do we convert hours saved into Dollars??? • Simple… multiply by the labor rate… Right?

  34. Burdened Labor RateOne Of The Hidden Costs • Hourly Rate That Includes Overhead Costs Burdened Rate Equals Employee Salary • Cost Of Employee Benefits • Paid Time Off • Insurance Costs • Taxes On Labor • Employees Share Of The Infrastructure Costs • Obtain From Your IE Or Cost Accounting Organization • Not Uncommon That The Burdened Rate Is 3X Wage

  35. Other Hidden CostsUnique To Each Situation • Program administration annual costs savings • HCP Program Admin (IH) – 40 Hrs • Medical Admin (Medical) – 20 Hrs • Supervisors Time – 75 Hrs (1 Hr per employee ) • Employee Time – 131.25 Hrs (1.75 Hrs for exam) • STS Retests Labor – 9 Hrs • Energy Savings ≈ $7600 • Indirect Cost Savings Expected ≈ $40 K

  36. Industrial Economics 101 • Compressed air is the single highest cost utility used in a manufacturing setting • 7 – 1 energy ratio • 7 HP of electrical power to produce 1 HP of compressed air “work” • Reducing compressed air use will result in • Lower noise levels • Lower energy costs • Use this as part of your value justification for noise control engineering

  37. Savings & Cost Avoidance • Annual saving • $41.2 K - HCP • ($1,200 Direct & 40,000 Indirect) • $549 Per employee • Expected cost avoidance • $50K - Hearing loss awards • $666 Per employee • Total savings expected - $91.2K • ($1,216 Per employee)

  38. Value of Compressed Air Nozzle Substitution • $12 K Initial Investment • ROI – 176% • DPP – 0.2 Months • NPV – $429K • IRR – 665%

  39. Control Hierarchy – Enclosure • Use Two Different Noise Abatement Techniques To Dampen Sound • Engineering And Installation Expected To Be $47,970 • Expect To Remove 150 Employees From The HCP

  40. Cost - Value • $48K Cost Vs • Value

  41. Mine Direct Cost Data • Hearing Testing Service Reduction • $7.5K • IH Support • $10K • Hearing Loss Awards – No Savings • ? Hearing Protection Costs • Direct Cost Savings Expected - $17.5K

  42. Mine Indirect Cost Data • Program Administration Costs Savings • HCP Program Admin & Training (EHS) – 120 Hrs • Training Admin (EHS) – 40 Hrs • Supervisors Time – 150 Hrs • Employee Time – Testing 225 Hrs • Employee Time – Training 75 Hrs • STS Retests Labor – 9 Hrs • Indirect Cost Savings Expected - $62.9K

  43. Savings & Cost Avoidance • Annual Saving • $70.5K - HCP & Supporting IH Costs • $470 Per Employee • Expected Cost Avoidance • $0 - Hearing Loss Awards • Total Savings Expected - $70.5K • ($470 Per Employee)

  44. Value of Noise Enclosure Project • $48 K Initial Investment • ROI – 131% • DPP – 1.6 Years • NPV – $327K • IRR – 78%

  45. Engaging Leadership Works • Two Different Scenarios • High Capital – Low Expense (Enclosure) • Lower Burdened Rate • No History Of Hearing Loss Claims • Low Capital – High Expense (Nozzles) • Higher Burdened Rate • Moderate Hearing Loss Claim Potential

  46. Why We Do What We Do

  47. Brian B. Bethel, CIH Sikorsky Aircraft brian.bethel@sikorsky.com

More Related