A company that solely tracks lagging KPIs and has low incident rates, while positive, leaves the organization with very little data to analyze and help predict future decisions.

Why the Construction Industry Needs to Adopt Leading Indicators

Continuous improvement and evolution of leading indicators will help your organization continuously improve safety records and reduce risks.

As companies continuously improve their safety management, leaders in the industry continue to use a variety of techniques, tools, and key performance indicators (KPIs) to measure safety performance. Despite the proof found in studies that failure-focused, lagging indicators don't help companies drive continued improvement, a large number of environment, health and safety (EHS) programs are still assessed solely by lagging KPIs. This is true for many industries, however, particularly crucial for the construction industry.

The construction industry suffers from one of the highest incident rates across high-risk industries. According to the latest report1 released by OHSA, construction and manufacturing jobs listed the most workplace incidents. Since 2015, there have been 10,388 cases involving severe work-related injuries, including 7,636 hospitalizations and 2,644 amputations. Most workplace incidents are preventable with the right safety management process in place. By continuing to solely use lagging KPIs, safety managers in construction will not have the tools necessary to combat these high incident rates.

Most construction companies are using KPIs, such as: the number of incidents, number of severe incidents resulting in hospitalization or fatalities, incident rate, Lost Time Injury Rate (LTIR), Total Recordable Incident Rate (TRIR), etc. These lagging indicators do provide some insight into how your safety program has performed in the past, but they lack the predictive power necessary to help proactively improve safety and prevent future incidents. This results in companies remaining unaware of hazards until after the incident has occurred. In other words, when you just use lagging indicators, you are essentially telling employees that you are waiting for Worker A to get injured before taking measures to ensure that the same doesn’t happen to Worker B.

Lagging KPIs are fundamentally weak indicators because they can't support continuous learning opportunities. In fact, a company that solely tracks lagging KPIs and has low incident rates, while positive, leaves the organization with very little data to analyze and help predict future decisions. Predictive data, or leading indicators, are crucial to safety management. Enabling safety leaders to proactively identify risks and trends before they become a problem gives them the tools and solutions to continuously better manage safety.

Leading indicators help to provide insight into the strengths and weaknesses of your safety program and play a crucial role in uncovering the need for additional measures. Leading indicators also play an important role in a business’s continuous improvement cycle, often referred to as the Plan-Do-Check-Act cycle. The continuous improvement cycle with regards to safety management involves planning how you are going to reduce risk (Plan), actually carrying out this plan into action (Do), checking and analyzing the results of these activities (Check), making any necessary changes or improvements (Act), and then repeating the cycle. This process allows your company to identify risks and opportunities, then eliminate and control these risks more quickly and effectively, as well as ensure that processes, people, and systems learn from these risks (and opportunities) and improve the company systematically. This cycle is the established way to change behavior and effect change. Leading indicators involve identifying risks and measuring activities or results-based metrics and play a key part in each step of the cycle.

In order for leading indicators to be truly effective in this continuous improvement cycle, you need to choose the right ones for your organization. Unlike lagging KPIs, there are no standard leading indicators each organization should be tracking. Leading indicators need to be tailored to meet the needs of individual organizations in order identify the risks your workers may face. This begs the question: How do you choose the right leading indicators for your organization?

How to Choose the Right Leading Indicators for Your Organization
For leading indicators to be effective, organizations must first identify the goal of using these metrics. By setting out what you hope to achieve in the beginning, you will be better equipped to choose the leading indicator to meet that goal. However, just setting a goal is not good enough. You need to make sure you are setting goals that are specific, measurable, actionable, relevant, and time-bound, or simply, SMART. These SMART goals will not only help you select the appropriate leading indicators, but also they will be vital to measure the results of those leading indicators and the success of the initiative overall.

One way to determine SMART goals could be by looking for holes in your existing safety program. For example, if many of your employees are not up to date on their training, then one of your SMART goals could be to implement a 12-month safety training program that measures attendance and competence. 

Another way to determine SMART goals could be to analyze your lagging indicators against industry standards. For instance, if in the past your OSHA recordable injury rate has been above industry average, you could make your SMART goal for the first year to be to reduce your injury rate to the industry standard and then continue to lower the rate by a fixed percentage for each of the next five years.

However you choose your SMART goals, they should relate to your company's overall goals. Take a look at your company's five-year plan and objectives and ask yourself how safety will play a role in meeting those objectives. For example, if your company's goal is to ensure all projects are completed on schedule, your SMART goal could be to reduce the time to complete corrective actions by a specified time period. Relating your safety program’s SMART goal to an overall company goal will not only help to improve your safety program, but it will also help you prove the value of your safety program to upper management. Showing how your department's achievements contributed to your company's overall success will allow upper management to see the return on the investment of safety initiatives for the organization.

After you've set your SMART goals, the next step is to choose the right leading indicators to measure whether or not you are able to meet those goals. Going back to our previous SMART goal example of implementing a 12-month training program for new employees, a leading indicator could be to track the percentage of new hires trained. For instance, you could track the number of new employees hired in a given period and the number of training certificates required, and measure this against the number of training certificates completed. By tracking the ongoing number of training certificates required versus the number completed, you'll know relatively quickly if someone isn't up to date on their training and can take the necessary steps to get employees the training they need.

When choosing leading indicators, it's crucial to remember that there is no "one size fits all" option. It is best to approach it as a trial-and-error process. You may think a particular leading indicator will help achieve your goal, but after tracking it, it may fail to provide the information necessary to meet your goal. This is why it's crucial to experiment with leading indicators before fully committing them to your executive safety reporting. Start by tracking a few leading indicators, see which ones are most effective, report on those, and replace or dismiss those which are not useful. Don’t be afraid to fail! We learn from mistakes and they only help us get better.

Another important element for running a successful leading indicator initiative is to constantly review and refresh your KPIs. Once you've had success in improving your safety program or meeting a SMART goal with one particular metric, don't stop there—look for the next area that can be improved and develop a new one. Continuous improvement and evolution of leading indicators will help your organization continuously improve safety records and reduce risks.

In short, reporting on key metrics is an essential part of safety management. This has never been truer for construction companies. Workplace incidents are avoidable. However, when lagging indicators are the only performance metrics measured, it makes it difficult to put the necessary controls in place to prevent these incidents from occurring. Many construction companies are missing the opportunity to proactively reduce risk and fulfill the Plan-Do-Check-Act continuous improvement cycle. By setting SMART goals and choosing the right leading indicators to meet those goals, you can arm yourself and your employees with the information necessary to make the right, proactive decisions to reduce risk and continuously improve safety management.

For more information on leading indicators and how to choose the right ones for your organization, check out these resources:

References
1. https://www.osha.gov/injuryreport/2015.pdf

This article originally appeared in the July 2016 issue of Occupational Health & Safety.

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