Factors Defining the Relationships between Safety Management Strategies and Safety Performance

1. Factors Defining the Relationships between Safety Management Strategies and Safety Performance Jon Kevin Loebbaka February 8, 2008 Doctoral Dissertation Defense Marshal Goldsmith School of Management Alliant International University

2. Dissertation Committee

3. Jon Kevin Loebbaka Education • B.S. Electrical Engineering University of Tennessee • M.B.A. in Management Ashland University Industrial Experience • 22 Years of Industrial Safety Experience in Production, Maintenance and Engineering Roles in the states of Tennessee, Kentucky, Indiana, Ohio, North Carolina, and California. • 12 Years General Management Experience Current Occupation • General Manager Alu Menziken Aerospace UAC

4. Research ProblemBackground - Safety Issue Turbulence • Safety performance first became important as States implemented workers compensation laws in the 1900’s in response to the Industrial Revolution. • Beginning in the 1970’s, OSHA’s safety regulations and reporting requirements have penalized poor safety performance resulting in fines and higher workers compensation insurance costs. • Safety regulations have become increasingly more complex and compliance costly. • Privatization of the workers compensation insurance market and increased litigation is deteriorating profits

5. Research ProblemBackground - Safety Issue Turbulence • Global competition demands continuous improvements in productivity and financial performance, creating rapid changes in the workplace as firms deploy new processes and technologies. • Resource constraints limit strategic pursuits. • Safety costs affect profitability and increasing define or deteriorate competitive advantage • How does the firm effectively translate safety strategies and align organizational capability from the executive suite through the work place?

6. Research ProblemSafety Management System Definition A safety management system (SMS) embodies the means of ensuring that an organization is capable of achieving and maintaining acceptable standards of safety performance.SMSs assimilate internal and external factors including; the firm’s safety environment and performance, the organization's capacity and capability, the organization's culture of commitment OSHA, NIOSH, & WC regulatory standards, safety technologies, compliance cost factors, and stakeholders’ influence.SMS strategies manifest themselves through safety decisions and action

7. SMS Input Output Model

8. Global Model Competitive Rivalry New Entrants NewTechnology Customers Suppliers Regulations Stakeholders Business Environment Perception of Environment Perception of Environment Perception of Environment Strategy Center Support Activities Information Systems Human Resources Strategy Center Core Activities Production / Marketing Finance / R&D Strategy Center Regulated Activities Safety & Health Environmental Compliance Strategic Responsiveness Strategic Aggressiveness Strategic Responsiveness Strategic Aggressiveness Strategic Responsiveness Strategic Aggressiveness Strategic Posture Strategy Integration Strategic Posture Strategy Integration Strategic Posture Business Performance Financial Performance / Regulatory Performance and Compliance / Societal Standing

9. Research Model Perception of Environmental Safety Issue Turbulence SMSResponsiveness SMSAggressiveness H4 H3 SMS Posture SMS Aggressiveness Gap SMS Responsiveness Gap H6b H6a High Behavioral School Poor SystemsReactive Efforts Management School Emergent Systems Best Practices H1 H2 Degree ofCooperationamongStakeholders Health School No SystemsAd Hoc Efforts Engineering School Planned SystemsAccepted Practice Low H6d H6c Low Degree of Coordination Integrating Individual’s Knowledge High H5 Safety Performance

10. Independent VariablesSafety Issue Turbulence • Conceptual Definition: Safety issue turbulence was characterized through the complexity, rapidity, and predictability of change in safety regulations, workers compensation insurance rates and workers compensation state laws. • Operational Definition: Safety issue turbulence was measured through calculating the arithmetic mean from each respondent for 3 questions using 5-point numerical scales. • Complexity of safety issues • Rapidity of change • Predictability of change

11. Independent VariablesSafety Issue Turbulence Complexity of Safety Issues

12. Independent VariablesSMS Aggressiveness Conceptual Definition: SMS aggressiveness was characterized by the discontinuity and speed in which safety strategies are conceived and deployed in response to safety issues. Operational definition: SMS aggressiveness was measured through calculating the arithmetic mean from each respondent for 6 questions using 5-point numerical scales. • Planning for regulatory change•Strategies to address new safety issues •Implementation of new safety technologies •Interaction with regulatory agencies •Interaction workers compensation, insurers •The overarching focus of the SMS staff

13. Independent VariablesSMS Aggressiveness Discontinuity and Speed of Strategies

14. Independent VariablesSMS Responsiveness Conceptual definition: SMS responsiveness was characterized by the ability of management and the organizations systems and staff to respond to changes in the safety environment. Operational definition: SMS responsiveness was measured through calculating the arithmetic mean from each respondent for 5 questions using 5-point numerical scales including: Involvement of top management, Climate of the organization, Competence & capacity of the SMS staff

15. Independent VariablesSMS Responsiveness Management Mentality, Capability, Competence, Capacity

16. Independent VariablesSMS Posture Conceptual Definition: The SMS posture articulated the reactive or proactive nature of the SMS. Reactive SMSs are focused on minimal compliance. Proactive SMSs strive to gain competitive advantage moving beyond compliance efforts. Operational definition: SMS posture was measured through calculating the arithmetic mean from each respondent for 13 questions using 5-point numerical scales. • Policy & Leadership – Goals, Communication•Organizational Infrastructure – Accountability, Rewards•Strategic Planning – Who develops the SMS plan, Scope, Audits•SHEQ Management – Procedures, Training•Contractors – Communication, Contract administration•Performance Monitoring – Measures•Continuous Improvement – Employee involvement

17. Independent VariablesSMS Posture Strategic Planning Continuous Improvement

18. Intervening VariablesSMS Aggressiveness GapSMS Responsiveness Gap Conceptual Definition: The SMS aggressiveness gap and SMS responsiveness gap was a measure of the alignment between an organization’s SMS aggressiveness and SMS responsiveness and that of its safety issue turbulence. Operational definition: The SMS aggressiveness gap and SMS responsiveness gap was calculated as the absolute difference between the scores of SMS aggression and SMS responsiveness respectively and safety issue turbulence from each respondent. These gaps ranged in value from 0 to 4.

19. Dependent VariablesSafety Performance Conceptual definition: Safety performance was a collective measure of both the positive and negative outcomes of the safety management system. The questions measured the organization’s safety performance in the following areas; overall safety performance; OSHA recordables, lost work days, serious incidents or fatalities, workers compensation insurance premiums; and the organizations relationship with regulatory government agencies, workers compensation insurance companies, safety consultants, and employees. Operational definition: Safety performance was calculated as the arithmetic mean from each respondent of 10 questions. Each question will be evaluated using a 5-point numerical scale. Respondents in some questions will be allowed to answer, “not applicable or do not know the answer”. In this case the arithmetic mean for safety performance will be calculated from those questions answered.

20. Dependent VariablesSafety Performance

21. Independent VariablesSafety School Orientation 5 High Behavioral School Poor SystemsReactive Efforts Management School Emergent Systems Best Practices Degree ofCooperationamongStakeholders 3 Conceptual Definition: The SMS safety school orientation characterized the reactive or proactive nature of the SMS. Reactive SMSs are focused on minimal compliance. Proactive SMSs gain competitive advantage moving beyond compliance efforts. Operation definition: Management school orientation was determined through calculating the two arithmetic means of the cooperation and coordination labeled questions and mapping the results into the axes to determine the health, behavioral, engineering or management school orientation. Health School No SystemsAd Hoc Efforts Engineering School Planned SystemsAccepted Practice Low 1 3 5 Low Degree of Coordination Integrating Individual’s Knowledge High

22. Research Hypotheses Summary

23. Research Hypotheses Summary

24. Research Plan • Descriptive Correlational Study • Interval Data was measured on 5 point Likert scales • Primary data was collected through questionnaires. • Confidentiality to participants was maintained • Risk to participants was minimal. • SPSS Data analysis H1, H2, H3, H4, H5 Pearson’s r Correlation H6 a, b, c, d ANOVA Comparison of Means

25. Research Population and Sample Frame Target population included all employers operating within the United States, governed by OSHA regulations, and required to carry workers compensation insurance. Intended survey respondent was any individual possessing safety and health responsibility or knowledge within such an organization. 600 surveys were distributed among safety and health professionals attending the 95th annual National Safety Council Congress and Exposition in Chicago Illinois, October 15-17, 2007. 156 completed samples were collected (26% Return Rate).

26. Validity and Reliability The survey instrument was validated through an extensive literature review of highly respected authors on the topic of safety strategy (Hansen, Geller, Krause, etc.). Review of the survey’s validity and clarity was sought from: dissertation chairperson, Dr. Alfred Lewis; and dissertation committee members, Dr. James Sullivan and Dr. Greg Lorton; Tom Quick, Bureau Veritas’ global safety systems vice president; and several safety and health professionalsfamiliar with SMS strategies.

27. Variable Descriptive Statistics (N=156)

28. Variable Descriptive Statistics (N=156)

29. Hypothesis 1 Supported[r = -0.273, p = .001, N = 156] There is an inverse relationship between the SMS aggressiveness gap and safety performance of the firm. This hypothesis confirmed an important relationship between; A firm’s future financial and societal safety outcomes, and management’s ability to foresee the complexity and rapidity of change in safety regulations, workers compensation laws and insurance requirements.

30. Hypothesis 2 Supported[r = -0.188, p = .019, N = 156] There is an inverse relationship between the SMS responsiveness gap and safety performance of the firm. This hypothesis confirmed an important relationship between; A firm’s future financial and societal safety outcomes, and the organization’s SMS climate, competency, capacity, and its management mentality.

31. Hypothesis 3 Supported[r = 0.532, p < .001, N = 156] There is a direct relationship between SMS aggressiveness and SMS strategic posture. This hypothesis confirmed an important relationship between; management’s mindset in its willingness to create timely SMS strategies in response to future safety issues and the extent to which the organization’s safety posture will be proactive. SMS Change Management Use of Technology Response to Regulations Interaction with Regulators SMS Strategy Integration

32. Hypothesis 4 Supported [r = 0.545, p < .001, N = 156] There is a direct relationship between SMS responsiveness and SMS strategic posture. This hypothesis confirmed an important relationship among; the competence and capability of SMS managers and staff, the organization’s safety climate, the robustness of the organization’s safety systems,and the extent to which the organization’s safety posture will be proactive. Management Involvement SMS Surveillance SMS Policy and Procedures Stakeholder KnowledgeRisk Propensity

33. Hypothesis 5 Supported[r = 0.505, p < .001, N = 156] There is a direct relationship between SMS posture and safety performance. This hypothesis confirmed that as an organization’s SMS becomes more proactive, the organization’s performance on safety issues will improve. Policy and Leadership Organizational Infrastructure Strategic Planning SHEQ Management Contractors Performance Monitoring Continuous Improvement

34. Hypothesis 6 High Behavioral School Management School N = 12 Mean = 3.6908 N = 76 Mean = 3.3642 Degree of CooperationamongStakeholders Health School Engineering School N = 47 Mean = 2.6419 N = 21 Mean = 3.0076 Low Degree of CoordinationIntegrating Individual’s Knowledge Low High There is a ranking among safety school orientations with respect to safety performance. Decreasing Safety Performance

35. Hypothesis 6 High Behavioral School Management School N = 12 Mean = 3.6908 N = 76 Mean = 3.3642 Degree of CooperationamongStakeholders Health School Engineering School N = 47 Mean = 2.6419 N = 21 Mean = 3.0076 Low Degree of CoordinationIntegrating Individual’s Knowledge Low High Management School Behavioral School Engineering School Health School Decreasing Safety Performance

36. Hypothesis 6 High Behavioral School Management School N = 12 Mean = 3.6908 N = 76 Mean = 3.3642 Degree of CooperationamongStakeholders Health School Engineering School N = 47 Mean = 2.6419 N = 21 Mean = 3.0076 Low Degree of CoordinationIntegrating Individual’s Knowledge Low High Management School Behavioral School Engineering School Health School Decreasing Safety Performance

37. Hypothesis 6 High Behavioral School Management School N = 12 Mean = 3.6908 N = 76 Mean = 3.3642 Degree of CooperationamongStakeholders Health School Engineering School N = 47 Mean = 2.6419 N = 21 Mean = 3.0076 Low Degree of CoordinationIntegrating Individual’s Knowledge Low High Management School Behavioral School Engineering School Health School Decreasing Safety Performance

38. Hypothesis 6 High Behavioral School Management School N = 12 Mean = 3.6908 N = 76 Mean = 3.3642 Degree of CooperationamongStakeholders Health School Engineering School N = 47 Mean = 2.6419 N = 21 Mean = 3.0076 Low Degree of CoordinationIntegrating Individual’s Knowledge Low High Management School Behavioral School Engineering School Health School Decreasing Safety Performance

39. Hypothesis 6 There is a ranking among safety school orientations with respect to safety performance?

40. Additional FindingsSMS Cooperation and SMS Coordination • There is a direct relationship between SMS cooperation and the safety performance of the firm. [r = 0.516, p < .001, N = 156] • There is a direct relationship between SMS coordination and the safety performance of the firm. [r = 0.441, p < .001, N = 156] • There is a direct relationship between SMS aggressiveness and SMS cooperation. [r = 0.512, p < .001, N = 156] • There is a direct relationship between SMS responsiveness and SMS cooperation. [r = 0.541, p < .001, N = 156] • There is a direct relationship between SMS aggressiveness and SMS coordination. [r = 0.493, p < .001, N = 156] • There is a direct relationship between SMS responsiveness and SMS coordination. [r = 0.489, p < .001, N = 156]

41. Contributions to Academia High Behavioral School Management School Inadequate Systems Reactive Efforts Emergent Systems Best Practices Degree of CooperationamongStakeholders Health School Engineering School No Systems Adhoc Efforts Planned Systems Accepted Practice Low Degree of CoordinationIntegrating Individual’s Knowledge Low High • Creation of a knowledge management typology from which to assess SMS effectiveness. • Furthered Lorton’s extension of Ansoff’s strategic success hypothesis to functional areas of regulated strategies. • Validation of Abrams safety school orientations and their description of SMS postures. • Provided empirical validation for Hansen’s spectrum of SMS characteristics.

42. Contributions to Management • Proactive SMSs lead to higher levels of safety performance. 2. Organization’s that are attuned to current and future safety issue turbulence and subsequently plan the proactive nature of their SMS aggressiveness, SMS responsiveness and SMS posture, will experience higher levels of safety performance. 3. Higher degrees of both cooperation among the organization’s stakeholders and coordination in the distribution of the organization’s safety knowledge will create higher levels of safety performance. 4. Manager’s who integrate their SMSs within the firm’s overall strategic framework will create safer organizations than those managers who do not. 5. Managers who involve themselves in their SMSs, creation, implementation, rewards, and recognition will create higher performing organizations.

43. Safety Professional Leadership Profile

44. Recommendations for Further Research • Investigate knowledge management practices in the development and deployment of SMS strategies. • Conduct a wider study of the behavioral safety school orientation to understand the influence of SMS coordination in SMSs where high levels of stakeholder cooperation are present. • Further analyze the data collected in this study to rank the effectiveness of Hansen’s SMS characteristics with respect to safety performance. • Extend Ansoff’s strategic diagnosis framework to the evaluation of organization’s functional level strategies in similarly regulated pursuits. (i.e. Quality, Financial, and Human Resources)

45. Questions?