Handing out recognition may boost morale, but it won't improve performance.
A few years ago, I was helping a client implement lean methods and concepts. We started the initiative with workplace organization. Progress was good, and the client was interested in ideas that would help sustain the effort. Company leaders came up with the idea of giving a “Golden Broom Award” to the department that kept its area best organized and cleanest during the month. They asked what I thought about the idea.
Lots of organizations have the idea that giving prizes and awards somehow motivates employees. I’m not opposed to handing out prizes, but I don’t think they actually do much to motivate higher performance across the workforce—and, in fact, can backfire badly.
The idea behind awards is that employees should be recognized in some way for exemplary performance. Certainly, one can’t argue with that. But why recognize just one employee or one department each month for good performance? Doesn’t the organization, when it gives prizes to just a few, then do a disservice to all the employees who worked well and did what was asked (and often more) to pursue the organization’s goals?
The “prizes and awards” approach to motivation has several serious flaws. First, they are difficult to design and administer. At my first job at a coal company in eastern Kentucky, managers decided to give a company jacket to any miner who had perfect work attendance during the year. The “company jacket for perfect attendance” program fell apart when a miner at one of the company’s operations didn’t get a jacket, even though the only days he missed all year were bereavement days for a close family member. When he didn’t receive a jacket, all the miners who did laid their awards at the doorway of the superintendent; most had notes attached with graphic suggestions as to what he could do with the jackets. A program that was intended to recognize performance and improve morale had exactly the opposite impact.
Second, too often they become “check the box” chores for management rather than real efforts to recognize good performance. Back when I worked for a national hotel firm, the property in Cleveland gave an “Employee of the Month” award. The hotel managers groaned each month when the need arose to choose another “Employee of the Month.” Generally, the award went to an employee who hadn’t previously received it. Employees learned that they weren’t actually being recognized for exemplary performance; rather, that it was simply “their turn to get it”.
Third, and perhaps most important, there’s little evidence that such awards actually motivate employees to improve their performance.
So, what does work to motivate employees? Several years after the “perfect attendance jacket” fiasco, the same mine shut down for a few months. Just prior to “start-up”, the mine’s superintendent was persuaded to communicate his plans for re-opening the mine and to get input from the miners. The sessions generated a number of suggestions from the workers as to how the mine could be reactivated quickly and safely. Several months later, production data showed that the mine had the quickest return to pre-shutdown production levels in the company’s history.
In spite of the “Employee of the Month” program, the hotel had chronic issues with service to guests and customers. In fact, guest satisfaction ranked near the bottom of all the company’s properties.
In their quest to improve, the company started a total quality management initiative that utilized employee teams to identify and resolve customer service problems. As part of that initiative, guest services departments receive unfiltered guest satisfaction data that, previously, had been only for managers to lay eyes on.
Two years later, the hotel had moved from 40th to 25th overall in the company with respect to guest satisfaction. It had moved to the top of the “Downtown Business Hotels” category.
What did these initiatives have in common? First and foremost, the organizations got employees directly involved in improvement discussions. Second, they provided employees the opportunity to put their improvement ideas into action. Third, they measured results and provided that data to employees.
The lesson is that, while external motivators (e.g., awards and prizes) can sometimes lead to increased employee satisfaction (but only sometimes), internal motivators are more likely to drive real improvements in performance. Such internal motivators include the opportunity to solve problems and provide improvement ideas, then to participate in the implementation of the solutions and improvements. They also include the ability to make decisions and plans in response to performance data. Finally, they include giving responsibility for the effectiveness of ideas and solutions to those who developed them.
Does this mean that companies should get rid of Employee of the Month awards and to refrain from implementing Golden Broom awards? Of course not. As mentioned earlier, administered correctly, such awards can be associated with good morale (at least on the part of those employees who actually receive the prizes). But don’t, for a moment, believe that they’ll drive real performance improvements. That will come when you truly engage employees in creating success for the enterprise.
Without management commitment to safety, a company cannot achieve best-in-class results.
Have you ever asked the question, “What else can I do to improve our safety culture?” The answer may be in your next conversation. One of the most common safety weaknesses I see in organizations is a lack of management engagement with employees. As a general rule, leaders support safety wholeheartedly from behind a computer but they fail to gain the value of personal interaction with employees in a safety context. The result is that workers develop a lack of trust and frustration in management’s commitment to safety. At the same time we ask, “What else can I do?” The remarkable solution is that we need to talk to people.
A couple years ago, I helped one of my clients identify ways they can improve their safety culture. The first step was to conduct a baseline safety performance assessment. I introduced them to our Principle to Practice Safety Scorecard. The process utilizes a standard protocol that measures the effectiveness of critical safety principles and practices such as management commitment. We compared how my client demonstrated management safety commitment versus how industry leaders demonstrate safety commitment.
Management commitment is one of the most important elements you can evaluate in your program. Without management commitment to safety, a company cannot achieve best-in-class results. For an example, a typical corporate mission statement shows management commitment on paper but our scorecard measures how well the commitment is translated to the workforce. If the safety commitment is not visible and consistent, it does not exist in the minds of workers.
The assessment took one week to complete. The result revealed that the client had a safety management system but they did not score well in the management commitment category. They did not have effective ways to engage employees. In other words, they did not talk with workers about safety on a frequent basis. They did not participate in safety audits, safety meetings or pre-job briefs, and they did not make it a habit to approach people about safety.
The management team had minimal visibility in a safety context. They supported safety from behind their computer and they delegated all of the “safety responsibilities” to the safety professional. This created a huge gap between the workers and management. Their safety program existed only on paper.
To fill this gap between commitment on paper and commitment in reality, we introduced a SAFE Dialogue process. The simple SAFE acronym is a proven error prevention tool that raises situational awareness with a conversation.
The initiative required the plant manager, the staff and department managers to leave their meetings and walk into the plant and engage employees face to face. They committed to do this once a week using the SAFE Dialogue format. The technique raises situational awareness with progressive questions about critical steps, potential errors, consequences and controls. The SAFE Dialog provides a forum for all leaders to learn what workers deal with on a daily basis. While gaining a better understanding of the risk with each step, leaders also developed a relationship with workers in a safety context.
The SAFE Dialogue engagement responsibilities included:
● Once a week, the plant manager, staff and department managers performed a SAFE Dialogue.
● They observed a specific operation and they talked to a minimum of two people.
● They used the SAFE Dialogue tool as their talking points.
● They asked employees the following questions:
S—Summarize the critical steps of your job. “What do you have to do today?”
A—Anticipate where you are most likely to make an error. “Where could you make a mistake?”
F—Foresee the worst-case scenario. “What is the worst thing that could happen?”
E—Evaluate your controls. “How will you prevent it?”
● They documented what they learned on the back of the card.
● They turned the cards in to the safety coordinator.
● The safety coordinator tracked participation and recorded good ideas.
The intent for the SAFE Dialogue conversation is to:
● Establish a relationship with your workforce in a safety context.
● Make yourself HIGHLY visible with safety.
● Talk to people about step-by-step safety in their work environment.
● Learn something about the process.
● Find a way to make an improvement.
● Show support and take ownership of safety.
● Make a difference in safety performance by engaging the workforce in a useful manner.
The intent for the SAFE Dialogue conversation is NOT to:
● Develop a long “to do” list for the safety coordinator.
● Pass off the safety responsibilities to others.
● “Get in the weeds” with every little detail.
The value of the program was a visible demonstration of consistent safety commitment. Leaders developed relationships with employees in the SAFE Dialogue forum and improvements followed.
Strategic Communication Strategy
To promote the program, the leadership team adopted a strategic communication strategy. The first step was to train the participants on how to execute an effective SAFE Dialogue. They also had to communicate the intent of the program to everyone in the plant. The communication process included four areas of focus:
Verbal Communications. Talk about SAFE Dialogues in a variety of settings.
Visual Communications. Make the program visible everywhere you go in the plant.
Written Communications. Keep the message alive through documentation.
Informal Communications. Leverage the momentum of the program and create a “buzz” around SAFE Dialogues.
The communication strategy included a list of actions such as:
● Teach SAFE Dialogue error prevention classes.
● Use the SAFE Dialogue as a learning process in casual conversations.
● Start every meeting with a safety topic that includes a discussion about a SAFE Dialogue.
● Promote the SAFE Dialogue in every safety training class.
● Deliver a different SAFE Dialogue safety topic each week.
● Put up SAFE Dialogue posters, banners and table tents.
● Document the procedure in the management system.
● Participate in casual conversations that include SAFE Dialogue elements.
The SAFE Dialogue program was a huge success. The results of the original Principle to Practice scorecard magnified a common weakness that organizations experience with employee engagement. The SAFE Dialogue was the solution. The process developed habits that encourage leaders to approach people about safety. The systematic questions about steps, errors, consequences and controls led to a better understanding of their processes. The insight improved situational awareness and built a stronger safety culture. The SAFE Dialogue process is an example of how injury prevention can begin with a conversation.
Industrial safety gets a bad rap as being a detriment to productivity. But what if you could use safety to better understand and improve the performance of your operations?
Smart safety can help you do just that. It uses the same concepts as smart manufacturing or Industry 4.0—such as seamless connectivity and real-time analytics—and extends them to your industrial safety efforts. This can help you not only better monitor and manage your safety performance, but also transform your operations in other ways.
By connecting safety devices into your operations and giving workers more insights into those devices, you can boost productivity, identify and resolve common machine-stoppage problems, and even predict production issues before they happen.
Smart safety devices allow you to access safety data that until now wasn’t being generated or couldn’t be extracted from your systems. The data can give you valuable insights into key aspects of your operations, such as where safety-related failures are occurring, if workers are following standard operating procedures and if machines are nearing failure.
You can then put these insights to work in several ways to help improve production:
Uncover production issues.
Reduce safety-related downtime.
Realize predictive maintenance.
Speed up troubleshooting.
Ease regulatory compliance.
Of course, smart safety is first and foremost about safety. And by connecting people, equipment and worksites, you create new opportunities to enhance both worker and environmental safety.
A safety management system provides a structured approach that enables an organization to control its occupational health and safety risks and improve performance. ISO 45001 is an international safety management system standard. It is the product of a project committee, representing 58 countries, to establish a common, global safety management system that is consistent in steps and language with the current environmental and quality management system. The final standard was published on March 15, 2018.
ISO 45001 includes some very important improvements over OHSAS 18001, including greater emphasis on workers and their participation.
Other improvements include an enhanced approach to managing the health and safety of contractors and making health and safety part of the purchasing decision-making process. There’s greater emphasis on leadership participation, change management and performance management. True implementation of a structured approach to managing health and safety means implementing a system and not a standard. Organizations that implement a standard tend to focus on compliance and not the effectiveness. The true value of ISO 45001 comes from linking the business strategy and the health and safety management system—not developing a standalone set of documents.
Using ISO 45001 to help manage risks and contractors, core and support processes, equipment and people gives you the opportunity not only to control but to assess and improve the health and safety of workers and others. Certification to ISO 45001 gives you the opportunity to identify improvements and further reduce the risk of injury, illness and death.
- Walt Rostykus, Rick Barker, Humantech; Tim Sparey, Lloyd’s Register Quality Assurance
If your company doesn’t have a program to eliminate employee bullying, you need to start one right away. Developments over the last several years guarantee that if you don’t do it, you face the possibility of paying a steep price in government penalties and employee lawsuits, and the stiff legal costs associated with them.
Workplace bullying can endanger employee safety, and the Occupational Safety and Health Administration requires employers to maintain an anti-bullying policy. This comes from OSHA’s authority under the OSH Act’s “General Duties” clause, which requires employers to maintain a safe workplace for their workers.
Bullying, harassment and violence (BHV) are safety issues in the workplace, even though they normally fall to human resource departments.
What ends as a violent act starts out slowly as incivility, or the intent to harm a worker. Negative interactions or jabs at someone could be brushed off as a cultural norm at the workplace. However, this could escalate to hazing or harassment and potentially to a physical act.
Prevention, training and programs fall into a company’s safety management system (SMS). Daniels outlined steps a safety professional should take:
Recognize bullying, harassment and violence as a safety hazard in the group or organization.
Establish a plan to address the hazard that includes processes for reporting.
Provide training to members of the organization at the awareness, supervisor and management level.
Integrate into the organization’s SMS. - Stefanie A. Valentic
“Your services could be suffering because workers were not treated correctly in their position,” said I. David Daniels, president and CEO of ID2 Solutions.
Nationally, the positivity rate for the combined U.S. workforce held steady at 4.2% in 2017, the same as in 2016, but a dramatic increase over the 3.5% positivity rate from 2012, which represented a thirty-year low.
The analysis of 2017 data also suggests shifting patterns of drug use, with cocaine and amphetamines positivity surging in some areas of the country and marijuana positivity rising sharply in states with newer recreational use statutes.
Prescription opiate positivity rates declined dramatically on a national basis.
“Not only have declines appeared to have bottomed out, but also in some drug classes and areas of the country drug positivity rates are increasing,” said Barry Sample, PhD, senior director, science and technology, Quest Diagnostics. “These changing patterns and geographical variations may challenge the ability of employers to anticipate the ‘drug of choice’ for their workforce or where to best focus their drug prevention efforts to ensure a safe and healthy work environment.” Nationally, the positivity rate for opiates in the general U.S. workforce in urine drug testing declined 17% between 2016 and 2017 (0.47% versus 0.39%).
Overall, marijuana positivity continued its five-year upward trajectory in urine testing for both the general U.S. workforce and the federally-mandated, safety-sensitive workforce. Marijuana positivity increased four percent in the general U.S. workforce (2.5% in 2016 versus 2.6% in 2017) and nearly eight percent in the safety-sensitive workforce (0.78% versus 0.84%).
Most manufacturers are now looking at a workforce that is 35% Millennials—the generation born between 1981 and 1996. According to Pew Research Center, Millennials became the largest generational group in the U.S. labor force in 2016, when they overtook Gen Xers. In 2017, 56 million Millennials were working or looking for work.
And, since the Baby Boomers are retiring in droves, this number is only going to grow. Millennials are expected to be 75% of the workforce by 2025.
This younger workforce needs to be trained—they are graduating without many of the skills needed for manufacturing jobs—but the traditional talking head and paper manual training programs their parents sat through won’t work with Generation Y.
Millennials and later generations were born into a digital world. (These days, by the time the average American has turned 21, they’ve spent 6,000 to 9,000 hours playing video games, but only about 2,000 hours reading books). They’ve been fed on video games, and it means they learn and play differently from older generations. Millennials are totally comfortable with technology, and research has shown that they crave variety in media and are born multitaskers; so they can’t just sit and listen to a talking head, the way earlier generations used to.
Intuitively, it makes sense for training programs to use games, since Millennial brains are already working that way. The “gamification of training” means using game design techniques in a non-game situation to engage users and reinforce a specific skill or concept. Training games use techniques from the game world like rewards, points, badges, frequent feedback, progression through many levels, etc., to make training more effective by making learning more fun.
The new silica regulation imposed by the Occupational Safety and Health Administration (OSHA) limiting employee exposure to crystalline silica may be detailed and complex, but the agency takes compliance seriously and is not expected to cut an employer any slack if caught violating the rule.
The rule went into effect on June 23 for most employers but was imposed on Oct. 23, 2017, on the construction industry, where OSHA believes most worker exposure to silica takes place.
Under the new standard, the permissible exposure limit now limits worker exposures to 50 micrograms of respirable crystalline silica per cubic meter of air, averaged over an eight-hour day.
Crystalline silica is in many natural materials that are commonly found in many industrial products and at construction sites, including sand, concrete, stone and mortar. Silica also is used to make products like glass, pottery, ceramics, bricks, concrete and artificial stone. It also is contained in industrial sand and is used in certain foundry work and hydraulic fracking operations.
When it announced the rule, OSHA estimated that 2.3 million workers are exposed to silica when they are at work. It also supported the proposed changes by citing epidemiological studies showing a strong link between silica exposure and lung cancer in at least 10 industries.
OSHA said it was expected to prevent 600 deaths a year from silica-related diseases—such as silicosis, lung cancer, other respiratory diseases and kidney disease—and to prevent more than 900 new cases of silicosis each year. - David Sparkman
Safety and cybersecurity are interconnected in the manufacturing environment. Security breaches can trip systems that stop machinery or alert operators in the event of a problem, damaging equipment, placing people at risk—even causing environmental calamities.
Yet at many manufacturers, safety and information technology teams do not effectively collaborate.
“If you discover a vulnerability in IT, you patch it and move on,” said Steve Ludwig, safety programs manager for Rockwell Automation. “On the [operations technology] side, that’s not the case. We need more education in the engineering community about OT risks.”
Safety-related security breaches can occur when: Employees or contractors inadvertently plug an infected machine into the system; connect to an unsecure network; or download the wrong program.
Disgruntled current or former employees, knowing the ins and outs of a system, break in and cause damage. Hackers break into an operations system for financial, competitive, or political reasons.
State-sponsored spies target critical infrastructure and production systems to disrupt operations or steal secrets. Cybercriminals seek to disrupt, infect or shut down critical infrastructure, from nuclear plants to water supplies and oil refineries.
EHS, operations and IT teams should work together to identify safety data requirements for operations systems and develop a risk-management strategy for security threats and vulnerabilities, as well as their potential implications on safety.
A safety assessment looks at not only standard operator functions but all human-machine interactions, including machine setup, maintenance, cleaning and sanitation, as well as training and administrative requirements. In addition, companies should expand their traditional scope of this assessment and look at potential cyberattack risk.
“The United States is the world leader in the deployment of connected technology,” said Michael Pina, program manager at the U.S. Department of Transportation. “Pretty much everyone in the world is waiting to see research.”
The federal government has provided cities across the country with millions of dollars to study and implement new vehicle features. The National Highway Traffic Safety Administration estimates that connected vehicles have the potential to reduce crashes by 80%.
Connected vehicles communicate with one another, traffic signals or even cell phones in order to reduce crashes and pedestrian accidents. Pina explained how they work in the following three steps:
1. A wireless device in a car sends basic safety messages 10 times per second. 2. Other nearby cars and roadside equipment receive the messages. 3. Drivers get a warning of a potential crash.
There currently are 40 different connected vehicle deployments in the works across the country, from rural areas in Wyoming to busy city meccas such as New York City.
Some features that are being tested or will become standard in the next few years include:
Shoulder and back injuries, along with general fatigue, are quietly stealing worker quality of life and plant productivity. They’re problems screaming for a solution, and by all accounts, industrial exoskeletons are the best answer.
Since 2012, Boeing has explored industrial exoskeletons. Portrayed in sci-fi movies as super-powered suits, these wearable tools offer very real solution to the overexertion injury..
Safety leaders need to focus on the significant few things that most impact safety, rather than trying to do too much.
If you had to work in the dark but you had a spotlight, where would you shine it? Would you aim it at the darkest places or the places where the light would do the most good? Most safety professionals have a limited amount of time and effort and it is not possible to do everything needed in safety. So where should you put your attention and efforts? Should you put your effort into the areas that are worst or the areas that have the most potential to improve safety?
The late Stephen Covey created a model of time management in which he differentiated the things that are urgent from things that are important. He suggested that it is human nature to prioritize things that seem urgent and important. Then if we have time and effort left, we tend to focus on the things that are urgent but less important, thus neglecting the things that are important but not urgent. These things include developing and modifying strategy, preparation, planning, clarifying values, building relationships and culture, and creating empowerment. When we focus on the urgent at the expense of the important, we tend to neglect the things that can make the greatest difference.
Failing to focus on the things that are most critical to safety success has other negative side effects:
It frustrates safety efforts. Peter Drucker once proposed that there is nothing more useless than doing something well that should not be done at all. Misguided safety efforts don’t always focus on totally useless things but often focus on things that have minimal impact on desired results. Workers try harder and get better, but results don’t reflect their efforts. They get frustrated or discouraged and often quit giving their best efforts. They feel safety is a lost cause or at least one over which they have little or no control.
It sub-optimizes results. Pareto told us years ago that some efforts produce more results than others. He proposed that 20% of the effort often produces 80% of the results. If you are shining your light on that highly significant 20% (or some part of it), you can produce optimal results. If, however, you are working on the trivial 80% (or some part of it), you will put out a lot of effort to produce little or no results. One of the most common functions we do as consultants is discover the significant few behaviors and re-focus the organization on these. By doing so, the same amount of effort and resources produces significantly greater results.
It overloads itself. All too often when you are not focused on the significant few things that most impact safety, you are trying to do too much at once. Unfocused safety efforts are ineffective at best and a complete waste at worst. Over the past ten years, we have found almost all organizations are trying to do too much. They implement new programs on top of old programs and workers can feel overloaded and confused. Leaders say, “You can’t be too safe,” and workers disagree.
It fails to produce meaningful metrics. It is virtually impossible to measure everything that is being done to improve safety. In lieu of meaningful performance metrics, we tend to rely on results metrics, i.e., lagging indicators. Lagging indicators, while useful to management, are virtually useless to individual workers or work teams to determine if they are improving their performance or not. Measurements such as recordable rates and severity rates do not accurately reflect individual performance. These metrics are also so far removed from the worker performance that creates them that they have minimal impact. On the other hand, focused efforts allow measurement of a few specific improvement targets that do reflect daily performance of workers.
It misaligns culture. The best safety culture is not defined by characteristics, but by capabilities. When a culture tries to improve and fails, it degrades confidence in its abilities. Culture is what is shared among the group, and experiencing a failure is definitely a shared experience. Even putting out massive effort for mediocre results is damaging. Focusing on high-impact behaviors or conditions can create quick wins in safety. Such quick wins can motivate the culture and solidify their confidence in their ability to make meaningful improvement.
It undermines authority. When leaders dictate priorities and followers diligently carry them out, what happens? If priorities are improperly focused, effort will lead to small or no positive results. When this occurs, trust in leaders is diminished. If the next set of priorities also fail, the pattern is set for an ongoing loss of trust, which will ultimately undermine the respect for the authority of leaders.
It promulgates the focus on failing less. Safety efforts that are focused on results and not the conditions and behaviors that produce the results are aimed at failing less, not succeeding. A harbinger of this mindset is the lack of KPIs (key process indicators) or leading indicators. Lacking process metrics, most organizations try to manipulate lagging indicators and fall into hopelessly reactive practices. Accidents are defined as failures but it often takes an accident to prompt further improvements. At one organizational assessment, workers identified multiple hazards in the workplace that had not been addressed. They asked each other who wanted to volunteer to get injured on these hazards so they could get them fixed. It was a tongue-in-cheek statement but reflected management’s priorities of managing safety reactively rather than proactively.
If a general is losing a battle, he should not pick up a gun and start shooting at the enemy. He should focus on what could potentially win the battle or successfully retreat. Too many safety leaders grab the gun. They get themselves so busy fighting fires that they don’t have time to analyze their data and develop priorities. They are shining the spotlight on the darkest areas rather than the areas that could make the most of the light.
Terry Mathis, founder and CEO of ProAct Safety, has served as a consultant and advisor for top organizations the world over. A respected strategist and thought leader in the industry, Mathis has authored five books, numerous articles and blogs. EHS Today has named him one of the “50 People Who Most Influenced EHS” four times. He can be reached at email@example.com or 800-395-1347.
New research office is aimed at exposing employers to data about discrimination.
The Equal Employment Opportunity Commission (EEOC) has created a new research unit called the Office of Enterprise Data and Analytics (OEDA) intended to “provide customers timely, accurate and bias-free data and information to prevent and remedy unlawful employment discrimination and improve organizational performance.”
“This is an exciting and forward-looking development,” says attorney Eric J. Felsberg of the law firm of Jackson Lewis. The firm’s Data Analytics Group was invited to EEOC’s headquarters in Washington, D.C., to attend a listening session about the new office.
“Employers have access to a wealth of data that, when paired with powerful analytical tools, can help them more effectively manage the workplace,” Felsberg says. “In order to remain competitive, reduce workplace management costs, and mitigate workplace-related legal risk, among other things, it is critical for employers to leverage their own data in combination with external sources.”
Asserting that their vision is to “build a 21st century data and analytics organization,” the EEOC describes OEDA’s principal goal is to “use state of the art data and information science tools and techniques to collect, utilize and share data and information, efficiently leveraging data to reduce burden and costs while protecting individual and employer privacy and promoting program transparency.”
Felsberg stresses that EEOC’s launch of the new office “should prompt employers to reconsider waiting to leverage data and analytics in managing their workplace. Using data and analytics in the workplace is not a passing fad.”
The federal EEOC’s new OEDA unit will consist of four divisions:
The Business Operations and Organizational Performance Division will oversee business operations and, among other tasks, is charged with enhancing the office’s transparency and effectiveness.
The Data Development and Information Products Division is intended to develop information products and taking part in data collection and survey methodology. It also will support EEOC charge-handling by linking EEOC charges with EEO-1 reports and providing analyses of EEOC charge data.
The Information and Data Access Division will oversee data governance and policy, and provide research and information services in support of enforcement litigation efforts.
The Data Analytics Division will provide systemic investigations analytical support and analytics on various data “to identify geographic, industry and other drivers of discrimination charges and emerging trends.” The division will consist of an Investigative Analytics Team and an Enterprise Analytics Team.
EEOC’s new office also is charged with taking steps to assist employers by making valuable data and data-related products available to them. It also will equip agency investigators and enforcement officials with new data and analytical resources.
“While access to new collections of data and data products from the EEOC will be of great value, employers should take note that these, and additional, resources also will be at the disposal of, and potentially bolster, enforcement efforts,” observes Felsberg. “Therefore, it is critical for employers to embrace the use of data to help analyze and manage the workplace and to better identify positive and negative trends.”
Big Data’s Potential Pitfalls
At present, when it comes to equal opportunity issues where employers make use of Big Data and analytics, the situation usually involves a company large enough to have a diversity officer and function. The potential for misuse of this data makes it vital that employers to seek legal counsel if it can be expected to generate anything other than unalloyed good news.
Typically, the analysis performed makes use of that company’s human resource information system (HRIS), which is considered proprietary information. Most diversity offices track workforce demographics using such a system, sometimes also called a human resource management system (HRMS).
These analyses typically include all job groups, like EEO-1 job categories, and may be as granular as job titles, Jackson Lewis explains. Most include race/ethnicity and gender, some include age and others may include such factors as veteran status, sexual orientation and disability, in part depending on the availability and reliability of the data in the HRIS.
The analyses may be snapshots for a specific date, or time-trends for comparison purposes: “Are we improving year-to-year in our representation of Hispanic females at the mid-level manager position?” Either way, they typically result in pie charts, graphs and other visual aids clearly displaying percentages of representation by race/ethnicity, gender, etc., sometimes with red-shaded warning signs for “high-risk” (or “high-opportunity”) areas, points out Jackson Lewis attorney John M. Bryson II.
One goal is benchmarking: Diversity offices being able to answer their CEO’s question, “So how are we doing compared with our competitors?” Benchmarking is a relatively easy task so long as comparative data is available, Bryson notes. “That, however, is the rub. Although some do, most companies do not publish their workforce demographic data.
Some periodicals, like DiversityInc, publish limited data on those recognized annually as their “Top 50 Companies for Diversity,” Bryson says. The list may include companies in your industry, and even if it doesn’t, it can be considered a “best in class” benchmark. There are other sources as well, such as industry groups and the EEOC.
He notes that government contractors are accustomed to preparing annual Affirmative Action Plans that include statistical analyses of potential “adverse impacts” of various employment processes, such as recruiting/hiring, performance evaluations, terminations, compensation and promotions.
“These analyses can be critical in proactively uncovering problems and addressing them,” Bryson says. “Particularly with non-government contractors, diversity and human resources offices often conduct such analyses to determine the fairness and equity of corporate policies and practices. Like other self-critical analyses, they present risks if disclosed.”
Because of the risk that the data will become publicly available, he says companies should identify potential legal and reputational implications of these analyses, and make sure to address them as quickly as possible.
Such data can turn out to be useful to enforcement agencies (EEOC and the Office of Federal Contract Compliance Programs), plaintiffs’ attorneys, disgruntled employees, activist shareholders and any media critics your company may face in the future.
You should take steps to establish and preserve the attorney-client privilege for such analyses as you would any other area of legal advice, Bryson urges. “You can also probe the accuracy and reliability of the methods used and results,” he adds. “To the extent your diversity office wants to publish the results of analyses beyond a ‘control group,’ ensure that this business decision considers the legal and reputational risks.”
How AI and analytics can be used to drive innovation, realize efficiencies and transform workplace safety and health.
Many industry giants are running out of options with increased competition. Wall Street is pressuring such companies to outpace potential disruptors or, like Ford CEO Mark Fields, get booted. Disruptors also grow — and get huge valuations — quickly, making buying your way to innovation less attractive.
One alternative is to adopt the tools like advanced data analytics and artificial intelligence to create better efficiencies. Businesses that do so enjoy competitive advantages, significant cost savings — and most importantly, ensure they provide their customers with the most relevant product or service.
As we head into 2019, it’s hard to find an industry that has been untouched by the data revolution. Even segments known for the hands-on nature of its work, like construction, are being reimagined with 3D-printed buildings, augmented reality and robots. The three industries below stand somewhere between those most and least affected by digital transformation. Here’s a look at how the three — automotive, manufacturing/food production and health insurance — are embracing data analytics and artificial intelligence, often through IIoT innovations (Industrial Internet of Things) and the benefits each are realizing:
Autos: Different Warranties for Different Drivers
It should come as no surprise that not all drivers treat their vehicles the same. These days, many cars have sensors in their interiors. Such sensors are tracking everything about how drivers use their cars and that data can be used to better segment drivers. Everything from how many turns a driver takes to how often they brake gets logged in a database. It even measures the pressure on brakes to distinguish hard braking from soft braking.
Once you pull such data together and apply advanced analytics, you can see patterns of people who are doing more brakes and stops than average and who is driving hundreds of miles on the highway where they barely have to touch the car. Using such data can change an automaker’s focus from product segmentation to a more granular customer segmentation.
One thing you notice by taking this approach is that mileage is less of an accurate barometer for warranties than usage. The worst kind of usage for a car is when a vehicle is driven mostly in traffic while the best is when it’s mostly highway driving, with less stopping and starting. An automaker in that case can offer everyone the same warranty for the first year but then can offer a different warranty package in the next year based on usage. Though no automakers have done so yet, this type of warranty package (similar to how the car insurance industry uses in-car tracking devices) can save automakers a lot of money and reward drivers who are gentler on their cars. For example, one of our auto clients was able to reduce warranty costs by 35% using sensor data.
Autos: Big Data for Product Design
Similarly, sensor data could be used to inform new product design for auto manufacturers. While auto manufacturing is complex and there would be challenges around making real time changes in the production line, data inputs could be used for future product design. By taking all of the input from the sensor data, auto makers could focus on the features that consumers are actually using and save money on eliminating features they aren’t using. It could also be used to re-configure different systems. Examples of this include the entertainment and navigation systems, which has a lot of software powering it. Physical examples include things like cruise control or climate controls. If the data sensor data shows that drivers are more comfortable adjusting these things manually, then the manufacturer could evaluate how much they invest in these systems for future models. Data for product development is important as organizations that leverage customer behavioral insights outperform peers by 85% in sales growth and more than 25% in gross margin, according to research by McKinsey & Co.
Food Production: Minimizing Manufacturing Stops
In food production, the use of sensors in machinery aren’t new. Some date back to the 1980s or 1990s. But since data storage was historically so expensive, no one had been collecting such data in a central repository. Also, the factory engineer who traditionally collected such data weren’t data scientists, but rather manufacturing experts who were accustomed to monitoring pressure and temperature. Today, data storage costs have come way down with the ease of public cloud, and advanced data analytics to realize new efficiencies.
One way to make food production more efficient is to limit so-called manufacturing stops. That name is a bit of a misnomer since the line never actually comes to a complete stop. Instead, there are an endless number of instances where equipment along the production line stops for a short period of time due to obstructed product flow or something easily resolvable that doesn’t require maintenance personnel to get involved.
For example, think of the production and packaging line for a product like potato chips or soft drinks. If the there’s a stall in the line where the chips get bagged or the soft drink goes into the cans or bottles, the entire process slows down for what may be an unperceivable five seconds as the glitch gets fixed and the next batch of chips can come come through the line, or the soft drink start flowing again. These series of small delays in food production can add up.
According to a 2017 OEE Benchmark study via Epicor and Sage Clarity: “Minor stops are a chronic problem in the food and beverage industry, up to 60% of downtime. Minor stops are difficult to capture manually and require automatic data collection. Otherwise, companies are ignoring 60% of production problems.”
By analyzing all of the sensor data that is being generated continuously in real time along the production line, and using artificial intelligence to organize and analyze for efficiency and optimization, food production plants can create incremental production improvements every month and even single digit percentage increases can translate into millions of dollars over time for any individual manufacturing plant.
Healthcare: Personalized Medical Devices
AI and advanced analytics is rapidly transforming the healthcare industry from leveraging data for efficient diagnosis to pattern recognition for treatments to resolving logistical challenges. In the manufacturing realm, data analytics holds major potential for advancing the way medical devices are designed and produced for individuals. With flexible manufacturing processes like 3D printing, if you have the right data available that can be analyzed (even if it’s aggregated and anonymized), the industry can get closer to manufacturing devices – from custom braces in dentistry to medical devices that are implanted into patients. Instead of a limited set of models or devices, patients will have increased choice for devices that are customized for their specific needs.
This isn’t just theory either. According to a Medical Xpress article, “researchers at the Wyss Institute for Biologically Inspired Engineering at Harvard University have created a novel 3D printing workflow that allows cardiologists to evaluate how different valve sizes will interact with each patient's unique anatomy, before the medical procedure is actually performed. This protocol uses CT scan data to produce physical models of individual patients’ aortic valves, in addition to a "sizer" device to determine the perfect replacement valve size.”
The opportunities for advanced analytics to help businesses navigate through digital transformation are endless. The above examples demonstrate just three areas where advanced analytics and artificial intelligence have massive potential to transform the way various industries operate. It often turns out that there are lots of areas for businesses to save money, but when it comes to implementing AI solutions, it’s a good practice to focus on one area, see the results and then move to the next.
Tackling AI initiatives is a difficult proposition for many industries. It requires resources, people and an overall change to mindset with buy in from leadership. The first step is to start small and pick one area to start where you want to make a change. Then, if you don’t have the in-house capabilities and resources, you need to choose a partner that has the ability and expertise in both AI and domain expertise in your specific industry to consult and lay out a plan. Once you’ve established several examples and projections on the benefits that deep data analysis can have on your business, it becomes much easier to get full management buy in for implementation.
We have seen a 350% increase in ransomware attacks, a 250% increase in spoofing or business email compromise (BEC) attacks and a 70% increase in spear-phishing attacks in companies overall.
Board directors continue to up their investment in cybersecurity. Seventy-three percent now say their organization requires that third-party vendors meet certain cyber risk requirements—up 30 percentage points from 2016, according to the 2018 BDO Cyber Governance Survey of 145 co-directors at public companies.
This increase in requirements and investment is warranted as manufacturing companies adopt and integrate more advanced technologies into their operations. During 2018, we have seen a 350% increase in ransomware attacks, a 250% increase in spoofing or business email compromise (BEC) attacks and a 70% increase in spear-phishing attacks in companies overall. Further, the average cost of a cyber-data breach has risen from $4.9 million in 2017 to $7.5 million in 2018, according to the U.S. Securities and Exchange Commission.
Risks have grown significantly around cyberattacks, information breaches from third-party vendors and information theft (i.e., personal identifiable information, intellectual property and trade secrets).
To further complicate the cyberthreat landscape, the threat actors are increasingly integrating their efforts between nation-state cyberattack groups, criminal cyberattack groups and hacktivists, resulting in more sophisticated cyberattacks on manufacturers—especially companies tied to critical infrastructure industries.
Manufacturers must focus on three key aspects of cybersecurity:
1. Protecting their business information systems, including email.
2. Guarding their manufacturing information systems , including computer-aided-design and computer-aided-manufacturing (CAD/CAM) systems, as well as securing production machinery.
3. Securing their products that include software and/or internet-connected devices.
Threat-based cybersecurity should be the North Star for manufacturers. Instead of focusing solely on protecting critical data assets or following the basic script of a cyber program such as ISO 27001 Information Security, this predictive approach concentrates investments in the most likely risk-and-attack vectors based on each manufacturing company’s unique threat profile.
To develop and maintain a comprehensive cyber threat profile, you first need to assess and take ownership of your organizational DNA: the data assets and other intellectual property that make your company unique—or a potential target. This involves identifying, managing, accurately categorizing, protecting and optimizing organizational data from inception to final disposition.
As you go through this process, it is important to realize that the data assets you value the most may not be the prime target for a would-be hacker. Your data on performance outcomes, for example, is far harder to monetize on the dark web than product designs, client account information or supplier information.
The next step is to factor in the threat environment to understand current exploits and the most targeted vulnerabilities. The most targeted cyber-attack vectors include email system attacks focused on gaining system access and/or re-routing payments, supply chain attacks and insider-threat attacks.
What does this tell us? To effectively detect and respond to cyber and data privacy risks, manufacturing organizations need to:
Conduct advanced email and network attack detection assessments. This will help you diagnose the real state of your cyber defense to advanced persistent threats on your email system and information/data network
Bolster access controls. Evaluate technical policies, plans, and procedures to protect vital information assets, including implementation of data encryption, multi-factor authentication (MFA), and developing a layered–cyber defense system
Make top-down personnel cybersecurity education and training a priority. This helps ensure all individuals from the Board of Directors and C-Suite are better informed about the nature of cyber-attacks and the appropriate actions needed to create a virtual human firewall.
Create an incident response plan. Include the participation of organization leadership and key personnel from all areas of manufacturing, information technology, business administration and engineering operations
Create an internal and external crisis communications plan. This should align with existing enterprise risk management frameworks
Strengthen monitoring, detection and response services. The goal is to quickly detect cyber intrusions and data breaches, rapidly respond to cyber-attacks and effectively eradicate malicious software.
Evaluate cyber insurance liability coverage to be sure it’s adequate to cover a significant cyber data breach.
Threat-based cybersecurity is a journey spanning the entire corporate lifecycle and requiring an ongoing commitment to cyber defense. Given the growing risk of cyber and data privacy attacks, it is vital to begin developing an approach.
Gregory A. Garrett is head of U.S. and International Cybersecurity for BDO audit, tax and advisory firm.