Benchmarking against risk management best practice – how do ‘industry average’ organisations compare?

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This post contains a comparison of the differences between organisations with best practice in risk management and those whose practice is the industry average.
This post shows that the quality of those factors which influence risk is higher and less variable in best practice organisations.  Different factors are more important to the ‘best practice’ organisations than to the ‘average’ organisations.
We have made the benchmarking tool available for free download so that you can benchmark your organisation against best practice.

Introduction

Some organisations manage risk successfully – they represent ‘best practice’ in risk management.  If the majority of organisations could raise their performance to the levels of their high-performing peers it could lead to significant improvements in areas as diverse as patient safety, financial services, major projects and workers’ health and safety.

In a recent post, I summarised five characteristics that I had observed over the years in organisations with best practice in risk management.

However, the differences between best practice and industry average organisations can be seen clearly in the differences in the quality of those factors that influence risk in an organisation.  These differences are shown graphically later in this post.

First, we need to identify what factors influence risk in an organisation. The Influence Network provides a useful means of identifying and assessing those factors.

A typical Influence Network is shown in Exhibit 1. Details on the approach are given in a recent post and report.

Exhibit 1: Influence Network for the typical factors that influence risk in an organisation

Organisations with best practice in risk management are benchmarked against those whose practice is average. Benchmark your organisation with our Tool.

The Influence Network contains four levels of factors:

  • Direct performance factors – these directly influence the likelihood of an incident being caused
  • Organisational factors – these influence the direct factors and reflect the culture, procedures and behaviour within the organisation
  • Strategy factors – these reflect the expectations of the decision makers in the organisation and the organisations they interface with (e.g. clients, suppliers, subcontractors)
  • Environmental factors – these cover the wider political, regulatory, market, industry and social influences which impact the strategy factors

Each of these factors can be assessed in a workshop to give the:

  • Quality of each factor by comparing their organisation with behaviourally anchored ratings and scoring between 0 and 10 – this gives an indication of the current quality of these factors, the variation in that quality and the underlying reasons
  • Importance of each factor by weighting its influence on each factor on the level above on a 6-point scale from zero to high – this identifies those factors that have the most influence on risk

The Best Practice and Industry Average Organisations

I have observed a range of differences between organisations over the years. A few years ago, I led a review of how health and safety risks were managed in the British construction industry(1) followed by a review of how those risks were managed in the construction of the London 2012 Games(2, 3, 4).  As both of these reviews used the same methodology, it was possible to make comparisons.

The construction of London 2012 was completed on time and within budget. It was also the first Games where no workers lost their lives during construction. Therefore, it seems reasonable to take the construction of London 2012 as evidence of best practice in risk management.

The review of the British construction industry involved a wide range of organisations, so it would seem reasonable to take this as evidence of industry average practice in risk management.

Many of the issues that were assessed were not specific to the management of health and safety risk, but relate to general organisational and human behaviour. As such, the differences observed are likely to be relevant to organisations in other industries facing other risks.

Differences in the quality of the Direct level factors

Exhibit 2: Differences in quality of the Direct level factors in best practice and average organisations

Organisations with best practice in risk management are benchmarked against those whose practice is average. Benchmark your organisation with our Tool.

Exhibit 2 shows that the main differences between best practice and industry average organisations are that:

  • There are sufficient suitable workers in the ‘best practice’ organisations
  • Those workers are more Competent, work better in Teams, have better Health, have better Front-line Communications, operate under less Pressure, are more Compliant
  • There is access to better Safety Equipment / PPE

Differences in the quality of the Organisational level factors

Exhibit 3: Differences in quality of the Organisational level factors in best practice and average organisations

Organisations with best practice in risk management are benchmarked against those whose practice is average. Benchmark your organisation with our Tool.

Exhibit 3 shows that best practice organisations:

  • Have better Recruitment and Selection
  • Provide better Training
  • Have more effective Procedures/Permits, Planning / Risk Assessment and Incident Management / Feedback
  • Have better Management and Supervision
  • Provide better Welfare Conditions
  • Have higher quality Design

Differences in the quality of the Strategy level factors

Exhibit 4: Differences in the quality of the Strategy level factors in best practice and average organisations

Organisations with best practice in risk management are benchmarked against those whose practice is average. Benchmark your organisation with our Tool.

Exhibit 4 shows that best practice organisations:

  • Have a better Contracting Strategy
  • Provide better Ownership and Control
  • Have more effective Health and Safety Management
  • Undertake better Worker Consultation
  • Have better Company Profitability

This is the level where the differences between best practice and average organisations are most pronounced.

Differences in the importance of the factors

Each factor was assessed in the workshops to establish how important it was in terms of its influence on risk.

Exhibit 5: The most important factors in each level for best practice and average organisations (shown in descending order of importance)

Organisations with best practice in risk management are benchmarked against those whose practice is average. Benchmark your organisation with our Tool.

From Exhibit 5, we can see that:

At the Direct level:

  • Two of the five factors (Competence and Front-line Communications) are common between the best practice and average organisations
  • Motivation and Compliance were assessed to be more important in the best practice organisations, whilst Team Working, Risk Perception and Pressure/Stress were assessed to be more important in average organisations
  • The importance of Compliance in the best practice organisations possibly reflects the highly controlled and organised approach taken
  • The importance of Pressure/Stress in the average organisations possibly reflects the pressure of the economic downturn on working on hours, deadlines and resources.

At the Organisational level:

  • All five factors (Management, Supervision, Training, Planning/Risk Assessment and Communication of Information / Advice) are common between the the best practice and average organisations

At the Strategy level:

  • Company Standards was the only common factor between the best practice and average organisations
  • Company Profitability being the most significant factor in the average organisations possibly reflects the influence of the economic downturn
  • In the the best practice organisations, the importance of formal Health and Safety Management systems and Working Engagement was stressed

Conclusions

For those factors that had the most influence on risk, there was little commonality between the best practice and average organisations at the Direct (worker) or Strategy (head office) levels.

At the Organisational (site) level, the results from both the best practice and average organisations indicated that the same five factors had the most influence on risk, namely: Management, Supervision, Training, Planning/Risk Assessment and Communication of Information / Advice.

When it came to the quality of the factors, 27 of the 39 factors had significantly higher ratings in the best practice organisations (mean ratings two higher on a 0 to 10 scale).  This suggests a significant difference from the levels of quality achieved in average organisations, and demonstrates what is possible.

It was noticeable that where the factors could be controlled by best practice organisations, the factor ratings were very high with little variability (e.g. Training and Compliance). However, where control was less easy, there was greater variability (e.g. Risk Perception).

The biggest differences between best practice and average organisations is in the Strategy level factors.  These are the factors where the key decisions are taken.

Benchmark your organisation against best practice

We have made the benchmarking tool available for free download so that you can benchmark your organisation against best practice.

References

  1. Evaluation of Construction (Design and Management) Regulations 2007, Part 1 Main Report and Part 2 Technical Annex, HSE Research Report 920 Part 1 and Part 2, 2012 (Primary author)
  2. Mike Webster and Liz Lloyd-Kendall: The Construction (Design and Management) Regulations 2007: Duty holder roles and impact, Olympic Delivery Authority Learning Legacy Report ODA 2011/269, October 2011
  3. The Construction (Design and Management) Regulations 2007: Duty holder roles and impact, HSE Research Report 941, 2012
  4. Mike Webster: ‘The use of CDM 2007 in the London 2012 construction programme’, Proceedings of the Institution of Civil Engineers, Civil Engineering 166, February 2013, Issue CE1, Pages 35–41

Free download of MPW R&R Organisational Risk Report About the author:

Mike Webster specialises in risk and regulation, and is a chartered engineer with over 30 years’ experience. He has led risk and regulatory projects in the UK, Europe, Far East and US, and has acted as an expert witness in the UK.

He founded MPW R&R to provide risk and regulatory solutions to regulators, businesses and litigants in construction and other high risk sectors.

If you would like free access to Mike’s report Do you understand what factors influence risk in your organisation? and the accompanying Organisational Risk Benchmarking Tool click here.

If you would like to discuss this further, drop Mike a line at mike.webster@mpwrandr.co.uk

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Posted in Organisational risk, Risk management

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