Value-Driven Service

EHS leaders must embrace the mission of showing "value" beyond compliance or crisis.

Since becoming AIHA president, I am often asked: "What is the future of our profession?" As you might imagine, given a soapbox, I will always get on it. So here are some of my thoughts and those of my friend and associate, Alex Pollock, EHS change management leader at Dow.

One of the things that most distresses me is the picture of the EHS professional who is only called when OSHA or EPA arrives, or when the plant blows up. That person's role is purely defensive, and many EHS staffs are purely defensive. They represent the minimum that the corporate world can do to meet government regulations and the minimum needed to keep production going.

The future of our profession is that of a supplier which competes successfully in the marketplace for the resources provided by our clients. If we compete successfully, we will be involved not only in OSHA/EPA-driven (or disaster-driven) corrective actions, but also in beyond-compliance preventive actions, design for EHS activities and strategic planning for sustainable development initiatives.

To do this, however, EHS leaders must embrace the mission of showing "value" to clients. Those clients can be internal or external to our organizations, shareholders or stakeholders. Remember that there is nothing more wasteful than doing something exceedingly well that did not need to be done at all.

"As members of the EHS community, how many of us wrestle with how to extract more value from the services we are providing our clients?" Pollock says. "We need to equip ourselves with the additional knowledge and skills to be effective deliverers of solutions to clients needs. In essence, we're in the 'solutions business.' It's not what we know that provides value; it's the results we produce."

Dow has responded to this challenge by reorganizing its environmental, health and safety resources into one EHS organization. As a result, Pollock says, the company focuses on meeting client needs and contributing to business profitability by finding ways to increase revenues, reduce costs and help avoid future costs.

"To be successful, EH&S people must know who their clients are, know the specific service needs of each client, know the degree to which they are satisfying these needs and leverage the value being gained from their efforts," he says. "Clients care nothing for our management structure or strategic plan. They are interested in only one thing: results, the value we deliver."

Measuring Value

What are the measures of the value we deliver? Measured purely in dollars, the value can be high. The classic example of this is the "Rick Fulwiler Calculation." When Dr. Fulwiler was at Proctor & Gamble, he used the following calculation to good advantage:

In U.S. operations of P&G in 1993, workers' compensation insurance and related costs were $11 million. That was one-sixth of the industry average. If P&G was "average" in its EHS loss experience, workers' comp costs would have been $66 million.

That year, P&G had a profit margin of 6 percent. Thus, the "cost of being average" in workers' comp costs would have required P&G to have an additional $1.1 billion in product sales. Thus, Fulwiler demonstrated to his clients that the efforts of his department were at least worth $1.1 billion when measured only by comp costs.

This same calculation can be made for the 1999 Ford Motor-Rouge Steel power plant explosion, only in reverse. The explosion is estimated to have cost more than $500 million. Of course, this does not include the pain and suffering of the burned workers or of the widows of the six dead workers.

Ford's Corporate Safety Department had contracted for outside audits in the years preceding this disaster. Had executive management listened to the audit results and taken the recommended corrective actions, $500 million would have been saved. Thus, the unrealized value of the corporate safety department was $500 million. In this case, the customer did not take the steps needed to realize that potential value.

Look at the definition of "value": "worth, importance, price, the standards by which one judges the worth of things." We can see that there is much that we in the EHS profession have to offer.

Pollock offers a quote that I believe is useful to EHS professionals. The quote is from Roberto Goizueta, who was chairman of Coca Cola: "I wrestle over how to build shareholder value from the time I get up in the morning to the time I go to bed. I even think about it when I'm shaving."

Whether it is selling Coca Cola, making steel, toothpaste or chemicals, or practicing the EHS profession, value-driven service is one sure model of our future.

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