What The Boss Doesn’t Know Can Hurt Him….And His Company

Google the phrase “Safety starts at the top” and you will get more than 6,000 results.  We automatically accept that the CEO sets the tone on safety in a company.
What if the people at the top don’t know the true state of safety in their organizations?   DNV GL just released a study that makes that point crystal clear.   The report, SHORT-TERM AGILITY, LONG-TERM RESILIENCE, looks at a lot of issues facing the oil and gas industry as it attempts to recover, including the impact of intense cost cutting on overall safety.    DNV GL’s survey of executives found that more than half expect to continue to lay off workers in 2017 and one-third expect to reduce spending on training and competency systems. Only a handful expect to increase spending on health, safety, and environmental programs.
Here’s the most interesting part of the DNV GL study – They asked different levels within organizations whether cost-cutting initiatives were increasing health and safety risk.
Only one-in-10 of the executives thought cutbacks in the company had increased safety risks.  However, roughly one-in-four of the people who were closest to the ground – either business unit heads of non-managers – thought there was increased risk.
What does this mean?   There are a couple of scenarios.  Both spell trouble:
Scenario One:  The heads of units and rank-and-file workers overestimate the risk.  That is natural. Good unit and line managers worry about risk a lot because they are directly responsible for controlling it. Cuts came to programs they were directly involved in, so they felt them directly.  Let’s also accept that some safety programs may not have been all that effective in the first place and cutting them doesn’t materially impact risk.  The danger here is that, if unit managers and people in the field overestimate risk, the top executives have failed to communicate why and how their companies are going to run lean without sacrificing safety.
Scenario Two: Oil patch execs don’t have a true feel for the safety risks in the field.  The danger there is even greater, because the people who run the companies may not have enough visibility on their exposure to accidents, injuries and losses.   Either way, it could spell trouble.
Part of the problem is that top execs usually look at programs (budgets for safety may not have been cut as much as other parts of the company), stats (usually recordable injuries and time away from work, which should be lower if there is less work and you aren’t hiring inexperienced employees).   As the study points out, part of the problem is:
the distance between the boardroom of the budget-setters and the risks in the field. Senior management often have good sight of formal indicators (such as lost-time injuries or days away from work) but can sometimes be too far from operations to see things like corroding steel,failing pipework, structural problems or workforce overload.
However, we are now three years into a serious downturn.  Maintenance and replacements have been deferred.  A lot of the tools that give executives objective visibility into field conditions, like audits and inspections, have been reduced, if not cut.  If the company relies on contractors, survival has meant requiring those contractors to make their own deep cuts, forcing them to figure out how to make ends meet.
The disconnect on safety perception between the C-suite and the people who are closest to the work is not unique to this downturn or even oil and gas.  It shows up frequently in surveys of every industry.   A 2010 survey of company culture on Occupational Health and Safety (OHS) in Australia asked people throughout company structures
about their safety programs.   About 85% of the Owners and CEO’s said they agreed or strongly  agreed that “Top level management demonstrates a commitment to OHS.”   Down at the field or specialist level, that number fell to less than 60%.
Some of this has nothing to do with safety and everything to do with the way information is shared in organizations.  There is a popular pyramid graph that shows how much bad news is actually shared within an organization.  The message is that only about four percent of the problems experienced in the field actually make it to the CEO’s desk.   The warning is that no one wants to bring the boss bad news.
As oil and gas recovers, companies put more crews in the field, new people get hired and equipment utilization goes up.  The potential for incidents related to equipment failures, over-work or lack of training goes up the way too much pressure can find a weak spot in a balloon.
CEOs and their executive teams need to be actively engaged in identifying risk and addressing weaknesses.  Unit managers need to be honest about what they are seeing in the field.   Above all, CEOs need to invest in communicating with every level of their organizations so they have a true picture of their exposure and ensuring that no one is afraid to bring bad news to their doors.

First of Its Kind Federal Study Targets Oil and Gas Worker Safety

Early next year, researchers will fan out to well sites, loading yards, man camps and anywhere else they believe they can find oil and gas workers to ask them about safety.  It is a first of its kind study that is being launched by the National Institute for Occupational Safety and Health (NIOSH), according to an article in the Denver Post.  The federal government plans to spend three years surveying and studying the industry to get a handle on worker injuries.

The government is concerned at the high rate of injuries and fatalities on the oil and gas work sites.  Officials say the incident rate for oil and gas is seven times higher than the rest of U.S. industry.  According to the report, researchers will try to get at the heart of the problem by asking workers “about the types of injuries they’ve suffered while on the job, what they were doing when they were injured, the training they’ve had and whether oil companies provide bonuses to workers who don’t report an injury or incident over a certain length of time.”

What will come out of the study?  Nothing in the short-term.  As noted above, the government says it will take three years to survey industry and study the data.   After that, OSHA may use the results to work with industry to hone in on problem areas or it could be used to prompt legislation and changes to regulations.   It is significant that the study will have a heightened focus on transportation, both worker and trucking.

Evolution Of Oilfield Contractor Safety Explained In One Graph

Working safely is a good thing.   Jumping through hoops to convince an oil and gas company you are working safely can be a hassle. One of the things you frequently hear from contractors in the oil and gas industry is how much more oversight they are getting from their  operator customers.

They are right.  It is.   It has to.  Here is why:

OGP Data Series: Safety Performance Indicators – 2012 Data

The  International Association of Oil and Gas Producers (OGP) represents on and offshore oil and gas companies.  One of its services is to keep worldwide statistics on safety.  The report is worth looking at and benchmarking against.

The graphic above represents how much work offshore is done by oil company employees vs. how much work is done by contractor personnel. Operator employees worked about 750,000 hours and contractors worked nearly 3 million hours …about a four to one ratio.   While it is not the focus of the study, the change over time should grab your attention.  Back in 2000, the different between contractor hours and operator hours was a little more than 2-to-1.    But then the use of contractors starts to climb rapidly.

Chances are great that some of the difference is that OGP has improved its sampling data.   But even taking that into account, what this shows is an industry in a rapid transition.    Within a short 10 years, upstream oil and gas has moved from a model when the host company used its own employees to do a large percentage of its work to one that brings in outside companies to do most of its work.

That has changed oil and gas in fundamental ways that we are only now coming to grips with, including in the area of safety.   The focus of oil company safety divisions has shifted from managing internal safety programs to managing a mix of internal programs with a large chunk of overseeing contractor safety.

And the flavor of that oversight differs from region to region.   In some areas, like the U.S., contractors may bring more expertise than the operators to a specific type of operation.  In other areas, using outside contractors is mandated by local content laws, designed to bring that expertise to a local population.   In some cases, the operator is a kind of virtual company, bringing in outside personnel for the vast majority of its hands-on operations.

In any event, the change has already taken place and now industry is really reacting, trying to come up with the right system to make it all work.    If you doubt that, look at how bumpy the process of managing contractors under SEMS has been.

So for contractors- yes, customer oversight is on the rise.   And, ready or not, it is the future of the industry.