Characteristics of effective metrics
Effective metrics have four key characteristics. They are (De Waal, 2013):
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- Easily measurable and calibrated. A good metric should be easy to measure and give the same results in the same conditions regardless of the person recording it.
- Correlated to the current business performance and predictive of future performance. Metrics must be closely connected to the goals and values of the organization and be able not only to tell what has already been achieved but also in what direction you are moving.
- Complete and isolated to factors that are measured. It is important for a good metric to exclude any redundant facts. Basically, you should receive the complete information on the measured factors but should not get what you do not measure.
- Comparable to metrics used by competitors. An effective metric must allow comparing the performance of the company with its major competitors.
A leading metric is the one predicting a future event. Such metrics are input-oriented, and their major purpose is to influence the future. For instance, the percentage of employees wearing protective uniforms on the building site is a leading metric as it influences the number of accidents in the output. This metric is easily measurable by statistic analysis, isolated to one factor, predicts future performance, and can be compared to other organizations.
A lagging metric is an output indicator following the event. For example, a number of accidents in the company are a lagging indicator since it shows how effective its safety measures are. Again, it meets all the enumerated criteria.
Benefits of using metrics in Process Safety Management
There are three major benefits of using metrics in Process Safety Management (De Waal, 2013):
- They statistically demonstrate which activities produce a positive impact on process safety and which must be eliminated or transformed. This is important because it gives company leaders and employees confidence that the safety of all activities is not only under control but is constantly improving. The effectiveness of the safety performance strategy chosen judging by leading metrics, will be easily measured in the aftermath using lagging indicators.
- Metrics are demonstrative in identifying how properly organizational roles in PSM are distributed and performed. For instance, one of the individual competence metrics may measure how well process safety coaching is delivered to employees (by demonstration, test, interview, etc.). Thus, the number of incidents owing to the lack of competent training will be evident. This is crucial for finding the basic cause of this or that safety failure.
- Metrics also act as a part of a prevention strategy. Various safety indicators allow predicting an event and performing preventive maintenance to decrease the likelihood of unfavorable consequences. For instance, it is possible to track overdue safety-critical PMs, completion rates, number of inspections, etc. Process hazard analysis, made possible by the implementation of metrics, is also important as it assesses the significance of potential hazards through monitoring equipment, human actions, instruments, utilities, etc.
Components of the auditing process
The four components of the auditing process are (Furnham, & Gunter, 2015):
- Planning. During this phase, the auditor should prepare for the upcoming review, which includes understanding what documents are required, collecting necessary data from previous audits, planning the scope of the review, setting its objectives, and analyzing preliminary statements of the parties if there are any.
- Preliminary evaluation. The second stage involves assessing the general operation of the company and all its organizational processes in order to identify if any of them can hinder the process of auditing and introduce corrections into the initial design. The auditor should also hold an entrance conference for all leaders and employees for the purpose of collecting recommendations.
- Fieldwork. The process of actual auditing begins. The auditor conducts tests, interviews with employees at different levels of the organization and collects all the required data to be able to understand the peculiarities of working processes. To my mind, this is the most important part of the process since the accuracy of the analysis makes it possible for the auditor to identify whether the organization operates as effectively as it should. Furthermore, some crucial violations can be revealed. For example, the auditor may find out that the company does not file documents in accordance with law mandates.
- Audit report. Finally, the results of the work are delivered in the report. It also includes recommendations to improve organizational performance.
Difference between audits and metrics
Auditing is typically understood as a process of observation and collecting information to reveal improper procedures or behaviors. Audits are aimed to measure the overall correspondence of an organization. On the contrary, implementation of metrics goes beyond this scope as they allow not only reacting to events according to evaluation results but also preventing them. They focus on identifying all gaps affecting business success and provide leaders and employees with tools that enable them to measure improvement in all performance aspects on a daily basis (unlike auditing, which happens at long intervals) (Furnham, & Gunter, 2015).
It is quite possible to use metrics in combination with auditing. Furthermore, performance indicators will also help the company re-evaluate auditing practices if they are not perceived as negative practices but as opportunities. An auditing checklist may show some gaps that the company did not notice, which will make it introduce new metrics to measure improvement in these sectors. The next auditing will show whether the implementation of these indicators was an effective solution to the problem. In their turn, metrics can significantly improve organizational performance, which will be evident by the audit report. The importance of this combination is that metrics provide immediate feedback, whereas audits allow assessing long-term results.
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De Waal, A. (2013). Strategic performance management: A managerial and behavioral approach. Basingstoke, UK: Palgrave Macmillan.
Furnham, A., & Gunter, B. (2015). Corporate assessment (Routledge Revivals): Auditing a company’s personality. London, UK: Routledge.