So, what is a balanced scorecard and how can we apply them to HSE?
Created in 1992 by Robert Kaplan and David Norton, the balanced scorecard (BSC) was and was initially aimed at helping public agencies better manage and measure performance. More recently, BSC has been used for an integrated approach on performance measurement and management. In principle, the BSC allows organisations to look at their business based on the following four important perspectives.
Financial perspective – how do we look to shareholders?
Internal business perspective – what must we excel at?
Innovation and learning perspective– can we continue to improve and create value?
Customer perspective – how do customers see us relative to time, quality, performance and service, and cost?
A Balanced Scorecard is most often used in three ways:
- To bring an organisation’s strategy to life.
- To communicate the strategy across the organisation.
- To track strategic performance.
The critical characteristics that define a BSC are:
- Focus on the strategic agenda of the organisation concerned.
- The selection of a small number of data items to monitor.
- A mix of financial and non-financial data items.
With a Balanced Scorecard, you have the capability to:
Describe your strategy.
Measure your strategy.
By combining financial, internal process and innovation, organisational learning and customer perspectives, the BSC help organisational leaders better understand the interrelationships between the various facets.
BSC application for HSE
The BSC provides a measure of current performance and also the opportunity to “look forward” rather than backward (i.e., leading indicator as opposed to lagging indicator). From a strategy perspective, BSC allows the integration of various (existing) scorecards relative to financial performance. The BSC provides a framework to translate a strategy into operational terms, supported by objectives, measures, targets and initiatives.
Let’s consider the application of BSC with regard to HSE within your organisation. Using the organisation’s risk ranking processes (based upon severity and likelihood), risks can be determined for hazards identified and controls applied. Application of controls should follow a hierarchy of controls relative to the risk level.
The next step is to define “what will be measured” relative to the BSC perspectives. Examples of HSE related metrics for consideration within a BSC framework may include:
- Financial perspective – workers’ compensation and program implementation budget.
- Internal business perspective – management systems assessment scores, process-specific Implementation and risk reduction.
- Innovation and learning perspective – continuous improvement (closure rates of inspections, investigations, notices, hazard analysis, IH, etc.), training retention, activities (e.g., training completed, programs performed) and trend analysis.
- Customer perspective – worker perception surveys, injury & illness rates, industrial hygiene overexposures and employee involvement.
If you do embark on establishing a BSC, you will need to establish clear “objectives,” “measures,” “initiatives,” and “actions”. Use the following as guidelines for defining these aspects:
- Objectives: Set high-level goals
- Measures: Define how to achieve the objective
- Initiatives: Are put in place to answer the question “what actions am I taking to accomplish the objective?
- Actions: Help that will allow you to complete your initiatives.
I suspect that many of you will be familiar with a risk ranking matrix that incorporates impacts relative to health, safety, environment, stakeholders, public relations etc. In this same context, it would be quite feasible to include the 4 BSC factors by incorporating the same into the risk evaluation process.
On a final note, the UK Health and Safety Executive (HSE) supports the argument for BSC for HSE and recommends a balanced scorecard (BSC) approach. They state that:
“Organisations need to recognise that there is no single reliable measure of health and safety performance. What is required is a “basket” of measures or a “balanced scorecard” providing information on a range of health and safety activities” (HSE, 2001, p. 5).
You can download the UK HSE document via this link.