High-Reliability Organizations: Managing Risk In Complex Operating Environments
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The environment companies operate in has become increasingly complex. With increased complexity, comes increased risk for high consequence/low probability events. At the same time, society’s expectations for performance have never been higher. In other words, achieving excellence in safety is both more important and more difficult than ever. Yet a select few High-Reliability Organizations (HROs), such as the U.S. Nuclear Navy, have defied this trend. This presentation will examine how these HROs leverage management systems and culture to thwart the impacts of complexity and achieve safety and operational excellence, while simultaneously creating the opportunity to significantly reduce operating costs.
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High-Reliability Organizations: Managing Risk In Complex Operating Environments
- 2. Complexity is stretching the capabilities of most organizations TECHNOLOGY PRODUCTS & SERVICES PROCESSES ORGANIZATIONS REGULATIONS MARKETS X XX X XCOMMUNICATIONS
- 3. Complexity grows exponentially 3 #Items #links 1 0 2 1 3 3 4 6 5 10 … 10 45 $ Complexity
- 4. 4 Characteristics of complex systems 1. Non-linear reactions 3. Unknown interactions 2. Feedback loops 4. Emerging properties
- 5. Many companies are passing a complexity threshold 5 VALUE (diminishing returns) COST & RISK (exponen4al growth) $ Complexity Few companies are s.ll here Many companies are here An increasing number of companies are here
- 6. Increased complexity Poor execution Loss of process control Poor performance Added processes Vicious Complexity Cycle The typical response to complexity is to add even more complexity
- 7. Catastrophic incidents are becoming more frequent and more severe 1979 – Three-Mile Island core meltdown 1988 – Piper Alpha explosion 2005 – Texas City Refinery explosion 2010 – San Bruno Pipeline explosion 2010 – BP Deepwater Horizon oil spill 2011 – Fukushima Daiichi disaster 2013 – West Fer1lizer plant explosion
- 8. 8 www.wilsonperumal.com Traditional risk management doesn’t address these “normal accidents” well Too complex to anticipate Too fast to address Too infrequent to understand
- 10. Wilson Perumal & Company, Inc. 10 Yet a few High Reliability Organizations seem to defy the Pessimistic View!
- 11. The Nuclear Navy has never had a reactor accident over its 50+ year history 150 mobile nuclear reactors 6,000+ years of reactor plant opera4on 11 www.wilsonperumal.com
- 12. 12 Three Lessons from the Nuclear Navy #1 Safety should not be a GOAL! #2 Simplify your management system #3 Culture is critical 1 2 3
- 13. 13 Lesson #1 Achieving zero incidents should not be a It should be an
- 14. 14 This has important implications for what we reward
- 15. 15 Lesson #2: Simplify your management system
- 16. 16 www.wilsonperumal.com The Nuclear Navy simplifies with one management system for all outcomes People Process Equipment Change Key Controls Safety People Process Equipment Change Key Controls Environ- mental People Process Equipment Change Key Controls Quality People Process Equipment Change Key Controls Reliability People Process Equipment Change Key Controls Cost Common Management System Approach Nuclear Navy Management System People Process Equipment Change Increased performance Accelerated learning Reduced cost and overhead Safety Quality Environmental Reliability Compliance Cost Key Controls
- 17. Wilson Perumal & Company, Inc. 17 Having overly complex management systems can be very expensive “If [the QEMS] has had an impact, it’s probably a nega1ve impact.” – Engineering Mgr. The cost of mee1ng QEMS requirements… does not translate to high performance task execu4on is highly variable among divisions (~50% variability in rework/revisions) high level of rework (17%) and revision (4%) while external findings/ audit are increasing majority of reports (44-72%) past 6 day target when compe4tors deliver in 1-3 days repe44ve audit findings indicate lack of process improvement adequate to maintain compliance with ISO & OHSAS ü û û û û Improvement Efficiency Accuracy Consistency Compliance Cost Es1mates for QEMS Range Fulfilling QEMS Requirements Operators $26 – 67M Engineers $17 – 31M Con1nuous Improvement CAR Processing1 $200K – 2M Internal Audit Program1 $100K – 700K QEMS Maintenance1 $200K – 800K Governance QEMS Group2 $3M TOTAL ~$50M – 100M
- 18. Lesson #3: Culture is critical 18
- 19. 19 www.wilsonperumal.com Culture is the Nuclear Navy’s last layer of defense RobustEquipment RigorousProcedures Culture
- 20. 20 The culture required was a vast departure from traditional military culture Tradi1onal Military Culture Follow orders Do what you are told Don’t ask ques4ons Never ques4on your superiors Rickover’s Cultural Pillars Have a higher level of understanding Follow procedures Ques4on procedures when things don’t seem right Back each other up Do it all with integrity
- 21. Level of Knowledge Formality Ques1oning Aktude Forceful Watch Team Backup Integrity LEVEL OF KNOWLEDGE FORMALITY QUESTIONING ATTITUDE FORCEFUL BACKUP INTEGRITY CONTINUITY OF POWER REACTOR SAFETY Safety and reliability depend on specific operator behaviors 21 www.wilsonperumal.com The “Pillars of the Program”
- 22. WP&C has worked with the Nuclear Navy to benchmark its culture 1.00 2.00 3.00 4.00 5.00 6.00 7.00 Seek the company's success Be results oriented Walk the talk Follow procedures Con4nually seek greater knowledge Always collaborate Confiden4al Pay alen4on to hierarchy and status Do what your are told Compete with peers Work long hours Cover the mistakes of others Punish failure/mistakes Shortcuts are tolerated Change Current vs. Target = 32% 40 Characteris1cs Target Culture Current Culture Average ranking for Current vs. Target Cultures Most Like Us Not Like Us
- 23. 1.0 2.0 3.0 4.0 5.0 6.0 7.0 Ques4oning Aotude Formality Integrity Forceful Watch Team Backup Level of Knowledge Current The Navy describes itself consistently with the Five Pillars Most Like Us Not Like Us Range Client Range Navy Navy Average Client Average
- 24. 24 Three Lessons from the Nuclear Navy #1 Safety should not be a GOAL! #2 Simplify your management system #3 Culture is critical 1 2 3