Operational Excellence Through Enterprise Risk Reduction (ERR)

About The Presenter• UC COE for Healthcare Injury Prevention• Previously worked with:

UCLAFender Guitars BoeingE! Network

About the presentation:• Presentation will be sent to all attendees – email list is in back.• Will cover many concepts very fast, if you have questions I will be available

afterwards.• “Key Concepts” will be pointed out – take not of these.

Before We Get Started

• Define ERR• ERR Background• ERR Concepts• High Reliability Organization• The “Enterprise” in ERR• Opportunity to Apply Concepts• Review and Summary

Overview

4

Enterprise Risk Reduction (ERR) is:• Combination of age old concepts on productivity, quality, and safety.• A revised approach with ERM in mind.• A systemized process to improve operations as a whole.

What is Enterprise Risk Reduction?

ERR Goals• As a team of SME’s, address ALL risks together – Not just individually for your

subject areas.• Improve the Output of the process/job/operation.• Eliminate all failure points.• Create a “High Reliability Organization”.

What are the Goals of ERR?

ERR Background

Operations encompass all business processes.

All operations are based off of one key similarity:

Operational Excellence through ERR

OUTPUT(creating a product or service)

….which is reliant on

BUT WE'RE RISK!!! Why look at efficiency?

EFFICIENCY

Efficiency is how fast you can get something done….. Right?

First we must answer: What is efficiency?

EFFICIENCY ...is theCOST PER

UNIT

Unit = “Value” Measurement

RISK!

So, what is efficiency made of?

Any ideas?

In ERR, everything is a risk!

ERR Risks are broken down into Risk Variables• Operational Risk (task time, productivity, reliability, user interaction, etc)• Loss/Hazard Risk (assets, materials, safety, injuries, etc)• Regulatory/Compliance Risk• Quality Risk (Right First Time, liability risk, product/service failure , etc)• Financial Risk (pricing, currency, liquidity , etc)• Reputational Risk (brand, customer satisfaction , etc)• Strategic Risk (competition, capital availability , etc)• and many more….

All risks tie in together.

Efficiency Risks

Operations

Output

Efficiency

Risks

Everything is a Risk

Key Concepts

DependentOn

DependentOn

BasedOn

Identifying & Controlling

Risks

ERR Strategies:• LEAN• Hazard Analysis• Six Sigma• Ergonomics• Organizational Behavior Management• Failure Mode & Effects Analysis

These strategies address:• Productivity• Loss• Quality• Predictability• Reliability

ERR Strategies to Identify Risks

Background - Started by Henry Ford in early 1900’s - Improved by Toyota in 1930’s – Continually improving ever since…

LEAN focuses on:• “Value Add” and “Non-Value Add” task steps• Operational “wastes”• Optimizing processes

Typical types of “waste”:• Non “Value Add” processes or steps• Non “Value Add” movement, or travel• Material waste• Overprocessing (rely on inspections rather than having an efficient process) – We often do this

in Risk disciplines• “Wait time” – caused by an uneven process• Supply chain management

ERR Goals: 1. Break down and outline all task steps2. Identify which steps add value to your “Output”3. Eliminate or control wastes and non value add tasks

LEAN in ERR (Productivity)

Background - Started at the dawn of time…

HA focuses on:• Identifying potential “loss” of life, health, or property

Typical types of “loss”:• Property (Fire, flood, etc)• Employee injury (lacerations, ergonomics, falls, death, etc)• Tool/equipment breakdown

ERR Goals: 1. Break down and outline all task steps2. Identify where loss may occur3. Eliminate or control loss

Hazard Analysis (HA) in ERR (Loss)

Background - Developed by Motorola in 1986 to reduce quality errors

Six Sigma focuses on:• Identifying & removing the causes of defects (errors)• Minimizing variability of processes (Ensure consistency & predictability)• Defect/error metrics

Typical types of metrics:• # of errors per operation/process cycle• # of injuries, lost time days, modified duty days• Lost/wasted assets

ERR Goals: 1. Identify, track, & trend defect (errors) metrics2. Review metrics for cause & effect trends3. Remove causes of defects/errors to create a consistent & predictable process.

Six Sigma in ERR (Quality)

Background – May have started as early as ancient Greek & Egyptian times.

Ergonomics focuses on:• Physical risk factors where musculoskeletal stress occurs.• User interaction with a process (is the process intuitive).• Tool design

Typical ergonomic risks:• Waste movements• Static postures• High or repetitive forces (not necessarily movements)• User interaction with the task (easy to use….dummyproof)

ERR Goals: 1. Identify musculoskeletal stress factors.2. Engineer out stress factors3. Dummyproof the process

Ergonomics in ERR (Productivity, Loss, Quality)

Background – Started at the dawn of time… Successfully modified by marketing strategists who found a way to control consumer behavior.

OBM focuses on:• How people interact and act at both work and at home.• Based on foundations of motivation (“SIRE”)• A carrot just big enough to chase, but not too big to weigh down the rabbit

What is SIRE?• Status – Status in social heirarchy• Incentive – Physical or monetary reward• Recognition – Recognition for actions• Encouragement – Support for desirable action

*This is what casino/store rewards are based off of…

ERR Goals: 1. Identify possible negative behavioral outcomes2. Design SIRE based rewards system to direct employees toward desirable goals

Organizational Behavior Management (OBM) in ERR (Predictability)

Background – Developed by military reliability engineers in the 1950’s to ensure high reliability. Used heavily in weapons design and airplane manufacturing.

FMEA focuses on:• Where a process can fail.• Testing a process with the goal of making it fail.

Typical failure points:• User interaction & behavior• Equipment• Process design• The design of your control methods

ERR Goals: 1. Anticipate failure points (especially the failure points of your controls)2. Test the revised process and try to make it fail 3. Plan for failure mitigation

Failure Mode & Effects Analysis (FMEA) in ERR (Reliablility)

Throwing a ball

Need 3 volunteers to throw a ball at a target1. Manually throw the ball

Were their mechanics consistent?Was the outcome predictable? Accurate?What could have failed? How likely is each?

2. Throw the ball with a lacrosse stick 3. Launch the ball with a catapult

A process vetted by failure modes will be: 4. Consistent5. Predictable6. Reliable

Failure Mode Examples

Almost all failures are indicated by “something”• This makes failure predictable… if you’ve identified the indicators.

How to identify failure indicators• Start with the problem• Identify sources of the problem• Accumulate metrics on each source• Identify the sources of the sources• And so on….

ERR Goals: 1. Anticipate failure points (especially the failure points of your controls)2. Test the revised process and try to make it fail 3. Plan for failure mitigation

Failure Indicators

Identifying & controlling them will prevent the

claims

Example – Patient falls in the hospital

How to Identify Failure Indicators

Patient Fall Injury Claims

Overall # of patient falls

IndicatedBy

IndicatedBy

Patient Mobility Factors

(balance, cognitive status, etc)

These are the “source”

indicatorsShould we track and trend these?

CausedBy Unstable Patients

Base your solutions on quantifiable data when possible:• Time• Repeatability• Accuracy• Force output• Behavior Reliability• Rate of failure per cycle

All risks are quantifiable to an extent, you’ll just need to define how you are quantifying each

ERR Solutions are based on ideas• Encouraged to be creative• Some will be bad… that‘s okay (I have many bad ideas)• A bad idea often has merit and can be used to better another idea• Just don’t follow bad ideas to a dead end street…

Developing Solutions for ERR Risks

FMEA ImproveEfficiency

Key Concepts

Six SigmaEliminate

Errors

ErgonomicsEliminateStressors

EliminateFailure

LEANEliminate

Waste

Crea

tes

a H

igh

Relia

bilit

y O

rgan

izati

on

Hazard Analysis

ControlLoss

(Reduce the Cost per Unit)

OBMEncourage

desired behavior

An organization where:• Cost per unit is optimized• Operations are reliable and predictable• Adverse events are very rare• Expectations are very well defined• Everyone takes ownership for all risk areas, not just their own

Background:• Concept developed @ UC Berkeley in 1987• Initially focused on adverse events in high risk tasks• Over time, morphed to include reliability in business operations

What is a High Reliability Organization?

The “Enterprise” in ERR

Breaking the SilosRi

sk M

anag

emen

t

EH&

S &

Wor

k Co

mp

Rese

arch

ers

Ope

ratio

ns

Supp

ort S

ervi

ces

Liability, Property, Litigation,

etc…

Injuries, Environmen

tal, Regulatory,

etc…

Grants, Chemicals,

Data Security

etc…

Equipment, Quality,

Productivity, etc…

Material costs,

Productivity, etc…

Lead

ersh

ip

Operations costs, Reputation,

Capital availability

HR

Employee turnover,

regulatory, etc…

BARRIER

Leadership’s Glass Barrier• Is in place to prevent overloading of

insignificant problems.• Is difficult to penetrate by a singular risk

group.• Is broken by large adverse events, or losses.

One Big Silo

Collaborative approach penetrates the barrier

Lead

ersh

ip

Operations costs, Reputation,

Capital availability

Entire Organization

Everyone:• Considers all risks.• Leads for their subject area.• Takes ownership of all other

subject areas.

ALL Risks

BARRIER

Include everyone in ERR projects, but keep member size manageable• Actively engage primary risk holders• Keep secondary risk holders informed in real time• Report findings to all

Know your project groups personality types:• Program builders• Visionaries/Innovators• Devil’s advocates• Program managers• Sustainers• People Leaders

Assign responsibilities in line with personalities.

Working Together

Who Owns the ERR Process?

Project Owner

Keeps Project On Target

Removes ObstaclesOwns Project Success

Or Failure

Addresses ProblemsHead On

Considers All RiskControl Ideas

Make the Business Case

Business Case

Quantifiable ROI metric examples

• Cost per unit• Time improvements (productivity)• Employee injury cost savings

(medical, lost time, mod time, replacements, training, litigation)

• Quality improvement (Less waste, happier customer, minimized errors)

• Insurance benefits (lower rates, increased rebates)

Difficult to quantify ROI metric examples

• Liability savings• Employee satisfaction &

retention• Brand improvement• Competitive edge

Executives rely on Return on Investment (ROI) estimatesIn order to have ROI estimates, you must have metrics

If it was a risk it can be estimated in the ROI.

COST PER UNIT

This all boils down to the

Sustain & Continually Improve

Sustain & Continually Improve

• Track & review metrics

• Audit checks and balances

• Report metrics to stakeholders

• Re-evaluate if metrics are off.

• Implement solutions

• ERR process• Create checks

and balances• Establish metrics

PLAN DO

CHECKACT

Opportunities toApply Concepts

(or at least food for thought)

A group of 100 employees in a medical billing office have all complained of injuries from working at their computer. You have one ergonomics specialist.

• What is your cost per unit? (wages, benefits, injury costs, equipment breakdown, new equipment, etc)

• What risks (efficiencies) are there? • Who should be involved in the ERR project?• How can you control the risks?• What are the failure modes?• How can you sustain risk control?

Now plan for 50,000 of these employees at UC… You still only have one ergonomics specialist.

• Do your risks change?• How can you control the risks?• What are the failure modes?• How can you sustain risk control?

Hands on Scenario - Job

Your custodial department for your office building needs to cut 40% of its budget & staff, but still maintain the same level of service to the university. The major tasks that they do are: empty all large & small trash bins in the building, vacuum all carpets weekly, mop floors every day, clean the grounds, & clean the restrooms 3x daily.

• What is your cost per unit? (wages, benefits, injury costs, equipment breakdown, new equipment, etc)

• What risks (efficiencies) are there? • Who should be involved in the ERR process?• How can you control the risks?• What are the failure modes?• How can you sustain risk control?

Hands on Scenario - Process

• PI just received a grant to perform research on a newly discovered, and highly contagious, infectious disease. He/she has nothing set up… no lab, no equipment, no staff, no procedures.

• What risks are there to this research? • Who should be involved in the ERR process?• How can you control the risks?• What risks can you anticipate and control to help them optimize their research

dollars?• How will they transport, receive, handle, & dispose of this new disease?• What happens if something goes wrong in the research? (foreseen reactive

controls)

Hands on Scenario – Entire Operation

Summary

Operations

Output

Efficiency

Risks

Everything is a Risk

Key Concepts

DependentOn

DependentOn

BasedOn

FMEA ImproveEfficiency

Key Concepts

Six SigmaEliminate

Errors

ErgonomicsEliminateStressors

EliminateFailure

LEANEliminate

Waste

Crea

tes

a H

igh

Relia

bilit

y O

rgan

izati

on

Hazard Analysis

ControlLoss

(Reduce the Cost per Unit)

OBMEncourage

desired behavior

BARRIER

One Big Silo

Lead

ersh

ip

Operations costs, Reputation,

Capital availability

Entire Organization

Everyone:• Considers all risks.• Leads for their subject area.• Takes ownership of all other

subject areas.

ALL Risks

Collaborative approach penetrates the barrier

Who Owns the ERR Process?

Project Owner

Keeps Project On Target

Removes ObstaclesOwns Project Success

Or Failure

Addresses ProblemsHead On

Considers All RiskControl Ideas

Sustain & Continually Improve

• Track & review metrics

• Audit checks and balances

• Report metrics to stakeholders

• Re-evaluate if metrics are off.

• Implement solutions

• ERR process• Create checks

and balances

PLAN DO

CHECKACT

Questions?