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Safety Performance Metrics
Put Some Science in Your Game with Leading and
Trailing Indicators
Tom Lott Senior Vice President Wachovia Insurance
Services Charlotte, NC
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Leading and Trailing Indicators Just Another
Passing Concept?

• Concept Long History in Financial Markets
• Risk Management Industry
• Not a new Concept, but for the industry, far
  from recognized and utilized to its potential
• Many have used approaches to some extent or
  another
• What are We Advocating?
• The use of Risk Management Leading Indicators as
  a Sound and Scientific Way to measure and drive
  risk management improvements

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Definitions

• Leading Indicator An indicator whose value
  changes prior to a change in the larger system of
  which it is a component
• Trailing (Lagging) Indicator - An economic or
  other indicator that changes value after the
  underlying conditions it measures have begun to
  exhibit a trend. Trailing indicators may confirm
  the existence of a condition or trend, but are
  not the most effective means for prediction.

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The Fishbone Theory

UPSTREAM
DOWNSTREAM
Training
Corporate Culture and Commitment
People
Catastrophic Losses
Incidents Near Misses
Losses
Engineering Process Design
Loss Prevention Practices
Incident Response Claims Management
TRAILING INDICATORS
LEADING INDICATORS
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What Do Leading Trailing Indicators look Like
in Action?

Correlation Top Level Report Links Leading
Indicators with Trailing Indicators Safety to
Financial
Leading and Trailing Indicators Leading and Trailing Indicators Leading and Trailing Indicators Leading and Trailing Indicators Leading and Trailing Indicators Leading and Trailing Indicators
  1Q2006 2Q2006 3Q2006 4Q2006 1Q2007
Avg RMQ Score 2.7 2.8 3.1 3.2 3.2
Total Cost of Risk / 1 Revenue 0.05 0.05 0.04 0.035 0.03
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What Do RM Leading Indicators look Like?

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What Do RM Leading Trailing Indicators look
Like?
SAMPLE OF QUALITATIVE JUDGEMENT
Category Stage 1 Significant Development issues Stage 2 Concerns Opportunities Stage 3 Average Performance Stage 4 Striving For Excellence Stage 5 Excellence
Measuring Employee Safety Performance Safety goals and/or performance is not considered in the performance evaluations There may be a section for safety performance, but it is not used pro-actively or consistently. It is having minimal influence on behavior and performance Safety is considered in the appraisal through a specific area. There is generally feedback given. Safety is measured through specific performance criteria. This area is given adequate weight in the overall performance and reward system. There is evidence of corrective action when performance is low. There is an excellent program in place (Stage 4) and the program has been up and running for a year or more with strong results. Employees fully understand that safety is a critical area of job performance evaluation.
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What Do RM Leading Indicators look Like?

• 3 Dimensions
• Technical
• Cultural
• Financial

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What Do RM Leading Trailing Indicators look
Like?

• Quantitative Leading Indicators
• Employee Turnover Rate
• Job Satisfaction Rating
• Inspection Compliance Score
• Driver Training Test Scores
• MVR Quality
• Vehicle Inspection Results
• PPO Utilization

• Qualitative Based Leading Indicators
• Quality of Hiring Process
• Quality of Employee performance Reviews
• Quality of Safety Accountability Program
• Quality of RTW Program
• Quality of Process Review Program
• Quality of Ergonomics

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What Do RM Leading Trailing Indicators look
Like?

• Trailing Indicators
• Defect Rate
• Reported Incidents
• Reported Accidents
• Number of claims
• Lost Workday Rate
• Losses / Employee
• Losses per payroll
• Losses per product
• Avg Cost per Employee
• Avg Cost Per Vehicle

Note Many of these indicators could serve as
both leading or trailing indicators, based on
approach
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Getting Started

• Two Basic Types of Approaches depending on what
  you are trying to Improve
• Focused Focus on a specific loss or exposure
  area (Slips/Falls)
• Organizational Broad application of loss and/or
  exposure areas

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Building Your Approach

• Key Selection Criteria
• Correlate Leading and Trailing Indicators
• Peel Back from Loss and Exposure Analysis,
  Accident Investigations, etc.
• Thorough Analysis To Select Best Leading
  Indicators that will drive positive change
  (Management Levers)
• Make this a group effort. People will own the
  issues and actions. Continue on a Regular basis
• Be Comprehensive in Approach (Training w/out
  enforcement wont work)
• Warning Watch what you Measure (ex. good
  performance reviews per manager)
• DRIVE ACCOUNTABILITY and CHAREBACK WITH LEADING
  INDICATORS
• Continuously test, review and Adjust Indicators
  based on Results.

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What Do RM Leading Trailing Indicators look
Like? - Examples

• Slip Fall Program Restaurant Chain
• Engineering
• Floor Design
• Floor Condition
• Signs Warning
• Maintenance and Cleaning
• Employees
• Training
• Accountability
• Shoe Program
• Post Incident
• Investigation
• Claims Management

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Importance of the Assessments

• Be the Facilitator
• Get Good Cross Section of Organization
• Power of the Employee Interviews
• Managing Expectations
• Using the Guidelines to Determine Next Steps

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Using the Results

• Get Group Focused on Outcomes
• Build into Management Accountability
• Use in Chargeback Systems
• Correlate to Overall Results

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Summary of Key Concepts

• Focus on Risk Management Quality Leading
  Indicators
• (Culture, Engineering, Training, etc.) to Drive
  Down Trailing Indicators (Incidents, losses,
  etc.)
• Choose Leading Indicators Carefully
• Thorough Causal Analysis of Past losses and
  Potential Exposures
• Choose indicators that will drive positive
  behaviors and improvements
• Make sure they correlate to the trailing
  indicators
• Be comprehensive in approach (training w/out
  accountability is worthless)
• Be Practical
• Must choose approach that fits with culture and
  needs of organization
• Measure the Big ticket items The ones that
  will cause the most change in trailing
  indicators.
• Be outcome focused. (Change Employee Perception)

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Questions Answers

For more information, contact Tom Lott Senior
Vice President National Practices Leader Wachovia
Insurance Services Charlotte, NC 704-805-6948