Needed: board-level curiosity about safety: this is the only way for the board to govern so as to protect cash flow, the workers, and the shareholders.

• Author: Krause, Tom
• Position: RISK MATTERS

IF FOR NO OTHER REASONS, safety has seized the attention of boards because of the $8 billion in direct costs incurred by BP from the date of the Deepwater Horizon explosion through August of 2010 and because of BP's loss of over $70 billion in market value over the same period following the resultant spill. While these downstream outcomes put the oversight of safety squarely in the laps of the BP board, our experience suggests that the boards of directors in high hazard industries rarely if ever see the information and data they need to assure themselves that exposures to catastrophe are being continually identified and effectively managed.

The information they do receive most often address the safety incident rates of the operations, and board members often take comfort that low incident rates predict longer periods of safe operations, while their data tell them nothing about the leading indicators that underlie the potential for disaster. That an organization has not experienced a catastrophic event should not be reassuring.

How can the board exercise its responsibility for safety?

1. Confirm the CEO's personal safety ethic. By that we mean the CEO's felt responsibility for the safety of workers and leaders, based directly upon the chief executive's own personal value regarding the importance of human life. This ethic is revealed in part by the sincerity and authenticity of the CEO when speaking about safety but also by the degree to which the CEO integrates safety considerations into critical and strategic decision-making processes.

2. Ask at the beginning of every board meeting for the latest data on organizational culture and climate related to safety. This is the only way for the board to govern so as to protect cash flow and to continue to command the talent needed to assure reliability in operations. Regular reports on incident rates are not revealing of the inherent behavioral tendencies of the organization. Continually measure via validated diagnostic instruments the behavioral effectiveness of supervisors, the quality of teamwork, the ease of upward communication (especially of seemingly bad news), and the perceived credibility of management on safety matters.

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3. Regularly employ and report--organization wide--a comprehensive dashboard of leading indicator data at the top, middle, and ground levels of the organization. This dashboard needs to include procedural audit findings, recorded...