Introduction
Case study
Occupational health
and safety and the
balanced scorecard
Kathryn Mearns and
Jon Ivar Håvold
The authors
Kathryn Mearns is Senior Lecturer, Industrial Psychology
Group, Department of Psychology, University of Aberdeen,
Aberdeen, UK.
Jon Ivar Håvold is Assistant Professor, Ålesund University
College, Ålesund, Norway.
Keywords
Balanced scorecard, Health and safety, Oil industry,
Gas industry, United Kingdom, Norway
Abstract
Since its introduction in 1992, the balanced scorecard
(BSC) has rapidly gained in importance throughout the
world. Harvard Business Review even selected it as one of
the most important management tools of the past 75
years. This paper takes the performance indicators used in
an offshore health-and-safety benchmarking study carried
out by Aberdeen University on 13 offshore installations
operating on the UK Continental Shelf and relates them to
the BSC framework. The results from the benchmarking
study are discussed from the perspective of suggesting
which indicators should populate each perspective of the
BSC: financial, customer, internal business and learning
and growth. In addition the paper includes the results of
interviews conducted with senior managers in the UK and
Norwegian oil and gas sector, about use of the BSC in
general and with regard to health and safety performance
indicators in particular. Reasons for including occupational
health and safety in the BSC and reports/papers covering
occupational health and safety indicators and the BSC are
discussed.
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The TQM Magazine
Volume 15 · Number 6 · 2003 · pp. 408-423
q MCB UP Limited · ISSN 0954-478X
DOI 10.1108/09544780310502741
408
In recent years the UK offshore oil and gas
industry has moved away from simply meeting
legislative requirements for health and safety,
towards identifying examples of “best
practice” and learning from the experiences
(good or bad) of other companies or
organisations. Much of this activity has been
instigated and directed through the
Step-Change in Safety Initiative
(www.stepchangeinsafety.net), which was
launched in 1997 with the key objectives of:
.
reducing accident and incident rates by
50 per cent by the year 2000;
.
having safety performance contracts in
place for all senior managers; and
.
sharing “best practice” throughout the
industry.
Through Step-Change, the industry launched
a number of initiatives identified by both
managers and the workforce as being crucial
for achieving good safety performance.
During this period the key performance
indicator for the industry was the accident
and incident rate as measured by the UK
regulator’s Reporting of Injuries, Diseases and
Dangerous Occurrences Regulations (HSE,
1995; see the Appendix); however, a number
of oil and gas companies were using a range of
other indicators to determine the state of
safety within their organisations. These
indicators were identified as “leading
indicators” because they could be used to
identify potential problems before they were
realised as accidents or incidents, i.e. the so-
called “lagging indicators” that occurred due
to safety failures. At the time the Step-Change
in Safety Initiative started, The Aberdeen
University Industrial Psychology Group
began a three-year project to benchmark
health and safety across 13 offshore
installations on a number of different leading
and lagging safety performance indicators.
The indicators were selected on the basis of
feedback from the health, safety and
environment managers of the 13 participating
organisations, regarding which indicators they
had in common and which were measurable,
manageable and had the potential to show
some improvement over the three-year
period. The adoption of an installation-based
approach arose from earlier research (Mearns
et al., 1997) where it had been shown that
offshore installations varied considerably in
their “safety climate” even when operated by
 Occupational health and safety and the balanced scorecard
Kathryn Mearns and Jon Ivar Håvold
the same company. It therefore seemed
reasonable to monitor safety performance and
disseminate examples of good practice at a
site-level rather than across the organisation,
where learning processes could perhaps
become too generalised for site-specific
problems.
It was necessary to fit the selected
indicators into an operational framework that
would facilitate the identification of different
perspectives on health and safety problems.
The balanced scorecard (BSC) is probably the
world’s best-known organisational
performance measurement system. Kaplan
and Norton (1992) start their article “The
balanced scorecard – measures that drive
performance” in Harvard Business Review
with these words: “What you measure is what
you get. Senior executives understand that
their organisation’s measurement system
strongly affects the behaviour of managers and
employees”. During the last few years
progressive industry leaders have discovered
that measurement plays a crucial role in
translating business strategy into results.
The BSC contains a diverse set of
performance measures divided into four
groups: financial performance, customer
relations, internal business processes and
learning and growth. The use of the BSC
highlights the fact that there often is a lack of
balance between the four perspectives and
therefore a lack of balance between the short-
term financial perspective (lagging indicators)
and the drivers of future financial
performance (leading indicators) (see
Figure 1).
Figure 1 Balanced scorecard
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Kaplan and Norton (1992) claim that a
company’s success for tomorrow rests as
much on its ability today to measure the
performance of less tangible assets such as
customer relations, internal business
processes and employee learning, as on its
aptitude for monitoring traditional financial
measures. BSC is designed to capture the
firm’s desired business strategy and to include
drivers on performance in all areas important
to the business. If safety is an important area
for a company then it should be included as a
driver in the scorecard.
There are a number of basic requirements
for an effective BSC:
.
The organisation has to know where it
would like to go and how it will get there.
The BSC forces management to focus
upon measures that are critical.
Management must invest the resources to
find those critical measures and
understand how directions and
milestones fit together.
.
The organisation must understand that
the scorecard is a long-term exercise. It is
a tool for implementing business strategy.
If it is used consistently management can
compare “apples” with “apples”.
.
Management must have the maturity to
use the results of the scorecard for
continual improvement and not look for
faults in the measures if they see
something they do not like.
.
The BSC must reach down the
organisational structure and back up
again. It is a tool for departments as well
as senior management, and the
 Occupational health and safety and the balanced scorecard
Kathryn Mearns and Jon Ivar Håvold
scorecards throughout the organisation
must be linked together.
.
Parameters must be objective and the
data gathering process should be
transparent to people using the
information or being measured.
.
It is unrealistic and de-motivating to
measure people on things they cannot
control.
The following paper reviews work done on
occupational health and safety measures and
outlines reasons for including health and
safety in a BSC. The paper also suggests how
the relevant indicators can be integrated into a
wider framework like the BSC.
Occupational health and safety and the
BSC
Most businesses would want simple and low
cost measures (if possible a single indicator)
covering every main area. It would be optimal
if such a measure were to be found, but
occupational health and safety experts say that
no such single measure can be completely
adequate to measure occupational health and
safety (Gallagher et al., 2001). One reason for
this may be that health and safety issues are
dynamic in nature. Discussions with senior
health and safety managers from the UK
offshore industry support such a supposition.
In managing health and safety they find that
once one problem is “fixed”, another problem
surfaces in its place. This is probably due to
the complexity of the socio-technical systems
that characterise high hazard, high reliability
industries such as offshore, nuclear, chemical
and aviation. Some theorists believe that
where people and complex technology meet,
there are always going to be safety problems
and accidents are to be expected where such
systems are operating (Perrow, 1984).
If this theory is accepted then the
implications are that risks can only be
managed and never entirely eliminated. In
other words, there is no such thing as “zero
risk”. This means that organisations have to
keep constant vigil to determine potential
weaknesses in their health and safety
management systems, in order to keep risks as
low as reasonably practicable. The process of
monitoring would be greatly enhanced by
identification of the critical “leading”
performance indicators that have an impact
on health and safety performance further
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down the line, i.e. accidents and incidents.
Appropriate indicators have been identified in
other industries (Fuller, 1999; Miller and
Cox, 1997) and Blackmore (1997) has listed
some of the leading indicators specific to the
offshore environment.
A recent publication (2001) from the UK
regulator, the Health and Safety Executive
(HSE) supports the arguments outlined above
and recommends a “balanced scorecard
(BSC) approach”:
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).
The same publication also underlines the
characteristics that make measures for
occupational health and safety different from
indicators for other areas:
Health and safety differs from many areas
measured by managers because success results in
absence of an outcome (injuries or ill-health)
rather than presence. But a low injury or ill-
health rate, even over a period of years, is no
guarantee that risks are being controlled and will
not lead to injuries or ill-health in the future.
This is particularly true in organisations where
there is a low probability of accidents but where
major hazards are present. Here the historical
record can be a deceptive indicator of safety
performance (HSE, 2001, p. 5).
Why include health and safety in the
BSC?
Obviously, industry is acutely aware of the
ethical and moral implications of killing and
injuring people at work. Many managers
claim that this is the main motivator for
ongoing efforts in health and safety within
their organisations, however, there is little
doubt that accidents can also influence an
organisation’s present and future competitive
success. For example, the Piper Alpha disaster
in the UK North Sea in 1986, which claimed
184 lives, led to the end of Occidental’s
operations on the UK Continental Shelf.
Accidents and incidents have both direct and
indirect costs and might influence growth and
profitability for a business. The recent demise
of Railtrack (the privatised rail network
provider in the UK, recently taken over by the
Government) could potentially be attributed
to failures by the company to monitor the
state of safety within the organisation.
 Occupational health and safety and the balanced scorecard
Kathryn Mearns and Jon Ivar Håvold
Railtrack allegedly failed to take sufficient
notice of potential safety problems, e.g. badly
positioned signals, wear and tear of railway
track, which led to the Ladbroke Grove and
Hatfield rail disasters.
In 1997 the HSE published a report
entitled The Costs of Accidents in which they
claim that incidents might account for as
much as 37 per cent of annualised profits for a
transport company, 8.5 per cent of the tender
price for a construction site and 5 per cent of
running costs for a hospital (HSE, 1997a).
For every pound of recoverable insured cost,
employers in the study were faced with
between £8 and £37 of uninsured costs.
Many people do not realise how expensive
accidents are. In fact many expenses are not
always obvious. The modern study of accident
costs began with the work of Heinrich (1959)
during the 1920s. He considered thousands of
cases and came to the conclusion that
management grossly underestimated the cost
of injuries on the job.
Another problem, if we look at the total
costs of accidents, is that they occur on several
levels: private, company and society, however,
it should be remembered that the most
important costs of accidents are non-
economic. These include the direct physical
costs to the victim, the emotional costs to the
victim’s family and community, and damage
to social values like justice and solidarity. The
list below is of examples of potential “indirect
costs” of occupational accidents at the
company level (note that it is limited to costs
at the company level):
.
interruption in production immediately
following the accident;
.
morale effects on co-workers;
.
personnel allocated to investigating and
writing up the accident;
.
recruitment and training costs for
replacement workers;
.
reduced quality of recruitment pool;
.
damage to equipment and materials (if
not identified and allocated through
routine accounting procedures);
.
reduction in product quality following the
accident;
.
reduced productivity of injured workers
on light duty;
.
overhead cost of spare capacity
maintained in order to absorb the cost of
accidents;
.
market share reduction/customer
retention;
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.
management must leave company;
.
lost goodwill;
.
difficult to get the right kind of people to
work in a company with bad reputation;
.
less support from local community official
bodies;
.
higher insurance premiums, difficulties in
obtaining insurance;
.
financing problems/stock exchange.
Previous studies on occupational health
and safety and the BSC
National Occupational Health and Safety
Commission (Australia)
Gallagher et al. (2001) discuss how
occupational health and safety outcomes and
occupational health and safety management
systems can be best measured in their report
to the National Occupational Health and
Safety Commission. They conclude that there
is no easy way to find measures, because the
complexity of occupational health and safety
is such that simple quantified measures are
inadequate and traditional measures like
incident/claims data has proven unreliable:
A balanced scorecard approach tailored to the
special characteristics of OHSMS [occupational
health and safety management system] is
advocated as an effective way of combining
multiple measures, and reflecting different
stakeholder interest in an operational OHSM
plan (Gallagher et al., 2001, p. 9).
In Table I their indicators for each perspective
in the BSC are suggested. The proposed
indicators mainly include output and process
measures.
HSE (UK) guidance
A new document developed by the UK
regulator (HSE, 2001) provides practical
guidance on measuring health and safety
performance. As mentioned earlier, in the
document they recommend a “basket” or a
“balanced scorecard” providing information
on a range of health and safety activities.
In the document they also emphasise some
of the problems with injury and health
statistics:
.
under reporting;
.
whether a particular event results in an
injury is often a matter of chance. an
organisation can have a low injury rate
because of luck or fewer people exposed,
rather than good health and safety
management;
 Occupational health and safety and the balanced scorecard
Kathryn Mearns and Jon Ivar Håvold
Table I A proposed OHMS BSC
Dimensions of
Perspective OHSMS
Business, organizational and financial All OHSMS
perspective
Stakeholder perspectives: internal (such as Voluntary/mandatory
employees); external (such as
Government, agencies, trade unions,
contractors, etc.)
Internal business process perspective Safe person/safe place
Traditional/innovative
management structure/
style
Learning and growth perspective Development level
Note: a PPI¼Positive performance indicators (like number of safety audits; percentage of workers receiving safety training; percentage of substandard
conditions identified and corrected etc.)
Source: Gallagher et al. (2001)
. injury rates often do not reflect the
potential severity of an event, merely the
consequences;
.
people can stay off work for reasons that
do not reflect the severity of the event;
.
there is evidence to show there is not
necessarily a relationship between
“occupational” injury statistics and
control of major accident hazards;
.
a low injury rate can lead to complacency;
.
a low injury rate can result in few data
points being available;
.
there must have been a failure, an injury
or ill health, in order to get a data point;
.
injury statistics reflect outcomes not
causes.
The HSE document does not discuss which
measures belong to the different perspectives
of the BSC but recommends that
performance measurements should be based
on a balanced approach which combines the
following three types of measurement:
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Measurement Objectives (examples) Type of Data
Capture qualitative and quantitative Reputation, claims and
outcome data to review performance benchmarking data
Monitor outcomes Incident data
Employee satisfaction with OHSMS Employee feedback mechanisms,
PPIa data
Compliance of OHSMS with Government External stakeholder feedback
and other external stakeholder (including the use of PPI and
requirements audit data)
Incident and quality of OHS training PPI data
Measures to identify, assess and control PPI, audit and benchmarking data
hazards
Assessment of senior management PPI. Audit and benchmarking
activity and level of involvement data; manager and employee
Assessment of integration into general feedback
management systems
Assessment of extent and quality of
employee involvement
Assessing extent of OHSMS Verification audit & PPI data
development
Meeting system specifications
Continuous improvement Verification audit
Validation audit and PPI data
(1) Input measures: measures of the hazard
burden. These are characterised by the
nature and distribution of hazards created
by the organisation’s activities (i.e.
different industries have different hazard
burdens). Input measures are monitoring
activities that give information on the
significance of hazards, variation of
hazards across the organisation and
variation of hazards over time. These
measures also determine whether the
organisation is successful in reducing or
eliminating hazards and what impact
changes in the business have on the nature
and significance of hazards.
(2) Process measures: measures of health and
safety management system and activities to
promote a positive health and safety culture
(leading indicators). These measure
organisational factors such as policy,
organising, planning and
implementation, performance, operation,
maintaining and improving the systems
and the development of a health and
 Occupational health and safety and the balanced scorecard
Kathryn Mearns and Jon Ivar Håvold
safety culture. This can be done by audits,
reviews, surveys etc.
(3) Outcome measures: measure of failures
(lagging indicators). These are reactive
measurements such as injuries and work
related ill health and other losses like
damage to property, incidents, hazard
and faults, weaknesses or omissions in
performance standards or systems.
Aberdeen University study (UK)
Lately there seems to have been a trend away
from the use of traditional outcome measures,
i.e. failures of safety in the form of accidents
and incidents, toward multiple measures that
can take account of various stakeholders”
interests and assist both internal and external
benchmarking. A study by Mearns et al.
(2003) reviewed the literature and discussed
benchmarking in safety and health areas for
the offshore industry. The review underlined
the fact that it was important that the
measures used in benchmarking gave top
managers a fast and comprehensive view of
the business on several levels. To find “best
practice”, and let benchmarking become a
motivator for improvement, it is advantageous
to have benchmarks from internal and
external operations from similar functions in
other industries and from the industry both
inland and abroad. For example, Fuller and
Vassie (2001) assessed employee and
contractor safety climates in an offshore oil
company in the North Sea. They concluded
that if a company has a well functioning health
and safety management system a
benchmarking approach would be
appropriate for determining the level of
cultural alignment achieved between the
contracting organisation and the contractors
(partners).
The Aberdeen University study was set up
as a collaborative Joint Industry Project (JIP)
between the Offshore Safety Division (OSD)
of the UK HSE and 13 offshore oil and gas
companies (including operating companies,
contracting companies and drilling
companies). Although 13 different companies
were involved, the benchmarking process was
carried out at the “installation” level, not by
company. This was due to earlier research
(Mearns et al., 1997) that had shown offshore
installations differ significantly in their health
and safety performance, despite being
operated by the same company and that
health and safety issues should perhaps be
tackled at a “site-level” rather than a company
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level, particularly in an industry where the
sites are so remote and where each installation
has its own culture.
A project steering group was set up
consisting of representatives from the
University of Aberdeen, OSD HSE, and each
participating company. The first phase of the
study involved lengthy discussions between
the research group and the representative
managers in order to determine what health
and safety performance indicators each
company was using. This process allowed
selection of a common set of indicators for the
purposes of benchmarking. The performance
indicators were also selected in order to fit
into the BSC framework.
Earlier work by Mearns et al. (1997, 1998)
identified a set of “safety climate” factors, i.e.
measurements of workers perceptions of the
“state of safety” at their place of work, which
were associated or correlated with self-
reported accidents. In the current study these
safety climate factors included
“communication”, “workforce involvement”,
“perceived management”, “perceived
supervisor competence”, “satisfaction with
safety activities”, “willingness to report
accidents/incidents” and “self-reported
unsafe behaviour”. The steering group
decided that “safety climate” indicators
represented the “customer perspective” of the
BSC, although some of the HSE managers
also suggested that the senior management of
their own organisation represented the
customer perspective and the contracting
company/drilling company managers felt that
the operating companies were the
“customer”.
In addition, a vast array of potential
performance indicators were identified for the
“internal business” perspective, many of them
associated with engineering controls, risk
assessments and control of process. In order
to arrive at a common set of indicators that
could be “benchmarked” and which reflected
“business process” aspects of health and
safety, HSG 65 Successful Health and Safety
Management (HSE, 1997b) was used as a
framework. The indicators chosen related to
policies and practices in six main areas:
(1) health and safety policy (i.e. exists, meets
legal requirements and best practice,
up-to-date, is being implemented
effectively);
 Occupational health and safety and the balanced scorecard
Kathryn Mearns and Jon Ivar Håvold
(2) organising for health and safety (control,
communication, co-operation,
competence);
(3) management commitment;
(4) workforce involvement in health and
safety activities, including risk assessment
and control;
(5) health and safety auditing;
(6) health surveillance and promotion.
A safety management questionnaire (SMQ)
was designed incorporating a range of
indicators under each of the six sections. This
data was both quantitative and qualitative in
nature and scores were derived from this data
for each section and totalled for the entire
SMQ. Further details of this study can be
found in Mearns et al. (2003).
Aberdeen University Petroleum Economic
Consultants (AUPEC) were sub-contracted
to investigate the “financial perspective” in
terms of loss-costing data from incidents and
accidents experienced by the various
companies on the installations that had been
put forward for the benchmarking exercise. It
soon became apparent that very few of the
companies involved actually collected loss-
costing data, and for various reasons only
three companies were able to provide such
data. Only limited conclusions can be drawn
from such a small sample size but the data
reveal that total costs varied from £2,476 per
personnel on board (POB) for one
installation, to £10,769 per POB for another.
There were major categorical differences in
the costs reported by each company –
company A’s cost driver was production
related, company B’s cost driver was people
related, and company C’s cost driver was
asset related. Company C provided no
people-related costs, and as such their total
costs may be a significant underestimate of the
true costs incurred. Unless company C did
not incur people related costs, their total costs
do not provide a meaningful comparison with
the other two companies.
As a result of the lack of adequate data from
a loss-costing perspective an attempt was later
made to collect data on “investment in
safety”, however this proved equally difficult
due to safety costs to the organisation being
tied up in operational budgets. For example,
does a valve replacement constitute a safety
cost (in terms of replacing old and redundant
valves that may fail) or does it constitute an
operational cost (to increase the flow of
hydrocarbons for production purposes)?
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In many ways the “bottom line” measure
for safety is usually “accidents” and
“incidents”, determined either as a frequency
or a rate. In order to collect systematic data
from the installations involved in the study,
accident and incident data collected under the
mandatory RIDDOR (Reporting of Injuries,
Diseases and Dangerous Occurrences Regulations
(HSE, 1995); see the Appendix for details)
was used as an outcome measure of safety.
Safety climate data from the installations
was collected in the summer of 1998 and the
summer of 1999. Correlational analysis
(Pearson product moment) revealed a
number of significant associations between
factors derived from the offshore safety
questionnaire (OSQ) and RIDDOR data. For
example, in 1998 “communication” was
significantly correlated with the RIDDOR
rate provided by the official installation
figures. Communication of health and safety
issues to the workforce has been viewed as a
key stage of organisational learning that
proceeds from accident/near miss
investigations, safety audits or changes to
procedures. The OSQ scale addressing
“involvement in health and safety decision-
making” was significantly associated with the
rate of lost time injuries in 1998 and with
RIDDOR data in 1999. Immediate
supervisors may foster a sense of involvement
during day-to-day tasks as well as the specific
design of safety programs but in both cases
evidence suggests that high involvement
promotes safer working practice (Simard and
Marchand, 1994; DePasquale and Geller,
1999).
Safety management practice displayed wide
variation across installations. In 1998, lower
self-reported accident proportions were
observed on installations with favourable
SMQ scores for management commitment,
and health promotion and surveillance. In
both years all coefficients were in the correct
direction. In both years, favourable total SMQ
scores were associated with lower rates of lost
time injuries. Health and safety auditing was
implicated in both years. Effective health and
safety auditing can be viewed as a first line
defence in preventing injury. Griffiths (1985),
among many others, includes auditing as a key
requirement in any effective safety
management system, and the theme of
auditing emerges in safety diagnostic tools,
not least among these the process safety
management system (Hurst et al., 1996).
 Occupational health and safety and the balanced scorecard
Kathryn Mearns and Jon Ivar Håvold
Shannon et al. (1996) in their review
identified five studies that included a measure
of auditing proficiency, and four of the studies
associated proficient auditing with lower
injury rates. Contrary to expectations, scores
on the management commitment section of
the SMQ were positively associated with the
rate of dangerous occurrences (i.e. releases of
hydrocarbon inventory) in year one (1998). It
may be the case that high rates of dangerous
occurrences the previous year motivated a
higher level of management commitment and
that changes in management commitment
were reactive rather than proactive.
On the basis of the leading performance
indicators that showed a relationship with
RIDDOR rates on the participating
installations, the following sets of indicators
could be selected to populate the various
perspectives of a BSC for the offshore oil and
gas industry. A proposed health and safety
BSC from Mearns et al. (2003) is listed below
(note that the learning and growth perspective
may well change as the organisation matures
or has to deal with new safety problems):
(1) Financial:
.
accident costs, i.e. loss costings;
.
investment in safety, e.g. safety
training budget.
(2) Customer:
.
levels of communication about health
and safety issues;
.
workforce involvement and
“ownership” of health and safety
issues.
(3) Internal business:
.
Health and safety policies.
.
Organising for safety:
– control;
– communication;
– co-operation;
– competence.
.
Demonstration of management
commitment and workforce
involvement in health and safety.
.
Health and safety auditing.
. Health surveillance and promotion.
(4) Learning and growth (best practice):
.
testing of employees knowledge of
health and safety policy;
.
visits by managing director, business
unit manager/director to the
installation, including face to
discussions with members of the
workforce;
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.
high percentage of staff attending
safety committee meetings once a
month;
.
occupational health plan in place, high
percentage of plan achieved and health
promotion activities offshore;
.
high percentage of corrective actions
formally closed out against an agreed
time scale of the past year.
Interviews with senior managers in the
UK and Norwegian oil and gas sector
In the Mearns et al. (2003) study some of the
managers on the project steering group
committee indicated that their organisations
operated a BSC approach to the business,
although not necessarily incorporating health
and safety. It is worth noting that this
observation was made at the start of the study
in 1998 and it was of interest to the authors of
this paper to ascertain whether the situation
had changed over the following three years. In
order determine the extent to which the BSC
has been adopted by the offshore oil and gas
industry in both the UK and Norwegian
sectors, interviews were conducted with
senior health and safety managers from six
major oil and gas companies (three in the UK
and three in Norway). The interviews were
carried out in December 2001 and January
2002 and asked about the use of the BSC in
general and with regard to health and safety
performance in particular. The sampling can
be classified as a judgement sample. The
interviewees were contacted first by
telephone and an interview guide was
sent by mail to the managers agreeing to take
part in the study. The information was
collected both as personal and telephone
interviews.
Five out of the six companies used a BSC
approach to measure and manage their
business, and those using BSC in the business
also used it for monitoring health and safety
performance. In fact, in these organisations
health and safety performance was very much
part of business performance.
Company 1
Company 1 uses BSC to monitor their
business. They are still in the initial phase of
implementation, although other parts of the
company are ahead of the oil and gas business
in the implementation process. The company
 Occupational health and safety and the balanced scorecard The TQM Magazine
Kathryn Mearns and Jon Ivar Håvold Volume 15 · Number 6 · 2003 · 408-423

focuses on output measures, but are working (2) Customer:

on a questionnaire to be able to include .
what the authorities demands;
process measures like knowledge and .
service and product quality.
attitudes based on survey results in the (3) Financial:
scorecard. .
costs of accidents/incidents, but
One of the main advantages using a BSC measuring the total costs of accidents
approach is that one can get “early warnings” is difficult;
because the focus is on the value drivers. It is .
lost time injuries.
important to include health and safety (4) Learning/growth: knowledge and attitude
indicators that can influence the financial measurements. Benchmarks.
perspective further down the road. Another
In conclusion, the manager indicated that he
main advantage is a balanced focus where all
was satisfied with the approach: “I can see that
parts of the business, not only the financial,
this approach gives focus on results and I get
are included. This gives decision makers more
positive feedback from all levels in the
comprehensive information. Yet another
organisation. The discussion around the
result of using a BSC is that it gives a broader
measures are intense.” In addition he
scope of an actual situation, both from a short
expressed the following points of view:
and long-term perspective. The company’s .
The approach has to be dynamic and they
scorecard is using Value based management
have had to change KPIs and ask
based on key performance indicators (KPIs),
questions about the ones they are using.
which is the type of scorecard found most .
The use of KPIs was implemented two
frequently in manufacturing organisations,
years ago and some of the KPIs that did
especially those that have been implementing
not function satisfactorily have been
total quality management (TQM).
changed.
The manager from company 1 could not .
The organisation is at a stage where it has
see any disadvantages with the approach so
to be even cleverer at using KPIs.
far, only a few challenges: it is demanding to .
The organisation was also in the process
find good and valid indicators and finding
of establishing a questionnaire to enable
good ways to do the reporting. Company 1
the mapping of attitudes to safety in the
has not structured the indicators into the
organisation (i.e. safety climate surveys).
different perspectives of the BSC; however,
examples of indicators used are:
Company 2
.
lost time injuries (How much time is lost
Company 2 uses BSC to measure and manage
by injuries);
the business. The main advantage of the BSC
.
H-value (number of accidents per 1
is that it is easier to discover what is happening
million workhours);
early when using several indices. Another
.
total recordable injuries (TRI);
important advantage is that it supports more
.
breach of permits given by the Norwegian
interconnection between the different spheres
Pollution Control Authority (Statens
in the company and has an educational effect
Forurensnings Tilsynet);
on the different parts of the company. The
.
incidents reportable to the regulator;
main goal is that the BSC enables the
.
chemicals to air/sea, etc. related to
organisation to take better decisions. So far
production unit (pr barrel) – divided into
the company has not discovered any
two groups, dependant on how dangerous
disadvantages related to the BSC, but
they are;
challenges in relation to the measures/
.
chemicals to air/sea related to drilled
indicators were mentioned. To find the
meter;
“right” indicators is difficult and one has to be
.
contravention of operating permits
critical as to what should be included in the
(number).
BSC.
The manager was asked how he would Company 2 has not structured the
allocate the indicators under the different indicators into the different perspectives of the
perspectives of the BSC and the results are BSC but use the perspectives as a guideline.
shown below: The company uses the BSC to measure and
(1) Internal business: manage health and safety and examples of
.
auditing; health, safety and environmental indicators
.
also more formal audits. used can be seen below:
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Kathryn Mearns and Jon Ivar Håvold Volume 15 · Number 6 · 2003 · 408-423

.
employee satisfaction; .
earlier each department and staff group
.
customer satisfaction (owners and had their own indicators, now the best
buyers); indicators have been taken from each area
. internal efficiency; and agreement has been reached on
.
learning efficiency; which ones will be used;
.
critical incidents (two levels dependent on .
responsibility, control and co-ordination
how serious the incident is); are delegated throughout the hierarchy;
.
accidents; .
staff organisation/functions are becoming
.
number of deviations from operating partners instead of controlling bodies;
permits; .
all the levels in the company are tied
. level of activity (health, safety and together in a positive manner, working for
environment); a common goal.
.
sick leave, absence because of injuries;
So far the company had not found any
.
maintenance lag (number of systems out
disadvantages in using the BSC but a few
of order);
challenges had to be overcome. For example,
.
progress on health, safety and
the BSC is demanding to introduce and
environment.
implement. Implementation takes a lot of
When asked what perspective of the BSC time and effort, particularly if the organisation
these indicators would be grouped under, the has many employees and is complex. Many
manager gave the response shown below: people have to be involved and those who had
(1) Internal business: their own goals and ways of controlling must
.
level of activity; now co-operate. The people responsible/
.
maintenance lag; involved need “stayer” characteristics (ability
. employee satisfaction. to stay on to the end of the run) knowledge
(2) Customer: customer satisfaction. and a “helicopter view” of the business area. It
(3) Financial: is very important that top management is fully
.
sick leave, absence because of injuries; involved and committed.
.
costs of accidents. Company 3 uses the BSC to measure and
(4) Learning/growth: manage HS&E and instead of the four
.
learning efficiency; perspectives used in the textbooks they use
.
SHE progress. five perspectives. The company has split
“Internal business” into “Health, Safety and
the Environment” and “Internal Processes”
The company uses bonuses linked to health
and according to the manager interviewed,
and safety goals. The goals are cascaded down
the reason for doing this is that in the oil and
through the whole organisation, which has
gas sector safety is so important that they
monthly health, safety and environment
“wanted to do it that way”. The different
(HS&E) meetings on the agenda. Top
perspectives are shown in Table II.
management conduct quarterly analyses and
The indicators marked with “x” are
evaluation of achievements in the HS&E and
compulsory for the time being (decided by top
these senior managers travel offshore
management). In addition managers in the
frequently to discuss the goals with regard to
organisation have to choose two or more
HS&E. It should be noted that most offshore
indicators from the list. All of the indicators
oil and gas companies are involved in these
shown in Table II except for the last five are
types of activity.
listed under the company’s HS&E
perspective. This means that it is listed in the
internal business perspective of company 3.
Company 3 Some of the benefits from better results on the
Company 3 uses the BSC to measure and internal business perspective will contribute
manage their business. It is in its third year of to reduction in costs and increased
using the BSC approach. The interviewed productivity in the financial perspective, but
manager listed several advantages by using at present we do not have any indicators
BSC. These included: covering that. The last five are listed under
.
covering the different perspectives and all operational indicators. The company has
information in one place; made clear definitions of the KPI used in
.
learning from each other; health, safety and the environment. So far the
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 Occupational health and safety and the balanced scorecard
Kathryn Mearns and Jon Ivar Håvold
Table II HSE indicators for company 3
Larger units
Business area
Frequency personnel accidents
Number personnel accidents
Frequency serious accident
Number serious accident
Gas leaks
Unwanted emission to sea/ground
Emission to sea/ground
CO2 emission
Energy use
Waste handling
Due HSE and quality measures
HSE and quality costs
Falling items
Number of breaks of barriers
Unwanted incidents
Quality of delivered product
Safety critical fault
Energy use
Lag of programmed maintenance
Not performed maintenance (not programmed)
company has not implemented indicators for
internal processes and customer perspective.
The allocation of indicators in the BSC
according to the manager in company 3 is
shown below:
(1) Internal business: all the indicators from
Table II.
(2) Customer:
.
include climate survey;
.
quality of delivered product.
(3) Financial: develop indicators covering
contribution of lower costs and increased
productivity as a result of better results on
the internal business perspective.
(4) Learning/growth: develop indicators
measuring competence and attitudes to
give results on the other perspectives.
The interviewee in company 3 commented
that they just had begun but so far they were
very satisfied with BSC, but underlined that it
is three critical factors that has to be present
during implementation:
(1) quality in the indicators and numbers;
(2) the system has to be easy to use;
(3) there must be an understanding for what
is behind the indicators and numbers.
The expectation from senior management is
high. Performance is followed up by the line
organisation and goes from the top to the
installations and sites and down to the work
The TQM Magazine
Volume 15 · Number 6 · 2003 · 408-423
Smaller units
Area Result unit Task responsibility Work group
X X X X
X X
X X X
X X
X
X X X
X
X
X X
X X
groups. The whole is the most important – all
parts of the business have to be covered.
In conclusion, the interviewee felt that the
BSC is extremely demanding to implement
and it is difficult to find general indicators in a
fully integrated oil company. In order for it to
work top management has to be fully
involved. The individual managing a BSC
project in such a large company has to follow
things through even if it is a long process:
“They laughed at us when we began, now
there is a huge demand for us in the
organisation”.
Company 4
Company 4 uses the BSC to measure and
manage the business in general and safety and
occupational health are therefore very much
part of the scorecard. One of the advantages of
this approach is that the scorecard reflects
what is important to the business coupled
with areas of improvement. One of the KPIs
for the organisation is “high potential”
incidents, which have shown a steady
downward trend over the past four years and
have been reduced by 30 per cent. In contrast
one of the disadvantages of the BSC is that it is
both a business and bonus scorecard and
there is an issue about being rewarded for
HSE performance when one should perhaps
be rewarded for HSE activities. The company
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 Occupational health and safety and the balanced scorecard
Kathryn Mearns and Jon Ivar Håvold
has a cascade of scorecards from the main
organisation down to subsidiary scorecards,
containing KPIs that are relevant to each part
of the business. Eighteen percent of the total
business scorecard is attributable to health,
safety and the environment. This company is
also introducing the scorecard to its
contractors and has developed leading
indicators with other operating companies.
These leading indicators include management
visits (performance and plan) and
performance against an HSE plan (e.g. 90 per
cent of plan completed). Senior managers
have clear goals for occupational health and
safety and have contracts outlining what they
are accountable for, which are integral to
reward and promotion.
When asked how he would allocate the
indicators discussed under the various
perspectives, the manager provided the data
presented below:
(1) Internal business:
.
total recordable case frequency
(TRCF)
.
high potential incidents (HPIs)
. progress against plan for management
visits and the HSE plan
(2) Customer: contractors and workforce.
(3) Financial:
.
impact of major loss of containment;
.
costs associated with leaks, lost
production.
(4) Learning/growth:
.
measures of competence;
.
measuring the skills portfolio.
Company 5
Company 5 uses the BSC to measure and
manage the business but tends to focus on
output measures, because then the
organisation knows exactly where it is (this is
one of the advantages of the BSC). The
disadvantage of the BSC concerns
“dynamism”. In other words the business
environment (and the health and safety
environment) is constantly changing. This
means that the set of performance measures
used at one point in time may not be
appropriate at another point in time.
The company also uses the BSC to measure
and manage health and safety. The outcome
measures for health and safety tend to be
occupational safety and health administration
(OSHA) based (e.g. days away from work
cases (DAFWC)), which is of US origin.
There are also a variety of individual
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performance contracts, which start with the
CEO and group executives. This then
cascades down through the business streams
and onto individual work sites and
installations. The individual performance
contracts are not consistent but are
widely divergent. More than 50 per cent of
them are concerned with operational
control and go into the company statistics
database.
The performance indicators used for
measuring safety are what the manager would
call “level 1 indicators” – in other words, are
the processes happening or not? With regard
to upstream global operations this would
include measures such as the number of safety
audits and the number of STOP cards (STOP
is a behavioural modification programmed
originally developed by the DuPont
organisation). An external party carries out
this type of audit once every three years.
There is also a process of annual self-
assurance and more frequent audits/checks
are carried out closer to the workplace, e.g.
the number of permits coming through. Level
2 indicators could be characterised by “is the
process operating effectively” and level 3
indicators are represented by “is this the
best?” The manager gave the example of a
chemical plant in Northern Ireland, which has
an outstanding safety record second
but no one really understands how this state of
safety has been achieved, so there is no
potential for sharing “best practice”. Finally,
the manager referred to the fact that they had
looked at the relationship between number of
interventions/audits and total recordable
incidents (TRIs) and had found that, contrary
to expectations, the number of TRIs increased
as the number of interventions/audits
increased.
When asked if he was satisfied with the
present performance measurement system,
this manager replied that he would like more
performance measurement of the things that
matter. His main concern about using the
BSC for health and safety was that it might
lead to a lot of measurements that mean
nothing. A multi-faceted approach would be
much better but each measure should be
assessed/screened for its utility (cost/benefit
analysis) and a case has to be made for the
business process, i.e. what helps us measure
the quality and what helps us measure what
matters. Finally, when asked how he would
allocate performance indicators in the BSC,
 Occupational health and safety and the balanced scorecard
Kathryn Mearns and Jon Ivar Håvold
the manager produced the results shown
below:
(1) Internal business:
.
auditing;
.
also more formal audits.
(2) Customer:
.
managers and workforce;
.
workforce opinions on health and
safety not surveyed regularly but
general survey carried out annually
across the company.
(3) Financial:
.
costs of accidents not a good measure;
.
costs are dominated by production
shut-down (measuring costs involves a
lot of effort for not much gain).
(4) Learning/growth:
.
measures of training, assurance,
competence;
. learning from accidents does not
appear at this level (safety flashes say
whether people have done anything to
deal with problems).
Company 6
Company 6 did not use the BSC to measure
and manage their business. However, after
an explanation of what the BSC involves,
the manager agreed there would be
advantages in using this approach and that
the company were measuring some of the
perspectives in the BSC anyway. He thought
that the BSC would provide a systematic
framework for integrating information about
the business, but the company had no plans
to use it in the future. He was not entirely
satisfied with the present performance
measures, especially those for health and
safety, although satisfaction with
performance indicators for financial
performance and operational performance
were perceived as satisfactory.
Since company 6 was not using the BSC to
measure and manage the business, safety and
occupational health were not part of the BSC
either. However, the company was using a
number of performance measures/indicators
(PIs) for health and safety. Within managers”
and supervisors” performance contracts they
were measuring Safety PIs and Environmental
PIs (but nothing on occupational health).
These performance contracts cascade right
down the organisation to teams on the
offshore installations. The safety PIs are made
up of lagging indicators such as the LTI rate
and other RIDDOR measures. The leading
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Volume 15 · Number 6 · 2003 · 408-423
indicators were “reporting of accidents/
incidents”, “auditing” and “management
commitment” and all the managers have a
safety performance contract. The managers/
supervisors/teams are allocated points on their
performance contracts. Leading indicators are
allocated positive points whereas lagging
indicators (e.g. an LTI or a dangerous
occurrence) are allocated negative points.
The manager was asked to indicate under
what perspective of the BSC he would place
the different measures. The results are shown
below:
(1) Internal business:
. auditing;
.
management commitment.
(2) Customer:
.
Everybody a customer for safety!
.
That includes managers as well as the
workforce.
(3) Financial:
.
accidents/incidents;
.
loss costing data for each site, includes
business losses;
.
try and keep accident/incident loss
separate from business loss.
(4) Learning/growth:
.
reporting;
.
accidents/incidents and learning from
these.
The manager indicated that he was not
entirely satisfied with the present
performance measurement system and that
there was still work to be done. In particular,
it was difficult to put the performance
measurement system into numbers. For
example, the company had tried a system
whereby people would be achieving 91 per
cent of performance targets in year 1, 92 per
cent in year 2 and so on, however, there was a
limit to how far you could go with this. The
company now has a system where they
measure both positive and negative aspects,
but some people have exceeded their targets
and the reasons for this are unclear. This
comment echoes one given by manager 5,
where the reasons for excellent health and
safety performance at a particular location
are not fully understood.
Discussion
Table III is an overview of the results from the
interviewed companies. Five out of the six
 Occupational health and safety and the balanced scorecard
Kathryn Mearns and Jon Ivar Håvold
Table III BSC and the interviewed companies in Norway and the UK
Using BSC Health and safety
Company approach included in BSC
1 (N) X X
2 (N) X X
3 (N) X X
4 (UK) X X
5 (UK) X X
6 (UK)
companies interviewed used a BSC approach
in implementing their health and safety
management strategy. All of the companies
used output measures, but fewer used process
and input measures.
The managers interviewed in the study
emphasised that a clear and cohesive
performance measurement framework that is
understood by all levels of the organisation
and that supports objectives and the
collection of results is needed. The BSC helps
determine potential relationships between
“leading” and “lagging” indicators. The
results of the interviews underline the fact that
leadership is critical in designing and
deploying effective performance
measurement and management systems.
Clear, consistent, and visible involvement by
senior executives and managers is a necessary
part of a successful BSC, with senior
management actively involved in both the
creation and implementation of an
organisation’s systems. The present study
indicates that the chief executive officer is
important both in articulating the mission,
vision, and goals to various levels within the
organisation, as well as being involved in the
distribution of both performance expectations
and results throughout the organisation.
Effective internal and external
communications also appear to be key to a
successful BSC implementation. Effective
communication with employees, process
owners, customers, and stakeholders is vital
for the successful development and
deployment of BSC. Results and progress
toward programme commitments should be
openly shared with employees, customers,
and other stakeholders. Furthermore,
accountability for results must be clearly
assigned and well understood and
accountability seems to be a key success
factor. It is obvious that BSC measurement
systems must provide intelligence for
decision-makers, not just compile data.
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Using input Using process Using outcome
measures measures measures
X
X X
X
X X X
X X X
X X
Compensation, rewards, and recognition
were linked to performance measurements for
some of the companies in this survey and
these companies emphasised that BSC
measurement systems should be positive, not
punitive. The most successful performance
measurement systems facilitate learning and
help the organisation identify what works and
what does not so as to continue with and
improve on what is working and repair or
replace what is not working. Furthermore, it
was perceived that it is important to fight
complacency within the organisation when
these types of performance measurement
systems are being used.
Just because the system is being monitored
and measured, this does not mean that
unanticipated hazards or interactions of
hazards can still arise. The BSC has to be
reviewed periodically and questions have to be
asked: are we measuring the right things, are
we making better decisions and how can we
improve our measures to get the information
we need.
It is interesting to note that the managers
interviewed did not concur in their opinions
of which indicators should populate the
various perspectives of the BSC. There was
also a feeling that monitoring and managing
the indicators involved a great deal of effort
and that often it was not obvious which
indicators were having an impact and which
were not. There was also reference to the fact
that safety was a dynamic phenomenon and
that the indicators used from year to year may
have to change in accordance with other
developments within the organisation. In
conclusion, it is perhaps important to
remember that the BSC and performance
measurement is not an end in itself, but a vital
tool to improve both short-term and long-
term occupational health and safety if it is
implemented and followed up continuously.
 Occupational health and safety and the balanced scorecard
Kathryn Mearns and Jon Ivar Håvold
General conclusions
From the information collected in this paper it
is evident that the UK regulator and
management within the offshore oil and gas
industry endorse the value of applying a BSC
approach to health, safety and environment.
Research also indicates the value of this
approach. Although the senior managers
interviewed had a positive attitude to the BSC
and the ones who had implemented the tool
had achieved results, they indicated that there
was a lot of room for improvement in deciding
on and including new indicators in the
scorecards. The companies using the BSC
were quite early in the implementation
process and did not have many results to show
yet. One aspect that seemed to be particularly
challenging was selecting indicators that
actually had an impact on performance. The
Aberdeen University health and safety
benchmarking study revealed those leading
indicators in terms of “installation safety
climate” and health and safety management
practice that had an impact on safety
performance in terms of accidents and
incidents. With regard to employee
perceptions of safety in the working
environment, aspects relating to
communication and workforce involvement
seemed to have most impact on reducing
accidents and incidents. There was also some
indication that perceptions of management
commitment played a role, with high levels of
perceived commitment being associated with
lower accident rates. With regard to health
and safety management practices it would
appear that a focus on health and safety
auditing had an impact on levels of dangerous
occurrences and good health surveillance and
health promotion activities were associated
with lower lost time injury rates. Although the
benchmarking exercise revealed relative
strengths and weaknesses in safety climate and
health and safety management practice across
the installations, and it also indicated
correlations between leading and lagging
indicators, more data is required to determine
the mechanisms that may be operating to give
rise to these effects. For example, is
investment in health promotion and
surveillance another indicator of management
commitment, or is it an indicator that an
organisation is good at assessing risks and
putting measures in place to mitigate against
those risks?
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Future research should be aimed at
collecting longitudinal data. For example, are
workforce perceptions of safety and safety
management practices at time 1 associated
with safety performance indicators such as
accident rates at time 2. This type of
relationship was explored in the Aberdeen
University benchmarking study. Workers”
satisfaction with safety measures and their
levels of self-reported safety behaviour in year
1 were highly and significantly correlated with
self-reported accident involvement in year 2,
across the nine installations that provided data
for both years.
Our interviews indicate that occupational
health and safety is important for the
companies in oil and gas related industries
implementing BSCs. The companies using
BSC included mainly outcome measures but
process measures are starting to find their way
into the scorecards of some of the
organisations surveyed in this study.
Selecting, measuring and managing the right
indicators for the organisations involved in
health and safety benchmarking activity
remains the greatest challenge in the near
future.
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Miller, I. and Cox, S. (1997), “Benchmarking for loss
control”, Journal of the Institute of Occupational
Safety and Health, Vol. 1, pp. 39-47.
Perrow, C. (1984), Normal Accidents: Living with High-Risk
Technologies, Basic Books, New York, NY.
Shannon, H.S., Walters, V., Lewchuk, W., Richardson, J.,
Moran, L.A., Haines, T. and Verma, D. (1996),
“Workplace organizational correlates of lost time
accident rates in manufacturing”, American Journal
of Industrial Medicine, Vol. 29, pp. 258-68.
Simard, M. and Marchand, A. (1994), “The behaviour of
first line supervisors in accident prevention and
effectiveness in occupational safety”, Safety
Science, Vol. 17, pp. 169-85.
Further reading
Mearns, K., Whitaker, S., Flin, R., Gordon, R. and O’Connor,
P. (2001), Factoring the Human into Safety:
Translating Research into Practice Vol. I:
Benchmarking Human and Organisational Factors in
423
The TQM Magazine
Volume 15 · Number 6 · 2003 · 408-423
Offshore Safety, HSE OTO 2000 036, HSE Books,
Sudbury.
Appendix. Definitions of accident
categories according to RIDDOR (HSE,
1995)
Fatalities. A death as a result of an accident
arising out of or in connection with work.
Major injury. An injury specified in
Schedule 1 of RIDDOR ”95 including
fractures, amputations, certain dislocations,
loss of sight, burns, acute illness,
hyperthermia/hypothermia, and loss of
consciousness requiring hospitalisation for at
least 24 hours.
Lost time incidents of three or more days
(LTI $ 3). A work-related injury resulting in
incapacitation for more than three
consecutive days.
Dangerous occurrences. Any one of 83
criteria, including 11 specific to offshore
detailed in Schedule 2 of RIDDOR ”95 with
the potential to cause a major injury. This
includes failure of lifting machinery, pressure
systems or breathing apparatus, collapse of
scaffolding, fires, explosion, and release of
flammable substances.
Near-misses. An uncontrollable event or
chain of events which, under slightly different
circumstances could have resulted in injury,
damage or loss.
Reportable diseases. An occupational disease
specified in column 1 of Schedule 3 of
RIDDOR ”95.
RIDDOR rate. Reporting of Injuries, Diseases
and Dangerous Occurrences Regulations (HSE,
1995) provides the relevant equation for
calculating a composite index of rates of
fatalities, major injuries, lost time injuries and
dangerous occurrences within any
organisation. This index was used in as a
lagging safety performance indicator.