9.1 Defining Successful Performance for a Compliance Program

A company performance has a direct impact on profitability, compliance and sustainability. As a part of achieving success, a company must also ensure that they comply with all of the regulatory requirements that are applicable to their business. To do so, leaders must have a working knowledge of the status of the company through predetermined mechanisms such as performance measurement. Measuring performance involves measuring the actual performance output against its intended goals and the important attributes that are necessary to achieve the goals. Performance measurement requires collecting, analyzing and reporting of data that represent the performance of an organization, system, processes, practices or individual. This requires a top-down approach by management for setting performance criteria, measuring outcomes and instituting changes as needed. To ensure that performance measurement is a core business activity, the measurement process and protocol should be included in the company’s overall strategic plan. The strategic plan should provide performance targets for the organization which sets the direction for operation and performance for each group and member. Performance measurement is a vital part of the process of monitoring that should demonstrate how an organization is progressing in various aspects of operations. The following types of questions should be answered or at least explored by performance measures developed in order for them to be deemed as being useful:

• How is the organization performing with regard to its goals?
• Does the organization have the resources needed to accomplish goals (people, financial, equipment, etc.)?
• Are the products developed aligned with the approved specifications?
• Does the product deliver high quality?
• Are the needs and expectations of customers met?
• Are regulatory commitments being met?
• Is worker training maintained to meet the current and future needs of the organization?
• Is there a process in place to support continuous improvement?

The aforementioned inventory only represents some of the questions that performance measures can and should answer for organizations. If designed and used appropriately, performance measuring can save a company in revenue expenditures, loss of business opportunities and negative impacts on their reputation. Many organizations continue to struggle with identifying, developing and implementing meaningful performance measures that provide an ongoing view of exactly how the company is performing. As such, they develop metrics to drive improvement, provide a focus on what is deemed to be important by the senior leadership team and measure the overall performance of an organization. Metrics that are developed are in the form of leading or lagging indicators. Both types of metrics provide some useful information, however; only leading indication can influence future performance, whereas lagging indicators can be used to analyze past performance. Understanding the past through lagging indications can help management plan for the future. Leading indicators are not always easy to identify and measure; as such, there tends to be a tendency to utilize lagging indicators more freely. A well-balanced performance measurement program should contain a healthy balance of both with a greater focus on leading indicators. This struggle to develop metrics that accurately depict performance is real and continues today. Some issues associated with the development of metrics include the following:

• There are too many of them.
• Metrics that are backward-looking with no account for what will happen in the future tend to be developed and cited more.
• Little or no forward-looking elements.
• The same level of importance given to all metrics.
• A false sense of security and achievement when they are not measuring what’s important.
• Metrics are not representative of the business in which it is deployed.
• They are not reviewed and used in business decisions.

Developing a comprehensive monitoring program to gauge compliance with environmental regulations can be challenging for many reasons. Depending on the business profile, a company can be subjected to many regulations that must be monitored. This process takes time and, of course, money: Just how much time and money it takes depends on a variety of aspects that go beyond just the regulations that must be adhered to. It also includes the staffing requirements to aid in compliance, record-keeping and knowledge required to be maintained. The process used to develop an environmental monitoring program should include someone knowledgeable in environmental regulatory requirements to inform development of the monitoring process.

When developing a comprehensive monitoring program, there are three types of information that should be explored and included in the monitoring process decisions. The three types of information are represented in Figure 9.1. Together these information components provide a thorough view of performance that can impact past, present and future performances.

Qualitative measures: The raw data represented by qualitative data are in words where observations and comments are evaluated to draw conclusions. Surveys, interviewing workers and clients, benchmarking and focus group discussions are often used to gather qualitative data to uncover viewpoints to inform performance in a specific area. Metrics developed based upon qualitative data exhibit a level of subjectivity that may not be recognizable and can impact the accuracy of the results and interpretation of performance. In short, qualitative data provide feedback or characterization of information.

Quantitative measures: The raw data represented by quantitative means are numerical in form. This form of data is favored because it is generally easy to gather, analyze and explain as it involves counting or applying a numeric value to an object or event. In short, quantitative data can be counted.

Intuition: It can be used to a lesser degree (not recommended as a strategy); sometimes intuition can provide a feeling of uneasiness or speculative that something is not right. These feelings that something is not right should be evaluated to ensure that there are not any underlying issues that can prevent performance or the culmination of accurate performance indicators. Some refer to intuition as nonconscious or instinctual; regardless, this mode of thinking can be of use on a limited ad hoc basis. This should, however, not be relied upon as the only method to determine performance.

It is important to keep in mind that performance measures can drive behaviors that will assist in achieving results as well as drive behaviors that will derail accurate measurements and reporting because of a focus on the end product. Therefore, these measures must be developed carefully, communicated, openly and thoroughly, and utilized in totality giving considerations to all information. Having performance measures that are not acted upon facilitates a loss of trust in leadership and their desire for quality, compliance and success and is useless to an organization. Performance management activities often fail when there is a lack of champions and leadership commitment and a lack of relevancy to the business.

9.2 Effective Methods Used to Measure Performance

Developing performance measurement takes careful thought and considerations for the business as a whole if the process is expected to be effective and serves the purpose in which it was designed. Too often these measures are not effective in providing management with the information needed to inform decision on various aspects of the business. Therefore, data are collected and placed on the shelf to present to auditors when requested. In Section 9.1, a brief discussion of the three components of a comprehensive monitoring strategy was briefly introduced. In this section, additional discussion will include example of what each component comprises and some examples or suggestions on interpretation of the results generated (Tables 9.1 and 9.2).

TABLE 9.1
Data Collection

TABLE 9.2
Data Analysis and Presentation

The most effective measures to use when measuring the performance of the environmental compliance program are different for different organizations even if they are in the same market. Therefore, performance measuring is organization specific. However, this does not mean that benchmarking other organizations to seek best practices is not a good strategy before developing a strategy, monitoring protocol and metrics. The caution is to ensure that the protocol meets the needs of the organization that is being monitored.

9.3 Identifying What Is Important: Corporate and Stakeholder Priorities

Before identifying what is important to measure, it is just as important that the leadership team and organizational members understand why measurement is necessary. In fact, it is important to have members of the organization onboard with the concept of measuring performance and the process that will be used to collect, analyze and communicate the data. It is critical to have the necessary parties involved in collecting the data and providing them to the assessment or monitoring team without concern of retaliation if the data do meet the expectation of leadership. The importance of performance measuring resides in the knowledge that it improves productivity, reduces costs, aligns activities with the business plan, facilitates identification and implementation of best management practices and improves performance of an entity. The measurement of performance is a continuous improvement process which involves checking the performance against the standards that demonstrate compliance that was developed to be followed by the entire group or organization. Monitoring performance begins with some thought-provoking questions. Some of these questions are:

1. 1. Why measure?
2. 2. What is important to accomplishing the goals of the business?
3. 3. What is important to customers and stakeholders?
4. 4. What does success look like for an organization?
5. 5. How should and can measuring be conducted?

The responses to these thought-provoking questions and others form the basis or foundation on which to build the performance-monitoring program and the type of metrics that should be developed, deployed and monitored. In identifying what to monitor and how to monitor, special attention must also be paid to the needs of the customers and stakeholders. In addition, the answers to these questions will more than likely spark more questions that will be useful in supporting the importance of monitoring that can be used to introduce and sell the concept along with the process to the organization as a whole. It can also demonstrate to customers and stakeholders that the company is responsible and interested in ensuring their needs are met and quality is maintained. The method used to determine what to monitor should also be utilized when addressing environmental regulatory requirements with the inclusion of the requirements specified by regulations and any permits or consent agreements held by the organization.

9.4 Evaluating Environmental Compliance Programs and Processes

Environmental compliance programs are developed and documented in organizations to ensure that members are aware of their responsibilities regarding the expectations for following environmental rules and regulations and how compliance can be achieved. A documented program also indicates to the regulators and auditors that you intend to be compliant and have a process for your workers to share in the compliance burden for the company. These programs are documented in the form of policies or/and procedures. The policies and procedures outline the environmental regulations that are applicable to the business and the process and practices used to ensure compliance and safety of workers and the environment. One should be cautioned that developing a program that is not followed can be perceived as being out of compliance by auditors and regulators and an organization can be penalized for what is documented and not followed or implemented. A penalty can be imposed even if it is not a regulatory requirement.

A comprehensive assessment program is a key component of a demonstrated effective compliance program. Assessing your program is necessary because regulatory requirements change frequently and as such the organizations’ internal document program will change as well. Having a current program that is documented and understood by organizational members is important to the program being embraced and followed. In assessing the environmental compliance program (the documentation), some elements are important to include in the review.

The first basic step to assessing a company’s program is to perform a crosswalk between the regulation and the internal organization procedures for all laws and regulations that the organization is expected to maintain compliance. This review is to ensure that the documentation is in alignment with the regulations. The assessment can feel like a daunting task, depending on the amount of applicable regulations that must be followed. As such, it may be a good idea to develop an assessment schedule for assessing the various regulations and not attempt to complete the task for all regulations at once. Key areas to evaluate include:

• Identify any changes made to regulatory requirements that are not included in internal procedures.
• As a result of regulatory changes, is there a need to change or develop new training for employees?
• Identify and ensure the workers needing training have the training requirement listed to their job demands profile.
• Are procedures and policies clear, easy to understand and followed?
• Are there any connected or referenced internal documents needing change as a result of changes in regulatory requirements?

9.5 Evaluating Implementation of Environmental Requirements

Implementation is where one would say ‘the rubber meets the road.’ Improper or inadequate implementation can result in a significant amount of noncompliances and financial penalties imposed on organizations. There are several methods that can be used to evaluate the effectiveness of an environmental program. These methods involve taking advantage of internal resources and utilizing external resources having the appropriate level of expertise to provide program insight.

Internal: Each organization should have an effective assessment program, one that is designed to evaluate a program or process effectively and uncover inefficiencies and noncompliance. A comprehensive assessment program should include a process that allows for identification of issues, resolving issues, validating that solutions are appropriate to prevent reoccurrences, tracking and trending of issues, resolving of issues and a comprehensive lesson-learned program.

External: Inviting external agencies into an organization to assess performance is a good way to learn from the viewpoint and experiences of others. External agencies are often viewed as impartial and have the capability to report honestly on the status of an organization, outline the issues that need to be addressed to improve efficiency and communicate accurately without apprehension compliance posture and areas needing improvements.

Implementing environmental requirements in organizations is not an easy task, especially when the requirements are many. An organization must employ several means to inform them of their implementation burdens and status and to identify areas for improvement. Some of the ways that environmental requirements can be evaluated are:

• Through assessments
  • Internal workers with knowledge in the regulatory requirements
  • External agencies hired by the organization
  • Regulatory inspections (least preferred method)
• Feedback from workers
  • Focus groups
  • Interviews
  • Surveys

The objective is to use all forms of assessments or evaluations in totality when evaluating a program and avoid focusing singularly on one piece of data. Focusing on one data source can lead to a false sense of security of ‘things are on fire.’ Data sources must be analyzed objectively to uncover the true status and development of the path forward. The graph in Figure 9.2 shows results for inspection of permitted air sources for three years performed by an internal team.

A point of note is that although an inspection program is in place and implemented, violations are still noted during the internal inspections at an increased rate yearly. When analyzing the graph in Figure 9.2, the following can be gleaned:

• The organization has an inspection program for permitted air sources that has been implemented for the past three years.
• A significant amount of the area is being inspected each year.
• Areas inspected increased over the years.
• Areas inspected increased as inspection days decreased.
• Conditions that can lead to a violation are not significantly observed.
• Violations are increasing over the years.

Just as important as having a process to evaluate performance, it is important to utilize the data and continue to improve programs and processes. Oftentimes organizations collect data and place them on the shelf or fail to use them appropriately. In order to improve the program and the results obtained from assessing permitted air sources, the following should be considered and explored:

• Does the inspection program for permitted sources need to be revamped? Are the correct metrics being used? This should be the last question asked, although they are presented as a first point to explore. One caution here is that don’t assume that the program or process is the problem and the data or the information discovered is not telling the correct story.
• Why is the amount of violations increasing each year albeit slightly? The first thought or question should be: Is program implementation decreasing? Effective program implementation should yield continuous improvement and there should be a decrease in violations. However, degradation in implementation can yield the results seen here.
• Are the right areas being inspected? The key is to ensure the correct areas are being inspected at the appropriate frequency – areas and sources where work is subjected to the requirements of the permit.
• Are the right sources being inspected? Ensure the appropriate components of the source are inspected. These components will include the parts of the source that contribute to or in some way impact emissions of a chemical or hazardous substance. Ensure that those critical parts are maintained and documented at appropriate frequency.
• Are the people performing the inspection knowledgeable? Ensure that the workers responsible for assessing programs and processes are knowledgeable of the operation parameters and the regulatory requirements. There are times when performing the assessment needs more than one individual to ensure that the appropriate level of knowledge is devoted to completing the assessment comprehensively.
• Is enough time allowed to conduct a meaningful assessment? Note that the inspection days decreased while the number of areas inspected increased may indicate that there is a rush to complete a task that is on the books. In such cases, the quality of the process is being impacted and perhaps quantity of inspections performed has taken precedence over program improvement.

9.6 Applied Learning

1. 1. What does a successful compliance program look like for a large organization? A small organization?
2. 2. List the comprehensive measures components. Explain each in detail.
3. 3. Which component of the performance measures components is most desired and why? Which component is least desired and why?
4. 4. Explain how to identify the important aspects of a business that should be monitored.
5. 5. What methods should be used to evaluate environmental program effectiveness and compliance?
6. 6. What methods should be used to evaluate implementation of environmental program effectiveness and compliance?