Human error is to blame for some of the costliest industrial losses and business interruptions. Leaving a roll of paper towels in a turbine? The tally: US$11 million. Pulling the wrong switch and draining the oil from a generator? US$23 million. Closing a compressor valve that should have remained open? A fire and 30-day production shutdown.
Sure, insurance may cover the cost of destroyed equipment and short-term business interruption, but the repercussions can be far-reaching and long-lasting. You risk losing market share, revenue, brand equity and shareholder value. These losses can be permanent.
As a financial executive, you’re in no position to manage this risk by taking the controls of a chemical factory yourself. But what you can do, and perhaps must do, is ensure your company embraces a “safety culture.” Although it sounds like a platitude, your people need to internalise it so that every equipment operator is always empowered to exercise his or her best judgment.
Why errors occur
Operator errors don’t occur in a vacuum. In fact, some academics claim there’s rarely (if ever) such a thing as pure operator error. Rather, they say, operator errors are more a function of the plant environment, e.g., process design, management or maintenance. Again, culture.
Roughly two-thirds of commercial property losses we see are at least partly to blame on human error. FM Global performs approximately 111,000 visits to clients’ commercial properties every year (not all of them having
boilers and other machinery requiring skilled operators). We’ve documented 1,000 incidents in the last 10 years caused or worsened by an operator error. The average loss in these cases is US$2 million. A couple of chemical and power generation accidents broke the US$40 million mark.
Below are some of the most common contributors to operator error and costly business disruption. Addressing them will help you create a safety culture.
Information overload – We once visited a client’s new power plant where alarms – beeps, bells, buzzers and flashing lights – were going off every 10 seconds. Many of these were just signaling routine functions such as pumps starting and stopping. At first, these stimuli put operators on high alert. Gradually, however, the operators were conditioned to ignore the warnings. Their conditioning became a problem when the boiler system started malfunctioning. With some justification, the operators assumed the alerts were false alarms. Fortunately, there was no explosion. Industry research indicates an equipment operator can’t respond effectively to more than 150 alerts per 24-hour period – or one every 10 minutes.
Complexity – Why such information overload? Equipment has become more complex and digitized. Twenty years ago, the console of a power station was analog. If there was a gauge on the control panel, you knew it was important. Today, a gas turbine comes with 600 sensors, each one theoretically capable of transmitting data to a panel and triggering an alarm. It’s too much. Perform alarm management reviews to ensure that alerts communicate only the important information and signal the proper urgency. If there’s an alarm with a sound and light, you’ll know it’s important.
Skills shortage – You’ve seen the reports about declining science, technology, engineering and math (STEM) skills to the point that job opportunities in the United States outstrip qualified candidates. The reports are real, but the problem is global. One of the teams at my company worked in South Africa, where the skills shortage was especially dire. The solution was to automate whatever could be automated. That approach was great as long as everything in the plant ran smoothly. But every time there was an exception, it was a crisis. This skills deficit is only worsening as millennials hop from job to job every year or two. Succession planning is critical.
Uncertain authority – Another team worked with a paper mill where a worker discovered a leak in a boiler tube that was allowing outside water in. The worker reported the problem to the boiler operator, who clearly should have shut down the boiler immediately. Instead, the operator, reluctant to take an action he knew would affect revenue, took time to confirm the leak himself, then search for a supervisor to bless his plan to shut down the boiler. Although the worker technically had the authority to shut down the boiler, he feared getting in trouble for disrupting the business. While he was searching for the supervisor, the boiler exploded, shutting down the mill permanently, putting 130 people out of work, costing US$25 million in damage and leaving customers in the lurch. The operator was simply trying to keep his job. This story does not describe a safety culture. It describes a fearful culture—one that ended up costing the company.
Bad habits – The risk of operator error generally declines as operators gain experience. Veteran operators, however, still need refresher training. Like auto drivers, they can sometimes develop habits and shortcuts that can lead to serious accidents. The best training, both initial and refresher, tends to come in the form of what-if scenarios, i.e. simulated emergencies. Financial executives must ensure that time and money are avail- able to get this type of training done.
False economies – Good financial executives cut costs. Great financial executives understand when they’re hitting bone. In many cases, it’s sound practice to keep two industrial equipment operators on a shift when you could probably squeak by with one. It’s like flying a plane: Although one pilot is typically enough, a copilot is important when needed.
Low-functioning workers – Everybody has bad days when they’re sick, depressed, stressed out or tired. For an office worker, it’s usually not a life-or-death concern. For a plant or equipment operator, it’s worrisome. Ensure your managers consider the health and well-being of operators controlling major plant processes and machinery, and have a process for replacing workers who aren’t at their best.
Plant design – Some plants seem almost designed to fail, with critical processes lacking safety controls and presenting operators with too many ways to make irreversible, costly mistakes. Other plants are designed
for resilience, resisting human errors through their processes and controls. These better designs enable quick recovery if an error is made. It’s important to ensure that your plant is designed for resilience or if not, is retrofitted that way.
Operator errors like the ones we’ve mentioned here can’t be completely eliminated because people, while often well intentioned, will inevitably make mistakes. But we as financial executives can take the
time and make the necessary investment to create a safety culture that reduces risk, prevents business disruptions and fosters resilience. When we do that, it’s always good for the bottom line.
This article originally appeared in FEI Daily, and was republished in Reason magazine Issue 1, 2017, which you can read here.