IMPLEMENTING A SAFETY CULTURE WITH AN INVISIBLE WORKFORCE: CONSIDERATIONS AND LESSONS LEARNED

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1 IMPLEMENTING A SAFETY CULTURE WITH AN INVISIBLE WORKFORCE: CONSIDERATIONS AND LESSONS LEARNED Nick Sajatovic Valerus Houston, Texas, USA ABSTRACT In 2010 Valerus began a journey into improving company performance. Safety was at the top of the list. The plan was kept intentionally simple. Create a safety culture within Valerus and improve safety performance by: 1.) Communicating that safety is the first priority of company leadership, and 2.) Reducing/ eliminating the opportunity for employee exposure to unpredictable conditions. Since Valerus began this journey to improve company performance, best practices have been learned and implemented for a number of critical areas. Safety is at the top of the list, and with Valerus adopting a safety culture, a commitment to a zero tolerance policy remains constant and continuous. Figure 1: Valerus TRIR and EMR statistics,

2 INTRODUCTION The midstream sector involves remote operations and mobile personnel who perform potentially hazardous tasks, often on a daily basis and in isolated locations. How do companies ensure they implement the right mix of programs and accountability so that, even when not under direct supervision, employees are behaving safely? Valerus needed to answer these questions to improve company performance. Creating a safety culture within Valerus meant developing the necessary components for an effective safety program, including implementation of a HSE management system (HSE MS), reducing risk and exposure, leadership involvement, and best practices for taking a corporate office mandate and effectively implementing it at the field and local facility level. A previous misconception was that safety was a stand-alone metric and that it would come at the expense of extra cost and company profitability. This two-year transformation and its quantifiable results illustrate that the pillars of company performance safety, growth, productivity and customer satisfaction are all connected. Through the application of this learning, Valerus was able to develop a company culture with a strong emphasis on predictable performance through standard operations and accountability. This paper will review the two major goals set forth by the management team, the company-wide initiatives and behaviors implemented, and their impact on safety and other key performance indicators (KPIs). Goal One: Top-down communication to reinforce safety as the company s highest priority Senior leadership recognized that a true safety culture begins with clear management commitment. We recognized that a gap in safety existed and knew we must take a strong stance to drive change. Pete Lane, CEO. To that end, the senior leadership team developed the foundation for a communication plan that continues today: 1. Regular company road shows conducted by the CEO demonstrates leadership commitment. Throughout the year, the CEO visits every Valerus location and conducts town hall meetings with all employees at that location. The format for these meetings starts with safety and then leads to company performance. These roadshows continue with a consistent message that safety is priority number one. 2. Established clarity on zero tolerance safety policies and stop work authority. We wanted every employee to know that safety is a core value and that any employee could stop a job or operation that, in their opinion, is unsafe or could have a negative environmental effect. 3. Re-enactments of every recordable or serious near miss at the company monthly management meetings. The re-enactments were presented by the supervisor and coworkers to the senior leadership team prior to the monthly review of company performance. This resulted in productive dialogue on alternative ways to do things more

3 safely and empowered employees to make changes. It quickly became known throughout the employee population that leadership was very engaged in safety. 4. Weekly senior leadership updates on safety. The first topic on the agenda at each SLT meeting is safety. The management team is kept informed about the safety performance of all locations within the company, both domestic and international. 5. Upgraded and expanded the HSE team. Although everyone owns safety, the HSE team was upgraded to bring in more seasoned HSE professionals from across the energy industry. This resulted in policies and procedures being upgraded and the implementation of comprehensive use of personal protective equipment (PPE) across the company. 6. All employees have a clear message that safety is the number one goal and have improved safety behaviors accordingly. The first six months of the safety turnaround were a true litmus test of the organization s commitment to safety and the HSE management system. A higher than normal percentage of employee turnover took place as a result of strict adherence to zero tolerance safety policies. Valerus was built on an entrepreneurial, customer focused spirit. Our goal was to maintain the Valerus can-do attitude, while incorporating our passion for safety as another one of our core values. Pete Lane, CEO. Goal Two: Reduction/ elimination of potential for employee exposure to unpredictable conditions Reducing and eliminating potential employee exposure to unpredictable conditions is an area of continuous improvement. Most recently this goal consisted of eight large company-wide initiatives. The most urgent processes were addressed first and will continue to evolve. 1. 5S Lean: Lean six sigma processes were launched across the entire company. 5S is one of many tools focused on workplace organization. It is thought to be the most basic building block of Lean (and the most difficult to truly accomplish and sustain). By organizing tools, parts and processes, and implementing daily housekeeping to keep the work environment safe, companies can reduce distractions, confusion, and hazards, making the workplace more productive and safer. The impact that 5S had on the Valerus safety culture was apparent almost immediately. For example, an employee who had been working for Valerus for two weeks injured his finger while operating a metal working machine in one of the company s manufacturing plants. This led to the implementation of improvements the short-service employee (SSE) program, with enhancements including training for equipment guarding and operation. This was one of the first areas where a 5S board was created for this work cell. No safety issues in this work cell have been experience since that time, and since then the employee has been promoted to a supervisor position in that plant. I really learned a lot about the value of 5S and its contribution to workplace safety and productivity. I was the lead for that operation for two years and enjoyed continuing to find ways to improve the 5S score of that cell with the team. I look forward to expanding the use of 5S in my new supervisory role in compression assembly. Chris Merrit, Assembly Supervisor.

4 2. Formal HSE management system (HSE MS) rolled out with key focus on big nine : Valerus targeted and implemented nine critical SOPs throughout the company s operations, including a zero tolerance policy, stop work authority, SSE/contractor safety, job safety analysis (JSA), lock-out/ tag-out (LOTO), hazard assessment, H 2 S and confined space procedures. The necessary tools for safe resources (guidance and support of supervisors) were also provided. The Valerus HSE MS contains over 60 SOPs and are reviewed and improved on an ongoing basis to meet our operational needs. Regional operations VPs reviewed all of the SOPs to look for opportunities for improvement as well as content accuracy. We did not take this activity lightly and devoted significant time and effort to this review to ensure we have meaningful SOPs for our operations teams to use as their go-by in the HSE portions of their daily job duties." Robby Johnson, RVP. 3. Visual management of company goals, including communication and clear understanding of expectations/ accountability: Key KPIs such as safety, customer satisfaction, and productivity are available at all locations, and every employee understands the measurement, current status and that these KPIs are their first priority. There is a direct link between employee performance and financial compensation, and employees see the customer satisfaction metric daily and are motivated to improve. Employees also understand how their contribution matters and fits into overall company performance and customer satisfaction. One customer, a VP of operations for a major midstream company, commented about the Valerus approach to safety: I wanted to send you a note thanking you and your team. In the past couple of weeks there has been a transition, you may even call it a step change, in performance for every facet of the operations of our facility. It has been a challenging project and there are very few groups that could have worked through those challenges in as safe and professional manner as you and your men have. It is obvious that Valerus s dedication to safety is not just words on paper, but a true value in your organization. Not only have I noticed, but my men have been praising your group and I wanted to pass that word along. Again, thank you and I look forward to working with you into the future. 4. Basic business process implementation: Like many companies in the energy sector that grew fast, the company s basic order fulfillment process was insufficient for what is required for a $500M + company. Order-to-invoice procedures were evaluated and gaps identified to create a more sustainable, scalable process. Work flows from order to invoice were also implemented, resulting in more predictable order fulfillment. Employee training on effective use of material requirements planning (MRP), process documentation and supplier coordination allowed for daily work to be more and the product to be delivered on time. 5. PM programs for fleet equipment: Valerus improved its predictive maintenance (PM) program to enable field technicians to be more proactive when addressing equipment

5 breakdowns and getting units back up and running. Unit- specific PM schedules were created and implemented, along with SOPs with clear work instructions to the field technician. By enabling employees to safely work in a predictable work environment, emergency field call-outs were reduced. This resulted in employees daily work being more but also provided a more quality product with better uptime. Danny Cannon, SVP Operations. 6. Standardized products: Traditionally the industry built compression units based on P&ID s and some "tribal knowledge" of the previous units built. Valerus engineering teams therefore focused on creating standard drawings and general arrangements that provided the detail necessary to build compression and production equipment the same way every time. Our engineering teams really stepped up in creating standard compression designs. It has allowed us to turn out drawings more quickly and to shorten our product lead times. Mike Paris, VP Compression. On the environmental front, standardization of components related to unit performance and emissions (catalyst housing, elements, and air-to-fuel ratio controllers) allow for technicians to be able to correct any emission issues more quickly. 7. ISO-9001 certification: In Nov 2011, ISO-9001 certification for the design and manufacture of gas compression equipment was obtained. This certification further strengthened the drive for processes and procedures. ISO for environmental management will be applied for in Remote monitoring: Field technicians who previously drove to units to check on their operation have started utilizing remote monitoring. This allows them to see when a service visit would be required before visiting the unit, therefore proactively planning their scheduled trips to units and spending fewer miles behind the wheel of a vehicle. Less travel required by technicians also means less vehicle emissions and less wear and tear on vehicles. For example, notification of a drop in oil pressure means a unit can be shut down if any environmental threat exists, and that a technician can be deployed proactively rather than reactively. This predictive maintenance reduces downtime and unexpected exposure for personnel and customers. Conclusion: The safety culture at Valerus has enabled the company to grow profitably and safely over the last two years. Table 1 summarizes the impact of the safety programs implemented and how they improved the other core performance metrics of the company. Table 2 further quantifies the top level metrics of the company s performance during the safety culture transition at Valerus (revenue, EBITDA, TRIR and EMR). We have only scratched the surface on where we are going with safety at Valerus. Pete Lane CEO. Since Valerus began this journey to improve company performance, best practices have been learned and implemented for a number of critical areas. Safety culture, processes and commitment to zero incidents will be a continuous journey and focus.

6 Table 1: Summary of Change Programs and Impact on Company Performance Goal 1: Communicate that safety is the highest priority Change Process Improvements Made Safety Profitability Customer Satisfaction 1) Senior leadership engagement with safety focus and initiatives 1) Regular roadshows by CEO 2) Weekly leadership safety updates 3) Recordables presented in person by the responsible area for root cause and corrective action 4) Upgraded/ expanded HSE team 5) Zero tolerance safety policies and Stop Work Authority All employees receive clear message that safety is #1 goal and improved safety behaviors accordingly Safety record increased sales opportunities and reduced operating costs (lower workers comp, insurance, etc.). Safe environment makes Valerus a preferred workplace. Valerus HSE MS and excellent safety record allow rapid approval by customers to work on their job-sites Goal 2: Reduce /eliminate opportunity for employee exposure to unpredictable conditions Change Process Improvements Made Safety Profitability Customer Satisfaction 2) 5S - Lean Launched Lean across the company. Cornerstone was the Lean 5S system. Daily housekeeping keeps the work environment safe, and sustainable. 3) Formal HSE MS rolled out with key focus on big 9 Targeted 9 critical SOPs and drove them across the company. zero tolerance policy, LOTO, confined space, H 2 S, stop work authority, PPE, JSA, SSE/contractor safety Eliminated workplace hazards Provided the tools necessary to be safe More efficient production - material and tools are in place Cost to implement outweighed by the disruptions caused by injuries Predictable work environment allows for schedule adherence to promise date. HSE MS and TRIR record provide access to a much broader customer base

7 4) Visual management of company goals 5) Basic business process implementation 6) PM programs for fleet equipment 7) Standardized products Key KPIs available at all locations (safety, customer satisfaction, productivity) Evaluated our order to invoice procedures and identified a gap. Implemented the use of work flows from order to invoice that result in predictable order fulfillment. Planning, effective use of MRP, employee training, process documentation, supplier coordination. Inconsistent predictive maintenance program required field technicians react to equipment breakdowns. Created PMs and SOPs that provided clear work instructions enabling employee to safely predict work environment every time. This reduced number of emergency call-outs to the field. Inconsistency in drawings. Engineered drawings were assembled with SOPs on how to build, resulting in less variation in daily work Every employee know how it is measured, current status and that it is priority #1 Employee daily work more Employee daily work more Employees daily work more Direct link between employee performance and financial compensation Improved productivity on all fronts resulting in lower product cost, warranty, penalties for late delivery, etc. Less cost to maintain and service field units Vastly improved cost of standardized product vs. custom/ oneoff products Employees saw the customer satisfaction metric daily and worked to improve Provided outputs matching commitments to customers. (>95% OTD) Predictive maintenance reduces downtime Predictable OTD and scope of supply

8 8) ISO-9001 certification 9) Remote monitoring Established processes and procedures on how we perform our daily activities Field technicians who previously drove to units to check on their operation can now monitor performance remotely and predict when a service visit is required. Employee daily work more Fewer miles driving a vehicle reduces employee exposure to injury Reduced training costs for new employees and improved quality through standardized operating procedures Less cost to maintain and service field units Improved sales opportunities with international customers in particular Predictive maintenance reduces downtime Table 2: Valerus Performance Safety TRIR EMR Growth - Revenue Revenue - % growth 62% 99% over base year 2010 Productivity - EBITDA - % growth 24% 55% EBITDA Customer Satisfaction over base year 2010 On-time delivery <50% 82% >95%