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New tests for management: health, safety & environment.

Going that 'extra mile' in complying to regulations leads to better morale, quality products and a consumer market with a vigorous outlook on American manufacturing.

"There's no secret to success. It requires good planning, hard work and learning from past mistakes."

Spoken by Gen. Colin L. Powell, chairman of the U.S. Joint Chiefs of Staff, these words ring true for the foundry industry. Industry can learn from its history and plan for tomorrow's market.

Universal challenges for business haven't changed in 3000 years, and they'll be the same for years to come. They are:

* Quality. If it's not good, it's not going to sell. The customer might take the product but, without quality, the product will probably get sent back and the company may lose the customer.

* Work force. Without trained, motivated and dedicated personnel, a company can't make a quality product.

* Competition. Products with better value always win.

* Cost. High productivity, quality and sound management mean lower costs and, therefore, higher profits.

* Technology. Always important, technology is accelerating, affecting productivity, quality and management.

Challenges for Changing Times

There are additional challenges that have always been important. Their consequences in the future, however, will seriously impact corporate profits. These challenges include health, safety and the environment.

Yesterday, health was an important factor because healthy employees were more productive. Today, companies have a legal responsibility to protect employee health.

Good safety practices reduce insurance costs, increase productivity and protect the investment companies make to train employees. Today, the law requires companies to provide safe working environments.

In the past, companies who damaged the environment were not always welcomed in their communities. Today, environmentally irresponsible companies may not operate, and, if they do, managers are subject to fines or even prison sentences.

Proactive Compliance

Quality was the number-one management challenge in the '70s and '80s. In the '90s and beyond, health, safety and environment (HSE) is the major management challenge.

Yesterday's HSE questions were limited to knowing and complying with a few regulations. Today, federal, state and local regulations have swollen to more than 9000, and each day brings new ones.

HSE issues have become more difficult and far-reaching. Is your health, safety and environmental strategy consistent with your corporate vision? Are your systems integrated, flexible and adaptable? Do you have a strategy beyond reacting to problems? Are your planning, organization, R&D, manufacturing, logistics, marketing and information systems integrated, flexible and adaptable?

HSE regulations became important to the future of corporate America as the result of public pressure, first on the local level and then from the federal government. Corporate America is mandated to comply and can do so either reactively or proactively. As with all management challenges, these decisions affect a company's return on investment (ROI). While it is possible to have an acceptable ROI being a follower, a high ROI is nearly impossible.

A more unfortunate problem is the company that assumes a proactive position but makes the wrong decisions. Poor decisions result in losing to the companies that are proactive, make correct decisions and achieve the highest ROI. "Winning companies" attract investors and the best staff.

The Quality Challenge

Before the '70s, quality programs were widespread but tended to be reactive. Companies only had to meet customer specifications. For many companies, a quality program consisted of the picture of the company president looking down from the wall proclaiming, "Our company produces quality products." There was good advertising, but few had effective quality programs.

Japanese automakers were good examples of how companies used quality as a major competitive force. W. Edwards Deming taught the Japanese how to use statistical quality control tools and how to "do it right the first time," instead of trying to inspect quality after production. He showed them how to lower costs through total quality management.

American companies began to react to pressure for quality and applied the teachings of Deming and Philip Crosby. Quality became the top subject in every industry and, by 1990, the quality of many American products became competitive worldwide. Subsequently, corporate ROI increased because:

* Commitment throughout every level of the organization became a reality as quality commitment of the total work force became a reality.

* Organizations elevated quality as a top management concern. Quality control used to be a plant function reporting to manufacturing or to a central quality control department that reported to R&D. Today, a vice president or director of quality reports to the CEO or a senior officer.

* Quality information is available throughout the company in an integrated line from suppliers, to employees and to customers. Dow Chemical has an excellent way of stating its progress on the road to total quality, moving from customer compliance to customer satisfaction to customer success.

The U.S. has achieved a global quality status, but it's taken 20 years.

The New Challenge

One major problem is revealed by asking companies about their total health, safety and environmental costs. Rarely does anyone know these costs. Then, ask, "Do you apply health, safety and environmental costs to each product to enable proper pricing?" The answer usually draws an embarrassed silence.

Remember Gen. Powell's advice: "Learn from past mistakes."

Most companies are still managing HSE on a compliance basis in which a solution is developed for each new law or regulation. This scatters management focus. Different parts of HSE responsibility reside among human resources, engineering, legal and other departments. Information is duplicated, incomplete and often wrong because no integrated system has been installed.

Learning from past mistakes means reexamining problems. Being in compliance through reaction cannot positively affect ROI. The challenge is to be proactive, make the right decisions and drive ROI to new highs--in fewer than 20 years.

Beyond Compliance

Again, commitment from the top to the bottom of the organization is needed. Companies such as Dow Chemical, Intermet and Belgium's Petrofina now have an

HSE committee at the board of directors level.

Organization is the key. Like quality, HSE must be moved up within the organization. Many companies now have a vice president or director of HSE reporting to the president or another senior officer. The elevation of this management responsibility sends a message through the organization about the company's commitment.

HSE must become part of a company's total strategic planning. Following the lessons learned in quality, teams should be formed to bring all the "people power" of the company to bear on this new challenge. Table 1. Current vs. Future Business Approaches
Traditional Perspective Response 2000
Legislative compliance Legislative participation
Regulatory incentive Market incentive
Spot solutions Integrated HSE business plan
Local scope Global view
In-house decisions Public participation
Optional training Required training
Technology Support Technology innovation

Employee involvement and empowerment can pay big dividends, as they did for quality. Workers know where the problems are and often can find the lowest cost solutions. Although the best solution may be changing a process, its payoff is often many times greater than the investment.

Any proactive program requires accurate, current, complete and integrated data to lower the cost of compliance and provide a base for problem-solving beyond mere compliance.

Foundry officials are working very hard right now, but as an industry, they must update their traditional perspective to fit the 21st century (Table 1).

A coordinated industry response is needed on all fronts to meet this new challenge. Working directly with AFS, foundries have the power and the resources to ensure the quick response necessary to meet the challenge.

This time, however, you won't have 20 years to figure things out.

Paying More Attention to HSE Helps Regain Credibility and Improve Bottom Line

If you think environmental issues are only on the minds of government and business, think again. Consumers have a pretty strong opinion, and that opinion can and will affect future purchasing interests.

Public surveys show:

* 93% of Americans believe companies are not doing enough to help the environment;

* 58% can't name a single environmentally responsible company;

* 75% believe executives should be held personally accountable--and serve prison time--for their misdeeds.

"You can't simply advertise, legislate or lobby those perceptions away," says Joel Makower, editor of the Green Business Letter. "If you do, you risk being bypassed and outclassed by your more enlightened competitors."

The chemical industry recognized the problem. The Chemical Manufacturers Assn. started its Responsible Care|R~ Program. This program covers the industry's commitment to its employees, customers, government and home communities.

Does all this attention to HSE pay off? Stephen Erfle and Michael Fratantuono, economic professors at Dickinson College, found top environmental performers have:

* 2.2% higher return on assets;

* 4% better return on equity;

* nearly 10% better sales growth.

In their study, Erfle and Fratantuono defined a good environmental record as more than avoiding a major environmental catastrophe or even being in full compliance with environmental regulations. They also stated the need to have a published environmental policy and a willingness to discuss their environmental record.

According to Makower, the professors said that they were surprised at their findings. When they started, they thought they would measure the cost of being socially responsible. Instead, what they found weren't costs but benefits. Do environmental improvements pay? They sure do!
COPYRIGHT 1992 American Foundry Society, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
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Title Annotation:Quality in the '90s; includes related article
Author:Dorfmueller, Anton, Jr.
Publication:Modern Casting
Date:Nov 1, 1992
Previous Article:North American Free Trade Agreement: a perspective from the U.S.
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