Scott M. Shemwell
October 20, 2017

Assuring Operational Excellence from Contractors and Their Subcontractors

Implementing a Culture of Safety and Operational Excellence

This piece accompanies our latest BTOES Insights premium content, a free chapter of Operational Excellence Book, 'Implementing a Culture of Safety: A Roadmap for Performance-Based Compliance'.

How Can You Assure Operational Excellence from Contractors and Their Subcontractors?

Most organizations depend heavily on contractors and subcontractors to perform the actual work process tasks/subtasks in the field. Often, this fact is overlooked by those challenged with assuring that the organization attains and sustains Operational Excellence.

Another long held myth is that the legal contract governs performance and in the worst case an injured party can file a lawsuit.  For those organizations, public, private or government working in sectors that can be consider ones with Critical Infrastructure, failure at the work process level is not an option.

Some industrial incidents can now impact not just the locale but society in general at a level previously only seen during warfare.  Certainly, the reputation of the company and its executives can be mortally damaged.  A few incidents come to mind including, Bhopal, Three Mile Island, Deepwater Horizon and most recently Equifax.

Get a free Chapter of Scott's book, 'Implementing a Culture of Safety: A Roadmap for Performance-Based Compliance'.

Bond Governance for Implementing a Culture of Safety

Strong Bond Governance

Readers may wonder how the Equifax incident compares with the listed industrial accidents.  All are case studies of the failure of management to assure Strong Bond Governance.  This governance model was developed by this author and his late colleague “Dutch” Holland.  With a focus beginning from the Board of Directors, this model helps assure that poor field practices are not followed whether it is oil well construction or updating software in the systems that the company depends on for its revenue stream and reputation.

Moreover, strong operational excellence practices across the organization’s ecosystem have a Safety Dividend.  For example, not having accidents reduces Unplanned Downtime, possible increased Regulatory Oversight, can Enhance Reputations and even reduces exposure to Litigation and subsequent awarded damages.

Therefore, a systemic approach to OE and its associated Safety Culture is a Best Practice.  This business model is available to all and does not have a high cost of implementation.  We will discuss this practice in more detail in our next blog.

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Another common misunderstanding is that any dramatic organizational transformation requires significant IT systems spend as well as associated Change Management lengthy processes.  In this author’s experience, most organizations can implement this paradigm shift without major disruption.

Systemic Models for Operational Excellence

In systems composed of many elements such as typical critical infrastructure operations, complex behavior can emerge from the simple interactions among a set of N elements.  These pairwise interactions can include the discussions between the operator and the drilling contractor or the drilling contractor with a service provider.[i]  A similar set of interactions may take place during heart surgery as well.

Since each pair will have its own Pay-Off Matrix, this process can be modeled using Game Theory.  Wikipedia defines game theory as, “the study of mathematical models of conflict and cooperation between intelligent rational decision-makers.”

Game theory is a powerful tool that is not limited to academic research.  For example, this writer uses it as a tool to teach cross cultural interactions to global clients.

Another school of thought suggests that the human behavior associated with team dynamics cannot be adequately modeled by simple pairwise interactions. With such Group Interactions, game payoff matrices cannot be theoretically derived from pairwise interactions.[ii]

Simply put, in our complex real world the behavior of each member of a team and his or her interactions with members of other collaborative teams will generate very complex human activities driven by individual biases and priorities.  Strong Bond Governance is necessary to exert authority over the behavioral economics of multi-team performance.[iii]

Download the first Chapter of 'Implementing a Culture of Safety: A Roadmap for Performance-Based Compliance'.

Going Forward

Large complex programs in Critical Infrastructure sectors can create significant stakeholder (including society) value.  However, they can destroy years of value “overnight.”

Strong Bond Governance is a Best Practice to assure the organizational ecosystem adds promised value and assures sustained Operational Excellence.  This Best Practice is available to all.

Additional information on Strong Bond Governance and other terms and information discussed herein are available from the Chapter One Excerpt, Implementing a Culture of Safety: A Roadmap for Performance Based Compliance.


Implementing a Culture of Safety: A Roadmap for Performance Based Compliance.



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About the Author

Scott M. Shemwell, D.B.A.

Dr. Shemwell, Managing Director of The Rapid Response Institute is an authority and thought leader in field operations and risk management with over 30 years in the energy sector leading turnaround and transformation processes for global S&P 500 organizations as well as start-up and professional service firms.  He had been directly involved in over $5 billion acquisition and divestitures as well as the management of significant projects and business units.

For more than a decade he has been directly involved with Fortune 100 firms, Government Agencies, and a large number of mid-size as well as start-up firms addressing a number of business and technology implementation problems.  For example, his Economic Value Proposition Matrix® model was developed with and for the energy sector and has been used extensively in CAPEX and Risk assessments.




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