Case Study: Tyco International’s Centralized EH&S Audits

The regulatory and compliance difficulties that accompany a single merger are challenging enough. Now imagine the hurdles that arise when acquiring hundreds of companies in the course of just a few years.

Add in the regulatory scrutiny that comes in the wake of a massive accounting scandal, and you have the mess that Tyco International faced a few years ago. Under former CEO Dennis Kozlowski, Tyco had adopted an aggressive acquisition strategy, buying more than 800 companies from 1999 to 2002. Years later, the company still had a hodgepodge of Environmental, Health & Safety programs and no room for error. To minimize risk, Tyco worked to centralize the EH&S program so it could have more control over its many far-flung units and subsidiaries.

A particularly tough challenge was shifting from a “holding company mentality to an operating company mentality,” says Rob Somers, director of EH&S management systems and transactions for Tyco. “From a risk standpoint, having such a diverse set of businesses—healthcare, electronics, manufacturing services—all presented their own issues.”

For example, Tyco’s service and installation operations work at customer sites, where they don’t control the work environment, and the risks may be harder to manage. “Tyco’s EH&S risk control programs must be able to accommodate all of the different work environments whether they are Tyco-controlled or not,” says Somers.

The initiative to consolidate certain support functions began as far back as 2002, when Edward Breen took over at Tyco as chairman and CEO. In addition to gutting the existing board of directors and leadership team, Breen helped drive the company to become one operating company with one way of doing things. “‘One Tyco’ was our approach,” Somers says.

This included creating a more centralized EH&S program. To achieve this, Breen hired, in addition to Somers, Robert Frantz as vice president of EH&S and Alan Roy as the director of EH&S compliance assurance.

The team soon realized that Tyco needed a more efficient system for global EH&S management. Working with spreadsheets and different pieces of varied software programs was no longer efficient, Somers explains.

So Tyco turned to a software provider to help it take internally developed management system tools, audit processes, checklist protocols, and scorecards and incorporate them into one software solution. “You need tools and you need to be consistent,” Somers says. “If you’re not measuring it, nobody is paying attention to it.” The provider Tyco has selected is a QEHS performance and compliance management tool from Enablon, which Tyco is using to consolidate its global operations.

Uniform Self-Assessments

With the company-wide rollout of Enablon nearly complete, Tyco is now turning its attention to the self-assessment process. “It is probably the biggest hurdle for us,” says Somers.

In the past, Tyco didn’t have a unified plan to implement the self-assessment program across the business units. “It was left up to the businesses to manage,” says Somers. “We were more focused on the compliance aspect and getting that under control.” The quality of self-assessments was inconsistent, he adds; some businesses did it very well—monitoring, measuring, and scoring them—where others weren’t doing much of anything.

Using the Enablon platform helps Tyco to analyze results across different regions and businesses. In addition, scheduling, managing, and reviewing self-assessments used to be done off-line; no longer. “Now we’re able to do it online,” Somers says. “Everybody has insight into when audits are happening, as well as what the results are.”

In addition, the platform has allowed Tyco to create a customized common hierarchy for its systems. This enables the business units anywhere in the world to map any audit protocol or checklist of regulatory content to a standard hierarchy if, for instance, a lockout/tag-out procedure needs to be entered into the system or an environmental permitting issue arises. “That gives consistency and visibility into specific risk areas,” Somers says.

“We’ve also developed a very specific and well-documented compliance assurance process,” he says. This includes how Tyco does things from the scheduling of the audit all the way through the follow-up and the corrective actions that are being taken.

HALLMARKS OF SUCCESSFUL EH&S PROGRAMS

Paul Beatley, co-founder and senior consultant with Enhesa, offers five common elements that make for a successful global EH&S compliance program:

1. Increasingly base audit program management on inherent and comparative risks with regard to company’s worldwide activities.

2. Differentiate and customize verification events according to risk profile.

3. Prioritize corrective measures to address greatest risk first.

4. Use self-assessments as part of a complete verification program.

5. Include tools to allow internal auditors to better target their compliance requirements.

In addition, Beatley summarizes five key characteristics that leading companies share when conducting an effective self-assessment.

Base activities on a common set of protocols;

Perform training through Webinars, and include a certification process;

Use a common database for management of findings and responses;

Manage the follow-up system at a central remote location; and

Aggressively communicate benefits, as well as risks and limitations.

Because it had such a high level of support, the audit program is credited with driving improvements in other areas of Tyco’s EH&S programs, “which is a little different from the traditional EH&S programs,” he says. “Traditionally, the programs are put in first and auditing starts thereafter. We decided to focus on legal and regulatory compliance first.”

Following its completion, both internal and external auditors were then trained on how Tyco conducts audits. This is done through auditing-skills Webinars and face-to-face training. “If you don’t have the training, you’re not developing the talent and understanding of the program,” says Somers.

The revitalized EH&S program has had the dual effect of helping Tyco fix long-standing problems and reduce risk going forward. “The great thing about our program is that we had support from our CEO and board of directors. They wanted to make sure we had a complete picture of the EH&S risks at Tyco,” says Somers.