To centralize or decentralize your EHS management program?
That is the question. Finding the answer for your EHS management program comes down to how you approach compliance in your business.
The ideal EHS management program comes down to more than your compliance regulations – and can change as your business grows. If you’re branching out into more countries and operations – or are inheriting a legacy program – it may be time to review your management structure for EHS. But how can and should you choose between centralized and decentralized approaches?
Before you change your EHS management program…
To decide what’s best for your business in the end, first there are many factors to consider from the beginning. These include your company’s compliance culture, allocated resources at corporate and site levels, and compliance goals – not to mention any business merger and acquisition activity. Crucially, neither a centralized nor decentralized approach is fundamentally ‘better’.
In our work with multi-national organizations, we’ve seen businesses succeed with both centralized and decentralized models for EHS management programs as well as a hybrid approach.
The key to success isn’t to revamp your EHS system. Instead, you need to understand the strengths of each management structure and leverage the resources available to overcome challenges and the potential shortcomings of the chosen approach.
Centralized EHS management programs: A better bird’s eye view
A centralized EHS management program has the advantage of maintaining consistent rollout and implementation of EHS efforts across the board. This provides better corporate visibility of sites’ performance. It also provides a clear scope of responsibilities and performance expectations for internal EHS professionals.
This approach is most suitable for light manufacturing and office-based organizations. These business scenarios often have a small team of corporate EHS experts overseeing the rollout, implementation, and progress of the sites’ EHS matters. This may be supplemented by local external consultancy or the sites’ HR department.
Overseeing EHS in this manner ensures consistent information exchange and management, even when EHS expertise and resources are limited at the local/site level. This is quite different from heavy manufacturing, which often has a full team of experts to deal with the broad scope of EHS matters.
Corporate reporting highlights the importance of gathering metrics on EHS performance. A centralized reporting structure therefore assures standardized performance measurement and provides consistent data points to track sites’ compliance progress. For instance, you might mandate tracking of EHS metrics to oversee the entire organization’s compliance without jurisdictional variances and language barriers. This will allow you to better identify risks and zoom in on particular EHS topics for future follow-ups.
For local EHS professionals, a centralized EHS management setup/team alleviates stress resulting from conflicting roles and expectations from the various business areas. This “center of excellence” model helps the management team to dedicate people and resources to EHS. It also supports effective scrutiny of EHS improvement.
However, a centralized management structure also has some disadvantages. The decision-making process can sometimes be prolonged because the EHS team at the regional or business level may be unable to make the final call on some issues. This could delay the execution of improvement or adjustment programs or getting the necessary resources to support the sites.
If you decide to centralize, make sure to develop communication or management procedures to overcome this prolonged decision-making process. For example, give regional or local sites more flexibility to determine their implementation strategies or additional authority to retain external support to facilitate program rollout.
Centralization and decentralization aren’t necessarily mutually exclusive. They can even co-exist.
Decentralized EHS management program: Divide and conquer compliance
On the other side of the spectrum, a decentralized management strategy also has its advantages. It tends to give sites more autonomy and a stronger sense of ownership of EHS issues. This in turn motivates them to act quickly to deliver improvements. Having the authority to make important decisions at the mid-management level also increases the agility of the program. It encourages faster reaction times and less bureaucracy in getting changes approved.
In a decentralized organization, the compliance goal is integrated into each facility’s operation. Each facility can therefore be held accountable for failing to comply and rewarded for success. This type of organizational structure is often seen in global conglomerates.
Business units and local facilities have a stronger sense of ownership and empowerment over EHS compliance. The operational team directly oversees performance and is tasked with its prioritization. This means that local teams tend to be more motivated to achieve the compliance goal. These usually have multiple and distinctive lines of business that each require a tailored approach.
With greater management autonomy, program implementation and improvement can also be more agile. Decisions can be made at the unit/facility level. Another advantage of decentralized management is smooth rollout. The unit and sites can participate in the decision-making process, which saves a significant amount of time bringing frontline managers and workers onboard.
However, there are also disadvantages. EHS professionals may face conflicting responsibilities and expectations within the organization. An EHS expert would typically report to the head of the business unit or regional operation but would also carry out work for the corporate EHS department. These departments may have very different expectations, which could make it hard for the EHS experts to work out their scope of responsibilities.
To resolve this dilemma in your decentralized program, explore how your head of the business unit or regional operation can give extra support to these EHS experts (e.g., support from the EHS professional community) and review their work based on EHS priorities.
Can both approaches co-exist in your company?
In short, yes. But it depends. Centralization and decentralization aren’t necessarily mutually exclusive. It’s not uncommon to develop a hybrid strategy that balances the interests of consistency and transparency, with preserving local autonomy and agility.
A hybrid EHS management program may be particularly suitable for an organization with relatively mature EHS programs and recently acquired businesses or facilities. This will give the new facilities more flexibility and time to adapt to the new company culture. The new units may continue to use their existing EHS support, so that they are not overwhelmed by new programs and information.
Additionally, this approach avoids forcing sites to adopt a standardized compliance tool. Instead, encouraging the sites to take ‘baby steps’ to learn and apply corporate assessment metrics to keep tracking their progress.
Move your EHS management program forward with you
To determine the best approach for your EHS management program, you need to look at your organization’s compliance culture and priorities, current practices, and available resources. Ultimately, there’s no ‘right’ answer. Whatever approach you choose, it should help you to build better resilience, transparency, and agility into your EHS programs. Ultimately, you can leverage either or both of these management styles to achieve success. The most important factor is to retain a positive compliance culture and keep providing support to your EHS professionals. This will enable you to overcome the challenges of the journey – and keep EHS compliance in step as your company evolves.