Aligning accountability and awareness for environmental performance in opertions

1. Introduction

Due to increased environmental regulations and costs of non-compliance over the past two decades, corporate expenditures in the area of environment, health, and safety have increased substantially. By the mid-1990s, expenditures in pollution control alone in the United States totaled over $125 billion per year, a level that represented more than 2% of gross national product (GNP) (Jaffe, Peterson, Portney, and Stavins 1995). In 1990, estimates of the cost to comply with the newly enacted 1990 Clean Air Act Amendments were projected at $4-7 billion for the coming decade (U.S. Environmental Protection Agency 1990). As a result of the large amount of capital expenditures required for environmental compliance, and the potential for substantial fines or criminal penalties for non-compliance, environmental concerns have become a key factor in a firm's level of competitiveness (Post and Altman 1992; Jaffe, Peterson, Portney, and Stavins 1995). It is thus important for a firm to incorporate environmental objectives into its overall strategy, and to hold management accountable for environmental performance. To do so requires a clear definition of objectives in operational terms, a commitment by management to monitoring performance against these objectives, and an awareness by all employees of expectations. Perhaps the most difficult aspect of this process is promoting awareness of the company's policies and objectives at all levels.

Several studies have investigated the external drivers that cause firms to increase awareness of environmental issues (i.e., regulations, industry trade associations, consumers, etc.) (Schmidheiny 1992); however, research is limited in how this awareness gets implemented, or articulated internally throughout the firm. While external drivers may have positive effects in improving environmental performance and awareness, increased regulation may have unintended consequences such as creating barriers to market entry due to excessive compliance costs involved (Dean and Brown 1995). Several researchers provide a framework for the types of strategies firms develop to address environmental concerns. Firms can generally be divided into those using a proactive versus a reactive strategy (Hunt and Auster 1990). Proactive firms focus on pollution prevention methodologies and going beyond the regulations, while reactive firms focus on end-of-pipe solutions and just meeting standards. Others have explored whether proactively integrating environmental management into a corporation's overall strategy improves business performance. Berry and Rondinelli (1998), Porter and van der Linde (1995), Schmidheiny (1992), and Shrivastava (1995) all propose that it enhances performance, while Gray and Shadbegian (1993) and Walley and Whitehead (1994) argue that it may negatively impact performance. These differences may be explained by differing manufacturing operations, in terms of both product and process designs (Cairncross 1992; Schmidheiny 1992; Hart 1995; Klassen and Whybark 1999). Given the impact of environmental issues on operational technologies and product designs, many firms have implemented the use of operational tools to improve environmental performance such as design for the environment, design for reuse, and design for recyclability. However, many environmental management challenges still exist in operations, particularly in production and inventory control (Inman 1999). Other researchers have examined difficulties corporations have in accounting for environmental costs and have developed improved tools for cost accounting and involving accountants in investment decisions to improve environmental performance (Bailey and Soyka 1996; Epstein 1996; Shields and Boer 1997; Whycherley 1997).

While the implementation of these cost accounting and design tools has reduced waste and pollution as well as operating costs, the new procedures and policies raise new challenges in keeping operating personnel aware of a firm's environmental policies and strategies. Prior studies have not addressed how the level of awareness of the operational personnel about a firm's environmental strategy impacts their motivation to improve environmental performance. Research is also lacking in understanding whether stated management strategies are actually in place. This latter question draws on Chris Argyris' work (Argyris and Schon 1974; Argyris 1982, 1990, 1993, 1998, 2000), which addresses the inconsistency, or gaps, between management's espoused theories and theories in use. This discrepancy may result in ineffectiveness and counterproductive results. This is especially true for non-routine behavior or decisions such as those that occur in the environmental arena. This work is further explored in the model development section below.

The objective of the current study is to assess the internal drivers of environmental awareness, including how firms are incorporating environmental, health, and safety (EHS) objectives, with specific attention on the environment, into the strategic planning process, and how they are communicating these objectives and deploying accountability for environmental performance to operating personnel. This is of particular interest to both researchers and practitioners because environmental decisions typically exhibit high degrees of ambiguity or uncertainty and a low priority relative to other issues in a typical firm, which all increase the challenge in holding operating personnel accountable for environmental performance.

Also discussed is a case study of a steel producer's approach to aligning environmental performance and accountability. Among other findings, we note that this firm, in line with common practice in its industry, has a strong connection between its environmental performance objectives and its quality management programs. This link is explained by company management as attempting to use the quality vehicle to address environmental issues in order to avoid duplicative management structures and because process quality and environmental performance face many of the same problems highlighted above (i.e., infrequently encountered defects, complex causal routes of interaction, conflicting priorities with day-to-day operations, etc.). Nonetheless, there are significant differences between the payoffs from quality defects and those associated with environmental problems, so alignment and measurement issues in the environmental area require special consideration, above and beyond normal quality approaches. To study these alignment issues in the context of the case study, a survey was developed based on a `gaps assessment' methodology similar to that of SERVQUAL, developed by Zeithaml, Parasuraman, and Berry (1990) in the area of service quality. SERVQUAL measures gaps in management and subordinate perceptions about expected service quality objectives and provides, ultimately, a measure of the gap between customer expectations of quality and the ability of a company to fulfill these expectations. We extend their work to measure the potential gaps that exist between perceived objectives and accountability standards for environmental performance between managers and operational personnel. The initial results of this application are promising.

We begin the paper with the development of a decision processes and motivational framework to study the key success factors that underlie implementation of a corporation's environmental strategy. We then discuss the challenges in deploying accountability for environmental performance and follow this with an analysis of the two-part case study. Implications of the results, including a set of propositions and conclusions are then presented.

2. Model Development

To study internal motivators for employee compliance and accountability for environmental performance, we draw on Vroom's Expectancy Theory of work motivation (Vroom 1964). This theory predicts that individuals make decisions based on the outcomes that they anticipate will result from their actions, i.e., their expectancy. Their judgments are also based on their perceived reward or punishment for the results that will occur from their actions, known as instrumentality. The final part of Vroom's model is valence-the value a person gives to the reward or punishment expected under various outcomes.

Applying this framework to the environmental context requires an understanding of a worker's perception of (1) the link between his actions and environmental performance, (2) the environmental performance factors evaluated, and (3) rewards and punishment for a given environmental performance level. Figure 1 provides a framework of Vroom's Expectancy Theory as it relates to the current study. This framework modifies Vroom's model in that we have added a middle stage in which a person also evaluates how their actions or outcomes are being monitored, as well as a learning stage following previous actions, consequences, and rewards. The learning stage captures the importance of feedback as employees update their perceptions of the link between actions and environmental consequences, which is important given the uncertainty that may exist between actions and long-term consequences. While the present study does not explicitly address the valence portion of Vroom's model, it will become clear that the value attached to anticipated consequences of non-compliance with operating procedures, or bad outcomes, is a major driver of employee behavior. In particular, if the company makes pious statements about the importance of environmental objectives, but no meaningful consequences or sanctions are perceived to flow from non-compliance or environmental releases, employees will exert minimal effort in improving environmental performance.

While this is an individual motivational model, we seek to connect it to the organizational theories of the firm. More specifically, we study whether a gap exists between the managers' perception of standards to which they are holding workers accountable, and the workers' perception of these standards. This is in line with Argyris' conclusion (Argyris 1982, 1990, 1993, 1998, 2000) that there is often a gap between management values, or espoused theories, and what management actually implements in practice (theories in use). Unintended consequences, often times counterproductive to the espoused theories, result due to these differences and the fact that people are often blind to the inconsistencies. In essence, Argyris claims that management does not `walk-the-talk,' and sends mixed messages to employees without being aware of the gaps in their own thinking and action. This seems to be most pronounced in times of organizational change, or in implementing new, non-routine corporate policies, such as what we see in environmental policies. This theory is consistent with Kerr's (1995) analysis suggesting that companies often reward for A, while hoping for B. Hackman and Wageman (1995) find similar unintended results occur from the implementation of many total quality management (TQM) programs, while Karlsson and Ahlstrom (1995) indicate the need to adjust remuneration policies away from piece-rate when shifting to a lean production system in order to achieve the desired results. As a firm implements an environmental strategy, it becomes important to also revisit the set of performance measures, responsibilities, and rewards for environmental consequences, and determine whether the policies they intended to be implemented and communicated are actually in place.

It should be noted that other models or tools might be used as part of a larger motivational model. For example, responsibility charting is a tool that is helpful for new tasks or groups to clarify who is accountable and responsible for each task or decision in a given process, and who must be consulted before a decision is made, as well as who must be informed of a decision (Larke 1954; Melcher 1967). While this reduces the ambiguity and misunderstanding of each person's role in a given task, it may not offer the motivation or incentive to perform each task, which is why the larger motivational framework is presented.

Given the above motivational framework along with the unique characteristics of environmental decisions and performance, we can readily see why a challenge exists in aligning accountability for environmental performance at the operational level. Environmental decisions may involve consequences that are realized far into the future. In general, environmental events can be divided into two categories. 'A' events have short-term environmental impacts, such as spills and accidental emissions, over which employees at manufacturing sites would have the most control. The second, B events, have long-term environmental impacts, such as routine air emissions from a process contributing to ozone depletion, and would be addressed by product and process design teams. Because of the latent period between an action and the environmental harm itself, particularly for B events, it is difficult to evaluate and communicate the expectancy of many actions, especially compared to safety incidents. Even for A events, such as spills into the ground that can be easily seen and recorded, possibly more accurately than safety incidents, eventual harm to the natural resources is not readily observable unlike the immediate harm from a safety accident, such as a bruise or broken arm.

In addition, the lack of immediate feedback about an action's effect on performance makes it difficult to hold people accountable for their actions, particularly if their tenure in a position is short. As a result, a firm must artificially create immediate `feedback,' perhaps in the form of monetary rewards/punishments, with clear accountability and responsibility for monitoring against operating standards that embody the firm's environmental policy. The challenge of creating immediate feedback for environmental performance is difficult because many competing factors for management's attention, e.g., profitability and financial goals, have well-established methods of measurement and reporting. This difficulty may be more of a cultural issue than a measurement issue, however, as illustrated in studies concerning implementation of safety and quality concerns in the past. These characteristics affect the instrumentality portion of the model.

Finally, the uncertain connection between actions and environmental consequences, again primarily for B events, makes it difficult for management to reach a consensus, on how the corporation's environmental policy should be implemented. Thus alignment of strategy, objectives, measurement systems, and accountability procedures is clearly an important and complex issue in assuring environmental performance.

Traditional incentives used to motivate employees to take 'correct' actions may not be adequate to motivate correct action in the environmental area because of the difficulty to see the direct connection between actions, consequences of actions, and potential rewards or punishments in the area of environmental issues. Hence, communication and accountability for environmental performance become critical factors in determining a firm's level of environmental excellence. The key issue is to create and maintain a consistent perception between what corporate, divisional, and plant management believe they are holding subordinates accountable for, and for what the subordinates believe they are accountable. Let us consider the experience of one company to understand the nature of these challenges in practice.

3. A Diagnostic Case Study

To study the above research questions, an in-depth analysis was conducted of a steel manufacturer (which we fictitiously name SteelCo) during 1996 concerning its policies and its results in communicating, monitoring, and rewarding environmental performance. While this is a case study of one firm rather than several firms, the purpose of the study is to develop a theory, or set of propositions, regarding environmental management implementation, specifically in terms of the creation and alignment of accountability for environmental performance, rather than to test a specific set of hypotheses.

We analyze a steel manufacturer due to the high degree of potential impact it may have on the environment, as well as the number of environmental regulations with which it must comply. The case study consisted of two parts: an interview and a survey instrument. Individual interviews were first conducted with top management at SteelCo's corporate office, including the Chief Operating Officer, Chief Administrative Officer, Vice President of Safety, Health and Environment, Corporate Controller, Manager of Safety and Industrial Hygiene, and General Manager of Environmental Affairs. Ten additional interviews were conducted individually with senior management at one of the firm's more profitable business units, a major plant site. These interviews lasted approximately 1 to 12 hours each and focused on the following four areas regarding environmental management, and corresponded with the four segments of the motivational framework presented above: (1) communication strategies (expectancy), (2) performance evaluation (monitoring), (3) accountability and responsibility (instrumentality), and (4) learning and feedback. The purpose of the interviews was to investigate the degree of alignment in accountability and awareness for environmental performance. This included investigating management's understanding of the corporation's environmental policy, the degree to which they believed their actions influenced environmental performance and the personal consequences to them based on this performance, and whether any 'gaps' existed between the various levels of management as to what was being communicated to them and what they considered to be actual priorities and facts concerning environmental performance and related management policies. Based on the expectancy theory framework presented above, the existence of significant gaps may adversely affect a firm's environmental performance. Zeithaml, Parasuraman, and Berry (1990) demonstrate that gaps in the perception of the factors that influence service quality will negatively affect customer satisfaction, and Argyris (2000) finds that unintended results occur due to the inconsistencies between management's espoused theories and theories in use. If management does not `walk-the-talk' then the message communicated to the employees may not be the one management believes it is delivering.

Prior to conducting the interviews and administering the survey, two executives within the Safety, Health, and Environment Department at SteelCo were consulted regarding the relevance of the areas to be discussed in the interviews and measured in the survey. At each management level, the same set of questions was asked of each manager to ensure comparability across responses.

The second part of the study consisted of a survey instrument, similar to SERVQUAL, to assess awareness levels, drivers of awareness (e.g., perceptions of accountability) at the operating level of the organization, and other issues associated with mental models of employees about environmental effectiveness and measurement, particularly the existence of gaps in perception of accountability for environmental performance between management and subordinates. The areas measured regarding environmental awareness included the following: (1) an overall assessment, (2) communication, (3) training, (4) performance measures, (5) accountability and responsibility, (6) rewards, and (7) knowledge. Respondents answered multiple questions in each section according to a seven-point Likert scale, ranging from strongly disagree to strongly agree.

The questionnaire was distributed to 48 of the business unit's foremen, 6 to each of the 8 departments involved in the manufacturing of steel. To determine whether there were any differences between what management believed the foremen perceived and what the foremen claimed to perceive, the same questionnaire was distributed to the 10 senior management interviewees at the business unit. They responded to each question by providing the response that they believed would be the average foreman's response, not their own beliefs.

4. Results of the Case Study

4. 1. Interview Segment

Overall, the responses from all participants regarding SteelCo's environmental policy were very much aligned. There was a belief from all respondents that top management had a clear and strong commitment toward the environment, but several commented that it was less clear than the firm's commitment to safety. Almost all believed that it was more difficult to attract attention and motivate interest in the environmental area due to the fact that some environmental impacts (1) may be hard to see (such as type B events discussed above), (2) have lagged effects with long latency periods, and (3) are possibly less visible than effects due to poor safety performance. In reference to Vroom's model, this comment indicates that a clear understanding between an individual's action and environmental consequences, i.e., expectancy, will be hard to achieve, especially compared to safety. Several managers believed that there is a lack of rewards (punishment) for good (bad) environmental performance, and this is the main gap between organizational levels.

We expand on the above comments by first briefly outlining SteelCo's environmental strategy, and then discussing comments from interviewees at the corporate office and business unit, highlighting differences that were identified among respondents.

4. 1. 1. STEELCO'S ENVIRONMENTAL STRATEGY AND CHALLENGES. SteelCo's environmental strategy consists of creating an environmental culture in which these issues are a 'corporate value' rather than a priority, as is true for safety. In addition, it consists of complying with environmental laws, and reducing environmental risk and liabilities.

In achieving the firm's environmental goals, the most common challenge indicated was dealing with changing regulatory requirements. Educating the workforce about the necessity of protecting the environment, and getting them to understand that the environment is important and that they have a responsibility to improve environmental performance was also seen as a major challenge. Other challenges included assigning and pushing down accountability and awareness and clearly defining responsibility for every individual in terms of the environment. Many of these challenges stem from the possible ambiguity in the link between one's actions and environmental consequences.

4.1.2. TOP MANAGEMENT COMMITMENT. Given the challenges of communicating and educating the workforce about environmental importance, it is critical to have top management commitment in implementing an environmental strategy to facilitate the education process. Most of the interviewees believed that top management placed a high importance and commitment on environmental policy and that this was a key factor as to whether employees would receive and act on the message that environmental performance is important to SteelCo. However, a couple of managers stated that they did not believe that `our actions back up our talk.' Another indicated that nothing really happens to a worker for failure to comply with regulations or management safety policies. Workers have not seen negative consequences to people for not doing something, "we only 'talk'-there is a lack of accountability in this area."

4.1.3. COMMUNICATION AND KNOWLEDGE AND LEARNING. In terms of modes of communication of environmental policies, SteelCo was in the process of administering a four-hour Environmental Awareness Program (EAP) to all employees at the time of the interviews. Management at the corporate office and top management at the business unit had gone through the program, and in the following year it was to be administered to all employees at the business unit. This indicates a commitment to learning as well as creating knowledge in the environmental area through additional training. Learning also occurs through internal environmental audits that are used as a coaching rather than confrontational tool.

Additional communication regarding environmental policy at the corporate level occurs through monthly reports and business plans. At the business unit, communication also occurs at a daily lunch meeting, as well as a morning phone call between the President and each department superintendent to find out whether any injuries or environmental violations had occurred. This regular communication confirms the importance that top management places on environmental issues.

Although the communication at the top management level seems to be appropriate in adequately conveying corporate and business unit missions, survey results (see below) at the operating level indicate a misperception exists as to the amount of communication that occurs between the foremen and their supervisors regarding environmental policy.

4.1.4. PERFORMANCE EVALUATION/MEASUREMENT AND ACCOUNTABILITY AND RESPONSIBILITY. Once a worker is made aware of how his actions influence environmental performance, the worker must have an incentive to take those actions that minimize environmental harm; he must believe that his actions are being measured, and that he will be rewarded (punished) for good (poor) performance. To gauge SteelCo's environmental performance and compliance, several measures are taken at each business unit including air, water, and solid waste emissions, and spills are reported beyond the regulatory requirement. In terms of public data, the toxic release inventory (TRi) data are used to compare the company within the industry.

For internal purposes, an audit is used for environmental performance. The role and nature of audits is to improve performance rather than to pinpoint wrongdoing by identifying superior practices within SteelCo. However, one corporate manager stated that, although audits are done, and improvement recommendations are made, there is often no clear accountability, or measures of consequences in place if the improvements were not made. This lack of follow-up can cause limited pressure to comply with audit recommendations. Thus, a stronger link between consequences and rewards would improve environmental excellence.

The above link is an important one in developing adequate accountability for environmental performance. Workers must also understand who is responsible for what aspects of environmental performance and compliance. SteelCo appears to have clearly articulated responsibility for environmental performance and compliance; however, in terms of the link between performance evaluation and rewards/punishments and environmental performance, a strong and credible connection has not yet been established.

When asked whether employee evaluations depended on environmental performance, responses varied depending on the position and level within the corporation. Several corporate executives claimed that raises and career advancement for senior management would be affected by environmental performance, but admitted that there was little correlation in the past. One executive indicated that he did not know of anyone who had suffered a demotion due to negative environmental performance, although he knew of several people promoted with an excellent financial performance, but poor safety records. This illustrates that the environment is currently a lower priority, which may be a cause or a result of difficulty in creating sufficient accountability levels in the area. Another executive indicated that top management personnel are not affected by environmental performance, while lower level managers and personnel are affected. One respondent believed that the corporation is not doing enough in linking pay to environmental performance, and that it is not adequately driven down to the frontline. These latter comments indicate that the link between performance measures and consequences has not been established, resulting in a lack of incentive for operating personnel to take actions to improve environmental performance. SteelCo has plans to develop a new evaluation form that has a specific area for environmental performance, which may help to strengthen this link.

Operating personnel have varying incentive plans linking environmental performance to their pay. Of the three departments whose superintendents were interviewed, the most environmentally intensive had a direct connection, in which 30% of employee pay was determined by monitored environmental performance measures. Given that environmental performance has improved in this department since the percentage increased from 5%, the superintendent believes that the employees are fully aware of how their actions affect the measurements and attempt to improve them. One department had an indirect effect through the corporate profit sharing plan, and another currently had no effect. The lack of effect in the latter department may be attributed to the lack of monitoring devices, which results in workers failing to appreciate the impact of their actions on environmental performance and their accountability for such performance, highlighting the importance of having measurements in place to motivate environmental excellence.

4.2. Analysis of Results-Survey Data

Of the 48 surveys distributed to foremen, 37 (77%) were returned in usable form, which together provided excellent coverage of the main processes at the plant. Eight of the 10 senior managers returned surveys; however, one survey was not used due to a set of responses that indicated that his own beliefs were given, rather than beliefs about the foremen's responses.

Given the large number of questions on the survey (a total of 57 questions across the 7 sections), a factor analysis was performed on the data for each section using only the foremen's responses to determine whether any of the questions could be reduced into a more general construct within each section. Due to the small sample size, a factor analysis on the entire survey was not possible. The factors were computed using the principal components analysis method and a varimax rotation. In most cases, the resulting factors within each section were selected when the associated eigenvalue assumed a value greater than one. Some factors with eigenvalues slightly greater than one were not retained because the marginal increase in information provided by inclusion of the factor was not deemed substantial (see Table 1 for a list of factors along with their eigenvalues).

4.2.1. GAPS IN MANAGEMENT VERSUS WORKER PERCEPTIONS OF ENVIRONMENTAL POLICIES. To determine whether any gaps existed between the average responses by the subordinates (foremen) for each factor and what management believed would be the average response by the subordinates on each question/factor, a two-tailed t-test was performed on each factor using the newly calculated factor scores. (The factor analysis provided standardized factor scores for each foreman, while factor scores were calculated for the managers' responses based on their raw data and the factor coefficients.) The differences in means are listed in Table 1. After taking into account the loadings on each factor, a positive (negative) difference indicates that management believed that the subordinates would have a higher (lower) response on the factor than they actually did. For example, management believed workers would respond with a higher level, or greater frequency of communication between their supervisor regarding the environment than they actually did (Factor 2.3). Three gaps existed that were statistically significant: Factors 6.1 and 6.2, Rewards to self/any employee due to environmental performance and profitability improvements, respectively, and Factor 7.2, Understanding of the importance of compliance to regulations to SteelCo. Management thought that workers would believe that their pay and career advancement are more directly linked with both environmental performance (6.1) and profitability (6.2) than they actually believe it to be. This is consistent with results obtained in the interviews in which interviewees claimed that `management does not walk the talk` and no one has seen anyone punished for poor environmental performance. Furthermore, it was believed that the corporation is not doing enough in linking pay to environmental performance, and it is not driven down to the frontline. This also indicates a weak link in the motivational model in terms of the creation of instrumentality, which specifies the rewards/punishments for a given outcome.

Management, however, believed that workers would have a lower understanding of the importance of regulatory compliance (7.2), and also of SteelCo's environmental policies (1. 1) and individual priorities on the environment (5.4), although only marginally significant. The latter differences may be the result of workers increasing their responses on these factors due to the mere administration of a survey regarding the environment, which may have indicated a level of importance and concern about the environment. The potential signaling of environmental importance from administration of a survey targeted on environmental issues may have also resulted in fewer gaps being assessed than what may have resulted if a more general survey with many issues had been presented. Another interesting gap, although marginally significant, was in the amount of communication that takes place (2.3). Given that management believed more communication takes place than workers believed, this may indicate an area for improvement to increase environmental awareness. What is interesting is that the only significant gaps occurred in two of the seven sections, the rewards and knowledge sections. Although this gives indication that there is alignment under most factors, the misalignment of personal consequences for environmental performance indicates that a clearer understanding of the reward and incentive structures needs to be articulated throughout the organization. As the corporation moves to a performance review with an explicit section on environmental performance, the gap in perceptions of accountability for environmental performance can be expected to decrease, and the connection between environmental performance and consequences should, as a result, increase. Both results should improve the motivational effects suggested by the expectancy model underlying the discussion in this paper. It appears that as of the date of the survey, however, management's espoused level of commitment to environmental concerns has not reached down to all levels within the corporation.

4.2.2. OVERALL AWARENESS/ASSESSMENT INDICATORS. In addition to testing whether or not gaps exist between management and subordinates' beliefs about environmental accountability and awareness, we also determined what influences a worker's overall assessment of SteelCo's environmental strategy (1.1) and perception of importance of environmental performance for business success (1.2). Pearson correlation coefficients were calculated using the standardized factor scores to determine the relationship between these two overall assessment factors and the other 18 factors. Since a factor analysis was performed on each section, only factors within the same section would be uncorrelated with one another. The correlations are reported in Table 1.

Only two factors were significantly correlated with a worker's understanding of environmental strategy (1.1). Clarity and regularity of communication (2.1) was positively related, while rewarding profitability (6.2) was negatively related. A third factor, amount of communication with a supervisor, also had a positive relationship, although marginally significant (p = 0.107). Together these relationships indicate the importance of communication in creating an understanding of environmental strategies. The administration of SteelCo's EAP will help increase the level of communication and environmental awareness. The negative correlation between understanding of the strategy and pay for profitability may be because employees believe that rewards/penalties for environmental performance are not as high a priority and `read between the lines' that this is the `true philosophy' of SteelCo.

Four factors were significantly correlated with a worker's perception of importance of environmental performance for business success: (i) belief that a worker is able to control environmental performance measures (4.2), (ii) a worker's understanding of his or her responsibilities for environmental excellence (5.5), (iii) understanding the impact of environmental regulations on his or her job (7.3), and (iv) the level of reward for profitability (6.2). Each of these had a significant positive relationship with the importance of environmental performance for business success (1.2). Each of the elements of the motivational model is associated with one of these factors, which may provide a blueprint for successful implementation of internal commitment to environmental performance. Reward for environmental excellence rather than merely for profitability appears to be the missing positive indicator to complete the implementation.

4.2.3. INFLUENCE OF ADEQUACY OF TRAINING AND DEPARTMENTAL ENVIRONMENTAL INTENSITY. The level of perceived adequacy of training (3.1) and departmental environmental impact were thought to influence the foremen's responses. Pearson correlations were calculated to determine the influence of training on each of the factors (see Table 1). This factor was significantly and positively related to six factors: the clarity of communications (2.1) as well as performance measures (4.1), the belief of the level of environmental commitment (what has been communicated) (2.2) as well as environmental reporting (1.3) and importance of regulatory compliance by SteelCo (7.2), and finally the level of rewards for environmental performance (6.1). Each element of the motivational model is associated with one of the above factors, indicating that SteelCo's training program places emphasis on each of the motivational elements.

To test whether the nature of the department a foreman worked in influenced his or her responses, possibly due to different levels of environmental regulation and impact, a one-way analysis of variance was calculated for each factor. The eight departments were ranked by the Superintendent of Environmental Services from lowest to highest potential for environmental harm and level of regulation of operations. The foreman's assigned department significantly influenced responses to six factors. The perceived level of SteelCo's environmental reporting (1.3) and commitment to the environment (2.2), along with the amount of training (3.2), control over environmental performance measures (4.2), and individual priority placed on the environment (5.4), were affected and seem to increase by departmental environmental intensity, while level of rewards for profitability (6.2) was also affected and seems to decrease by a department's environmental intensity.

5. Discussion and Development of Propositions

Based on the interviews at various levels of the operation, and the survey data, it appears that SteelCo has a strong commitment to environmental performance, but it has not yet developed strong connections between a worker's actions, environmental consequences, and resulting recognition or punishment. Plant operations with higher potential environmental impact appear to have somewhat better alignment of knowledge, accountability standards, and environmental priorities than overall plant operations. Nonetheless, both survey and interview data indicate that communication (level of expectancy) and accountability (level of instrumentality) for environmental performance is more challenging than for areas such as safety where employees have a direct stake in the outcome. The findings also point to the difficulty in aligning accountability and objectives for environmental performance; in particular, significant gaps between management and foremen's perceptions about rewards for environmental performance exist. These results suggest that traditional incentives used to motivate operating personnel in areas such as safety are not likely to succeed in the environmental area, due in part to potential delays between action and consequences.

The main findings regarding SteelCo's implementation of environmental policies can be summarized as follows. (1) Communication was viewed as a challenging, yet important aspect of improving environmental performance. Increased training will improve awareness. (2) Although there appears to be an agreement about who is responsible for environmental performance, a strong sense of accountability for environmental performance has not been established. This is seen in the lack of rewards/punishment for environmental performance, as well as a lack of follow-up in the environmental audit process. (3) A significant gap exists between managers' and subordinates' perception regarding the linkage between environmental performance and personal recognition/rewards.

These results indicate that, although top management espouses a commitment to environmental performance, this is not perceived to be a priority at the level of operations. SteelCo could improve their environmental excellence by strengthening the link between environmental consequences and rewards/punishments above and beyond the traditional incentives used in the safety area. However, care must be taken to avoid punishment for negative consequences from deterring the reporting of spills and other small incidents, which is beneficial for organizational learning regarding environmental impacts, and can be used to prevent a catastrophe. Punishment should be used in only extreme cases. Top management also needs to `walk the talk' if it wishes to increase accountability.

Research Propositions

Given the above results along with the motivational and gaps assessment framework, we develop a set of propositions regarding the challenges a firm may have in implementing an environmental policy that may be tested in future research. The basic premise of these propositions is that top management commitment to environmental performance is not enough to obtain desired environmental results. Rather, the appropriate organizational infrastructure is also needed to achieve better environmental performance.

As indicated by the motivational model, what a worker believes the results of his actions will be, how these results are monitored, and how he is rewarded or punished for a given level of results determine the worker's action. For management to motivate workers to improve environmental performance, a strong connection between each of the elements of the motivational model is necessary. The motivational effect will `only be as strong as the weakest link.' If management communicates how actions affect environmental performance, but does not measure performance, or hold people accountable for that performance, then communication alone will not motivate action to improve environmental performance.

PROPOSITION 1. The extent to which employees engage in the level of environmental protection desired by top management depends on the extent to which they understand (i) the link between their actions and environmental performance and (ii) which environmental measures are evaluated, and (iii) the extent to which they are held accountable for a given environmental performance level.

The tendency for environmental issues to be uncertain or ambiguous in nature, such as the ever changing environmental regulations, or the assessment of environmental harm, may make it difficult for management to reach a consensus on what the corporation's environmental policy is and how it should be implemented. Once in place, these strategies must be deployed throughout the organization. However, Argyris (2000) indicates that a gap often exists between two theories of action: espoused theories, those that people value and use to design action, and theories in use, those that they actually use, especially for non-routine behavior as may often occur with environmental issues. These inconsistencies result in consequences that may be counterproductive to the intended results from the espoused theories. As experienced by SteelCo in the gap between management and employee's perceived rewards for environmental performance, inefficiencies in organizations may result, and management must unlearn the defensive routines that they use in their theories in use in order to implement the intended strategies and obtain the intended results. Narrowing of the gap between messages intended and messages received will improve performance. Not only must an employee understand the connections between their actions and the environmental results and consequences of these results, but these perceptions must be consistent with what management believes they are holding employees accountable for in order for environmental performance to improve.

PROPOSITION 2. The firm's environmental performance will be better if employees have more accurate perceptions of the link between their actions and environmental consequences and if they are held more accountable for those environmental consequences.

Environmental decisions may involve consequences that are often not realized until far into the future, as in B events discussed above, as well as long-term effects from more routine A events. This is unlike safety decisions in which negative consequences are realized immediately following an 'unsafe' action. As indicated by SteelCo, this creates difficulty in communicating the expectancy of their actions. Thus it is all the more important for a company to emphasize training and communication about such linkages. Improved training, as seen in SteelCo, can influence many factors necessary to improve the level of motivation and internal commitment to environmental performance.

PROPOSITION 3. Communicating the importance of environmental protection to employees is more difficult for firms than communicating the importance of safety. Firms will need to put more effort into communication and training for employees to understand the connection between their actions and environmental performance than for safety performance. Firms that have better communication in this area will also have better environmental performance.

The fact that environmental effects are not always observed immediately makes it difficult to hold people accountable for their actions, particularly if the tenure in a specific job is short, and to motivate them to act in the best interest of the company. Unlike safety concerns where there is immediate feedback about how actions affect safety performance, e.g., injury, death, and there are obvious ways to prevent negative performance (e.g., use of safety goggles, yellow lines outlining 'caution' or 'hazardous' areas), such immediate and non-ambiguous feedback does not exist for many environmental concerns. Thus it is proposed that for a firm to successfully implement an environmental policy it must artificially create immediate 'feedback' perhaps in the form of monetary rewards/punishments and clearly assign accountability and responsibility for compliance with environmental regulations. As noted above, however, rewards and training should be emphasized over punishments. Furthermore, a firm may seek to increase the level of employee's internal commitment to environmental protection so that employee action is not taken just to obtain extrinsic rewards. The number of competing factors requiring management's attention, i.e., profitability and financial goals, also make it difficult to adequately communicate to workers that environmental performance is a top priority. These characteristics affect the instrumentality portion of the motivational model.

PROPOSITION 4. Holding individuals accountable for environmental performance is more difficult for firms than holding them accountable for financial or safety performance. Firms in which individuals face a higher accountability for environmental performance will also exhibit better environmental performance.

Given the challenges in the environmental area, it is important for a firm to understand how existing management programs or practices can assist in the implementation of environmental policies, and deployment of accountability and responsibility for environmental excellence. It has been found that firms with an existing total quality management (TQM) program in place will tend to have an easier time implementing environmental programs (Isbell 1991; Kirschner 1992; Neidert 1993; Gibson 1995). Many companies, particularly those that are ISO 9000 and ISO 14000 certified, are also integrating their environmental management systems (EMS) with their quality management systems (QMS) to gain efficiencies and reduce costs. While some believe that, without integrating these two systems, efficiency benefits cannot be achieved (Beechner and Koch 1997), others believe that there are differences in the two systems and that successful integration requires these differences be recognized (Wilson 2000) or separate systems be implemented. Clayton Aniline, a unit of Ciba, observed an additional benefit from an integrated system, which relates closely to the present study. When implementing an EMS, they applied their quality management system approach and found that what they thought they had implemented, they had not. Specifically, `the company found significant gaps in its environmental management. It had not carried out a formal initial review, it did not have a policy, and it had not defined lines of responsibility. Targets and objectives were not clearly stated' (Chynoweth 1993). This example, along with results of other studies (Beechner and Koch 1997; Lawrence, Andrews, and France 1998; Wilkinson and Dale 1999), indicates that an integrated management system is beneficial in assigning responsibility for environmental performance and avoiding gaps in what a company believes they have implemented and what has actually been implemented, and more generally for a firm to stay focused on the same targets and goals. Lawrence, Andrews, and France (1998) states that `Organizations should utilize one deployment process for translating strategic objectives into operational activities. Total Quality Management provides an ideal vehicle for deploying strategic objectives and ensuring that business and the environment are aligned, focused and integrated within organizational activities' (p. 238).

PROPOSITION 5. The use of an integrated management system will assist a firm in implementation of their environmental strategy by creating a higher level of accountability for environmental performance, as well as a higher alignment between management and employee beliefs regarding the environmental strategy.

To summarize, we propose that due to the difficulty to see the direct connection between one's actions, potential consequences of those actions, and rewards or punishments in the area of environmental issues, communication and accountability for environmental performance become critical factors in determining a firm's level of environmental excellence. Further, corporations that have a high level of accountability along with a consistent perception between what top management believes they are holding subordinates accountable for, and what the subordinates believe they are accountable for will outperform firms in which there is a 'gap' in the perception of accountability, or other areas critical for motivation. A test across various firms, or business units within a firm on the above propositions using a similar survey will help build this theory.

6. Conclusion

The most important conclusion from this case study is that, in addition to the role that external drivers have in influencing a firm's environmental performance, internal drivers such as communication and accountability will also influence a firm's environmental performance. Clear communication of values and alignment of rewards and punishment with these values will influence the actions of employees in day-to-day operations, which will in turn impact overall environmental performance. Furthermore, given the level of ambiguity and uncertainty in values and feedback in the environmental area and the potential long-term latent effects, firms need to pay special attention to promoting feedback, education, and quality improvement in this area.

The case study illustrates the value of Vroom's Expectancy Theory as a behavioral foundation for operations, as well as the need to link it to espoused organizational theories. This is especially important in evaluating and improving environmental performance where traditional incentives and feedback mechanisms may not be adequate to create the motivation (i.e., appropriate levels of expectancy and instrumentality) to improve performance.

Insights were obtained by using a survey instrument based on the SERVQUAL model to evaluate potential gaps in alignment across levels in the corporation. This approach has been used successfully in service companies to improve service quality, and it appears to be very useful as a tool for determining alignment, awareness, and accountability in the environmental, as well as health and safety areas. The techniques described can be replicated elsewhere to identify significant gaps in alignment and associated challenges in setting and communicating management priorities. Such replicated results could lead to a sufficiently large statistical base to allow comparative studies across firms on the overall impact of internal accountability and communication levels on environmental performance. However, even the present modest approach has the ability to identify problems in the desired coherence between knowledge, action, and anticipated consequences. This coherence is fundamental to operational excellence in any arena, and not least in the area of achieving environmental excellence.1