SMS can be seen as one of those things that costs but you cant see why because in reality in can be very difficult to see why your paying for it, beyond the legal requirement for it.
Even the saying "if you think safety is expensive try paying for an accident" does not explain away the cost issue of implementing an SMS.
As you say you establish a monitoring system, most companies all-ready have them in the form of, for example, Pilots do company check-flights or simulator time, engineers have their work checked by technical records or at certificate of maintenance review periods; these are required by an SMS system to be complimented by a reporting system of some sort. So what you have with a check-ride, or a review of engineers paper-work, is a proactive system of the company going out look for errors within a set system, or systems. The required introduction of a reporting system means errors can be picked up after they occure, alowing an operator to deal with an error reactively.
So as you ask, your CEO wants to know how pilots are doing... ok last year the training officer said that all his pilots suck at landings when he took them out for a check ride, one key indicator, and we had X number of reports via our reporting system saying much the same thing... the little chap who lives under the flight path is in fear of his life... a second key indicator.
So the proactive & reactive systems both suggest that pilots suck at landings; the CEO can now say I will target my money on improvements on this issue and for example insist every pilot does simulator training on landings.
This is a targeted approach to safety, having identifyed an error a course of action has been established to correct it. So how do we know it works?
The very same system that found this error should "hopefully" see the training pilots proactive reports that pilots suck at landings and the reports from the guy in fear of his life under the flight path reduce, or dissapear.
If it works simulator training becomes a standard part of pilot training, if the reports are still there you tray a different approach, more training flights, change the flight profiles, whatever but at least you can measure a corrective actions effectiveness.
Ok you asked how do you know if a sms is working, well the above is ok if you have reports. Some companies have a rubbish culture of handling reporting, no anonymous report systems, or a sack the reporter attitude, so just because there are no reports doesn't leave you high-and-dry.
For example, I have no reports from technical records or from the guy who carries out certificate of maintenance reviews that the engineers are rubbish at paperwork. Do you therefore ignore it? No you proactively go and look at the systems against the systems in place.
For example you go talk to the technical records clerk and "sample check" a work order she is processing and find that you can't read a single word on the work order. The clerk turns out to be an ex-kinder garden teacher and can read crayon scrawl with oily finger prints on it via a form of brail technique. Great so we can read "engineer" but it high-lights the issue that when that clerk leaves we may have a problem.
You move on and do a sample check of a certificate of maintenance review with the senior engineer who is an old school engineer who thinks all this safety stuff is just "a bother" "it just gets in the way!" Ok when we do our sample check we find that everything is great but there is no written procedure for carrying out a certificate of maintenance review.
These two "issues" need addressing, engineers need a targeted and "encouraged" to improve their written skills, we can provide them with pens or whatever approach is deemed best. There needs to be a process written down for the CMR because what happens when the senior engineer isn't there?
so from no reactive reports and no suggestion of an error you have proactively assessed a system, identified two "errors" and can now target a solution. This is fed back into the audit system and assessed again at the next audit where hopefully at the next assessment the errors will not be there.
Safety management is a continuous process of assessment & reassessment, both proactively & re-actively to allow a targeted allocation of resorces to correct an error.
Sorry it's long, I hope it helps
Miles