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SAFETY - “THE” ULTIMATE BUSINESS INVESTMENT Bill Simkins, Orr Safety Corporation
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In today’s business climate successful organizations profoundly comprehend that “safety”, means prevention of accidents, injuries and dollar losses to business. Perhaps more significantly, that “safety” is managed, as a business investment, producing a definitive return on all outlaid dollars. Approaches short of this proven perspective and methodology always impact overall profitability by adding costs to the business.
No matter the business
motivator for addressing “safety” moral, legal and or financial, safety must
be managed. Just as any dollar invested in the businesses is analyzed for ROI so
must dollars outlaid to, or in the name of safety.
To
the extent this does not occur then the investment may provide little or no
return at all with the expense of accidents, injuries and dollars lost.
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As
mentioned above safety is preventive, and historically, human behavior
suggests prevention as a negotiable subject. (see “Total Picture”
View) In
reality, strategic safety requires the organization to practice risk
assessment and risk management. That is, based on workplace hazards
(chemicals, machinery/operations) what are the possible accident outcome
scenarios a business would experience? Does an accident cause merely lost productive time, or serious bodily injury or even death? And, based on control factors, what is the probability of the outcome occurring?
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We
all know that the best decision-making processes are those utilizing the most
objective information available. This is indeed the case in “safety”.
“Safety”
must include a comprehensive recognition and evaluation of total costs
and consequences related to safety. The dollar balance between
achievement of safe, incident free operation (cost to business) and those
consequences of accidents
(costs to business) must be assessed.
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1)
Regulatory
Compliance (OSHA) -
Machine and environmental safeguarding -
Employee information and training -
Internal resources -
External resources 2)
Workers Compensation -
Experience bases, hazard based premium
to insurer -
Accident prevention activities
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Self insured with TPA
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Deductibles
3) Safety Products & Services
- Procurement process -
Supply chain costs - Handling, redundancy, loss, theft, obsolescence
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Dollar$ Invested in Safety Have ROI of 3-10* to 1. |
Inadequate
management information results in legal non-compliance; penalties,
fines; (internal resources lack knowledge, time, or experience, results in
non-compliance, external resources deficient, not credentialed increased
liability exposure)
Accident
and W.C. claim frequency and severity increases insurance premium paid,
(catastrophic loss affects high internal cash reserves)
Safety
products application knowledge inadequate or deficient, resulting in
improper or inadequate selection, leading to non-compliance, injury,
illness, and dollar losses limited comprehensive knowledge of hazard risk
status leads to flawed, disjointed decision making processes, further
exposing businesses to accidents and loss.
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The
business must be familiar with and evaluate the total cost of safety
(prevention) while they must recognize the devastating impact accidents
have on the business. Traditionally, the two categories of accident costs associated with workplace accidents are direct costs, or payments to the injured and their medical care providers, and indirect costs, also, referred to as un-insured costs and lost dollars. |
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Direct or insured costs
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Uninsured costs (Examples)
Building damage, tools or equipment, production down time or delay, product and or material damage, business interruption, lost productivity
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overtime required -
cost of training new employees -
affect on future insurance premiums -
inefficiency of back-up employees -
company reputation - missed shipment or delivery of services
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According to a recent Liberty
Mutual Survey of 200 business executives 40% of responding businesses report a
relationship of 3-5 times indirect over direct costs. That is, for every $1 paid
directly, an indirect or uninsured cost of $3-5 is actually incurred by the
business.
The
Liberty survey also reported that, the same executives demonstrated a safety
R.O.I. of $3.00 to $10.00. Each
dollar invested in achievement of workplace safety, was in fact, yielding as
much as 10 x 1 dollars to the income statement.
The bottom line, accidents and injuries occur because of many organizational controlled issues, safety is purposed at not simple operation and safety but safe operation. Safety is the business of protecting business assets, people, property and materials from loss, therefore, assuring safe efficient, profitable operation.
