Safety Should Be Everybody's Business - Don't Underestimate The Value of Employee Safety

Executive summary

Timothy C. Healtey, Hartford Steam Boiler

The safety of a company’s employees is critical to its success. No matter how sophisticated the technology, it is employees who operate a business and maintain the equipment. It takes people to resolve problems when disruptions occur. Ignore the safety of employees, and a business can experience financial losses and a tarnished reputation.

The Need for Planning is Clear

The need for an emergency plan, disaster recovery plan, or business continuity plan has been reinforced in the aftermath of the terrorist attacks on 9/11, hurricanes and other calamities. But the best plans are useless if a company doesn’t first move to protect the safety and health of its employees. Employees must come first if any of those business recovery operations are to be addressed.

About the Author

By Timothy C. Healtey, Hartford Steam Boiler 

The full article

Safety Should Be Everybody's Business - Don't Underestimate The Value of Employee Safety

Introduction

Regardless of the size of your enterprise, or how you chose to measure it, the safety of each and every employee is crucial to your organization’s success. No matter how sophisticated the operations, activities, communication and data processing systems become, they are designed, maintained and operated by people. It took people to establish the business, to provide the services or fabricate the products, and to get them to the customer. When problems are encountered, it will take the efforts of your human resources to resolve them.

What is at Stake?

Federal agencies report the economic costs of occupational deaths and injuries in 2003 were estimated at $156.2 billion. This translates into an additional $1,120 in goods and services each worker needed to produce to offset this expense. Further, it is estimated that each workplace fatality costs employers $1.11 million, and each disabling injury costs $38,000. In addition, 115 million worker-days were lost in 2003, including time lost for injuries suffered in that year (estimated at 70 million worker-days) and 45 million more worker-days from injuries suffered prior to 2003.

Ask the Professionals for Advice

There are too many factors to provide a simple average cost for an employee safety program. A long list of variables might range from the type of work done on site, the workplace safety record, the use of vehicles and risk management provided by the workers’ compensation insurer. That’s why an organization should make use of well-informed safety professionals who understand its business and can help develop and implement an effective worker safety program.

Safety is Important to Everyone

The safety and protection of employees carries greater financial implications than many people might realize. Workplace accidents create a ripple effect that can influence immediate and long-term costs. Safety programs are a good investment when even a single incident can cause devastating losses, in addition to the emotional impact on the injured person, his or her family, co-workers and the entire organization.

The Need for Planning is Clear

The importance of having an emergency plan, disaster recovery plan, or business continuity plan cannot be overlooked to minimize the negative impact of potential natural or manmade disasters. It has been part of the Occupational Safety and Health Administration’s regulatory requirements since 1980 (see OSHA’s Employee Emergency Plans and Fire Prevention Plans, 29 CFR 1910.38). The need for planning has been reinforced by the lessons learned in the aftermath of the terrorist attacks on 9/11 and catastrophic natural events such as hurricanes, tornados and earthquakes.

Your Employees Must Come First

But the best plans are useless if you don’t first move to protect the safety and health of your employees. To this point, consider how fire drills or plant/building evacuation drills are practiced: sound an alarm to alert everyone to a dangerous situation and get them moved to a designated location of safe refuge, so that trained responders can deal with the problem. Buildings can be repaired. Files can be backed up. Product can be warehoused at alternative locations and transported. But the protection of your employees must come first, if any of those recovery operations are to be addressed.

The Financial Impact of Worker Injuries and Deaths

In reviewing national data from the Bureau of Labor Statistics (BLS) and the National Safety Council (NSC), the economic costs of occupational deaths and injuries in 2003 were estimated at $156.2 billion. This translates into an additional $1,120 in goods and services each worker needed to produce to offset this expense. Further, the BLS and NSC estimated that each workplace fatality costs employers $1.11 million, and each disabling injury costs $38,000. (These estimates include lost wages, medical expenses, administrative expenses, and other employer costs, but do not include property damage.)

Lost Productivity, Higher Costs, Unhappy Customers

In addition, consider the cost to employers for lost time related to a workplace disabling injury. Again, using 2003 BLS/NSC estimates, 115 million worker-days were lost that year, including time lost for injuries suffered in 2003 (estimated at 70 million worker-days) and 45 million more worker-days from injuries suffered prior to 2003. Where do those lost worker-days come from? And who pays for that?

Certainly, some of those costs will be borne by your insurance carrier. And you can pass some of these costs through to your customers. But just how elastic is your insurer or your customer market? What sort of premium increase can you expect from your insurer? Your customers may resist price increases, particularly if you are in a cost-sensitive or highly competitive market, or if the economic climate becomes lean.

Much More Than Money Is At Stake

There are also non-financial costs to consider. Your business reputation can be placed at risk. What employer wants to see his or her business headlining the local 6 o’clock news, emergency vehicles with lights flashing and sirens blaring, while reporters speculate about the “industrial accident” that took place in your plant? Do you really want to spend the resources it takes to respond and attempt to control that scenario? It would be much more prudent to make an effort to prevent such an event by highlighting employee safety as a visibly supported company value.

How Much Does An Employee Safety Program Cost?

What is the average cost of implementing an employee safety program? It depends on several factors, but a starting point in conducting an employee safety assessment should consider, among other items:

  • What type of work is done on site?
  • How many employees do you have on site?
  • What do they do?
  • What workplace hazards exist on your property?
  • Do your employees work with hazardous or toxic materials?
  • Do they perform risky or hazardous work?
  • What is your facility’s history of workplace fatalities, injuries, illnesses or mishaps?
  • Are vehicles used by your employees, either on-site or over-the-road?
  • How secure is your facility from outside agents?
  • What do your employees feel about their safety while on the job?
  • Do you have a written employee safety program that is communicated to all employees?
  • Are you part of an industry that OSHA has identified for focused enforcement?
  • What does your workers’ compensation insurer do for you to help identify problem areas and offer suggestions to eliminate or minimize those hazards?

Ask the Professionals for Advice

As you can see, this is not a simple equation that yields an obvious answer. That is why your organization should make use of well-informed safety professionals who understand your business. They can complete a meaningful review of your safety history and help you chart a course that will reduce injuries, illnesses and lost time. A safety review and an improvement plan are part of creating a culture that will help protect your employees as they strive to help you meet your corporate goals.

Employee Safety is Good for Business

Business leaders from major U.S. corporations with worldwide presence are stepping to the forefront to support the need for proactive employee safety programs. In June 2004, the American Society of Safety Engineers (ASSE) assembled a speakers’ panel featuring Riley P. Bechtel , chairman and chief executive officer of Bechtel Corporation; John R. Murphy, chairman emeritus of Bell Helicopter; Paul V. Tebo, vice president of safety, health and environment for DuPont; and Hussain Tadayon, chief executive officer of Bahrain Petroleum. All spoke about their organizations’ commitment to employee safety, which they said was paying dividends to the bottom line.

"That Little Fire" Cost $30 Million

As an example of the financial impact of even a seemingly minor safety-related event, Tebo described a preventable, small fire at one of his company’s plants in 1997. Although no injuries resulted, the plant’s operations were disrupted for the next three months. To meet its business commitments, the company asked competitors to help supply their customers and some long-term business was eventually lost. The net effect of “that little fire” — which would not have occurred if existing safe work procedures had been followed — was a $30 million loss.

Bechtel echoed the importance of employee safety when he commented: “Safety is one of our core values. It’s good to work with customers that share that value. We don’t work with a customer that doesn’t share that value that does not have the same level of commitment. And safety should not be pushed down the priority list because nothing happened.”

Management 101: Finding a Balance

Calculations mentioned above say that each employee must produce $1,120 of goods or services just to offset the costs of workplace injuries. Perhaps this can help us estimate a breakeven point between the cost of building and maintaining an appropriate employee safety program compared to the average cost of an injury. This is an artificial point, of course, as there are innumerable opportunities for those average costs to be substantially different in your facility. But consider it a starting point. Would you be willing to spend $900 or $1,000, if it saved you $1,120? That’s a better than 10 percent savings return.

Don't Take Short Cuts

If your organization’s safety history is worse than average, you should expect to budget for more than this. The converse, however, is not true. That is, just because your safety record may be better than average is not an excuse for spending less. That is backwards looking, and there is no guarantee of continued good performance. There are too many variables; the management of change plays just as important a role in safety management as it does in all other aspects for corporate oversight. Do not be lulled into a false sense of success just because you have had a good year or two.

In Summary: Employee Safety is Important to Everyone

The safety and protection of your employees carries greater financial implications than many in corporate leadership roles recognize. It creates a ripple effect that can influence immediate and long-term costs. Safety programs are a good investment when even a single incident can bring a sizeable enterprise to its knees. All of these financial issues are at stake, in addition to the emotional impact on the injured person, his or her family, co-workers and your entire organization.

Consider a motor vehicle accident involving a company employee while on business: more than 44,000 people lost their lives in crashes in the United States in 2003. It is the leading cause of work-related fatalities. Recall that the average work-related fatality costs more than $1 million. And that is before any civil court actions. Now, doesn’t that $250 that you decided to spend on a good driver-training program look a lot better?

About the Author

By Timothy C. Healtey, Hartford Steam Boiler 

Disclaimer statement:

All recommendations are general guidelines and are not intended to be exhaustive or complete, nor are they designed to replace information or instructions from the manufacturer of your equipment. Contact your equipment service representative or manufacturer with specific questions.

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