Federal Aviation Administration 1 of 30 A Process to Prove the Payback on Safety Interventions Dr. Bill Johnson Chief Scientific and Technical Advisor.
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Federal AviationAdministration
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A Process to Prove the Payback on Safety
Interventions
Dr. Bill JohnsonChief Scientific and Technical AdvisorMaintenance Human Factorsbill-dr.johnson@faa.gov
+1.770.500.8217
Shell Aircraft Safety Seminar 2012Human Factors –Safety’s Vital IngredientThe Hague, Netherlands11-12 October 2012
Federal AviationAdministration
Federal AviationAdministration
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Presentation Plan• Finance and Safety
• ROI Challenges - Solutions
• Calculating ROI (A detailed example)
• Other Examples
• Cautions
• Q&A
Shell Aircraft Safety Seminar 2012Human Factors –Safety’s Vital IngredientThe Hague, Netherlands11-12 October 2012
Federal AviationAdministration
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Why care about ROI
Investment
in Safety
Continuing/
Improving Safetyand/or
Expense Reduction
and/or
Revenue Increase
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Why care about ROI?
“If you want to implement/revise safety
programs you must show the payoff.”
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Challenges to ROI of Safety
Intangible
Cause and Effect
Integration-Combination
TimeShell Aircraft Safety Seminar 2012Human Factors –Safety’s Vital IngredientThe Hague, Netherlands11-12 October 2012
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ROI Solutions
SMS Data Emphasis
Voluntary Reporting
Acceptance
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Presentation Plan• Finance and Safety
• ROI Challenges - Solutions
• Calculating ROI (A detailed example)
• Other Examples
• Cautions
• Q&A
Shell Aircraft Safety Seminar 2012Human Factors –Safety’s Vital IngredientThe Hague, Netherlands11-12 October 2012
ROI: Any Questions
Shell Aircraft Safety Seminar 2012Human Factors –Safety’s Vital IngredientThe Hague, Netherlands11-12 October 2012
ROI: From Words to Numbers
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Example: Fatigue Awareness Training at MRO
Shell Aircraft Safety Seminar 2012Human Factors –Safety’s Vital IngredientThe Hague, Netherlands11-12 October 2012
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A Few More Challenges to ROI
Financial personnel assume ROI responsibility
Executives do not demand ROI
Corporate culture and ROI
Perceived value of ROI
Fix problems rather than assign costs
Focus on costs
Focus on production and schedules
Shell Aircraft Safety Seminar 2012Human Factors –Safety’s Vital IngredientThe Hague, Netherlands11-12 October 2012
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Example ROI Summary
Reduction in A/C damage: $935K (10% of 2010)
Reduction in OSHA injury: $119K (10% of 2010)
Financial ROI: 312% Probability of success: .8 +/- .1
Reduction in A/C damage: $3M (30% reduction)
Reduction in OSHA injury: $184K (15% reduction)
* Does not include a 1% system-wide efficiency improvement of $900K
Fatigue Awareness Training to 2,500 @ 2 hours eachCost was $205 K during 2011
Investment
Benefit Forecast*
Actual*
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ROI: Fill in the Boxes
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The ROI Menu
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Investment QuestionsHow many personnel trained?
How long is training in hours?
What is the average hourly rate for trainees?
Were there missed opportunity costs during training time?
Count time for management and support ? Rate?
Cost of special hardware? Amortize?
Costs for training development & facilities? Amortize?
Schedule for training over time?
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The Investment
Investment to deliver training$204,500.00
Investment to deliver training$204,500.00
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Expected Return QuestionsWhat are the safety benefits?
How many current safety incidents?
How many safety incidents can be reduced?
What are the metrics to measure these changes? (e.g., aircraft damage, rework, delivery delay, OSHA injuries,…)
Costs associated with each metric?
How much will personnel efficiency be improved?
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The Return - Benefits
Investment Benefits$1,053,702
Aircraft DamageOSHA Reportables
$ 934,500$ 119,20210%
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The Directions to ROI
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Project Summary (1 of 2)
Break Even Point
$204.5K
$638,461/$204.500 = 3.12
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Project Summary (2 of 2)
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Recent ROI Findings
Reduction in A/C damage: $935K (10% of 2010)
Reduction in OSHA injury: $119K (10% of 2010)
Financial ROI: 312% Probability of success: .8 +/- .1
Reduction in A/C damage: $3M (30% reduction)
Reduction in OSHA injury: $184K (15% reduction)
* Does not include a 1% efficiency improvement of $900K
Fatigue Awareness Training to 2,500 @ 2 hours eachCost was $205 K during 2011
Investment
Benefit Forecast*
Actual*
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Presentation Plan• Finance and Safety
• ROI Challenges - Solutions
• Calculating ROI (A detailed example)
• Other Examples
• Cautions
• Q&A
Shell Aircraft Safety Seminar 2012Human Factors –Safety’s Vital IngredientThe Hague, Netherlands11-12 October 2012
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Need More Examples?Org.
Type
Topic Invest
$
Return
$
Break
Even
ROI 2Q %
ROI 4Q
%
ROI 5Q
%
MRO FRMS
Training205 .0 K 1.1 M 1.5 Qtr. 224 274 312
Airline Wheel
Installation24.5K 1.7 M 0.6 Qtr. 2896 5556 6938
MRO Windscreen
Service1.8K 75.1 K 1.0 Qtr. 1908 3514 3916
Airline Ramp
Comm.3.1 M 6.8 M 5.0 Qtr. 0 77 120
Airline Paint
Hangar16.0 K 120.0 K 1.0 Qtr. 169 598 650
Airline Hangar
Damage56.0 K 390K 2.0 Qtr. 96 381 426
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Cautions
• Real world vs. Controlled laboratory
• Diligence on estimates
• Be conservative
• Expect surprises
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What you can do next
Shell Aircraft Safety Seminar 2012Human Factors –Safety’s Vital IngredientThe Hague, Netherlands11-12 October 2012
• Your SMS provides the data
• Try the formula
• ROI considerations will increase
• Knowledge equals power
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Presentation Summary• Finance and Safety
• ROI Challenges - Solutions
• Calculating ROI (A detailed example)
• Other Examples
• Cautions
• Q&A
Shell Aircraft Safety Seminar 2012Human Factors –Safety’s Vital IngredientThe Hague, Netherlands11-12 October 2012
Federal AviationAdministration
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Why care about ROI?
“…safety and profitability are the mutually
inclusive #1 priority for most industries
especially transportation…”
B. Johnson, Paragraph 1 of this conference paper.
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Questions - Discussion
top related