Injuries, Illnesses, and Fatalities = Expense · Injuries, Illnesses, and Fatalities = Expense Safety Programs, Systems, Equipment, Etc. = Investment Whether investing in people,

Both ◦ Injuries, Illnesses, and Fatalities = Expense ◦ Safety Programs, Systems, Equipment, Etc. =

Investment

Whether investing in people, equipment,

programs or the process, there are savings!

Returns on Investment (ROI) exist! ◦ ROI = cash flow or savings that result from an

action divided by the total cost of that action.

Progressive Safety Services LLC - All Rights Reserved

The True Cost of Injuries and

Fatalities

Selling the Investment

The Right Message


Each year workplace injuries, illnesses, and deaths cost our nation:

A) 1 billion dollars B) 100 billion dollars C) 150 billion dollars D 200 billion dollars

Answer $200 billion dollars – direct/indirect

costs (2014 National Safety Council’s “Security Facts Report”)


36.5 billion in administrative expenses

55.7 billion in medical costs

89.6 billion in wage and productivity losses

11 billion in employer’s uninsured costs

3.2 billion in fire losses

2.2 billion in vehicle losses

Every worker in the United States must produce an additional $1,400 in goods and services each year to offset the cost of injuries and death.


The numbers may surprise you!


It is important to understand that while we can put dollar figures to injuries and fatalities, cost savings is not the primary reason for safety efforts.

We do it for people, their families, and loved ones.


Direct costs associated with injuries, illnesses, and fatalities include:

◦ Worker’s compensation

◦ Medical expenses

◦ Property losses


Indirect measurable costs include:

◦ Workplace disruption

◦ Loss of productivity

◦ Worker replacement/overtime

◦ Training of replacements/retraining

◦ Increased insurance premiums

◦ Attorney fees

◦ Administrative fees

◦ OSHA penalties


Marketing/Sales – Customers don’t want to be associated with poor safety performers.

◦ Guilt by association

◦ May find another company to work with


Human Resources

◦ Employees are the best

recruiters. If the workplace is safe, they will recruit.

◦ If employees feel they are at risk, they will not recruit and most likely leave.


Operations

◦ Where the work is done and

morale is determined

◦ If people are getting injured, morale takes a nose dive

◦ Low morale = decreased productivity, poor customer service, infighting, and people looking for other jobs


The basis of this discussion will focus on models used by:

◦ The National Safety Council (NSC)

◦ The Center for Disease Control (CDC)


CDC Model Estimates

◦ $991,000

NSC Model Estimate

◦ $1,420,000

Although these estimates may seem high. They only account for direct costs.


Much more expensive

For every dollar of direct costs, indirect costs may be as much as $2.12 (NSC)

Using this math the cost of a fatal injury goes from costing $1.42 million to $3 million

Progressive Safety Services LLC -

All Rights Reserved

Medically consulted injury estimate from NSC:

◦ $39,000 including

wage losses, medical expenses, administrative expenses, and other employer costs


All Rights Reserved

Amputation $66,777

Burn $37,389

Concussion $60,770

Crushing $56,567

Dislocation $73,800

Electric Shock $86,528

Foreign Body $18,953

Fracture $48,492

Laceration $19,059


How do we sell it?


Would you spend $1 to save $2 in the future?

What if you could save $3, $,4 or $5 for every dollar ?

Easy choice right, but what if it were $50,000, to save $100,000 or $500,00 to save a $1,000,000?


The challenge with safety is selling it to management, especially when investment is required.

Investing in safety can be different than calculating ROI for a piece of equipment.

◦ I.e. Install a new loadout system for $200,000 that

will lead to an additional $600,000 of revenue over within three years.


All Rights Reserved

Safety programs vie for the same resources as other programs that provide revenue

Attitude that health and safety is not a business issue


Experts suggest that the savings exist

Armed with the right info, we can improve our chances for success

We can use direct and indirect cost associated with injuries for justification and projections


Hard sell when bosses, managers, and companies don’t “get it”

Start with the “human side”

Invest to protect the company’s greatest asset, the employee


All Rights Reserved

Initial focus on the return on investment – “the human side” ◦ Increased productivity

◦ Improved customer service

◦ Employee Satisfaction

◦ Morale

◦ Improved Community Relations

◦ Brand Image


All Rights Reserved

The “the human side” – Additional Benefits:

◦ Quality

◦ Lower absenteeism

◦ Lower employee turnover

◦ Image in the community


What do we do if the “human side” approach isn’t enough?


Poll of company executives – For every dollar a company invested in safety , they saved from $3 – $5 dollars (Liberty Mutual)


Review the company’s injury expense data history

Use calculations for estimating indirect costs (projections)

◦ Loss of productivity

◦ Workplace disruptions ◦ Worker replacement ◦ Increased insurance premiums

Look for productivity/efficiency gains


Include information and data that you can back up and feel confident explaining:

◦ Include the cost of a fatality

or injury to communicate the size and scope of the problem

◦ Put it in terms that management can understand


Communicate the Cost of an Injury or Illness:

◦ As a percentage of payroll (i.e. our injuries costs

represent 15% of payroll)

◦ In production terms

“We need to make X number of units per month/sales to offset or break even from injury costs before we start to make a profit” or

“Our facility has to operate the first five days of the month just to pay for injury losses”


In Product Cost Terms ◦ “Out of our losses this month, we have to sell X

next month to pay for them”

Per Employee “This cost equates to $300 per employee per year”


Designed to assess the impact of injuries and illnesses on a company’s profitability

Project the amount of sales needed to cover both indirect and direct costs associated with injuries using:

◦ Company’s profit margin

◦ Average cost of an injury or illness

◦ Direct cost multiplier


Total Cost

of Accident 1% 2% 3% 4% 5%

$1,000 $100,000 $50,000 $33,000 $25,000 $20,000

$5,000 $500,000 $250,000 $167,000 $125,000 $100,000

$10,000 $1,000,000 $500,000 $333,000 $250,000 $200,000

$25,000 $2,500,000 $1,250,000 $833,000 $625,000 $500,000

$100,00 $10,000,000 $5,000,000 $3,333,000 $2,500,000 $2,000,000


Profit Margin

The sell becomes more challenging when little to no history of illness or injury exists

Hard to convince management “there could be a problem”


Switch the focus to the impact an injury would have on the interruption to business ◦ Use near miss data ◦ Use average injury cost data

◦ Saving projections

Good safety management programs may impact insurance premiums (discounts)


All Rights Reserved

Elements of a Business Case: ◦ Definition of the problem and

desired outcome (goals) ◦ Both direct costs or benefits

of a project ◦ Specific Ideas for

Implementation ◦ Budget including start-up

funding, ongoing costs ◦ Comparisons to other

Companies (Competitors)


Consequences of non-action and non-compliance

Discussions of alternative solutions

Explanations of calculations, projections, etc.


Know the audience


Always consider the audience

Discussing financials is appropriate for managers, leadership, etc., but may not be appropriate for discussions with front-line employees.

Put yourself in their shoes ◦ Savings may appear more important than safety of

employees


We invest in safety to protect employees

A side benefit of investing in safety is savings, it’s not the primary reason we do it, but a side benefit!


Review:

◦ The cost associated with fatalities

◦ The cost associated with workplace injuries

◦ The $afety Pays calculator

◦ Selling the Investment

◦ Elements of the Business Case

◦ The right message


Morrison, Kyle W. “The ROI of Safety” Safety and Health Magazine.

May 2014. Safetyandhealthmagazine.com Web. 28 July 2014.

Colford, Jill, “The ROI of Safety” Business Week. September 2005. Businessweek.com Web. 28 July 2014.

Burns, Kevin, “Strategies to Build Personal Leadership in Safety” www.kevinburns.com, Web. 13 May 2013

National Safety Council, “Preparing The Business Case for Investment in Safety” nsc.org/journey, Web.


[email protected]

[email protected]

mailto:[email protected]

Injuries, Illnesses, and Fatalities = Expense · Injuries, Illnesses, and Fatalities = Expense Safety Programs, Systems, Equipment, Etc. = Investment Whether investing in people,

Documents