Knowing Value Versus Cost: The Benefits To A Workplace Safety Program
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The Illinois Manufacturer – Summer 2004
By Ronald Dukes
It’s been said that knowing the cost of something is far different than knowing its value. This is especially true when it comes to safety.Whether a company’s culture is imbued with the value of safety depends on the attitude and message communicated by top management.
“To be truly effective, safety programs have to start with top management and go down to the firing line — the employees on the floor,” says Chuck Keenley, a commercial insurance agent with The David Agency. Keenley bases his opinion on 28 years of experience.When safety is so highly valued that it becomes part of every process and practice, positive results can be seen throughout the organization.
Failing to value safety can be incredibly costly. The findings of the Executive Survey ofWorkplace Safety attest to the negative impact. Conducted by Liberty Mutual Group, the survey found that 93 percent of the participants see a relationship between the direct costs of safety — like workers’ compensation, and the indirect costs — lost productivity and overtime. Forty percent of the survey respondents said that every dollar of direct costs creates $3 to $5 of indirect costs.
The survey further found that 95 percent of participating business executives think workplace safety has a positive effect on the company’s financial performance. Specifically, 61 percent think that for each dollar invested in safety, the company receives a $3 return on investment. Data by the Occupational Safety and Health Administration (OSHA) pegs the ROI at $4 to $6 for every dollar invested in safety.
Keenley said there is a general trend to be more aware about employee safety, and that employers know the direct and indirect benefits. Seven of ten executives who participated in the survey stated protecting employees as a major benefit.
David Darling, an attorney with Chicago-based Stone & Moore, confirms the ever-increasing emphasis on safety. During his 15+ years representing nationwide manufacturing and construction clients, he has seen management come to view safety as more beneficial to the company when implemented as a comprehensive program.
‘Comprehensive’ is key. “The evolution of a multitude of issues facing manufacturing and construction companies has made a comprehensive program essential.Management just can’t say ‘safety first,’” states Darling. “If management has a strong commitment to safety and a comprehensive safety program, the commitment and positive effects will filter down to all levels.”
Union/management animosities can even be put aside.When safety initiatives are introduced, management is usually scrutinized as to their real motivation. In those cases where union members believe that the improved safety of the workplace and well-being of employees are the real goals, they come to trust management’s commitment and support the implementation of the initiative. “Occasionally, one hears negative comments from some union people as to the burden of certain safety regulations that are perceived as impeding their productivity or ability to perform their jobs.However, they see and understand the need for it,” explains Darling.
One of Darling’s clients has a strong history of promoting safety. Every contract this national company enters into states no single feature of the work is greater than safety.Vendors and subcontractors must have written safety policies that are strictly enforced. Their workplaces must meet certain standards of safety as well.
The organization truly values its people and works diligently to take all possible precautions to prevent injury. “It goes beyond the minimum standards set by OSHA,” points out Darling.
Darling continues, “Good safety creates a better work environment. Employees are more confident. They know they are better equipped to safely perform their work and that confidence is a catalyst for greater productivity.”
But no matter how safe a workplace, there is always the possibility of a lawsuit related to safety issues. Taking some simple actions can help reduce the chance of potential suits, legal and other associated fees, and large verdict awards.
Darling reviews clients’ safety programs periodically and makes suggestions to bring them in line according to case law. During one review, he learned the client’s workforce was 60 percent Hispanic and Polish, most of whom were not functionally fluent in English. The client had a written safety program that had been furnished to all employees. It was written in English.
Darling suggested the client should translate the written document into Spanish and Polish and present the appropriate version to workers. “This solution protected and benefited both employees and employer. The employer showed concern for employees and a strong dedication to safety. The employees appreciated the extra effort put forth to help them understand and work in a safe environment, building trust and loyalty.”
“In the event of litigation, the employer’s action would be viewed in a positive light as the company made reasonable accommodations for the literacy barrier. The costs to translate a 30-page document, photocopy it, and the training pale in comparison to the fees and possible award that would be incurred from even one lawsuit,” says Darling.
He advises manufacturers to develop and implement a comprehensive safety program in written form. “When creating a program, use OSHA regulations as minimum requirements. It is less likely OSHA would be harsh in its assessment of a workplace if an employer demonstrates and enforces morestringent controls than mandated.”
Companies should be aware that questions have arisen as to whether the Sarbanes-Oxley Act extends to a company’s safety programs. Some experts argue that the law’s requirement of full disclosure of any type of organizational and operating risk extends to occupational safety and health. Investors would be at risk for financial losses from liability and litigation resulting from safety, health or environmental issues.
Proactive measures can influence insurance premiums.While some can argue that recent experience or dedication to safety had little effect on premiums the past few years, Keenley sees the pendulum starting to swing back. “The appetite in certain lines is coming back, which is good for more predictable businesses like manufacturers with strong safety records.”
Keenley believes a modestly priced incentive program is the single biggest thing an employer can do to make safety an expected, ongoing part of the workplace.He has seen that little things do mean a lot.“Recognition can mean more than the dollar benefit of the reward,” he says. “One employer gives McDonald’s coupons to employees as a safety initiative incentive. They are thrilled. It doesn’t cost the employer that much but it communicates not only the importance of a safety program but the importance of the employees.”
The second biggest thing needed to make sure employers reap all of the benefits of an investment in safety is “strict adherence to loss control procedures,” states Keenley.
Many insurance companies have risk managers who conduct safety audits. Again, nonverbal communication can be a factor influencing premiums.“A risk manager will immediately notice if there is visible enforcement. For example, are employees wearing hard hats where required? Comprehensive safety programs have to be enforced to be beneficial, “ says Darling.
Not only will the results of good safety programs be seen in modification in workers’ compensation, the change in morale can have unexpected benefits.
“Employees look around and see the safety measures.When management communicates with them about safety and rewards employees with an incentive program, workers have the impression that the employer is genuinely interested in them. The employees think they work in a pretty nice place and respond with improved performance,” says Keenley. “How can you overlook the potential of that type of benefit to your company?”