Business & Safety Economics

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As a safety team member, leader or manager you should understand the basic principle, vision and values of why your company was created.  It either provides a needed product to a consumer base or valuable service to an industry or community.  But most of all, the company was created to provide sufficient revenue to make a profit.  Unfortunately, often times many in upper management consider safety as a costly legal necessity with no little to any impact on profitability. Thus, they can be resistant to making any safety program changes that could cost additional monies.

Today’s successful safety managers that have received additional funding to strengthen their safety program all had a basic understanding of business economics and the direct impact of any program changes may have on profitability. In essence, you need to know how to effectively sell safety by showing how any monetary expenditure in the short-term can save the company money in the long-term, thus having a positive impact on profitability. But be prepared to support your claim.

When I’ve dealt with business leaders in my career, I was always astonished by how little they knew about the adverse effects that safety non-compliance and overall injury costs had on the profitability of their companies.  Sure, they knew losing an employee to a work-related injury or illness, at least temporarily, put a strain on their manning and productivity.  But was a total business and safety economic figure ever associated with it? Probably not!

Workplace injuries and illnesses are more expensive than historically thought. Many business owners and managers only review and compensate for the direct costs associated with injuries, and, in fact, they are considerable. The direct costs of an injury include emergency room and doctor visits, medical bills, medicines, rehabilitation and associated workers’ compensation costs. However, direct costs are only a small part of the bigger picture.

As a safety manager, it is your job to ensure management understands the importance of indirect costs of injuries and illnesses as unbudgeted costs associated with an injury in order to get those workers back to pre-injury status.  Some of the more expensive indirect costs associated with worker injuries include such things as lost or decreased productivity, administration costs, training a replacement employee, attorney fees, potential OSHA penalties, and higher workers’ compensation fees to name a few.

Safety managers should not hesitate to calculate and openly discuss the historical economic facts of the company’s direct and indirect costs of work related injuries and illnesses with upper management.  You should also understand and relay that Indirect cost multipliers for work related injuries usually range from 3 to 10 times the direct costs. Assigning safety economic facts for past and present worker injuries and illnesses should hopefully gain managements approval for any program changes or additional funding you may need to strengthen your safety program.

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