Chapter 4:
The return on safety
To be able to explain the return of safety to C-Level executives, you will need to be knowledgeable about ROI. “ROI” is a common method of comparing the business value of several initiatives. It can be especially helpful when you have several initiatives with quantifiable benefits. Let’s take a look at how return on investment (ROI) is calculated.
One initiative may take an investment of $50,000 and result in $100,000 savings per year for at least 3 years. This would be an ROI of 6x or 600% ($100,000 x 3 years return ÷ $50,000 investment). The key is to keep your return and investment estimates based on future amounts, not investments or returns already experienced. Similarly, the phrase payback is also commonly used to describe the period of time that passes before the initiative pays for itself. Using the example above, the payback period would be 6 months. That’s because the $50,000 investment is recovered within half of the first year’s benefits, which are $100,000 per year (or $50,000 over 6 months).
ROI and payback statements will always be estimates, but you’ll want to communicate them something like this:
"With conservative assumptions, our ROI on this initiative is very high at 6x (or payback is very short) and therefore, we have a very high confidence level that this EHS initiative is justified for its business value alone, in addition to harder-to-calculate safety or intangible benefits.”
Whether you rely on an “ROI” type communication or not, it is also possible to apply this thinking to calculate a Safety ROI. This ROI can help prioritize the EHS value of initiatives from your perspective when dealing with limited resources:
Initiative A:
$30,000 total investment to help safety conditions for 1,000 workers across the company. $30/employee cost for incremental safety benefit.
Initiative B:
$100,000 total investment to help safety conditions for 500 workers in Division “B”. $200/employee cost for incremental safety benefit.
Initiative C:
$50,000 per year investment to help safety conditions of 1,000 workers over 3 year period. $150/employee cost for incremental safety benefit over 3 year period.
Prioritizing EHS initiatives
Let’s say that we have five EHS initiatives that we’re considering, but we only have enough relationship capital, or time with the executive team, to push on one or two of these initiatives (if you’re lucky).
Executives will not buy in to all these initiatives at once, but over time they may.
In our hypothetical example, our executive team is highly focused on risk, retaining key clients in an increasingly competitive market, and prides itself on a high level of quality, which has allowed our company to retain the best clients in the industry.
Current / New business
Current company priorities
Retaining our top 5 clients that have been with us for 10+ years each
Overlap of EHS initiatives
Sustain bidding advantage with 2 clients due to higher safety performance
Time to completion
Current company priorities
Not a concern for management at this time; in line with industry average
Overlap of EHS initiatives
No Overlap
Quality of work
Current company priorities
Our company culture emphasises quality as the reason our clients choose us
Overlap of EHS initiatives
New safety and quality reporting program for all clients
Cost containment
Current company priorities
Not very cost sensitive as clients pay a premium as long as quality is sustained
Overlap of EHS initiatives
No Overlap
Corporate risk and Reputation
Current company priorities
New CFO & Counsel working on ways to reduce risks across contractor base at all sites
Overlap of EHS initiatives
Creation of real time corrective action dashboard for all sites and managers
We have put our five EHS initiatives through our filters for establishing business value based on our company’s corporate and financial goals, and only 3 have clear business value associated with them within the context of those company business goals (risk, new business, quality).
Because they have business value associated with them, we can make a stronger case for executive support and have a higher likelihood of the initiatives succeeding (which positively impacts both business and safety).
However, we can still only pitch one or two options and only have ten minutes to make the case during the monthly executive meeting. As shown in the following chart, we can further prioritize our initiatives by which ones have a higher business value and a higher probability of success.
This means that we won’t propose the initiative that came first, or the one that we came up with. Instead we rather focus on expected outcomes. The sooner these two initiatives are completed successfully, the sooner we’ll be able to sweep through and complete the rest. Besides, we’ll have a solid track record with executives the next time we pitch to them.
One important thing to keep in mind is that ultimately, it may be the company’s CEO that decides to accept (or discount) the price the uncontrolled risk you estimate is resulting from the safety gaps that you’re looking to close.
Similarly, the CEO will also decide to accept (or discount) your proposed initiative as a solution to address those risks. If they had no decision in the matter, you would have controlled it already!
Therefore, framing the “price” or “cost” of such risks in relative terms will help your leadership peers see your perspective and resulting recommendations for prioritizing EHS initiatives.
How to accomplish your EHS initiatives
Now, that you’ve proven safety has value, it’s time to prove how you’ll be able to accomplish your EHS initiatives. Companies have many ways of managing their health and safety program from relying on paper-based systems to robust digital platforms.
After speaking with a multitude of safety professionals, the way to truly strengthen safety is by going digital.
Here’s why we would choose a sophisticated digital safety system over pen and paper any day.
Current / New business
Paper-based system
With gaps in paperwork and no insight into safety because of poor management and organization, bids may be lost due to a poor safety record.
Digital safety system
Greater bidding opportunities due to higher safety performance and stronger safety record.
Time to completion
Paper-based system
Staff gets bogged down by administrative tasks and takes hours to complete a task that could be accomplished in minutes with the help of a digital system.
Digital safety system
With all documents digitalized and centralized in one location, safety professionals will be able to find what they’re looking for and complete tasks much faster.
Quality of work
Paper-based system
Relying on paper means that there is more room for human error, affecting the quality of work.
Digital safety system
Provides complete transparency into your safety and reporting program, with less room for human error. Identifying trends will now be easier, allowing for quicker, data-driven decisions.
Cost containment
Paper-based system
Since there is no insight into the safety program, leading indicators cannot be tracked, thus employees are more prone to injuries on-site, resulting in higher injury rates and insurance premiums.
Digital safety system
With greater insight into your safety program, you can focus on leading indicators. This will help to reduce your injury and incident rate, decreasing the cost of insurance premiums.
Corporate risk and Reputation
Paper-based system
Because injury rates are so high, employees will not want to sign on, projects will be delayed, and your reputation will be affected within your industry.
Digital safety system
A digital safety record will function as a repository for all records and information. With a strong safety program, you’ll protect your employees and boost your standing in the market.
