Safety – a true investment!

Published:  30 November, 1999

Many companies across UK Manufacturing have cut costs and investment to the bone in order to remain profitable. The ramifications of this policy are felt at all levels of manufacturing even in areas one would least expect such as plant floor safety. This is undoubtedly short-sighted, as the cost of an accident, in terms of legal action - possible fine - and lost production will greatly outweigh any costs resulting from not using safety equipment. However, companies not investing in safety equipment can still incur disastrous costs even when accidents do not occur. A visit from the local HSE Inspectorate can quickly result in a prohibition order on any machine considered to be unsafe. The machine (or machines) so proscribed may be one(s) that are critical to production, so any interruptions could have very serious economic consequences for the company concerned.

Recent research from the USA shows that while the legal/economic imperative for investing in safety is paramount, there is another major reason that most companies are not aware of, namely, that safety is good for business. As evidence of this, in 1999, when Forbes published its list of the most successful US corporations, many in the top 100 were participants in the Voluntary Protection Programs (VPP) sponsored by the Occupational Safety and Health Administration (OSHA). These programs are only open to companies implementing safety programmes that exceed OSHA standards and result in lost time rates at least 50% below their respective state average. Not only did these companies set a new benchmark in health and safety management best practices, but they also verified the correlation between plant floor safety and profitability.

The recognition that safety measures weren't a hindrance to productivity, and that safety was truly an investment with positive return, did not happen overnight with these companies. However, the acceptance of safety as a good business practice is now evident as the number of workplace injuries continues to fall each year.

There are two main arguments, economic and ethical, to challenge companies that are holding back from investing in safety equipment: Although, on first reading, these would seem to be at odds, they are in fact closely linked. They are linked because safety always pays: a safe machine is unlikely to be shut down by inspectors, or cause costly interruptions to production as a result of an accident. In addition, by investing in proper safety provision to protect its workforce, a company is fulfilling both its moral obligation and safeguarding its most valuable asset, helping to ensure continuity of future production.

The availability of empirical data such as the reduction in workplace injuries is powerful evidence that a company"s commitment to providing a safer workplace boosts employee morale and leads to improved productivity. However, the   productivity gains and cost savings attributed to fewer accidents, reduced medical expenses and legal costs are still often overlooked. When considering safety in this capacity, its value can be more easily determined by reviewing the costs of time lost due to past injuries. The direct costs of these incidents, such as workers" compensation, are easy to grasp, but the indirect costs such as lost production time and resources are much more difficult to determine. The total incident cost, the sum of the direct and indirect costs, is the key to determining the impact of accidents on a company’s profitability.

To help companies gauge the impact of occupational injuries on their financial performance, the US- based OSHA has developed free software that can be downloaded from its website at www.osha.gov. This software takes into account profit margin, average costs of injury and indirect costs (expressed as a multiplier) to project the additional sales a company would have to generate to make up for workplace injuries.

For further information please visit: www.ejaltd.com