Companies are in the business of making money. Everything else, even if beneficial or complimentary, is secondary to the primary focus of staying in business. As a result, it often seems as though there are competing priorities to production and operations, especially when it comes to safety and safety-related spending. When tasked with making a pitch, such as spending on digital EHS technology, developing a structured return on investment is a shrewd move.
A return on investment can be calculated using the following formula:
(Benefits of Investment) / (Cost of Investment) = Return on Investment (ROI)
Benefits can be both direct and indirect, as outlined below:
- Direct Benefits:
- Time and efficiency savings (paper vs. digital; improved reports and analytics; digital workflow and communications; historical retrievals and storage)
- Reduction in incident-related costs (e.g., fewer incidents; reduced insurance costs)
- Indirect Benefits:
- Less data entry and more focus on data analysis
- Continuous improvements
- Increased production
- Consistency in approaches
- Improved morale
Unfortunately, the costs are much easier to quantify, such as the license fees for software use and the implementation costs to put a new program in place. These are tangible and immediate, whereas the direct returns are measured by the absence of something—the absence of injuries, illnesses, and fatalities – and are harder to recognize before a system is rolled out or recognized over time as having been achieved due to the change. Additionally, indirect costs are trailing indicators that are often recognized tangentially. In effect, the return-on-investment request must guarantee cost savings from reduced injuries and other indirect improvements to justify the expense. Although, with the cost per medically consulted injury averaging $41,000 1, it should not be that big of an ask.
Protecting our workers should always be the primary goal of any safety management program as a moral obligation, but safety also brings real benefits to the bottom line. Our industry needs to do a better job of promoting those payoffs, too. Studies have shown there is a return of $2 to $6 for every dollar spent on injury prevention, according to the National Safety Council 2.
Investing in safety can save a company money as well as realize additional benefits. Businesses will see lower costs related to workers’ compensation claims because there are fewer injuries. This includes costs for medical visits, insurance costs, legal fees, and more. In fact, fewer incidents can help lower insurance premiums, providing longtime cost savings. In addition to direct savings, companies with improved safety management see additional benefits such as increased employee morale as employees see and feel that management is invested in their safety and well-being 3. This often offers businesses measurable benefits like fewer instances of absenteeism and lower staff turnover. More effective safety programs will help businesses focus on their staff rather than paper because the system takes care of these processes. Ideally, the company’s safety culture will improve because employees see these processes and programs as beneficial.
Ultimately, the return-on-investment conversation must be about setting clear expectations. The goal should be to do more, better. There is no high functioning robot that will replace EHS staff or artificial intelligence or predictive model that magically calculates solutions to problems. What should be sought is a system to better manage the deluge of information pouring in so that qualified EHS staff can make better sense of it and communicate it more effectively to the organization.
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Cary comes to the SafetyStratus team as the Vice President of Operations with almost 30 years of experience in several different industries. He began his career in the United States Navy’s nuclear power program. From there he transitioned into the public sector as an Environmental, Health & Safety Manager in the utility industry. After almost thirteen years, he transitioned into the construction sector as a Safety Director at a large, international construction company. Most recently he held the position of Manager of Professional Services at a safety software company, overseeing the customer success, implementation, and process consulting aspects of the services team.
At SafetyStratus, he is focused on helping achieve the company’s vision of “Saving lives and the environment by successfully integrating knowledgeable people, sustainable processes, and unparalleled technology”.
1 National Safety Council (2020, February 20). Work Injury Costs. https://injuryfacts.nsc.org/work/costs/work-injury-costs/#:~:text=The%20cost%20per%20worker%20in,cost%20per%20death%20was%20%241%2C190%2C000
2 Morrison, K. W. (2014, May 23). The ROI of safety. Safety+Health Magazine. https://www.safetyandhealthmagazine.com/articles/10414-the-roi-of-safety?page=2
3 Berthold, J. (2017, February 15). Supporting a culture of caring can reduce injuries and costs, improve performance. EHS Today. https://www.ehstoday.com/safety-leadership/article/21917903/supporting-a-culture-of-caring-can-reduce-injuries-and-costs-improve-performance