© 2012 BLR-Business & Legal Resources How to Promote the Business Value of Safety & Health David Galt Managing Editor, Safety

© 2009 Business & Legal Reports, Inc. © 2012 BLR-Business & Legal Resources The Business Value of Safety Define business value ID barriers to safety as a business value 7 steps to make your business case 1. Identify business value drivers 2. Identify costs 3. Identify investments in safety 4. Link safety to value drivers 5. Measure performance 6. Communicate results 7. Follow up

© 2009 Business & Legal Reports, Inc. © 2012 BLR-Business & Legal Resources What is ‘Business Value’? Determines the health and well-being of an organization Measurable values – Profit – Market share – Productivity Not Easy to Measure – Compliance – Reputation, brand – Morale, talent

© 2009 Business & Legal Reports, Inc. © 2012 BLR-Business & Legal Resources Business Value: CFO Priorities 1.Control Costs 2.Reduce compliance risk 3.Support business initiatives 4.Protect/enhance image 5.Everything else Source: NAEM, “Performance Measurement of EHS Management Programs Survey”, November 1995

© 2009 Business & Legal Reports, Inc. © 2012 BLR-Business & Legal Resources CFO Priorities: Benefits Top benefits of workplace safety 1. Productivity (43%) 2. Reduced costs (28%) 3. Employee retention (7%) 4. Employee morale (6%) Top injury prevention activity 1. Better training (26%) 2. Better equipment and workspace (7%) 3. More safety management (7%) 4. Safer environment (6%) 5. Enforce policies and procedures (6%) Source: 2005 Liberty Mutual CFO SurveySource: 2005 Liberty Mutual CFO Survey

© 2009 Business & Legal Reports, Inc. © 2012 BLR-Business & Legal Resources CFO Priorities: Costs (Losses) Workers’ compensation costs, related medical expenses and attorney fees Lost workdays and injury/illness-related downtime (productivity loss) OSHA penalties, civil suits (compliance risk) Cost to train replacement employees Accidents have average impact on financials Source: Professional Safety, “Financial Decision Makers’ View on Safety” April 2009, p39

© 2009 Business & Legal Reports, Inc. © 2012 BLR-Business & Legal Resources Barriers to Safety As A Business Value Safety viewed as a cost instead of an investment Failure to link safety performance to business outcomes Improper application of safety measures to the business case Business managers want to know future benefits and the risk of future loss.

© 2009 Business & Legal Reports, Inc. © 2012 BLR-Business & Legal Resources Integrate Safety as a Business Value WHAT GETS MEASURED (accurately, reliably, documented) GETS ATTENTION

© 2009 Business & Legal Reports, Inc. © 2012 BLR-Business & Legal Resources Step 1—Identify the Business Value Drivers Do basic business value research Review annual reports, mission statements, goals Learn business terminology Observe the winners ID key financial personnel and learn

© 2009 Business & Legal Reports, Inc. © 2012 BLR-Business & Legal Resources Step 1—Identify the Business Value Drivers Increase profit Reduce costs Reduce risk of violations Increase productivity Enhance reputation Build employee skills Increase customer satisfaction

© 2009 Business & Legal Reports, Inc. © 2012 BLR-Business & Legal Resources Step 2—Identify Costs and Losses 1.Conduct JHA and risk assessment (risk of future loss) 2.Develop “Financial Hazard Analysis” from JHA exposures  Existing financial losses from injury/illness  Risk of future loss “…safety professionals need to understand an organization’s financial losses in order to help senior management understand the financial benefit the safety department provides.” Professional Safety, April 2009, p40

Step 2—Identify True Costs (Losses) © 2012 BLR - Business & Legal Resources Tool—Profit Impact Calculator

Step 2—Identify True Costs (Losses) © 2012 BLR - Business & Legal Resources

Step 2—Identify True Costs (Losses) © 2012 BLR - Business & Legal Resources

© 2009 Business & Legal Reports, Inc. © 2012 BLR-Business & Legal Resources Step 2—Identify True Costs (Losses) Tool—OSHA Management Systems eTool

Step 3—Identify Investments in Safety Tool—Safety Investment Chart Staff time, equipment Choosing equipment, fit test, replacement Protective Equipment Staff time Update OSHA 300 forms, inspection reports, investigations Record- keeping Staff time, consultant fees, training materials purchase Scheduling, program development, conduct training sessions Training Staff time, consultant fees, monitoring equipment purchase Hazard analysis, write plans/procedures, reports, investigations Program Development InvestmentTasksActivity © 2012 BLR - Business & Legal Resources

Step 3—Identify Investments in Safety © 2012 BLR - Business & Legal Resources Tool—Total Cost Accounting Tool

Step 3—Identify Investments in Safety © 2012 BLR - Business & Legal Resources

Step 4—Show Benefits: Link Safety Investments To Value Drivers Business Value → Safety Activity ↓ ProfitProductivityCompliance Risk Reputation /Image Program Development XXXX TrainingXXXX Safety CommitteeX RecordkeepingX Protective Equipment XXXX © 2012 Business & Legal Resources Tool—Safety Activity/Business Value Linkage Table

Step 5—Measure Performance Tool—Safety Performance Metrics Table Safety Program Activity Business Value Objective Measure of Performance Business Value Result Training Reduce compliance risk Cost containment Incident rate Employees completed % incident rate change/time % completed Hazard control procedures Reduce compliance risk Cost containment Injuries per # of work hours % change in lost work days/DART Personal Protective Equipment Reduce compliance risk Cost containment employees wearing PPE during incident Cost of injury with and without PPE © 2012 Business & Legal Resources

© 2009 Business & Legal Reports, Inc. © 2012 BLR-Business & Legal Resources Step 5—Measure Performance: Leading and Lagging Indicators Leading—indicates future value or direction Employee engagement Safety mgmt system audit Frequency of completed inspections Results of observations Risk assessment results Employee perception survey Near miss report Lagging—indicates facts about past events Lost Workday and DART Fatality Experience Modification Rate (EMR) Accident

Step 5—Measure Performance © 2012 Business & Legal Resources Tool—Balanced Organizational Scorecard

© 2012 Business & Legal Resources

© 2009 Business & Legal Reports, Inc. © 2012 BLR-Business & Legal Resources Step 6—Communicate Results Speak the language of management Be strategic—recommend action toward business objectives Make pitch in 10 minutes – State the problem, solution, plan of action

© 2009 Business & Legal Reports, Inc. © 2012 BLR-Business & Legal Resources Step 7—Follow Up Update regularly Provide information, not data overload Stay consistent with the indicators Communicate progress on intangibles as well as tangibles

© 2009 Business & Legal Reports, Inc. © 2012 BLR-Business & Legal Resources Key Points to Remember Safety activities undervalued due to: – Barriers between safety performance and business values – Lack of standard measures of performance 7 steps to promote business value 1. Identify value drivers 2. Identify costs 3. Identify investments and benefits of safety 4. Link safety activities to value drivers 5. Measure performance 6. Communicate results 7. Follow up