Federal Aviation Administration 1 of 30 A Process to Prove the Payback on Safety Interventions Dr. Bill Johnson Chief Scientific and Technical Advisor Maintenance Human Factors Shell Aircraft Safety Seminar 2012 Human Factors –Safety’s Vital Ingredient The Hague, Netherlands October 2012 Federal Aviation Administration

Federal Aviation Administration 2 of 30 Presentation Plan Finance and Safety ROI Challenges - Solutions Calculating ROI (A detailed example) Other Examples Cautions Q&A Shell Aircraft Safety Seminar 2012 Human Factors –Safety’s Vital Ingredient The Hague, Netherlands October 2012

Federal Aviation Administration 3 of 30 Why care about ROI Investment in Safety Continuing/ Improving Safety and/or Expense Reduction and/or Revenue Increase

Federal Aviation Administration 4 of 30 Why care about ROI? “If you want to implement/revise safety programs you must show the payoff.”

Federal Aviation Administration 5 of 30 Challenges to ROI of Safety Intangible Cause and Effect Integration-Combination Time Shell Aircraft Safety Seminar 2012 Human Factors –Safety’s Vital Ingredient The Hague, Netherlands October 2012

Federal Aviation Administration 6 of 30 ROI Solutions SMS Data Emphasis Voluntary Reporting Acceptance

Federal Aviation Administration 7 of 30 Presentation Plan Finance and Safety ROI Challenges - Solutions Calculating ROI (A detailed example) Other Examples Cautions Q&A Shell Aircraft Safety Seminar 2012 Human Factors –Safety’s Vital Ingredient The Hague, Netherlands October 2012

ROI: Any Questions Shell Aircraft Safety Seminar 2012 Human Factors –Safety’s Vital Ingredient The Hague, Netherlands October 2012

ROI: From Words to Numbers

Federal Aviation Administration 10 of 30 Example: Fatigue Awareness Training at MRO Shell Aircraft Safety Seminar 2012 Human Factors –Safety’s Vital Ingredient The Hague, Netherlands October 2012

Federal Aviation Administration 11 of 30 A Few More Challenges to ROI Financial personnel assume ROI responsibility Executives do not demand ROI Corporate culture and ROI Perceived value of ROI Fix problems rather than assign costs Focus on costs Focus on production and schedules Shell Aircraft Safety Seminar 2012 Human Factors –Safety’s Vital Ingredient The Hague, Netherlands October 2012

Federal Aviation Administration 12 of 30 Example ROI Summary Reduction in A/C damage: $935K (10% of 2010) Reduction in OSHA injury: $119K (10% of 2010) Financial ROI: 312% Probability of success:.8 +/-.1 Reduction in A/C damage: $3M (30% reduction) Reduction in OSHA injury: $184K (15% reduction) * Does not include a 1% system-wide efficiency improvement of $900K Fatigue Awareness Training to 2 hours each Cost was $205 K during 2011 Investment Benefit Forecast* Actual*

Federal Aviation Administration 13 of 30 ROI: Fill in the Boxes

Federal Aviation Administration 14 of 30 The ROI Menu

Federal Aviation Administration 15 of 30 Investment Questions How many personnel trained? How long is training in hours? What is the average hourly rate for trainees? Were there missed opportunity costs during training time? Count time for management and support ? Rate? Cost of special hardware? Amortize? Costs for training development & facilities? Amortize? Schedule for training over time?

Federal Aviation Administration 16 of 30 The Investment Investment to deliver training $204, Investment to deliver training $204,500.00

Federal Aviation Administration 17 of 30 Expected Return Questions What are the safety benefits? How many current safety incidents? How many safety incidents can be reduced? What are the metrics to measure these changes? (e.g., aircraft damage, rework, delivery delay, OSHA injuries,…) Costs associated with each metric? How much will personnel efficiency be improved?

Federal Aviation Administration 18 of 30 The Return - Benefits Investment Benefits $1,053,702 Aircraft Damage OSHA Reportables $ 934,500 $ 119,202 10%

Federal Aviation Administration 19 of 30 The Directions to ROI

Federal Aviation Administration 20 of 30

Federal Aviation Administration 21 of 30 Project Summary (1 of 2) Break Even Point $204.5K $638,461/$ = 3.12

Federal Aviation Administration 22 of 30 Project Summary (2 of 2)

Federal Aviation Administration 23 of 30 Recent ROI Findings Reduction in A/C damage: $935K (10% of 2010) Reduction in OSHA injury: $119K (10% of 2010) Financial ROI: 312% Probability of success:.8 +/-.1 Reduction in A/C damage: $3M (30% reduction) Reduction in OSHA injury: $184K (15% reduction) * Does not include a 1% efficiency improvement of $900K Fatigue Awareness Training to 2 hours each Cost was $205 K during 2011 Investment Benefit Forecast* Actual*

Federal Aviation Administration 24 of 30 Presentation Plan Finance and Safety ROI Challenges - Solutions Calculating ROI (A detailed example) Other Examples Cautions Q&A Shell Aircraft Safety Seminar 2012 Human Factors –Safety’s Vital Ingredient The Hague, Netherlands October 2012

Federal Aviation Administration 25 of 30 Need More Examples? Org. Type TopicInvest $ Return $ Break Even ROI 2Q % ROI 4Q % ROI 5Q % MRO FRMS Training K1.1 M1.5 Qtr Airline Wheel Installation 24.5K1.7 M0.6 Qtr MRO Windscreen Service 1.8K75.1 K1.0 Qtr Airline Ramp Comm. 3.1 M6.8 M5.0 Qtr Airline Paint Hangar 16.0 K120.0 K1.0 Qtr Airline Hangar Damage 56.0 K390K2.0 Qtr

Federal Aviation Administration 26 of 30 Cautions Real world vs. Controlled laboratory Diligence on estimates Be conservative Expect surprises

Federal Aviation Administration 27 of 30 What you can do next Shell Aircraft Safety Seminar 2012 Human Factors –Safety’s Vital Ingredient The Hague, Netherlands October 2012 Your SMS provides the data Try the formula ROI considerations will increase Knowledge equals power

Federal Aviation Administration 28 of 30 Presentation Summary Finance and Safety ROI Challenges - Solutions Calculating ROI (A detailed example) Other Examples Cautions Q&A Shell Aircraft Safety Seminar 2012 Human Factors –Safety’s Vital Ingredient The Hague, Netherlands October 2012

Federal Aviation Administration 29 of 30 Why care about ROI? “…safety and profitability are the mutually inclusive #1 priority for most industries especially transportation…” B. Johnson, Paragraph 1 of this conference paper.

Federal Aviation Administration 30 of 30 Questions - Discussion