In our previous blog post I discussed my definitions for five key terms related to occupational safety and health. I appreciate everyone’s comments; in fact, I even tweaked my personal definition of “safety” a little, based on feedback from one reader who took the time to comment. Now I’d like to start the journey of discussing the various core elements of OSHA’s Recommended Practices for Safety and Health Programs. Those core elements, listed in the order presented by OSHA, are as follows:

1. Management Leadership;
2. Worker Participation;
3. Hazard Identification and Assessment;
4. Hazard Prevention and Control;
5. Education and Training;
6. Program Evaluation and Improvement; and,
7. Coordination and Communication for Host Employers, Contractors, and Staffing Agencies.

While the success of a health and safety program depends on the effective implementation of all seven core elements, it is my opinion that the first one listed, Management Leadership, must be addressed first. That is because nothing else is possible if “Management” does not commit to providing adequate time and resources needed to create, implement, and maintain your program. It is important to recognize that “Management” includes not only the business owner or the Chief Executive Officer, but also board members, corporate officers, directors, managers, supervisors, and foremen, where applicable. And ALL levels of Management must be committed to and involved in your health and safety program if it is to reach its maximum potential. But the actions you can take to gain the support and involvement of each level of Management will vary, because their priorities also vary.

So let’s focus first on getting the attention of the Top Dog; the man or woman who owns the business or is the Chief Executive Officer. And keep in mind that we are not talking about Fortune 500-sized corporations here, we are talking about small to medium sized businesses, where the barriers to direct communication are much lower. That key person we need to focus on may be your boss, your boss’s boss, or it could even be you!

The first mistake I see many people make when trying to sell their ideas for a safety program is to use “moral reasoning” to appeal to Top Management; basically telling them that implementing or improving their company’s safety program is “the right thing to do” for their workers. I say that is a mistake because first of all, most managers probably feel like their company is already doing a good enough job managing health and safety at their company – or at least they feel like it is not a big problem that requires their upmost attention. And furthermore, every single manager would probably answer “Yes” if asked if safety was their number one priority. The problem with that approach is, priorities can change – often times at the drop of a hat! All it takes is for an angry customer to call screaming because their projected delivery date was pushed back, and the number one priority suddenly becomes “production”, not safety. The same can be said when there are customer complaints about the quality of your product (QA is now the new top priority), or when your suppliers suddenly ups the cost of your raw materials without notice (cost control is now the latest top priority du jour).

We will expand on the “priorities” of middle managers and supervisors in a latter blog post, but for now I suggest you concentrate on something else; demonstrating to Top Management how the current state of their health and safety program (or lack thereof) is impacting their company’s bottom line. That is because, ultimately, most businesses exist for one primary reason; to earn a profit! And to gain TOP Management support, we need to demonstrate to them how an effective health and safety program can actually make the company more profitable.

How can this be demonstrated? A good first step to get a handle on the company’s basic health and safety-related expenditures is to look at their insurance policies. That obviously includes the company’s workers compensation insurance policy (where applicable), but should also include policies for property insurance, vehicle and equipment insurance policies, as well as any umbrella policies. Why? Because many business owners and CEO’s consider workers comp insurance policies and the like to be “a cost of doing business”, and often don’t realize how their costs can creep up over time, especially when you file a lot of claims. So determine what the premiums and deductibles were for each of these policies for each of the past three to five years or so, as well as the numbers of claims filed for each policy, and see if either of those numbers has increased over time.

You should also find out from your insurance agent if your company’s workers comp policy incorporates an “experience modifier” (also called an e-mod). Generally speaking, an e-mod is a multiplier that is used to adjust the insurance rate for a particular company up or down, based on their past claims history. The average e-mod for any particular business classification is 1.0, and the more claims your company files, the higher your e-mod . . . and the higher your premiums. So any e-mod higher than 1.0 shows your company is paying more than other companies in the same or similar business (including your competitors), which means you are at a competitive disadvantage. Conversely, it is vital to work towards achieving (or maintaining) a lower e-mod so you can eventually gain a competitive advantage over your competitors.

While insurance premiums and associate costs are usually known by Top Management and, again, typically considered to be a direct cost of doing business, another useful figure you should calculate is the “indirect” costs of the injuries and illnesses experienced within your company. These indirect costs associated with work-related injuries and illnesses are not covered by the company’s workers comp policy, so they directly impact the company’s bottom line. Indirect costs can include but are not limited to:

• Costs for lost production. Production may need to be halted while someone conducts an accident investigation; an injured worker who remains on the job is often slowed down while dealing with the effects of the injury; overtime may be needed to make up for the missing injured employee while they are off work; a temporary replacement worker, if needed, is usually not as efficient as the experienced worker who got hurt;
•  Administrative costs. A supervisor and/or office personnel have to stop what they are doing and fill out a workers comp and/or accident investigation report; someone must take time to occasionally coordinate with the injured worker or their medical provider to keep track of the case.
• Uninsured medical costs. Some relatively minor injuries are handled at a clinic, and the treatment costs are paid directly by the company instead of filing a workers comp claim. This keeps the incident “off the books” as far as the comp carrier is concerned, but does have to be paid for out of the company’s funds.
• Litigation costs. Work-related fatalities, as well as some severe injuries and illnesses, often result in a lawsuit being filed against the employer. An employer with workers comp is protected, up to a point. But depending on state law, it is possible for damages to be sought that are not covered by comp. And even if the employer is successful in defending themselves in a lawsuit, there are still legal fees to be paid.
• Cost of dealing with OSHA. Effective this year, employers must now report all injuries and illnesses that result in a worker being admitted into the hospital or result in an amputation or loss of an eye to OSHA within 24 hours. That, in turn, will result in some form of intervention by OSHA, up to and including an on-site inspection that could result in the employer receiving citations that carry hefty monetary penalties. In addition, data about the company could be posted on OSHA’s website in the form of a press release and/or entry into OSHA’s “High Penalty Enforcement Cases” database – both of which are available for your customers to see and your competitors to exploit!
• Intangible costs. Hard to measure things associated with injuries and illnesses that could affect your workforce include lower morale, elevated turnover rate, and lack of trust of management.

Be sure to look at indirect costs for ALL injuries and illnesses, even those first-aid type incidents where the company does not file a workers comp claim, because many of the factors above will still apply.

Estimates of the indirect cost of an injury vary, from 1 times up to 8 times the direct cost. If you are looking for a guide to help you calculate the indirect costs of an injury or illness, OSHA has provided a worksheet on their website that you can use (click here). In addition, OSHA provides an “e-tool” on their website called “Safety Pays” that you can use to help calculate not only the indirect costs of injuries and illnesses, but the amount of product or services your company would have to sell to cover those costs! There are a plethora of other resources available on the world wide web that can help you calculate indirect costs of workplace injuries and illnesses, so Google away and research the results to find something that works best for your organization.

Once you have calculated your indirect (aka uninsured) costs, you can use that information to demonstrate to Top Management how improvements in your safety program can result not only in fewer injuries, but also show a return on investment (ROI) and create value for the company. And you are more likely to get their support because you are speaking the language needed to their full attention.

Do you agree with me that, generally speaking, Top Management is more likely to act on a recommendation if you can show them how doing so can improve the bottom line? Do you have any input on other types of “indirect costs” that I overlooked? How about resources that can be used to help someone calculate these costs for their small to mid-sized businesses or organization? If you have something to contribute, I (and many of our readers) would appreciate your providing that information, as well as other pertinent feedback, in the “Comments” section provided below. And also, please share a link to this blog with others in your network who could benefit from reading this information.