As defined by most business schools and educational training, a manager’s primary responsibilities include superior returns and working for shareholders’ best interests. Unfortunately, this mindset does not fully capture the full responsibility for managers interested in long-term, sustainable growth and well-being. Worker’s health and safety does not provide increased initial profit, but with the right training, could sufficiently increase the efficiency and productivity of operations for future gain. Instead of focusing purely on profit and shareholder wealth, stakeholders such as workers and safety professionals, can easily convince managers of the financial benefits of safety.
Increasing a safety budget, given the right reasons, can provide superior returns in the form of lower expenses and long-term, sustainable growth of the workforce and equipment life-cycles. If you are pondering on the benefits of an increased safety budget, below are just a few of the many convincing reasons to expand your investment.
Why Invest in Safety?
Profit is not Revenue – Many professionals with authority in risk-based industries look at expansion in terms of increased revenue and sales. The mindset is often, “Increase market share and build more customer interest.” On the contrary, revenue is only one part of the profit equation. Sale price of goods or services minus expenses equals profit, but not all costs are per unit raw material costs. In fact, most lost profit in business occurs from a lack of organization, asset management, and labor utilization. A lack of proper safety training has proven to back up production and cause unnecessary operational costs. In order to convince managers of the benefit for an increased safety budget, workers must show how profit margins are affected by a lack of efficiency. As part of standard safety operating procedure, all safety hazards and accidents are to be logged and reported to senior management for the purpose of audits and further preventive measures. If workers can express through productivity statistics, or a lack thereof, most managers would see the long-term benefits of safety training and equipment. For example, when logging a safety incident or hazard, attach the labor hours required to either avoid the hazard or rectify the situation. This will help attach value to a loss of productivity.
Increased Administrative and Insurance Costs – Measuring productivity through logging labor hours and efficiency-degrading practices may be difficult on a daily basis within a busy company, but proving the worth of safety investments is easily captured through administrative and insurance costs. Insurance companies follow the compliance of companies and organizations within the standard operating procedures of OSHA. One of the many ways OSHA and other government safety organizations can hurt businesses is through non-compliance reporting. If audits fail and non-compliance with basic safety procedures are found within high-risk industries, OSHA can punish businesses through fines and increased insurance costs. In addition, for every accident occurring on the job site, insurance premiums will rise to the occasion, making it impossible for non-compliant companies to stay competitive in the marketplace. Without proper communication systems and safety software such as eCompliance or IndustrySafe, administrative costs will continue to grow as well. Every accident or logged hazard created by a lack of worker training or proper procedure is more time wasted on paperwork and reporting. Investing in real-time safety management software would be money well spent.
Worker Turnover and Labor Costs – With more safety hazards in the workplace, workers will need to work hard to complete the same tasks required prior to safety problems. Over time, this could lead to more worker turnover and job training costs, lowering output, productivity, and worker commitment. If a company does not see worker safety as a paramount priority, highly-skilled individuals working for the company may find other work or may not commit to the overall organizational goals set forth by management. The soft costs associated with losing proper talent and moral can be devastating to company profitability.
The writer of this article, Matthew Hall, is a small business owner who is well versed in the many factors that influence the profitability of a business. He uses a variety of techniques to not only increase revenue, but cut overhead, resulting in bigger profits. He will write about what he has learned on the side to help others realize their own business dreams.