Occupational Safety

Communicating the value of health and safety to leadership

Long-term success over short-term expense: Convincing key stakeholders

20 minutes   |    06/25/2021

Managing directors usually focus on health and safety because of the two vital issues: liability and responsibility. Associated costs are on the other side of the coin. Thus: In many companies it is part of everyday life for occupational safety specialists to showcase the economic viability of occupational safety and health. To what extent do planned or implemented measures contribute to the overall success of the company? Compliance with laws, unnecessary costs due to accidents or illness, a shortage in staff, property damage or production downtime, are strong arguments that can help you build a good argumentation. But also, small things such as motivation and employee satisfaction as well as the company's reputation, can support you in convincing internal stakeholders. Of course, ethical arguments also matter. Ultimately, every employee should return to their family and friends safe and sound at the end of a work day. Management is usually interested in: how can the positive relationship between occupational safety and health and the company's success be backed up by sound facts and data?

1. The return of investment from one euro

Numerous national and international studies on the so-called return on prevention provide answers to the question of the economic efficiency of occupational safety and health. The study of the German Social Accident Insurance (DGUV) "Calculation of the international 'return on prevention' for companies" could be mentioned as an example at this point. 

What is the Return on Prevention (RoP): 

The RoP determines the extent to which investments in occupational health and safety are economically worthwhile. Based on the return on investment (RoI), the key figure is intended to prove that a low number of accidents at work increases productivity in companies. 

The international study of the DGUV mentioned above comes to the conclusion that the RoP factor is 2.2. This means that every euro invested in prevention, brings a return of 2.20 euros from a business point of view. The key figure was calculated based on numerous interviews and expert surveys. The details of the exact procedure can be found at the DGUV. 

The outcome, certainly depends on the size and industry of a company and therefore cannot always be transferred one-to-one, this you should acknowledge in your argument. Is the presentation of the economic benefits of occupational health and safety still too abstract? In this case, you can draw on facts from your company – such as the number of accidents at work. 
 

2. The cost of accidents at work

Modern controlling, works with key performance indicators (KPIs) -  such as the Lost Time Injury Frequency Rate (LTIFR), the Severity Rate or Lost Workday Rate that help visualize the status quo of occupational health and safety in the company. But how do KPIs ultimately support your argument?  

  • They are used as a comparison with other companies 

  • They illustrate the development/stagnation of the success of your measures in occupational safety and health 

  • They help to illustrate the costs of accidents at work. This point in particular, is important in your argument. An investment in improved occupational safety and health, will also depend on whether the expenses are profitable and the accident costs (such as continued payment of wages, compensation, damage to property, repair costs, production losses, administrative costs, etc.) are considerably reduced.  

Calculation Example

In a construction company there are 200 employees who work 328,000 hours. 26 personal injuries with loss of working hours occurred in 2020. The employees were absent for 325 days (a total of 2,525 hours) due to an accident. 

LTIFR = personal injury with loss of working time / working hours x 200,000 = 26/328,000*200,000=15.8 

In the calculation example, each work accident with downtime leads to an average of 12.5 days of absence and, a total of 325 days of absence annually. Converted, that's almost two full-time positions. If one assumes that an accident hour costs 50 euros, accidents with loss of working time with 2,535 lost hours project costs of almost 130,000 euros.

In addition, minor accidents must also be considered. This refers to accidents that do not lead to downtime, but cause delays and disruptions in the production process.
If one follows the conditions assumed in the Dupont accident pyramid, there are 10 times as many minor incidents, as accidents with downtime and, again 10 times as many near misses and critical situations. The cost of this is of course, difficult to predict. At this point, for a better overall picture, another example and calculation to back the argument up should be given.
 

Calculation Example

If, due to the high number of work delays and it is assumed that the same costs as for accidents at work are caused, the total costs of accidents and near misses amounts to around 260,000euros. That means that the accident cost is 1,300 euros per year per employee. 

Additional costs that may not have  been taken into account:

  • Contractual penalties due to late fulfillment of the order 

  • Repair or replacement of machines and equipment 

  • Clean-up work 

3. A safety management system (SMS) pays off

Costs that are directly associated with occupational accidents can be minimized, by the introduction of a suitable safety management system (SMS). If you have not yet introduced an SMS, a calculation example is also worth to help back up your argument.

To implement an SMS successfully, four central elements of occupational health and safety must first be introduced, implemented and tested: 

  • Risk assessments 

  • Safety instructions 

  • Learnings

  • Testing of equipment 

In the risk assessment, the risks of individual activities are identified and evaluated. However, risk assessment is also stored ideas and planning for measures that the company can implement. Think of working conditions in areas such as ergonomics, lighting, climate or physical stress, at the workplace. Not every measure is feasible. Nevertheless, it is advisable to assess factors holistically with regard to preventive occupational health and safety.

In the safety instructions, all hazards at the workplace are discussed in dialogue, and measures for prevention or minimization are explained. In some cases, exercises with equipment or with the use of personal protective equipment (PPE) are also necessary. Those responsible are encouraged to subject instructions to an effectiveness check.

In the training sessions, all risks that can arise at the workplace are discussed collaboratively and actions to prevent and minimize the risks are formulated. In some cases, exercises with company equipment or PPE may be necessary. Responsible parties are therefore required to check the effectiveness of such trainings. A written proof of training is also required.  

As part of a risk assessment, an interval and scope of the testing of equipment must be specified. These also, result from the manufacturer's specifications and official requirements for plant safety. The competence of the examiner should also be noted in the risk assessment. 

All four elements require documentation in which the people responsible and implementation dates are determined. The improved organization of occupational health and safety protects the company from unnecessary costs. 

Presenting a solid plan for the use of SMS to management and leadership, will enhance the probability that your project will be taken seriously.
 

Calculation Example

Assuming that the introduction of the AMS incurs costs of 25,000 euros and thus reduces the accident costs (of 130,000 euros) in the first year by only 10%, the investment in our example company has already been refinanced after two years. However, a realistic target should be a much higher rate of reduced accidents at work.

4. Why reputation is at stake

In addition to the major factors that play a role ( RoP, the costs of occupational accidents and SMS), minor factors can also help your argumentation. Occupational health and safety thus does not have a inconsiderable influence on the external impact of the company.

Image and reputation are central 'value drivers' for management today. Stakeholders, expect companies to take responsibility and need to ensure occupational safety along the entire value chain. Inadequate occupational health and safety can lead to employees or external parties reporting on abuses in social media – and thus quickly reaching a the public at large. If there are fatal accidents,  a factory that collapses or other critical incidents, companies have to deal with a serious crisis communication.

The media response here, often lasts a long time. The consequences can lead to long-term sale loss and liquidity. If legal proceedings are initiated, further costs may follow, such public crises are particularly sensitive for listed companies. The financial myths are very sensitive and have long understood the power of the media. Occupational health and safety, on the other hand, becomes holistic – and ideally beyond legal regulations –  it supports the good reputation of a  company. In this case, occupational safety is an image driver and can be integrated into reputation-promoting CSR communication.
 

5. Employee recruitment and corporate branding

The responsibility taken by a company has an immense effect on the satisfaction and retention of employees, but also on the recruitment of new employees. One thing is clear, healthy workers are more motivated. In view of the current shortage of skilled workers, this argument is gaining additional weight.

  • If the usefulness of this argument is not convincing enough, you can also evaluate this factor monetarily. Employee retention is cheaper than recruiting. If there is a high fluctuation, constant recruitment results in high costs. They range from the loss of knowledge, to personnel recruitment to time resources for the induction of new employees. And as serious is lost sales due to employee shortages. 

  • Good preparation is half the battle: This is how communication with managing directors and other internal stakeholders is so successful. | © iStock: SeventyFour

Prepare and conduct conversations

How to convince managing directors

Many measures for occupational safety and health do not need persuasion, as they are legally binding. Most protective equipment is an example of this. However, if you would like to invest, for example, in a SMS or other large measure, the first position in which approval must be obtained is management. 
For the preparation you can not only use the usual sources such as literature, internet or similar. You should also contact other institutions and individuals that have points of contact with the issue of occupational safety and health. These include:

  • The company doctor (occupational physician) 

  • The safety officers / specialists for occupational safety 

  • Other experts (e.g. hazardous substances officers, environmental management officers, waste officers, etc.) 

  • Works Council

If you have collected a comprehensive picture and numerous arguments for yourself, the next step, is to prepare for the conversation. When communicating with management, it is important to consider the following: 

Managers often have precious little time. Therefore, describe your concern briefly and concisely, but comprehensibly

  • Focus on the benefits of the desired measures for the company and its employees 

  • Prepare several variants of implementation (if possible two or three)

  • Explain the advantages and disadvantages of each alternative.

  • Be transparent about the costs, but also highlight the advantages with a calculation 

  • Be prepared for questions and also for resistance from the leadership ("Is this necessary?", "What laws or regulations dictate this?" "Can we implement it differently for less the cost?") 

  • Arrange binding deadlines and define responsibilities for the implementation of the adopted measure. 

  • Create a protocol or conversation note, with all the important points.

Such a conversation can end with you being referred to the appropriate department to discuss further details. In this case, ask the managing director or the plant manager to inform the department or the person responsible about the upcoming meeting. 

Communicating with the specialist department

Here, too, a certain preparation for the interview is necessary, which differs from the meeting with the manager – considered in the following points: 

  • Avoid professional paternalism, try to take on a consultant role

  • Take advantage of the expertise of your interlocutor, involve him/her 

  • Allow new ideas and proposals as long as they are conducive to the achievement of the measure's objectives 

  • Ask for necessary help and support from other areas or departments 

  • Agree on a binding timetable for the implementation of the measure 

  • Discuss an appropriate time to monitor effectiveness

Many preparations from the conversation with the management can also re-appear in the specialist department. Once again, it is crucial to communicate the advantages and benefits of the measures for the employees. Use your experience from the conversation with the plant manager and explain the benefits and advantages that the measure brings for each employee.
It is again necessary to choose simple and understandable language, to keep the attention. Create a dialogue atmosphere and remember that only if the measure is understood and accepted by the employees will it be implemented successfully.

Employee health and wellbeing matters in business

As you can see, several tools are available for the positive presentation of occupational health and safety. The range of arguments ranges from "major" calculation examples to minor factors that have an indirect effect on profits. However, occupational safety should always be considered holistically. The arguments mentioned are certainly only a small part of it. After all, in addition to compliance with laws and financial statements, ethical reasons also matter: companies have a responsibility when it comes to the health and safety of employees

Applied correctly, the arguments help you present the value of occupational safety and build a good business case. All levels of the company, from management to the very last employee, should recognize the benefits of well-organized and systematically applied occupational health and safety. Constant monitoring and improvement with the participation of all employees, guarantees a committed implementation of all measures. This can be summarized under the formula heading already mentioned above: "Employee health and wellbeing matters in business"

Modern safety is worth every penny!

It takes long conversations and good arguments to convince leadership of the ROI. We have compiled  the 5 most important reasons why companies should set aside a budget for modern occupational health and safety.

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