This presentation was delivered at the 2008 National Safety Council's National Conference and Expo in Anaheim California, by Phil La Duke (Director, Performance Improvement--O/E) Daryl James (retired--Chrysler) and George Drexel (Local 3520 President---UAW)
4. Real Cost of Worker InjuriesReal Cost of Worker Injuries
• Worker’s Compensation
• Insurance Premiums
• Fines
• Loss of Productivity
• Loss of Inventory
• Wages of first responders
• Paperwork and administrative
costs
Hidden Costs
Direct Costs
• Drop in Employee Morale
• Absenteeism
• Loss of Customer Confidence
• Legal Fees
• Public Relations Fallout
• Disruption of Productivity
• Work Stoppages
• Turnover
• Lower Quality
• Property Damage
• Scrap
5. Calculating the Cost of InjuriesCalculating the Cost of Injuries
• Direct Costs Can Be Difficult to Quantify
• Indirect Costs Are Impossible
6. The Case for Safety As An ElementThe Case for Safety As An Element
in Competitive Advantagein Competitive Advantage
• Case Study 1: Chicken Processing
• Case Study 2: Tire Manufacturing
• Case Study 3: Heavy Truck Manufacturing
7. How We Figured…How We Figured…
• Bureau of Labor Statistics Survey of Occupational
Injuries and Illnesses, 1995
• Manufacturer’s News North Carolina
Manufacturer’s Directory, 2007
• Sundry industry websites
• http://finance.yahoo.com/search
• www.census.gov
• http://www.osha.gov/SLTC/etools/safetyhealth/mod1_
• www.safety-impact.com
8. Assumptions and DisclaimersAssumptions and Disclaimers
For the purposes of these cases :
• We assumed the companies had a safety record that was roughly the
average for their SIC code as calculated by the U.S. Department of
Labor and the companies worked 2,080 hours per employee
• the sales volumes were roughly the mid-point of the range reported to
Manufacturer’s directory
• No companies suffered any fatalities during the time period (unless you
count chickens which were getting killed right and left)
• Where gaps in the data existed the authors made educated guesses as
to the most likely data, endeavoring to provide the most accurate picture
of the industries involved.
• The costs of injuries were computed using the etool for calculating
injuries available from their website
9. Industry Overview:Industry Overview:
Chicken ProcessingChicken Processing
Industry SIC Code # Employed
Annual
Revenue
Average
IR
Average
DART
Average
Profit
Margin
Poultry Processing 2015 2,365,000 $25 B 7.4 4.6 2.0%
11. Example 1: Poultry ProcessingExample 1: Poultry Processing
Company A
# of Employees: 1,200
SIC Code: 2015
IR: 7.4
DART: 4.6
Injuries: 131
DART Injuries: 81
Annual Sales: $380,000,000
Price Per Unit: $.16 lb
12. Example 1: Poultry ProcessingExample 1: Poultry Processing
Company B
# of Employees: 1,000
SIC Code: 2015
IR: 6.9
DART: 5.3
Injuries: 72
DART Injuries: 55
Annual Sales: $40 M
Price Per Unit: $.16 lb
13. Competitive AnalysisCompetitive Analysis
Company A Company B
Annual Profits $40,000,000 $380,000,000
Profit Margin .13% 3.08%
Profit $52,000 $11,704,000
Injury Cost $1,883,000 $3,185,000
Injury Costs as a % of Profit 27.2% 6,071.2%
Additional Production 15,177,884,612 lbs 778,462 lbs
Additional Revenue $2,426,461,538 $103,409,000
Additional Market Share 31.83% >1%
14. Competitive AnalysisCompetitive Analysis
Required Increase in RevenueRequired Increase in Revenue
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
$
Company A
900,000
Company B
1,000,000
1,100,000
1,200,000
1,300,000
1,400,000
$2.5B
17. Tire Industry OverviewTire Industry Overview
Industry SIC Code # Employed
Annual
Revenue
Average
IR
Average
LWDI
Average
Profit
Margin
Tire Manufacturing 3011 64,000 $12 B 6.3 3.9 2.0%
19. Example 2: Tire ManufacturerExample 2: Tire Manufacturer
Company A
# of Employees: 2,800
SIC Code: 3211
IR: 7.0
DART: 4.5
Injuries: 134
DART Injuries: 109
Annual Sales: $380 M
Price Per Unit: $81
20. Example 2: Tire ManufacturerExample 2: Tire Manufacturer
Company B
# of Employees: 2,200
SIC Code: 3211
IR: 7.0
DART: 4.6
Injuries: 35
DART Injuries: 106
Annual Sales: $350 M
Price Per Unit: $98
21. Competitive AnalysisCompetitive Analysis
Company A Company B
Annual Profits $380,000,000 $350,000,000
Profit Margin 4.62% 5%
Profit $17,556,000 $17,500,000
Injury Cost $3,990,000 $5,220,000
Injury Costs as a % of Profit 22.7% 29.8%
Additional Production 1,066,218 109,936,842
Additional Revenue $86,363,636 $104,440,000
Additional Market Share .72% .87%
22. Competitive Analysis:Competitive Analysis:
Required Increase in RevenueRequired Increase in Revenue
0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
80,000,000
$
Company A
90,000,000
Company B
100,000,000
110,000,000
120,000,000
130,000,000
140,000,000
$104M
$86.3 M
25. Industry OverviewIndustry Overview
Industry SIC Code # Employed
Annual
Revenue
Average
IR
Average
DART
Average
Profit
Margin
Heavy Truck
Manufacturing
3713 669,000 $21 B 11.1 5.0 3.3%
27. Example 3: Heavy TruckExample 3: Heavy Truck
ManufacturingManufacturing
Company A
# of Employees: 4,500
SIC Code: 3713
IR: 13.1
DART: 4.4
Injuries: 613
DART Injuries: 346
Annual Sales: $380 M
Price Per Unit: $98,500
28. Example 3: Heavy TruckExample 3: Heavy Truck
ManufacturerManufacturer
Company B
# of Employees: 4,800
SIC Code: 3011
IR: 7.0
DART: 4.6
Injuries: 654
DART Injuries: 370
Annual Sales: $450 M
Price Per Unit:$118,000
29. Competitive AnalysisCompetitive Analysis
Company A Company B
Annual Profits $380,000,000 $750,000,000
Profit Margin 3.5% 2.5%
Profit $13,356,000 $18,750,000
Injury Cost $14,000,000 $17,500,000
Injury Costs as a % of Profit 105.3% 79.7%
Additional Production 4,061 4,779
Additional Revenue $400,000,000 $597,520,000
Additional Market Share .55% 2.85%
30. Competitive Analysis:Competitive Analysis:
Required Increase in RevenueRequired Increase in Revenue
0
100,000,000
200,000,000
300,000,000
400,000,000
500,000,000
600,0000,000
700,000,000
800,000,000
$
Company A Company B
$597 M
$400 M
33. Secrets to Improving Work PlaceSecrets to Improving Work Place
SafetySafety
• Treat All Injuries As Predictable and
Preventable
• Understand that Compliance is not enough
• Be Proactive
• Instill Operations Ownership
• Reinforce that Safety is Everyone’s Job
• Treat Safety As a Strategic Business
Element
34. All Injuries Are Predictable andAll Injuries Are Predictable and
PreventablePreventable
Injuries are system failures.
FMEA and Root Cause Analysis can be used
to predict system failures.
Job Safety Analysis helps to determine likely
failure modes.
No-blame incident investigation.
Standard Work is key to preventing injuries.
35. Compliance Is Not EnoughCompliance Is Not Enough
Industry average is a dangerous and
misleading metric.
There is no cause-and-effect relationship
between compliance and lower injury rates.
Compliance-driven safety is not good
business.
Compliance-driven approaches tend to be
reactive.
Prevention-driven approaches seek to reduce
risk irrespective of regulation.
36. Be ProactiveBe Proactive
• Balanced Scorecard Approach
• Monthly Strategy Sessions
• Leading Indicators
• Analyze and Understand Industry Trends
and Take Appropriate Action
37. Safety Is Owned by OperationsSafety Is Owned by Operations
• Goal Alignment
• Leadership-driven
• First-line Accountability for Safety
• Forced Accountability
• Safety Personnel as Coaches
and Consultants
38. Safety Is Everyone’s JobSafety Is Everyone’s Job
• Defined in each worker’s
job description.
• Identified as a criteria for successful job
performance during annual
reviews/compensation.
• Safety is hardwired into Operations.
39. Safety Is a Strategic BusinessSafety Is a Strategic Business
ElementElement
Injuries are inefficient and cost money
and productivity.
Understanding the true cost of injuries.
• Obvious costs
• Hidden costs
Policies and processes are reviewed
and changed to reflect changes in the
business environment.
40. Push BackPush Back
• “We’re already doing this.”
• “We can’t afford it right now.”
• “We’re already ahead of industry
average—that’s good enough.”
• “Safety Culture Change?---Isn’t that
why I hired you?”
41. ConclusionConclusion
Companies spend significant sums of
money hurting workers
Preventing Injuries has the same effect as
boosting revenue
By seeing safety as a business element
companies can have a competitive
advantage
Questions?
Each speaker introduces himself and provides:
Name,
Position,
Experience
DARYL JAMES:
Additional Revenue. Most of us here don’t have a lot of power to add revenue to the company, although some of us might. Do we have any consultants in the audience? How about other service for hire providers? Unless your company sells safety services, and you are in a sales role, you don’t have a lot of control over your organization’s revenue stream.
Increased Efficiency. We all have some influence over our organization’s operating efficiency. To increase efficiency we can either boost productivity (do more with less) or by reducing our operating costs.
There are two types of costs: direct costs and indirect costs
Direct Costs. Direct costs are the kinds of things that we have to pay for as an immediate consequence of an injury. These kinds of costs include Workers’ Compensation payments, Insurance Premiums, Fines and legal fees, and loss of productivity; in other words, the kind of things that we know we’re going to see anytime someone gets injured.
Indirect Costs. Indirect costs aren’t as obvious. These are the kind of things that we know in our gut are related to worker injuries, but are difficult or impossible to prove. Indirect costs include things like poor morale or decreased reputation in our community.
Direct Costs can be really tough to measure and define in ways that make sense to our customers in Operations, and Indirect costs can be impossible to prove definitively. For example, while the death of a worker might cost the company millions as they fight the negative public relations fall out, but you would be hard pressed to find someone who is able to accurately track the exact amount that was lost because of the injury.
Isn’t the claim that a safer organization is more competitive than it’s less safe rivals a bit of a stretch? Well we’ll let you be the judge of that yourself. We’ve created three side-by-side comparisons of three industries in the state of North Carolina. The figures you will see are all available from public documents and none of these figures were provided by the companies themselves. We’ve concealed the names to abet the guilty.
It took a mess of reverse engineering to figure out the costs we’re about to share with you. If you want to try to duplicate our little experiment, here is a copy of the sources we used. All these sources can be found at the O/E website for SafetyIMPACT! (www.safety-impact.com)
What I would like you to do now is go back to your organization and take a look at your info.