In the current financial climate, many companies are looking for items to cut from the budget. A quality safety program really shouldn’t be one of them. Safety issues don’t disappear by ignoring them, and doing nothing can actually cost a company quite a bit in the long run.
That’s why we’ve got Deren Boyd, KPA’s SVP of New Markets here today to talk about all the costs of ignoring safety, including some you may not have considered.
Thanks for joining us, Deren. It’s great to have you here.
Yeah, I appreciate the opportunity.
Before we get to the costs, Deren, let’s talk about the why. Why do organizations ignore safety or put it on the back burner? Are there common causes you see?
There’s definitely some commonality here. I think within the organization itself, they all have their own personality, and that’s driven from the top. So I think safety is one of several factors that leadership drives and controls, and I think just right off the bat, what’s the personality of that leadership?
What’s a priority for them? What’s important? What’s their experience look like? So I think right off the bat, it’s the people. I think that provides a role in why some ignore it versus some make it a top priority. The costs associated with it, there are dollars that have to get pulled to apply for programs, to buy PPE, to do the things necessary to keep us safe, and to have a strong structured program.
I think some, certainly some ignore, I think there are also some that are more simple-minded, and they just don’t think it through properly, and the interruption of business processes overwhelms some folks, and that becomes the focal point of getting the job done, and ultimately other things fall off to the side like safety.
So I think interruption to business, the ‘it’ll slow us down’ mentality is certainly there. Again, not aware that they are ignoring it. Maybe they don’t have the experience or the history of understanding the risks associated with what they’re doing. I think that could be one. And then simply, I think some just have this, ‘it won’t happen to us’ attitude.
It’s ‘those problems are across the street’, ‘we’re gonna be fine’. So I think there are so many variables there. I think it really comes down to the people and the leadership, and all those become filter factors as they’re going through their decisions.
For sure. It’s always a little easier to ignore a risk if the possibility seems remote or in the future. Now that we’ve covered the why—some of the reasons companies might do nothing or ignore safety, let’s talk about what that actually looks like. When you look at a company, are there specific signs that indicate they may not be adequately investing in their safety program?
Several. What does nothing look like? If you were to be on vacation and you’re driving down the interstate, and your kids are needing to use the restroom, and you see to the left there’s an off-ramp that’s dimly lit, just kind of trash. It doesn’t look very kept up, maybe the windows are broken, and that’s a convenience store option.
And then across the street, you have well-lit, clean, new. You kind of know which off-ramp you’re gonna take, right? So I think if you step back and look at a program like that, what does their formal training program look like? What is their competency to do the tasks that they’re doing?
And if that doesn’t exist, then really they’ve created this, ‘we’ll figure it out’ attitude. Where we’re not going to really put our employees through the proper training so they know the job steps, they know the risks associated with those. I’ve mentioned the void of leadership. If there is no leader that’s a voice to the employees and to the workers on the front line, something will fill that void.
It’s gonna be another person, and who knows what that attitude looks like, but that’s gonna get filled somehow. So I think void of leadership is a ‘What does nothing look like?’ indicator for sure.
Reactive planning. I think if you’re not properly planning for your day, for your shift, what task is in front of you; we just open the door for this inability to mitigate or control hazards associated with what we’re doing. We’re not all on the same page.
Ignoring lessons learned, we all have history, right? Like we all come to the table with experiences and understanding, but if we’re not paying attention to what happened yesterday, how can we be better today? So if there’s no focus on that, no improvement strategy.
Unaware of worker acts and conditions, and that kind of goes along with lessons learned. But there’s, I would say a ‘lesson learned’ is something happened, like there was an unwanted event of some sort, and we gotta learn from that and be better to make sure that doesn’t happen again.
But there are acts and conditions that happen all the time that don’t produce some sort of incident, but it’s lucky it didn’t. So how are we paying attention to the way people respond, the way they act? What are they doing? How are they doing it? And correct those as we go. So if we’re unaware of our surroundings, that’s a problem.
I think a lot have just this shoulder-shrug attitude, a kind of ‘oh well, it is what it is’, which is one of my least favorite sayings ever. It is what it is. It’s really not like we’re going to control that. And no leadership is a leadership decision of the way we’re going to do it.
And then I think lack of communication or feedback. From a safety standpoint, if we’re trying to develop this culture of safety and proactive prevention of problems, if we encourage that, and employees to speak up and voice a concern, ask a question, and they get no feedback from that, there’s nothing more damaging to a safety culture than crickets, right? If nothing comes back, then I’m less likely to raise my hand or ask a question again, and then the sense is they just don’t care.
So I think that’s a lot of variables to what would be nothing. But it can be those plus probably several more.
Now let’s dive into some of the costs of failing to develop a strong safety program, starting with productivity. What productivity costs do you see in organizations that have taken a hands-off approach to safety?
Productivity costs. There’s a quote that I love that is “How you do anything is how you do everything.” And so the productivity cost, if we have this hands-off approach to safety, you’re setting yourself up for failure in so many areas, because if we’re gonna just let safety slide, then what’s to prevent our quality from sliding or the ability to finish a job, or we’re gonna shortcut and do things like, “hey, just board that up. They’ll never see what’s behind that wall” type of attitude.
Shortcuts are contagious, and if you’re gonna do it with safety, it’s gonna kind of string throughout the entire organization. But the safest crews, the safest shifts, whatever your terminology is, tend to be the most efficient because they do have their ducks in a row, and they don’t have the attitude of it’s gonna slow us down or take time, they actually are more productive, maybe even get the job done ahead of schedule.
They’re finishing the task, and they’re off to lunch early. Like I think that if you’ve got stuff set up, the productivity cost slides away. And then the converse of that is an inefficient organization, which the productivity costs of extended hours of paying employees to do a job that should have been done in half the amount of time, the misuse of our resources. So if it’s materials for a project, if it’s equipment being utilized, if it’s gas in a truck, all of those things. If we’re not doing those right, we’re gonna see some additional costs there as well.
I think the breakdown of communication, and lack of teamwork, I see costs stretching beyond the dollar sign, right? There’s just the efficiency in the way we’re doing it, how we’re doing it, the approach with our customers. Of course, there’s the dollar figure side, right? We want to be lean and mean where we can, but doing all of the right things.
I do think a hands-off approach, though, it really is from a productivity/cost perspective, it’s really just a matter of time until the issues are significant. We might skate for a little while. We may have some near-misses that were like, ‘Oh man, that was close’. But if we don’t change our behavior, it’s just a matter of time. There’s a great proverb that I love that’s “Walk with the wise and become wise, but a companion of fools will eventually suffer harm”.
And that’s saying if I’m surrounded by people doing the right thing, that rubs up on me. It becomes part of my habits and my take and my attitude towards whatever it is. The other side of that isn’t necessarily ‘hang out with fools and become a fool’. It’s if you hang out with fools; eventually, you’re gonna suffer harm.
Like the shrapnel of their decisions is gonna negatively affect me. And I think that’s so true with organizations and leadership. And so that’s my additional little nugget just from a productivity cost perspective, but dollars and certainly just the behaviors and attitude of the organization.
It’s a really important reminder not to overlook the very real, if intangible, psychological costs to your employees when safety is lacking.
Okay, now let’s talk about the regulatory risks a company could face for not taking a serious or strategic approach to managing safety.
Yeah, I think about parenting here a little bit. And if someone’s not getting the job done or their chores done, what are the ramifications of that? In some cases, it’s I’m gonna hold back their allowance. If you’re not doing your chores, you’re not gonna get paid this week. So I think hitting a company with that, so fines and citations, those have really become the consequence for failing just to meet the regulatory expectations or standards requirements.
This past March, OSHA policy gave area administrators and regional directors the ability to issue citations for each instance of a violation, which really expands the hit that a company can take. And then, on top of that, penalties increased ranging from the low end, $14,000 per citation, all the way up to $145,000 per citation.
So that is getting people’s attention. If it wasn’t before, in some cases, 5, 6, 7x of what it used to be. So certainly, a dollar figure is associated with not complying and meeting those expectations.
And what about the costs that are a bit harder to quantify? What are the potential reputational costs for a company with a poor safety record?
Yeah, in companies—construction, energy, manufacturing—that have a business-to-business type of organization or structure, you’re always auditioning for your next job. Like the current job that I’m in, I want to do this well, I want to be without incident because it gives us the opportunity to work again for the same customer next month on their next project.
And so having that mentality of always earning your next job, you’re always in audition mode and just making sure you’re doing things the right way. That’s maintaining customers, then getting new customers, there may be a request for a proposal that includes an entire section on our safety programs, our safety metrics, what our incident rates look like, all of those kinds of things.
And they may red light, or green light a potential vendor strictly on that section. You may not even make it to like the opportunity to provide your pricing if that is not falling into order. So I think keeping customers, getting new customers, and then you’ve got, from a reputation standpoint, it’s like how are you viewed in the community?
Obviously, we want to be viewed well, we want to be good stewards. We want to serve and be part of the community. But if you’re known as, “Hey, these guys drive like crazy through town. They’re unsafe when they’re on the job. Did you read the article in the paper yesterday about the guy that fell off the building?”
That is a ding against the company and the culture. And then hiring, right? Like we’re all in a mode of hiring good talent. And if a company has a poor reputation and the culture is bad, people get hurt. Who’s gonna want to go work for them? So your talent pool really falls on who’s willing to do the job and take that on.
So I think all of those things. We want to be known for good, and that means a lot of different things, but definitely, safety is an adjective on how they describe your organization. And a poor safety record can be the first domino to fall in how people view and perceive the organization.
Yeah. Really impacts business all around at that point.
Now, to get a bit wonky, let’s talk about TCOR. What does that stand for, and why should organizations be adding it to their vocabulary?
Yeah, so TCOR is an acronym that stands for Total Cost Of Risk, and it’s really an equation that captures the total cost of self-retained losses, risk management, administration expenses, and insurance premiums. It’s really often converted to a percentage of an operating value, which is typically up against revenue.
And that’s a lot. There’s a lot behind what I just said, but really the reason why organizations need to understand this comes down to benchmarking how we do compare to others in our industry. What do our peers look like? Because what does good really mean? At first, I think the first look is how are we doing amongst everybody else.
It’s kinda like when you look at an NBA team, like, what’s their record? Well, their record is 40 and 10, so where do they stand compared to everybody else? That’s an important measurement stick. So it allows you that comparable. But then, also like your internal setup, you want to look at how you compare against your peers, but you also want to look at how can we be better, regardless of what everybody else is doing.
And maybe we’re leading the pack, maybe our statistics are fantastic, and we’re in a really good spot from that standpoint, but that doesn’t mean we’ve made it right. We’ve got to continue to be better, and you can’t change what you don’t measure.
So just being dialed in to what is that total cost of risk. How are we doing that calculation? And then even what are all the other things that become important that we’re gonna start to measure so we can get that data to understand and build a roadmap of where do we go next and how do we take one and get it to sub one, whatever the metric is, right?
We want to continually work towards a zero-incident culture, and there’s a lot that goes into that, but I think it’s good for people to make sure they’re understanding not only the total cost of risk but all of those little factors that kind of come into play for continuous improvement.
Okay. To close things out, let’s look at this from a different angle. We’ve talked about the risks and costs when you ignore safety. What about the positive ROI for having a robust safety program? What are the benefits for a company actively developing a safe working environment?
I think the first return on investment from a safety standpoint is the impact on people. And the livelihoods of those people, and how do we impact them when they’ve clocked out for the day and their home safely? At least in my little mind, for the longest time, it was like this mall cop mentality of, they’re gonna get me if I step outta line in the wrong way.
And it’s really, that’s not it. It’s a mental shift in how we approach what we do and how we mitigate, eliminate, or accept hazards in a way that we can keep people from getting hurt, and keep vehicles or other pieces of equipment from being damaged. So just the impact on people, I think, is first and foremost in the livelihoods of those people, ensuring people are coming back to work the next day.
They’re leaving incident free. The only thing that has been impacted is their wallet. It’s a little bigger from the job that they’ve performed for the day, and then that attitude translates to home. Once I got into this safety world a little bit I was like, the way I was putting up my Christmas lights, I was like, wow, that’s not a good way to do it.
Because we segment life a lot into personal and work and vacation time and all that. Well, our risk to what can injure us, or what creates a fatality, right? It can get pretty extreme, but it doesn’t stop. And so I think the rate of return on how we impact people and then within our own organizations, it’s our culture.
Like that rate of return on just, there’s a lot that lies beneath the water, but what’s that part that we see above? So you gotta make sure that the culture is super strong because what we see above is a result of what’s below. Obviously, reduction of cost, to me, it’s critically important to a business’s health, but it’s also, in my mind, it’s down the list a little bit because there are things that are more important than that.
But I would say those would be the things that when we’re really focused on safety, what I am a firm believer in, even OSHA suggests, for every dollar spent in safety, you’re gonna see a $4 to $6 return back because of that. If we’re reducing insurance premiums, if medical costs are down or how do we manage those incidents or lost productivity time? All of those things, there’s a return back from that dollar. I’m a firm believer that’s true. So I think just being able to keep money in the pocket of the business ultimately helps everybody. So I think those would all be factors for me.
Deren, thanks so much for joining us today. I really appreciate your time.
You got it. Appreciate the time.