Companies come in all shapes and sizes. But they're basically in business for the same reason: to make as much money as possible for their owners and shareholders. If you're a safety director, you must resign yourself to this fact; more importantly, you must recognize what it means to you and your safety program. To spell it out, it means that your ultimate effectiveness is based on your capacity to advance the goal of profitability. More precisely, to compete with other parts of the business for resources, you must be prepared to demonstrate that safety isn't just some kind of charitable donation for workers, but an investment that directly contributes to positive financial performance.

How do you make such a case? Answer: By showing that dollars invested in the safety program have a positive return on investment (ROI). This series will explain how to measure the ROI of a safety program. We'll start by looking at what ROI is and how to calculate it.

What Is ROI?

ROI is a financial measure that business people use to figure out if spending money on a project makes financial sense. In addition to making go/no go decisions, ROI is one of the most common methods for comparing one investment option to another, e.g., buying new machines or retrofitting old ones.

A positive ROI basically means that the benefits yielded by the investment are greater than the amount of the original investment. A negative ROI means just the opposite. Generally speaking, the higher the ROI, the more desirable the investment.

Although there are lots of different variations, the basic, or "simple" ROI equation is this:

ROI = Net Benefits x 100 %
Costs

The Elements of the ROI Equation

Let's take a closer look at the different parts of the ROI equation:

• Net Benefits: This is the difference between the benefits of the investment and the costs associated with the benefits. For example, if spending $100,000 on a new lockout system is expected to generate $150,000 per year in reduced claims, the net benefit would be $50,000 (that is, $150,000 - $100,000). You can calculate net benefits either before or after taxes and depreciation.

• Costs: The denominator in the ROI equation is the total costs needed to generate the benefits from the investment.

• Time Period: There's also a timing element in the ROI equation. Companies generally want to measure recovery of the investment over a unit of time. In some cases, benefits are shown during the first year of investment - or even within the same fiscal year. In other words, companies want to know if they can recover the costs of the investment in the first year (or fiscal year). Other companies use an ROI formula that spreads out the benefits on a weighted average over the lifetime of the investment.

Conclusion

Next week, we'll look at some of the variables that can complicate the application of ROI to proposal building and corporate decision making in particular with regard to the occupational health and safety program.

THIS DATE IN HISTORY

Charge of the Light Brigade

October 25, 1854

By Glenn Demby

The Crimean War, which lasted from 1853 to 1856, was a struggle between Britain and France on the one side and Russia on the other for control over parts of the Holy Land that had once belonged to the Ottoman Empire. But the war is best remembered for two things: Florence Nightingale and the Charge of the Light Brigade. The latter took place 152 years ago today.

The charge which was made by the Light Brigade of the British cavalry (consisting of the 4th and 13th Light Dragoons, 17th Lancers and the 8th and 11th Hussars) took place in what is today the sleepy vineyard town of Balaclava, east of the Crimean capital of Sevastopol. Lord Cardigan led 673 cavalry troops into a valley between the Fedyukhin Heights and Causeway Heights.

Tennyson dubbed it the “Valley of Death.” And it was. The Russians controlled both Heights and either side of the valley with 20 battalions and more than 50 cannons. The Brigade was slaughtered. Although they did make it to the end of the valley, the British were forced back with heavy losses—118 dead, 127 wounded and 362 horses lost.

The British public learned of the disaster three weeks later. Commanders were recalled and the bravery of the troops lauded. The Light Brigade’s ticket to immortality was punched seven years later when the young poet Alfred Lord Tennyson penned “The Charge of the Light Brigade,” which remains one of the world’s best known poems.

Sadly, the kind of reckless charge of cavalry into fixed fortified positions would provide a dress rehearsal for the tactics practiced in the next 70 years of warfare with disastrous results, most notably during the U.S. Civil War and World War I.

THE CHARGE OF THE LIGHT BRIGADE

Alfred Lord Tennyson

By Alfred Lord Tennyson

1.
Half a league, half a league,
Half a league onward,
All in the valley of Death
Rode the six hundred.
"Forward, the Light Brigade!
"Charge for the guns!" he said:
Into the valley of Death
Rode the six hundred.

2.
Forward, the Light Brigade!
Was there a man dismay'd?
Not tho' the soldier knew
Someone had blunder'd:
Their's not to make reply,
Their's not to reason why,
Their's but to do and die:
Into the valley of Death
Rode the six hundred.

3.
Cannon to right of them,
Cannon to left of them,
Cannon in front of them
Volley'd and thunder'd;
Storm'd at with shot and shell,
Boldly they rode and well,
Into the jaws of Death,
Into the mouth of Hell
Rode the six hundred.

4.
Flash'd all their sabres bare,
Flash'd as they turn'd in air,
Sabring the gunners there,
Charging an army, while
All the world wonder'd:
Plunged in the battery-smoke
Right thro' the line they broke;
Cossack and Russian
Reel'd from the sabre stroke
Shatter'd and sunder'd.
Then they rode back, but not
Not the six hundred.

5.
Cannon to right of them,
Cannon to left of them,
Cannon behind them
Volley'd and thunder'd;
Storm'd at with shot and shell,
While horse and hero fell,
They that had fought so well
Came thro' the jaws of Death
Back from the mouth of Hell,
All that was left of them,
Left of six hundred.

6.
When can their glory fade?
O the wild charge they made!
All the world wondered.
Honor the charge they made,
Honor the Light Brigade,
Noble six hundred.

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