Here's a two-step strategy you can use to demonstrate the economic benefit of safety to your company's executives:

• First, document the real monetary losses your company incurs with each workers' compensation case;
• Next, show how those losses affect your profitability.

This isn't as hard as it may sound.

Step 1: Show the Real Costs of Injuries

Most CEOs understand that workplace injuries cost money. But many fail to realize just how much. The money for compensation is generally hidden in various budgets and is thus hard to monitor. Laying bare the true costs of injuries thus gives you a better chance of getting through to management. The worksheet below shows you how to do this:

• Calculate total direct costs;
• Calculate indirect costs by multiplying total direct cost by a multiplier; and
• Add direct and indirect costs to get your total costs.

Step 2: Show Impact on Profitability

Next, show how total costs of injury affect profitability by calculating how much money in sales your company must generate to make up for these losses. This is a real eye-opener. Again, you can use the worksheet on the next page to calculate the impact of an injury or illness on your company's profitability:

• Calculate your company's profit margin by dividing its total profits by total sales; and
• Divide the total cost of an injury or illness by your company's profit margin.

Conclusion

Under this formula a modest compensation claim of $4,000 would require a company with a profit margin of 5 percent to sell $208,000 worth of product. A $100,000 claim would take $4.2 million in sales to make up. There's a model worksheet in the Tools Section of SafetyXChange that you can use to apply this formula.

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