Want to show your CEO that safety isn't just a moral obligation but an actual economic benefit? Try this two-step strategy:
- 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 sounds.
Step 1: Unveiling the Price Tag for Injuries
Most CEOs understand that workplace injuries cost money. But few realize just how much. The money for injury losses is generally hidden in various budgets and is thus hard to monitor. Laying bare the true costs of injuries will give your CEO pause and win you attention. The injury loss worksheet shows you how to present injury costs:
- 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.
[Editor's Note: There's a copy of the worksheet in Tools].
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 [in the Tools section] 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.
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!
[Editor's Note: See the Cost of Injury Worksheet in Tools for a copy of the worksheet and instructions how to use it.]
PUSHING YOUR CEO's BUTTONS
What arguments work best in persuading CEOs to invest in safety? Here are five arguments. Rank them in the order of how effective you think they would be:
- Keeping employees happy
- Maintaining positive community relations
- Cutting workers' compensation costs
- Avoiding OSHA fines
D. Avoiding OSHA fines (35%)
A. Keeping employees happy (30%)
C. Cutting workers' comp costs (12%)
B. Postive community relations (11%)
Source: Industrial Safety and Hygiene News, Reader Survey (2001)