The Business of Small The Business of Small Business: Part IIIBusiness: Part III

Making The Case for Safety and HealthMaking The Case for Safety and Health

Directorate of Cooperative and State ProgramsDirectorate of Cooperative and State ProgramsOffice of Small Business AssistanceOffice of Small Business Assistance

April 28April 28thth, 2006, 2006

THE BUSINESS CASETHE BUSINESS CASE FOR SAFETY FOR SAFETY

Adding Value and Competitive AdvantageAdding Value and Competitive Advantage

A Joint Initiative of OSHA, Abbott, and A Joint Initiative of OSHA, Abbott, and The Center for Business and Public Policy The Center for Business and Public Policy

at Georgetown Universityat Georgetown University December 2005December 2005

GOAL OF ALLIANCE

• Alliance intended to address the shortage of:– Real world examples and – Practical information

for business executives demonstrating how “excellence in safety” adds value and provides competitive advantage…

for safety and health trainees demonstrating how safety and health programs must be integrated into business

HOW CAN THE MATERIAL BE USED?

• Presentation materials can be used:– Individually

• PowerPoint• Mini-case studies

– Tailored to the audience• By industry sector • PowerPoint slides can be used with all or selected

case study slides based on audience• Case studies can be used as teaching tools by

Business School Lecturers

WHY BE CONCERNED WITH SAFETY?

– Safety is good business– Right thing to do…

– Employee morale / protection of most valuable resource

– Control costs (direct and indirect)

– Safety and health excellence correlates with business excellence (quality, efficiency, profitability)

EXCELLENCE IN SAFETY & HEALTH Adds Business Value and Competitive Advantage …

Safety and Health

Ability to compete

Access to Global Markets

Cost and Risk Reduction

Enhanced Reputation

Employee morale

Improved quality

Improved efficiency

Improved productivity

INTEGRATED INTO THE BUSINESS…

Business Value

Linking steps

• Safety is a core value of the company’s culture

• A systems approach is taken toward safety

• Safety is integrated throughout the company

• Employees participate at all levels

• Corporate Image• Ability to Compete• Access to Global

Markets• Employee Morale• Efficiency and

Productivity• Product and

Service Quality• Cost and Risk

Reduction

• Senior management commitment and involvement

• Employee active participation

• Shared goals and accountability

• Defined roles and responsibilities

• Common language• Effective communication• Right resources• Balanced performance

measures• Knowledge sharing and

information transfer

Safety and Health Principles

BARRIERS TO INTEGRATION

Too often:

– Management has a reactive rather than proactive focus

– Lack of understanding (vocabulary)

– Risks & hazards are poorly communicated

– Safety is considered a cost … not an investment

– Cost/benefit analysis is rarely applied to justify the safety case

– Retrofitting is never as cost-effective as designing it right initially

SAFETY EXCELLENCE MODEL requires…

Management Management CommitmentCommitment

SystemsSystems

Safety and HealthSafety and HealthSite LeadershipSite Leadership

Employee Employee InvolvementInvolvement

VALUE CHAIN IMPACTSBusiness Process

ProcurementProcurement DesignDesign ManufacturingManufacturing ServiceService End of LifeEnd of Life

Leverage supplier

relationships

Safe and ergonomic processes

High quality and

productivity

Customer good-will

Future assets

SYSTEMSPerformance Metrics

Attitudes (set up conditions,

behavior)Program Elements

Physical conditions

Behavior (action)

- Perception surveys- Perception surveys

- Training- Accountability- Communications- Planning & Evaluation

- Roles & Procedures

- Incident Investigations

- Training- Accountability- Communications- Planning & Evaluation

- Roles & Procedures

- Incident Investigations

-Inspections-Audits-Risk assessments

-Prevention & control

-Inspections-Audits-Risk assessments

-Prevention & control

-Observations-Feedback loops

-Observations-Feedback loops

Incident or Near

Miss

- OSHA Recordables

- Lost Workdays

- Restricted Workdays

- OSHA Recordables

- Lost Workdays

- Restricted Workdays

Leading metrics

Trailing metrics

ORC Worldwide Metrics TaskforceORC Worldwide Metrics Taskforce

WHAT DO ACCIDENTS COST YOU?WHAT DO ACCIDENTS COST YOU?

Direct - Insured Costs

“Just the tip of the iceberg”Unseen costs can sink the

ship!

Indirect - Uninsured, hidden Costs - Out of pocketExamples: 1. Time lost from work by injured employee. 2. Lost time by fellow employees. 3. Loss of efficiency due to break-up of crew. 4. Lost time by supervisor. 5. Training costs for new/replacement workers. 6. Damage to tools and equipment. 7. Time damaged equipment is out of service. 8. Loss of production for remainder of the day. 9. Damage from accident: fire, water, chemical, explosives, etc. 10. Failure to fill orders/meet deadlines.11. Overhead costs while work was disrupted. 12. Other miscellaneous costs (over 100 other items may 13. Others? ________________________________

Unknown Costs -

1. Human Tragedy2. Morale3. Reputation

Accident Costs

 1% Profit

 2% Profit

 3% Profit

$ 1,000 $ 100,000 $ 50,000 $ 33,000

$ 5,000 500,000 250,000 167,000

$ 10,000 1,000,000 500,000 333,000

$ 25,000 2,500,000 1,250,000 833,000

$100,000 10,000,000 5,000,000 3,333,000

SALES TO COVER COSTS

It is necessary to sell an additional $250,000 in products or services to pay the cost of $5,000 annual losses

IMPLEMENTING SAFETY EXCELLENCE

– Assume all incidents are preventable

– Assume all exposures/risks can be controlled

– Hold management responsible and accountable for preventing injuries

– Involve employees

– Make working safely a condition of employment

– Train employees to work safely

– Promote off-the-job safety

– Audit safetyAdapted from “Managing Safety: Techniques that Work for the Safety Pro”, Dupont

SAFETY’S ROLE IN BUSINESS FUNCTIONS

FINANCE / FINANCE / ACCOUNTINGACCOUNTING

OPERATIONSOPERATIONS

SAFETY SAFETY

and and HEALTHHEALTH

STRATEGYSTRATEGY

MANAGEMENT / MANAGEMENT / ORGANIZATIONAL ORGANIZATIONAL

BEHAVIORBEHAVIOR

MARKETING / MARKETING / RISK RISK

COMMUNICATIONCOMMUNICATION

The Center for Business and Public Policy at Georgetown University

“The guiding principle of business economics is not the maximization of

profits, but the avoidance of loss”

Peter Drucker

Author, Management Consultant

SUCCESS STORIES VS. BUSINESS CASES

• Success Story -Presents details of a well-handled situation.

Readers hopefully see similarities to future problems.

• Case Study -Poses a decision-focused challenge to

facilitate analysis and discussion. Learning from thinking about issues from the business manager’s

perspective. -Provides teaching notes with discussion questions and

learning objectives

SUCCESS STORIES/CASE STUDIES

– Review the impact of safety programs on the “bottom line” in several industries:– Construction– Foundry– Healthcare (Nursing Homes)– Auto Parts Manufacturing– Insurance– Pharmaceutical

WISCONSIN ALUMINUM FOUNDRY

• Success Story

WISCONSIN ALUMINUM FOUNDRYMSD Cost Analysis1-1-99 thru 10-1-03

Body Part Number Avg. Cost Cost Range

Back 128 $2,285 $81 - $48,851

Arm/Wrist 39 $4,941 $79 - $38,638

Shoulder 29 $5,017 $59 - $52,532

PROBLEM: Employees were required to use a jack hammer to remove and break up air set core from castings. Stressors included vibration & bending over for 4-8 hrs/day.

SOLUTION: A core lump crusher has been purchased to eliminate the use of the jack hammer.

COST: $51,000

COST RECOVERY TIME: 8-12 months

BENEFITS: Eliminated strain from repetition, vibration and poor posture, increased productivity, recovery rate and reduced manpower.

BEFORE AFTER

PROBLEM: Employees in the Finishing Department were sanding 500-1000 castings with many hand movements. The employee must support the weight of the casting (2-10#) while rotating the casting.

SOLUTION: One robotic sander installed.

COST: $176,000

COST RECOVERY TIME: 6-12 months

BENEFITS: Eliminated strain from repetition and force, increased productivity and reduced manpower.

BEFORE AFTER

WISCONSIN ALUMINUM FOUNDRYWorkers Compensation Loss Summary

2000 2001 2002 20030

50

100

150

200

0

100,000

200,000

300,000

400,000

500,000

166

8894

23

388,970

110,01291,059

13,814

NU

MB

ER

OF

CL

AIM

SC

OS

T O

F C

LA

IMS

# CLAIMS $ CLAIMS

(4 months)

STADIUM CONSTRUCTION CASE STUDIES

A number of stadiums were built in the past few years in Region 5.

MILLER PARK STADIUM

July 1999 crane collapse caused the deaths of 3 construction workers.

Hours before collapse of “Big Blue” After collapse of “Big Blue”

July 14, 1999

• Three iron-workers, in a suspended personnel platform monitoring the passage of a roof section, died after falling approximately 300 feet to the ground when the personnel platform was struck by the uncontrolled load of a heavy-lift crane. The victims were working in windy conditions during the construction of a baseball stadium.

The destruction was extensive

The Sad Results

• Delayed the opening for One Year • 100 Million in repairs • Three construction workers killed, several

others injured• On Dec. 1, 2000, a Milwaukee County jury

awarded $94 million in punitive damages and $5.25 million in compensatory damages to the families of three ironworkers killed in the accident. Although the families have been paid $27 million for their loss, the issue of the large punitive damage award is under appeal.

PAUL BROWN STADIUM

– OSHA Partnership– Labor/Management Partnership

Construction took 2-1/2 years and cost $453 million.

PAUL BROWN STADIUM RESULTS

– Significant decrease in expected injuries:– 0.95 lost time rate v. 4.0 for construction

– Significant program savings– $4.6 million less in workers comp and liability

cost than would be expected.

– No fatalities!– Only one fall injury

The Great American Ballpark;WHAT TO DO?

• County Administrator

• Miller Park vs. Paul Brown

• Bad luck vs. good luck?

• OSHA Partnership?

• Safety and Health Program?

• Owner Insurance vs. Contractors’ policies?

• Indicators/Metrics?

GREAT AMERICAN BALLPARK

– OSHA Partnership

•Estimated savings from Owner Control Insurance Program was over $3 million (1999-2003).

•1.2 million hours; 0.8 lost time rate

OSHA Abbott Alliance Web PageOSHA Abbott Alliance Web Page

Safety and Health in Small Safety and Health in Small Businesses: Some Businesses: Some

ChallengesChallenges

OSHAOSHAApril 28, 2006April 28, 2006

Lamar ReinschLamar ReinschProfessor of ManagementProfessor of Management

McDonough School of BusinessMcDonough School of Business

Georgetown UniversityGeorgetown UniversityReinschL@georgetown.eduReinschL@georgetown.edu

Increasingly, Organizations Increasingly, Organizations Recognize Workplace Safety Recognize Workplace Safety

as a Good Investmentas a Good Investment

New Factory

IncreasedSales

MoreWidgets

AvailableResources

Return onInvestment

Capital Budgeting Process

SafetyCauses

SafetyEffects

WorkplaceSafety

AvailableResources

Return onInvestment

Capital Budgeting: Investing in Safety

Safety Performance

Pro

du

ctiv

ity/ F

ina

nc

ial P

erfo

rma

nc

e

CausesWorkplace

Safety

Leadership FewerInjuries

LowerRisk

SafetyConsciousness

SafetyClimate

Adapted from Barling, Loughlin, & Kelloway (2002), J. of App. Psy.

EffectsWorkplace

Safety

Injury

MedicalTreatment

Temp.Worker

Costs

LowerProductivity

Inexperience

Risk & Injury

PersonalInsecurity

Lower Morale

Costs

LowerProductivity

Turnover

Distraction

Risk &Injury

Lower Morale

NegativeMedia

AttentionHigher

Turnover

+Costs and -Revenue

InvestigationsAnd Lawsuits

SaferWorkplace

Higher Productivity

HigherROI

PositivePR

IncreasedCompany

Value

ReducedCosts

So, Why Isn’t the Value of So, Why Isn’t the Value of Safety and Health Obvious to Safety and Health Obvious to

Small Businesses?Small Businesses?

““Small Businesses” Tend:Small Businesses” Tend:

To Employ Fewer PeopleTo Employ Fewer PeopleTo Be Younger (newer) To Be Younger (newer) OrganizationsOrganizationsTo Be Owner ManagedTo Be Owner ManagedTo Have Less Internal S&H ExpertiseTo Have Less Internal S&H Expertise

Challenge #1: Reasoning Challenge #1: Reasoning from a Small Samplefrom a Small Sample

But, the Risk per Employee is But, the Risk per Employee is Greater in Smaller CompaniesGreater in Smaller Companies

Challenge #2: A Short (and Challenge #2: A Short (and so far Spotless) Historyso far Spotless) History

But, Past Experience Does But, Past Experience Does Not Guarantee Future ResultsNot Guarantee Future Results

Challenge #3: Challenge #3: Understanding Near Understanding Near

MissesMisses

A Near Miss is a Warning – A Near Miss is a Warning – Not a Reassurance Not a Reassurance (Profs. Robin (Profs. Robin Dillon-Merrill & Cathy Tinsley)Dillon-Merrill & Cathy Tinsley)

Challenge #4: Unpleasant Challenge #4: Unpleasant Thoughts are UnpleasantThoughts are Unpleasant

But, failing “to think the But, failing “to think the unthinkable” precludes unthinkable” precludes preparation preparation (Prof. Ian Mitroff)(Prof. Ian Mitroff)

Challenge #5: Challenge #5: Understanding the Understanding the

ConsequencesConsequences

A Serious Accident Can End a A Serious Accident Can End a Small BusinessSmall Business

Challenge #6: “The Challenge #6: “The ‘Experts’ Are Overly ‘Experts’ Are Overly

Cautious”Cautious”

But, the experts would prefer But, the experts would prefer to help businesses to help businesses preventprevent problems problems

Challenge -#7: Hoping Challenge -#7: Hoping for the Bestfor the Best

But, “Hope is Not A Strategy” But, “Hope is Not A Strategy” (Prof. Paul Almeida).(Prof. Paul Almeida).

Management Commitment

Line Owner-ship of Safety

Safety Training & Activities

Comprehen-sive Safety Systems

Safety Specialists

Safe Equipment & Environment

Safety Committed Workforce

Outstanding Safety Performance

Main

Drivers

Essential

Cornerstone

Workplace

OutcomesResults

Stewart: Model of Safety Management

Safety & Health Add Value bySafety & Health Add Value by

Reducing Health Care CostsReducing Health Care Costs

Improving ProductivityImproving Productivity

Increasing EfficiencyIncreasing Efficiency

Improving Product/Service QualityImproving Product/Service Quality

Enhancing MoraleEnhancing Morale

Strengthening Company ImageStrengthening Company Image

Aiding CompetitivenessAiding Competitiveness

Safety and HealthSafety and Health

The Right Thing to DoThe Right Thing to Do

A Good InvestmentA Good Investment

Winchester Plant

Visitor Welcome

and

Safety Guide

Company Profile• Locations: Winchester, VA (Headquarters & Production ) - 1996

Fernley, NV - 1999

Olive Branch, MS - 2005• Former division of Mobil Corporation• Trex Company, Inc. is the manufacturer of Trex® decking

and railing, the leading brand of alternative decking lumber in North America.

1) Process 300,000,000 lbs. of used polyethylene each yeara) 50% (apx.) of recycled grocery bags available on the market

2) Process 300,000,000 lbs. of used hardwood/sawdust each year

IMAGINE THE POSSIBILITIES...

• Create Your Space® • Decks & More Decks • Docks, Pools & Marinas

• Patios & Porches • Railings • Fencing • Landscapes • Commercial Showcase • Site Amenities

Production Flow Chart In-Coming Plastic

Weigh Unit

Heating Unit

Mixing Unit

Extruder

Water Bath

In- feed Conveyor Reclaim

Quality Hold Area

Finished Goods Inventory

Cooling Conveyor & Finished Goods Inspection

Traveling Saw

In-Coming Wood

Wood Storage

Wood Hammermill

Magnet

Magnet Magnet

Rock Box

Plastic Granulators

Magnet

Fluff Storage

Contaminant Removal

OR Embossing

In-Coming Wood In-Coming Plastic

Participation Improved OurBottom Line By…

• Reducing work-related accidents/illnesses1) Effective use of trend analysis to target & reduce

employee injuries/illness

2) Development of action plans to focus on critical root causes of accidents

3) Alignment of values/goals with co-employer values/goals (i.e., injury free workplace)

H e a d :

N e c k : 1

C h e s t : 1

B a c k :

W h o l e B o d y :

F a c e :

A r m / S h o u l d e r :

H a n d /

W r i s t :

F i n g e r s :

K n e e :

F o o t :

“B o b b y T R e x ” R e p o r t e d I n j u r i e s t o m y b o d y

S a f e t y T r i a n g le 2 0 0 5

N e a r M is s : P r o p e r t y D a m a g e : F i r e : E n v ir o n m e n t a l : O t h e r :

F ir s t A id

R e c o r d a b le

F a t a lit y

P e l v i s / G r o i n :

Safety Triangle 2006

Participation Improved OurBottom Line By…

• Decreasing Workers’ Compensation Costs1) Provide immediate onsite medical attention

2) Offer a “Modified Duty” program

2003-2004

• Payroll = $18,000,000

• Experience Modifier = 1.17

• Premium = $360,000

2004-2005

• Payroll = $25,000,000

• Experience Modifier = 0.79

• Premium = $360,000

Participation Improved OurBottom Line By…TREX WORKERS' COMPENSATION RATES

1.17 1.15

1.77

0.790.77

0

1

2

3

4

5

6

7

2005 - 2006 2004 - 2005 2003 – 2004 2002 - 2003 2002 - 2001

VA Production Rate

NV Production Rate

MS Production Rate

Experience Modifier

Participation Improved OurBottom Line By…

• Limiting equipment damage & production losses

1) Onsite emergency response (i.e., Industrial FFI/FFII)

Participation Improved OurBottom Line By…

• Ensuring compliance to the latest legislation

OSHA Issues Final Standard on Hexavalent

Chrome

Participation Improved OurBottom Line By…

• Promoting “Continuous Improvement”1) Implementation of an EHS auditing/program

evaluation process involving both internal & external resources (i.e., VOSH, SHARP/VPP worksite representatives, intra-company EHS representatives, etc.)

2) Benchmarking and sharing of “best practices” among other SHARP/VPP worksites

3) Employee EHS Perception Surveys

Participation Improved OurBottom Line By…

• Enhancing public recognition within the composite decking & plastic industries and community

1) Improve company image by demonstrating a commitment to manage & minimize risks to employees, contractors and visitors

2) Share “best practices” with other industries (i.e., NSVSN)

Participation Improved OurBottom Line By…

• Strengthening commitment to safety & furthering awareness among all employees

1) Improve performance through standardization of & adherence to internal EHS policies and procedures

2) Establishment of the T-SHERT Committee to ensure safety & health workplace concerns are listened to and acted upon

3) Development & implementation of a formal EHS training matrix

Participation Improved OurBottom Line By…

H office H plant (HOLIDAYS) A & C B & D

Sun Mon Tue Wed Thu Fri Sat 1

2 3 4Activities Committee Meeting B&D Crew 7-8 am

5 6Activities Committee Meeting A&C Crew 7-8 am

7 8

9 10 1 hour Training A&C Crew 6:00 am/pm

11 B&D T-SHERT

12 1 hour Training B&D Crew 6:00 am/pm

13 14 H 15

16 17 18 A&C T-SHERT Roundtable B Crew 9-10 am Building #1 Training Room

19 20 21 22

23 24

25 26 Roundtable D Crew 9-10 pm Building #1 Training Room

27 Love em’ or Lose em’ class 1-3pm Building #3 Communication Room

28 29

30

2006

April

Participation Improved OurBottom Line By…

• Improving employee communication1) Implementation of a variety of communication

vehicles (i.e., roundtable discussions, focused training sessions, newsletters, employee perception surveys, marquis signs, etc.)

Participation Improved OurBottom Line By…

• Leveraging government resources1) Flow of information from the private sector to

VOSH on successful methods of addressing workplace safety and health

2) Industrial Hygiene services provided by VOSH