Or do high profits create the opportunity for a safe workplace?
The success of Paul O'Neill as CEO of Alcoa Corporation has resurfaced in the book, The Power of Habit: Why We Do What We Do in Life and Business, by Charles Duhiggs.
Prior to becoming US Treasury Secretary in the Bush Administration, O'Neill took on the task of turning a “tired” and “floundering” company into a highly profitable and efficient organization. To simplify his formula for success, he created and led a new mindset of safety in the workplace no matter the cost. Employee safety became the main goal of Alcoa.
Critics emerged from everywhere questioning O'Neill's belief that a goal of zero workplace injuries would result in high corporate earnings. The facts proved the critics were wrong, and history continues to show continuous financial growth after O'Neill retired from the company.
From 1987 to 1991, the employee injury rate decreased 50%. Because of the culture O'Neill created, the injury rates continued to decrease even after he retired from Alcoa and continue to do so today.
During his leadership, company sales increased 15% each year, and the earnings per share increased seven times the level when he joined Alcoa.
Obviously, most employers are not the size and financial stature of Alcoa. But, what can all organizations gain from the “O'Neill Formula for Financial Success?”
No one can argue that making sure employees leave work for home as healthy as they arrive at work is a bad idea. Let's face it — creating a safe work environment should always be the top priority for any organization. Most employers believe safety is important, but they feel they don't have the time or resources to adequately address all issues. The solution to the employer's dilemma is to align themselves with a risk insurance advisor who can help an employer plan, implement and lead their organization through a consistent process to achieve measurable results of improvement.
If an employer's risk insurance advisor relationship does not have the interest, resources, knowledge and experience to be a coach and leader for a program like this, it should be time to find a new relationship. Keeping valuable assets safe, like employees, and helping to keep an organization financially sound are of the utmost importance.
Financial success can be achieved at different levels — the O'Neill approach will rally all stakeholders and result in outcomes that you could not have imagined. Certainly, O'Neill's detractors felt that way until they saw the results.
What has your risk insurance advisor done for you lately to help you achieve your financial goals?
For the past several years, up to three of the top five concerns expressed by respondents to CFMA's Construction Industry Annual Financial Survey have been insurance-related. And, contractors continue to seek how to leverage their investment in safety and risk management.
The traditional view of safety has been as a line item expense calculated within administrative overhead or as a cost center. Construction Financial Managers use a variety of techniques to evaluate the cost effectiveness of recommended safety and risk reduction investments. These include: ROI, ROE, and/or ROC calculations; cost benefit analyses; and breakeven analyses.
However, some forward-thinking contractors have gone beyond seeing the direct link of profitability from safety and risk management to establishing safety as a profit center. A select few have captured even greater value by making safety part of their brand image.
Either way, a program that measures safety — and risk-related leading indicators, loss analysis rates, and indirect costs can provide contractors with a competitive advantage that goes far beyond lower insurance rates.
Some companies understand that the fixed cost of insurance, the premium, is the smallest piece of the insurance pie. They recognize that true savings more often result from decreasing the variable costs of their insurance program — the loss dollars from claims.
These companies have learned that proactive safety and risk management programs increase profitability — they reduce risk, prevent claims, and contain costs through aggressive claims management.
What is their secret? Through the ongoing measurement of risk indicators, these contractors establish goals for improvement and continuously monitor their company's performance. Some traditional measures include such frequency and severity incidence rates as:
- Total OSHA recordable cases
- Total lost workday cases
- Total lost workdays
- Number of fatalities1
Called lagging indicators, these measures are passive metrics of prior results without consideration of the activities that influence the results. Also called downstream measures or trailing indicators, lagging indicators provide feedback on data collected and analyzed “after-the-fact.” These metrics are diagnostic and sometimes prescriptive; they reveal past performance and highlight improvement opportunities.
In contrast, current and leading indicators provide different views of safety and risk performance. Designed to influence real-time outcomes, current indicators provide almost immediate feedback on present activities. Current indicators include a supervisor's same-day completion of an incident report or the number of job safety observations completed on a project each day vs. an established goal.
Leading indicators are proactive measures of focused activities to prevent incidents of a general or specific nature. Also called upstream measures, these metrics are “beforethe-fact”2 and can predict future performance.
For example, a high number of safety orientations should help decrease the frequency and severity of onsite accidents. (The first table below compares lagging, current, and leading indicators for safety performance. The second table lists examples of emerging leading indicators for productivity, quality control, and risk management.)
|Lagging, Current & Leading Indicators|
|Emerging Leading Indicators|
Measured by the Number of:
Measured by the Number of:
Measured by the Number of:
|Field supervisors with laptops or hand-held technology||Independent third-party expert reviews on prototypical designs or materials||Pre-bid constructability, scope, and schedule reviews completed|
|Administrative staff trained on automated functions||Architect and engineer approvals for changes to specified materials or design specifications||Pre-qualified or pre-approved subcontractors on the eligible bidding list|
|Open trade/craft employee positions filled compared to percentage needed||Quality assurance inspections completed||Subcontracts signed before starting work|
|Days with no idle equipment||Detected defects corrected||Project sites properly planned and laid-out for logistics, traffic control, and work zones|
|Projects with proper sequencing of trades||Project files with digital photos of conformance to specifications||Project sites inspected for compliance to safety and risk controls|
|Projects completed on time||Completed projects with no open punch list items||Projects that had a post-mortem review of project risk performance|
While many contractors know their basic loss picture, fewer understand the factors that cause or contribute to accidents and claims. To leverage safety and risk management, contractors need to identify where to invest time, staff, and other resources. An analysis of historical claims and loss experience provides an excellent starting point.
There are many methods of analyzing claim and loss data, but it's important to conduct both macro- and micro-level analyses, which provide the clearest perspective on what types of accidents are loss leaders, in addition to clues about necessary prevention activities. Trend, type, causal, and lost workday case analyses are four basic and reliable methods.
A trend analysis determines the number of claims and the total incurred losses (the dollars paid plus the dollars reserved to pay for the future cost development of the claims) for each line of insurance coverage over a period of time. This provides a quick “big picture” view of claim count and loss experience by policy year.
A type analysis summarizes the frequency of claims and the resulting incurred claim costs by type of loss. This method uncovers the leading types of loss for your company. For example, you may learn that two or three leading types of loss account for greater than 70% of your loss dollars.
By highlighting the areas that have the greatest impact on risk management performance, this analysis helps focus prevention efforts.
A causal analysis determines the reasons for accidents and resulting claims by evaluating various causal factors for each leading type of claim. It indicates areas for possible incident prevention activities and safety management controls.
Ideally, you'll be able to determine the job classification with the greatest number of claims and highest claim costs. For example, you might learn that “falls” are your company's leading type of workers' comp claim, making up 20% of your total claim count and 65% of your total incurred losses.
By evaluating the causes of your company's losses, you may discover that 60% of the falls were the result of a fall from an elevated surface — with 40% resulting from slips, trips, and falls on the same level. You might also learn that 10% of the total falls from elevation claims occurred from a scaffold or ladder, but that the other 90% resulted from getting into or out of vehicles or heavy equipment.
The safety and risk management controls for each of these causes are different. Depending upon the findings in the causal analysis, additional drill-downs should provide even better clues.
The success of this analysis hinges on the depth of your company's accident reporting and investigation process, as well as the quality of the claim coding information. Some of the best factors to evaluate include:
- Day of week
- Time of day
- Date of loss vs. the date of hire
- Objects and materials involved in the loss
Lost Workday Case Analysis
Why focus on lost workday cases? After fatalities, lost workday cases are among the most serious type of workers' comp claims.
Greater than a third of all workplace injuries result in lost workdays. According to the National Safety Council, the average cost of lost workday cases across all industries in 2005 was $38,000, an increase from $28,000 in the year 2000.3
The average for the construction industry is not calculated separately. However, the construction industry figure should be significantly higher for three reasons:
The median number of days for each lost workday case is higher for construction than across all industries. The Bureau of Labor Statistics (BLS) reports seven days as the median number of lost workdays per case for all private industries in 2005.
In contrast, the median is eight days on average for specialty trade contractors, nine days for general building contractors, and 11 days for heavy and civil contractors.
- The construction industry has some of the highest average labor wage costs among major industry groups.
Modified or restricted duty assignments in formal return-to-work programs appear to be increasing throughout the construction industry.
Yet, pockets of resistance still exist among some employers, employees, labor groups, and medical practitioners — even though such resistance results in longer absences and higher costs per case.
A lost workday case analysis determines the number, type, and severity of lost workday cases by occupation and body part. The most important portion of this analysis is the comparison of minor and major lost time cases.
“Runaway claims” can be identified by comparing the average length of cases greater than nine days (the overall median for the construction industry) vs. the average for cases less than nine days.
The distribution of lost workday cases by duration metric helps underscore the need to evaluate policies, procedures, and administrative controls to improve accident prevention and claim management.
Here's how it works: The chart below summarizes one contractor's average duration of lost workday cases. The contractor's totals were benchmarked against the average Bureau of Labor Statistics totals for the construction industry. In this case, 54% of lost workday cases exceeded 31 days of lost time, slightly more than double the construction industry average.
Further analysis revealed that the median number of lost workdays for each case was 37 days (four times higher than the figure for the construction industry). The average length of cases less than nine days was only three days each; however, the average for cases longer than nine days was 90 days.
This meant that, on average, this contractor incurred a “runaway” claim after the fourth day of lost time for every injured worker. In effect, excessive days of lost work time unnecessarily increased this contractor's total loss costs.
From the contractor's point of view, this analysis helped demonstrate the importance of injury prevention. Severity reduction of lost workdays was identified as the goal and the contractor decided to partner aggressively with the claim service team on:
- prompt reporting and thorough investigation of all injuries;
- coordinated identification of modified duty assignments; and
- better nurse case management to help injured employees return to work sooner.
Indirect Cost Assessments
New, sophisticated tools are now available to help contractors measure, monitor, and align safety and risk goals with overall financial performance.
As already mentioned, risk performance metrics provide useful information about the following key performance indicators:
- leading types of losses,
- their causal factors, and
- possible corrective actions.
The next factor plays to the Construction Financial Manager's expertise: demonstrating the financial impact of insurance claims.
Not only does this metric show the financial benefits of safety, but it also creates a compelling business case for proactive safety and risk management.
Direct vs. Indirect Costs
Like other areas of construction financial management, insurance claims have both direct and indirect costs. For our purposes, the insured loss costs are considered direct costs, and the uninsured loss costs are indirect costs.
The indirect costs are the “hidden” costs and share three key characteristics:
- They act as a multiplier upon direct (insured) costs that increases the total cost of insurance claims.
- They are often not captured or calculated and, therefore, are not consistently charged-back or recovered in job costing systems.
- The net effect of factors one and two is a drain on contractor profitability.
There are many different estimates used by safety and risk management professionals for calculating the impact of indirect costs. Safety industry sources indicate an average ratio of indirect to direct accident costs from 2:1 to 4:1.
One conservative method is available at the OSHA Web site, where a sliding scale multiplier is provided that depends on the total direct cost. Note that the indirect cost multiplier decreases as direct costs increase. To calculate your company's ratio using this method, go to www.osha.gov/Region7/fallprotection/safetypays.html.
Required Revenue Replacement
Achieving buy-in for safety and risk management programs from other construction executives and operational managers can be a challenge. However, the revenue replacement tool is a convincing way to show the additional sales needed to offset the cost of insurance claims.
This number varies based upon total cost of losses and the company's profit margin expressed as a percentage:
Annual Losses (in dollars) ÷ Company's Profit Margin
With this metric, it's simple to see the total additional sales required to offset the cost of claims. Once upper management appreciates how substantial claim costs can be, it's much easier to obtain buy-in for proactive safety and risk management practices.
The most important outcome of risk performance metrics is the focus on continuous risk improvement initiatives. Incident prevention and claim management initiatives can significantly improve a contractor's jobsite productivity, quality control, risk management, and safety programs.
The net effect of this investment is a potentially significant increase in profitability, not to mention a bidding advantage for contractors.
- National Safety Council
- BLS Table R65: Number of nonfatal occupational injuries and illnesses involving days away from work by industry and number of days away from work, 2005
- BLS Table R66: Number and percent distribution of nonfatal occupational injuries and illnesses involving days away from work by occupation and number of days away from work, 2005
- Harvard Business Review: “Competing on Analytics” by Thomas H. Davenport (January 2006)
1 Petersen, Dan, “Setting Goals, Measuring Performance: Frequency Versus Severity,” Professional Safety, Vol. 50, No. 12. December 2005, pp. 43-48.
2 Janicak, Christopher A., Safety Metrics: Tools and Techniques for Measuring Safety Performance, Government Institutes/ABS Consulting, Rockville, 2003.
3 National Safety Council. (2006). Injury Facts®, 2006 Edition. Itasca, IL.
You may have heard the saying “Show me your friends and I’ll show you your future.” Then consider this one: “Show me your safety culture and I’ll show you your company’s future.” Here is an outline of what we will cover in this article:
- Go Big — Safety as a Culture not as a Program
- Getting Started
- Measuring Your Progress
- Refining Your Process
Go Big — Safety As A Culture Not As A Program
The safety umbrella is broadly defined. For some, safety is a specific program. For others, it is a way of life. Let me submit to you that safety is a mindset, a culture, an attitude. Safety is all encompassing. Its presence or absence will have a profound impact on your organization. Safety should not be merely an isolated component of your company’s overall strategy but more of a culture of process-mindedness.
As mentioned, some companies approach safety as an isolated program (e.g. like marketing, research and development, etc.). Companies that adopt this “silo” approach to safety — as is typical of other business processes — may find the mark being missed. I have found that the most successful organizations have adopted a culture of safety. In these companies, safety is not a silo but rather the bedrock and foundation for all the other business processes.
Whether your company is a recent start-up or well underway, here are some things to consider. Do not consider this list as a recipe but more as ideas for key ingredients that will help define your safety culture. This list is not all inclusive and you don’t need to limit yourself to the items shown:
- A culture of safety must be adopted by you, your leadership team, and your entire organization.
- Adopt safety as your most important core value.
- Decide your desired metric for safety. Is your goal to only have 5 accidents per year? 3 accidents per year? Of course not, we can all identify the ridiculousness of such a metric. Shouldn’t the ultimate goal be to have ZERO accidents and injuries? Let’s be idealistic rather than realistic!
- Implement your company’s safety process:
- Indoctrinate new hires into your safety culture.
- For construction or “active” companies, consider identifying requisite safety gear (e.g. eye protection, gloves, ear plugs, etc.). Make sure everyone has the items and audit employees on the job for proper use.
- Establish new hire drug screens, DMV, and background checks.
- Incentivize executives and employees based upon safety performance.
- “Catch” employees doing the right things and working safely and reward them.
- Create guidelines for a safe work area or work site, etc.
- If you do have an accident/incident, immediately debrief the matter and consider adopting a mitigating correction to prevent the incident from recurring.
- Have regular (should we say, weekly?) safety meetings.
- Put everyone on the “Safety Committee” such that hazards are identified and corrected by employees performing their normal duties before things happen. A culture of safety not only allows — but encourages and empowers — employees to genesis ideas for improving safety policies and/or eliminating unsafe or risky practices.
- Create safety “billboards” that indicate your company’s safety track record.
Again, the above are ideas, and the list can be augmented and improved upon.
Measuring Your Progress
As you embark upon your journey and define your safety culture, it is very important to establish metrics to measure your success. I recommend tracking your progress and emphasizing positive developments; however, actual accidents/incidents should not be overlooked or hidden but analyzed.
Following are some positive metrics: create a checklist to ensure each new employee is given a new hire safety orientation, track “safe days” (e.g. no accidents/injuries since …), publish new ideas submitted and implemented by employees, have safety drawings for a safe month, etc., compare your safety record for the current quarter to the prior quarter and the prior year’s quarter, reward employees when you “catch” them working safely, etc.
An important side note is that your annual insurance renewals are a litmus test for how your culture of safety is working for you. Is your worker’s comp experience mod going down, are your claims less in frequency and in size, is your liability policy premium lower? Think of your insurance renewal process as a report card of how you are doing.
Refining Your Process
Can you think of a great company that wasn’t safe? We can all recount some past incidents that may have happened to some great companies. The great ones don’t run from their challenges — they face them, live up to them, and get better from them. I believe we should strive for perfection — as elusive as that is; however, if and when something unforeseen happens, it is important to debrief the situation and identify how to prevent that item from happening in the future.
I want to encourage you to create a culture of safety within your organization. I believe that by doing this, you will help establish a process-mindedness that can spill over into the other business disciplines: lead generation, sales, shipping, etc. Everything you do is borne out of your safety culture.
Over my career, I have audited, worked for, and consulted with a multitude of companies. Those that do well seem to have had the safety issue figured out — and as a result — had the rest of their ducks in a row.
As flour is to cake so is safety to your company. Safety is the basis (and core building block) for the success of your company. The key is to go “all in” on your safety culture and to keep an attitude of continuous improvement in all you do. Keep up the great work!
Two thirds of employees in industrialized countries use a computer on a daily basis. One in five interact with a computer at least 3/4 of the total work-time1. This usage of the technology ushered in an epidemic of work related ailments known as musculoskeletal disorders (MSDs). They are also known as repetitive motion disorder (RMD), repetitive motion injury (RMI), repetitive strain injury (RSI), ergonomic related disorder (ERD) and cumulative trauma disorder (CTD).
Though these disorders may as yet not be household terms, the patent effects of substantial computer use reveal themselves in terms of increased morbidity and declining productivity. In short, in the absence of ergonomic practices, employee efficiency in the American workplace takes a substantial hit.
In fact, according to the United States Bureau of Labor and Statistics (Chart 1), the prevalence rates for these types of disorders increased 1200% from 1982 to 1994 for all standard industry codes; however, those who employed good ergonomic safety management strategies enjoyed a 27% decline through 2000. Even though the rate reached a plateau for office or knowledge workers (computer workers) the wane may have occurred as a result of skewed interventions (e.g., training, workspace design and layout, equipment and accessories, work organization, etc.)2.
In addition, according to the Liberty Mutual Workplace Safety Index, injuries due to repetitive motion disorders from using computers were the #4 cause of work injuries in 2001 and 2002. The bottom line? A $2.8 billion price tag in 2002 for haphazard ergonomics3.
The Good News
According to OSHA, work related musculoskeletal disorders are the most prevalent, most expensive, and most preventable injuries in the American workplace today 4. The Center for Disease Control and Prevention's Injury Control Division reveals that injuries follow the same principles as infectious diseases and are just as predictable and therefore, just as preventable5.
Historical Sketch Of Computer Usage
Twenty years ago, computer workstations typically adjusted easily; however, they were relatively uncomfortable. Over time, they have morphed into rather complex devices with myriad levers and buttons that allow an uneducated user too many options for damage. Position (user may sit or stand), chair interfaces that move in multiple directions, numerous viewing angles of the monitor and fancy keyboard constructions that are split in half and look like accordions supply bells and whistles that may end up delivering harm unless organizations provide training. For those in the know, today's desktop computer were not necessarily designed to cooperate with the body; the user's natural alignment and paths of motion need not become contorted or required to engage in movements that never were designed to become repetitive nor prolonged. Modern fixed computer workstations beg accommodation to the body's motion flow.
Unfortunately, just when we are getting accustomed to our cubicles and other workstation environments, and are making gains in users' ergonomic awareness, some large computer companies have stopped making these computers and amazingly, are forecasting the death of the personal computer. Over the last 10 years, advances in technology have brought us a smorgasbord of new miniaturized devices or gadgets that provide us with faster communication — in essence what amounts to a handheld mobile computer workstation. Ironically, with this enhanced portability comes additional risk exposure for injury, particularly for the hands and neck.
These smaller devices foster awkward postures such as hands twisted into claws, and unnatural neck and shoulder angles — in short, resulting in increased discomfort and less than-efficient performance6. The root cause appears to be poor design — keyboarding areas, pointing devices (mouse) and a monitor-to eye interface that work together to produce a non-accommodating interactive work station. In particular, laptops (notebooks), tablets, I-phones and various PDAs unwittingly draw an unaware user into muscular and skeletal distortions.
Are the gadgets themselves to blame? Arguably, what is most important is the method by which we interact with them: the duration of exposure (how much is too much?), work organization and flow-process stress that occurs at less-than-optimal locations for usage. For example, many users must often conduct business in places such as coffee shops, airport waiting areas, planes, trains, and automobiles — places not designed for anyone to remain effectively postured.
Several primary physical risk and causation factors come into play between the computer user and all computer workstation environments, whether large or small. Three interfaces must be negotiated: the support interface (chair and floor), the manual interface (keyboard and mouse) and the monitor interface (distance from user, luminance, height). In addition to physical risk factors, behavioral variables commonly emerge: individual keyboarding and mousing techniques and style, excessive work pace without a break, prolonged sitting, and awkward forward head and wrist postures complicate the risk. What should be done about this trend?
The Spectrum Of Prevention
Fortunately, there are several easy-to-use methods to implement an effective ergonomics program. Once incorporated, they have prevention potential. A good ergonomics program can minimize computer-related musculoskeletal disorders by utilizing a more proactive and comprehensive approach to the potentially disabling conditions computer users in various workplace settings encounter. The answer lies in numbers.
It has been well documented that an integrated model of ergonomics safety management is critical for developing a healthy, effective workforce provided the company emphasizes a grassroots participatory approach in order to maximize collaboration and communication. The first step is to dedicate an ergonomic team. A successful group should comprise: an ergonomist, risk manager or loss control specialist, health service provider, company management representative (e.g., human resources, CFO, general manager, etc.), and a pre-designated employee ergonomics team trainer (leader)7.
This model efficiently capitalizes company resources and makes the best use of opportunities for surveillance and behavior change. It has been particularly effective in various organizations where the majority of employees consist of office and biotechnical workers typically tethered to their desktops 4-16 hours; all the while engaging in forceful/repetitive/awkward keyboarding and mousing whether interacting with desktop computers or hand-held devices. This extended risk exposure without appropriate rest cycles invites subsequent unwieldy neck and constrained back postures. The inevitable result? Discomfort at best or an actual recordable MSD at worst.
Nevertheless, these disorders have been shown to respond significantly to surveillance and behavioral change interventions such as job-task-specific ergonomics team training that provides information about strategies to maintain neutral work postures and movements when interacting with computers (Table 1).
Table 1: Team Intervention Recommendations
|Have A Seat||
|Watch Your Hands||
|Feast Your Eyes||
|Ring A Bell||
|Stretch Your Day||
|No Foot Faults||
|Make It Happen||
If your employees are experiencing any discomfort, have them contact their supervisor or designated ergonomics-team leader for a possible ergonomic evaluation of their workstations. Also, these same principles and practices will apply to employees with material-handling tasks of transferring mail, printed materials, folders, bins, etc. in the office area. Any employee whose tasks include lifting should be trained to use correct lifting postures, personal protective equipment, and employ stretching and strengthening recommendations for maintaining neutral work postures, especially in the wrists, shoulders, and low back.
Moreover, as ergonomists, health and safety professionals, human resources personnel, loss control and risk managers, and managers of various workplace settings, we must provide a solution to the question of how much exposure for those workers interacting with various computer devices is too much. Employees who must use a workstation are ever exposed to potential harm through extra strain or forces from the repetitive motions and awkward postures while keyboarding mousing, or staring at a monitor screen for hours on end. Further, we must be on the lookout for the important question in terms of what is good ergonomics vs. voodoo ergonomics. We must be adept at identifying the potential smokescreens of unsuccessful products and advice given to companies with real problems in their workplace. White collar environments are especially at risk for unqualified vendors … be careful out there when selecting an intervention program8.
1 Brandt, LP. Neck and shoulder symptoms and disorders among Danish computer workers. Scand J Work Environ Health 2004, 30:399-409.
2 Sherrod, C. Johnson, D. The modulation of upper extremity musculoskeletal disorders in a knowledge worker population with chiropractic care and ergonomics. ACC-RAC Washington, DC. Journal of Chiropractic Education, 58;2007.
3 Liberty Mutual Safety Index of 2002. Liberty Mutual Insurance Company Seminar. 2003.
4 Sherrod, C. The relationship between an ergonomics team training program and the compression of repetitive motion injuries in a bus operator population. ErgoCon Conference Proceedings, 4; 2000.
5 Cotton, P. Preventive medicine extends to injuries, too. Journal of American Medical Association 1990, 263:19-2097.
6 Korkki, P. So many gadgets, so many aches. New York Times. 2011; 12.
7 Sherrod, C. The relationship between an ergonomics team training program and the compression of repetitive motion injuries in a bus operator population. ErgoCon Conference Proceedings, 4; 2000.
8 Chong, I. Prioritize office workstation goals and watch out for voodoo ergonomics. Occupational Health and Safety. 1993, pg. 55-57.