Determining costs and benefits of risk, safety and health improvement initiatives within your organisation can be a challenge.
Without having to loan money to pay for an MBA, in this article, I am going to share with you some personal experience on how you can develop more robust proposals.
Setting the Stage
Have you ever watched Dragon’s Den?
In fact, the show is very popular in the UK and also exists in other parts of the world in a similar format. Dragon’s Den is a series in which budding entrepreneurs get three minutes to pitch their business ideas to investors willing to invest their own cash. In effect, investors become stakeholders of successful business ideas.
In many ways, stepping inside the boardroom and asking leaders to fund your Risk, Safety and Health improvement ideas is like entering the Dragon’s Den.
You have that golden opportunity but limited time to pitch it properly.
If you are not well prepared or not aligned to the language that leaders can understand you will find very little success in convincing them about your great idea.
What is the basis of that “language”?… Costs and Benefits!
Give that “great idea” a fighting chance
But have we taken into consideration any financial aspects or impacts?
After all, other business functions (i.e., quality, production or engineering) seem to be much more adept and equipped at demonstrating financial and economic value.
Let’s face it. Every organisation has a limited “resource pot” and competition can be fierce for all the other great ideas that are presented.
To give our great idea a fighting chance, we need to make sure it’s:
- Well defined and clear.
- Succinct – don’t oversell it, use jargon, “management speak” etc.
- Avoid using threats like “if we don’t do this then…”. This will not only alienate your audience but make them ask questions such as “how did we survive before this great idea of yours?”
- And of course, make sure you have taken into consideration the cost and financial merits associated with the great idea.
On that last bullet point, we need to outline how costs and benefits can be measured and presented.
Setting your stall out for that “great idea”
It is much easier than it might first appear.
The good news is that a well-designed, planned and implemented project for risk, safety and health improvement will almost always yield a good return on investment (ROI).
The question is how to demonstrate that.
Costs can be determined quicker than benefits because they are normally fewer in number.
Typically, the following types of costs are often considered:
- Personnel costs. Consulting fees, the salaries and benefits of in-house professionals (pro-rated based on their input into the project), and employee downtime (pro-rated by the time the employee is not able to do their job)
- Hardware and software specifically purchased or hired for the project (e.g. online surveys, measuring instruments, new work equipment, and tools. We also need to consider delivery, installation, and maintenance costs.
- Reduced productivity. HSE interventions may cause temporary disruptions to the operation; this cost needs to be factored in too.
- Overhead (i.e. costs associated with running and maintaining the assets).
Benefits can be divided into tangible and less tangible.
- Improved health outcomes. Days lost due to sickness can be multiplied by the average salary of a full-time employee to determine the economic benefit.
- Increased productivity through improved workstation, task redesign, provision of more efficient tools and technologies. Conservative estimates can be calculated from case studies (see HSE rr491, OSHA EU).
- Reduced turnover often has a positive impact on staff retention, consequently, decreasing the number of training hours. The number of training hours saved can be multiplied by training hourly rates to derive the economic impact.
Less Tangible Benefits
- Better employee commitment and corporate image.
- Empowered employee.
- Improved talent attraction.
- Reduced scrutiny from the regulator.
Factors that influence success
Unsurprisingly, management commitment is what drives or restricts many risk, safety and health improvement initiatives.
The competence and credibility of the project generator are key to get management buy-in.
Something that unsuccessful interventions have in common is that are technology-centred rather than human-centred approach i.e., stakeholders’ views have been neglected.
Making it Happen
It’s very easy to pick “low hanging fruit” but once collected it’s more important to start by picking the “ripe fruit first”. Make sure you identify and easily recognise what they look like. If you can’t…how can you expect others to buy into your “great idea”.
Low-cost high-impact opportunities for improvement are easier to justify. Typical examples include faulty machinery guards, awkward postures due to poor workstation setup, or badly designed tools.
By giving managers quick wins your credibility will increase. It will be easier for you to get them on-board the next time.
- To maximise acceptance, your risk, safety and health improvement proposal needs to be financially convincing.
- Your proposal should include good estimates of the improvement costs and benefits.
- Make sure you take into consideration planning, competency and a human-centred approach.
- Before going onto centre stage, sense check that your proposal has a high probability of being endorsed by senior leaders, thus setting you and everybody for success.