Providing a safe environment for
employees makes good business
sense on a number of fronts. Studies have shown that workplaces that establish
safety and health management systems
can reduce their injury and illness costs by
up to 40 percent. In addition to potentially
saving large sums of money, safe environments have also been shown to boost
employee morale, which can lead to
increased productivity and better service.
According to OSHA, lost productivity
from injuries and illnesses costs companies $60 billion each year. In today’s competitive business environment, safety-related costs can be the difference between
reporting a profit or a loss.
Determining the exact value of safety is
challenging, but OSHA studies indicate
that for every $1 invested in effective safety programs, $4 to $6 may be saved as illnesses, injuries and fatalities decline.
“It is obvious that even a little investment
in safety can have huge dividends,” says
Jim Kapnick, president of Kapnick
Insurance Group.
Smart Business spoke with Kapnick
about how safety programs can impact a
company’s bottom line, how to quantify the
true costs of accidents and the importance
of staying the course once a program is in
place.
How does safety impact the bottom line of a
business?
A well-established, management-supported and documented safety program can
have a huge impact on the overall bottom
line of a company. Preventing incidents,
whether they are injuries to employees or
visitors, fires, motor vehicle collisions,
environmental incidents or similar occur-rences, can reduce losses and thereby
improve profits. The direct cost of insurance as well as many indirect costs, such
as lost work time, productivity, damaged materials, etc., can upset what may otherwise be a profitable year.
What are some ways to measure and quantify the true total costs of accidents?
Most professionals agree that the direct
costs of accidents — insurance premiums,
deductibles, direct payments — can be
multiplied by four to 10 times to calculate
the indirect costs of the same instance. So
if the direct cost of an accident was $2,500,
an additional indirect loss of $10,000 to
$25,000 can be expected. If your company
is operating at a 5 percent profit margin, up
to $500,000 in new sales would be needed
just to pay for this loss.
How can the impact of a safety program be
measured?
Company presidents, chief financial officers, human resource managers, risk managers and safety directors have spent
countless hours trying to measure the
impact of their safety initiatives. The truth
is that it is very difficult to quantify something that didn’t happen. Accident rates [frequency and severity], premium costs,
OSHA recordable incidents and the like are
some common methods of measuring losses after the fact. Reducing these trends by
implementing safety programs can be
measured by comparing year-by-year statistics and quantifying the difference.
Can you provide a specific example of how a
company has benefited from having a safety
program in place?
One that comes to mind is a plastic injection molding operation that had an issue
with cumulative trauma injuries, particularly carpal tunnel syndrome. The company’s management and employees worked
together on ergonomic improvements and
dramatically reduced their injury rates and
severity and workers’ compensation costs,
saving the company more than $100,000
per year.
What advice would you give about establishing an effective safety program?
I would caution business owners not to
back down on their safety efforts as trends
begin to improve. A safe and healthful
workplace is truly a marathon and not a
sprint. It requires a dedicated management
team, supportive employees, trusted advisers — including your insurance agent, safety consultant and accountant — a budget
and an organizational framework that outlines everyone’s responsibilities in order to
truly be successful.
JIM KAPNICK is president of Kapnick Insurance Group. Reach
him at (888) 263-4656 ext. 1320 or [email protected].
Kapnick Insurance Group is a member of Assurex Global, an
international network of insurance and employee benefit brokers.
