Bleeding Money: How Much Does Safety Really Cost?

Downtime and/or Loss of Production. Time is money and any organization must keep the machine running. Injuries can cause major disruptions that result in the wasteful and expensive loss of work.

Scrap. Damage, corruption or contamination of material that renders it useless for sale.

Wages paid to first responders. Emergency response professionals are seldom the first responders to workplace injuries. Instead, coworkers and supervisors are typically the first on the scene and when they deal with injuries they are not performing the work for which they are paid.

Legal Fees. Where there’s an injury there is typically a legal fee: Whether the fee paid to an attorney to defend against a lawsuit or fees paid to case managers, the cash outflow in response to worker injuries is often sizable. In some municipalities, corporate officers can face criminal charges for worker deaths and the company must pay to defend them.

Wages Paid to Investigate the Injuries. Workplace injuries must be investigated, an exercise that can consume considerable resources. Again, time is money. The more serious the injury, the more likely the injury will be time consuming and expensive.

Increased insurance rates. An unsafe workplace makes insurance companies worry about higher risk, which projects higher cost claims, which ultimately leads them to raise their rates.

INDIRECT COSTS
Indirect costs are far more difficult to calculate and quantify because they include things like:

Difficulty In Recruiting. Television shows like “Deadliest Catch” and “Ice Road Truckers” might make for entertainment, but workers today are more acutely aware of the safety of a prospective job than ever before. Safety really does matter, and promises of adventure and high wages are balanced against the risk of injury or death.

Companies spend millions on marketing and advertising only to have their good names smeared because of a high profile safety incident. Recruiting costs correlate to this smeared reputation. When an organization becomes known for its poor safety record, job candidates become increasingly reluctant to join the ranks of a bad corporate citizen.

Damage to the Corporate Image or Brand. The public increasingly links a safety record with being a good corporate citizen. More people are choosing to do business with companies whose politics, values, and ethics align with their own. Nobody wants to tarnish their own reputation through association with a corporate villain.

Crisis Communication and Public Relations Recovery. The branding impact mentioned above also includes bad PR. High profile injuries negate marketing efforts: Millions spent crafting a corporate image to attract customers and talent can be wasted if the company is a central figure in a high profile injury or fatality. Examples include Union Carbide, Exxon and other highly recognized manufacturers whose safety records became the center of media scrutiny and were forced to spend millions more repairing their images.

Increased Worker Turnover Costs. Injuries sap morale. When an employee is injured the entire company suffers to some degree, especially in cases involving a fatality or serious injury where family members and friends may actively lobby employees to leave that company before a similar fate befalls them.

Organizations with high injury rates tend to have higher turnover rates than their safer competitors. The costs of increased employee turnover – finding, recruiting, training, retaining new workers – are significant and well documented. Furthermore, this expensive process inherently exposes the company to even greater risk.

Increased absenteeism. People who don’t feel safe at work tend to be absent a lot and create a vicious circle: injuries lead to absenteeism that, in turn, places those workers who do report to work at greater risk of injury.

Lower efficiency. Efficiency is calculated by determining the number of hours it takes to produce goods or deliver services. Because time is lost to worker injuries, an unsafe workplace that hurts more workers is less efficient than those who hurt fewer workers.

BRINGING IT ALL TOGETHER
The unsafe workplace costs a lot of money, but some safety management systems require such high upkeep costs that any savings associated with their successful implementations are essentially a wash. Many safety professionals make the mistake of spending more on prevention than anyone could ever hope to recoup.