This paper describes a project whose objective was to define a costing methodology that showed indicative costs and effects of recordable safety incidents in an organization. This project’s main aim was to raise awareness, through a cost calculator, of occupational health and safety by placing a measurable dollar value to recordable safety incidents, similar to the nonconformance cost incurred when a quality incident takes place. The novelty of this costing methodology is that it instills a continuous safety culture that is integrated into the employees’ lives, both inside and outside the workplace, helping them realize the financial implications of incidents.
Considering current economic crises and cost pressures mounting on an organization, understanding the global financial effect of these incidences is vital. In many cases, most organizations have never measured this effect before. This cost calculator truly will be an indicator that demonstrates how effectively an organization is improving its safety performance. Various groups, including safety professionals, project managers, business unit owners, and field service personnel, will be able to see the effect that safety incidents have on the organization as a whole, beyond how they affect their individual rates alone. Organizations can use the output from the cost calculator not only to cut down on the number of incidents they experience but also to decrease their severity. This will provide true transparency and help organizations embody a more complete vision of achieving a zero-harm culture.
This paper summarizes the strategic approach used to develop and support the idea, from inception to final delivery of a costing calculator. The systematic approach used to collect, analyze, and draw conclusions from relevant data is also discussed. The approach described in this manuscript can be adapted to align to complimentary programs and strategic goals and can be scaled in terms of time and resources. It, therefore, is applicable to any organization.
Introduction
Companies and their employees have a responsibility to ensure that everyone always has a safe working environment. Most large organizations with operations around the globe have localized best practices in each country that work well to ensure health and safety.
The incident frequency rate is one measure that companies commonly track to gauge the effectiveness of their health and safety programs. A low incident-frequency rate is seen as one of the most-desired key performance indicators (KPIs) for an organization to achieve. However, this KPI has historically served as a number-chasing exercise, with no financial value attached to it.
The conventional, theoretical way of creating an understanding of recordable safety incidents (or, more precisely, safety KPIs) in an organization is by using the terms “direct costs” and “indirect costs” related to incidents. This understanding, however, is far from reality with regard to illustrating the true cost and financial effect of a safety incident.
This led to the idea of developing a costing methodology with a framework that more clearly can identify the indicative monetary effect to an organization when a severe safety accident occurs. With organizations having a global footprint in terms of their businesses, they also have sufficient data sources available that relate to recordable safety incidents, financial figures, and other metrics. When analyzed in a systematic way, this data served as crucial breakthrough in developing the Safety Recordable Incident Cost Calculator.
One of the goals that the cost calculator can help companies achieve is to permanently transform the way their employees think about improving behaviors related to health and safety. With these tools, employees can fulfill the high standards of safety required from customers, suppliers, and regulatory authorities.