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The Business Case for Using Leading Indicators to Improve Safety Performance

Vince Marchesani

Over the past 50 or more years, companies have used injuries as a means of estimating safety performance. The use of safety leading indicators - instead of the present use of safety lagging indicators like injury rates - will significantly reduce these costs, improve the effectiveness of the safety program, increase efficiency and improve bottom lines. 

Over the same period of time, safety has gone from an employee benefit to a serious effort to protect employees. From the selection and use of personal protective equipment, behavioral training and new approaches to measure safety performance, great strides have been made. 

Today, first aid injuries, OSHA recordable injuries, lost time injuries, disabling injuries and fatalities are recorded. Managers of a typical safety program react to these injuries by taking steps to reduce the likelihood of their re-occurrence. These corrective measures may take the form of hardware, software, training and other material-based approaches to prevent accidents. 

OSHA Estimates Costs 

While OSHA has stated that businesses spend $170 billion a year on costs associated with occupational injuries and illnesses - expenditures that come straight out of company profits - workplaces that establish safety and health management systems can reduce their injury and illness costs by 20 to 40 percent. In today's business environment, these costs can be the difference between operating in the black and running in the red. 

Further, OSHA has stated that injuries and illnesses increase workers' compensation and retraining costs, absenteeism and faulty product. They also decrease productivity, morale and profits. Businesses operate more efficiently when they implement effective safety and health management systems. A Fortune 500 company increased productivity by 13 percent, while a small, 50-person plant decreased faulty product and saved more than $265,000 with a strong safety and health program. At companies that use lagging indicators to determine safety performance, efforts to modify or replace safety programs are instituted when performance is poor.

The Safety Cycle 

If the number of injuries occurring over a given time is decreasing in number, all is well and the program is working. When the number of injuries is increasing, attempts are made to modify efforts to bring about an increase in awareness with the anticipation of injury reduction. If program modifications work, all is well, and the program continues. 

However, if modifications to the existing program do not work and injuries increase, consideration is given to introducing a new safety program. If the new program is introduced, it will take time to determine its effectiveness. In the meantime, people continue to suffer injuries. If the number of injuries begins to decline, the new program is judged to be successful and all is well.  

I call this the safety cycle. Perhaps you’ve experienced this cyclic behavior. The cost of this cyclic behavior often is overlooked because it is considered a given, a cost of doing business. I reject this notion. It should not be considered as a cost of doing business. As shall be seen later, the use of leading indicators instead of lagging indicators will significantly reduce these costs. 

The Use and Cost of Leading Indicators  

The use of leading indicators to predict future injuries and illnesses can and should reduce or eliminate much of the cost identified above. By examining near-miss injury incidents, unsafe conditions and unsafe acts with the probability of injury, the severity and type of injury may be predicted. This new data set can help you introduce corrective measures to prevent said injuries before they occur. 

While there is a cost savings from using leading indicators to predict injuries and illnesses, what is the cost of implementation of such a program? Since most companies already collect data on leading indicators, the cost is minimal, if at all. Leading indicator data generally is shared at safety meetings to increase awareness, but many employers do not presently use it to predict injuries and illnesses. To have a more efficient, cost-effective, safety-focused company you need to use leading indicators to predict injuries and illnesses.     

The following are areas of cost savings found with the use of leading indicators within your safety program. The numbers will vary depending on type and size of operation. 

1) Periodic program modifications – This will vary depending on program effectiveness and the number of modifications. The cost includes:  

  • Staff time  
  • Safety meeting presentations  
  • Implementation of hardware and software modifications   

2) No need to implement a new safety program.  

  • At companies with increasing injury and illness rates, safety programs are replaced as frequently as every 2-3 years. 

3) No need to hire temporary employees to replace injured employees for the period they are not able to work at their present job. This could be for one to three months or longer. If the injury is disabling, or results in a fatality, it may require a new hire. 

  • Recruitment costs 
  • Training costs 
  • Workers' compensation disability payments to disabled worker or death benefits for families of deceased workers. 

4) Payment for physicians/nurses, first responders and/or ambulance if not covered by company insurance. 

Additional costs include: 

  • Increases in the cost of insurance as a function of the number, type and severity of injuries  
  • Workers compensation costs, which are dependent on company size, risk of work and experience 
  • Support groups, if not covered by company insurance to assist families and employees as a result a worker fatality or disabling injury 

 

The use of leading indicators to predict safety performance should significantly reduce the $170 billion annual costs associated with occupational injuries and illness and as a result increase the bottom line. This is because, unlike the present use of lagging indicators to generate information to reduce and eliminate injuries, leading indicators will generate information before workers can be injured. This absence of injury while obtaining information that injuries provide saves all the costs associated with company occupation injury and illnesses. It is that simple!    

OSHA has estimated that management systems will reduce that $170 billon by 20 to 40 percent. In auditing management systems, questions are asked such as: "What is your process for ………." For example: you may ask, "What is your process for ensuring compliance with rule or company requirements?"  

You DO NOT ask (as part of the management system audit), "Are you in compliance?" You ask, "What is your process for ensuring compliance?"  

Of course, you could ask if they are in compliance, but it is not part of the management system audit protocol.  It is part of a compliance audit.  

The use of leading indicators to predict injuries and illnesses focuses on information that presently is being collected by most companies. Since information being generated by leading indicators can be used to prevent injuries without anyone being injured - unlike the present lagging indicator system - it is expected that actions taken in response to injuries and illness predicted using leading indicators will result in reduction of actual injuries and illness by more than the 20-40 percent estimated by OSHA for the employment of a management system.  

The use of leading indicators not only works for reducing the cost of injuries and illnesses, but with only minor changes will also work to predict for health and environmental incidents. Some things to keep in mind when using leading indicators:   

  • Use your database of near misses, unsafe acts and unsafe conditions to help predict injury and illness trends - Leading indicators are recognized as information that should be collected. Many companies collect leading indicator information but do nothing more than share that information at safety meetings hoping that it will help prevent future injuries.  
  • Use your existing leading indicator database effectively - Leading indicators can be used to predict injuries by estimating the probability, severity and type of injury that may occur if the near miss, unsafe act or unsafe condition resulted in an injury. Today, lagging injuries are used to introduce measures to prevent future injuries. If injuries can be predicted using leading indicators, measures can be put in place to prevent the injury from occurring in the first place and unlike lagging indicators, no one was injured in acquiring the information.   

Use leading indicators to impact the safety process and decision-making process. Many companies, not all, are collecting leading indicator information. However, not all companies that collect leading indicators are making the best use of that information. While sharing leading indicators within a plant or across a company is good and should be commended, it falls far short of what leading indicators can provide.  

Dr. Vince Marchesani, Ph.D., formerly vice president, Environmental, Health and Safety (EHS) at LyondellBasell, has over 30 years of experience in the chemical manufacturing industry. Vince holds a Bachelor of Science and Masters of Science from Drexel University and Ph.D. from Rutgers University and is the author of  the book, “The Fundamentals of Crisis Management.“  

 

For more contributions from Vince Marchesani, click here: Vince's profile, or visit his blog page:. https://blog.intelex.com/author/vince-marchesani/ 


September 19, 2018 @ 01:52 PM EDT Health & Safety

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