Safety: A Profit Opportunity

Companies that consider safety more than a nuisance might profit from it.

It is impossible today to have a discussion about safety without involving economics. The cost of safety is tied directly to the profits of a company. If it is an unsafe company, it will almost certainly pay out more in Occupational Safety and Health Administration (OSHA) fines, lawsuits and attorney’s fees, and for increased insurance premiums than needed.

All of those payments directly affect the bottom line. This article describes how profits are lost through unsafe practices, and helps provide companies with a program to help stop the leakage. It’s directed at construction and demolition (C&D) recycling businesses, both fixed facilities and mobile facilities, but can be used by all industry.

Tours of C&D recycling operations can, unfortunately, reveal unsafe situations at C&D recycling facilities. On one visit I saw three men standing next to a grinder that was in operation. That particular grinder emits out about 110 decibels of sound when it is in full operation. None of the men was wearing ear protection.

Another visit included the site of a worker on a conveyor belt while it was in operation. He’s one of those "pack rats" that you see at C&D facilities who can’t resist a good find. In this case, he was getting a game for his daughter, but playing a very dangerous game of his own.

Another site I witnessed on a tour was a valve sticking up from the floor where it is leaking water. The facility manager had appropriately put an orange safety cone next to it to warn workers. What he didn’t quite notice was the electrical panel above the leaking water. I don’t think I would want to work on that panel with while it is surrounded by water.

And yet another visit brought the site of a visiting worker tying steel at a C&D transfer station under construction. He was about 30 feet in the air while sitting on the forks of a boom lift. Sitting on the boom lift is bad enough, but he wasn’t even tied in.

All of these cases illustrate why safety is important for a business.

Consider this: What can safety do for a company?

• Safety increases a company’s ability to attract quality employees and increases morale

• It improves the public’s perception of a company or facility and helps you avoid criminal and civil fines

• It increases profitability. An increase in profits can be created by a decrease in the number of accidents, injuries and near misses. This decreases the amount of employee down time and lost work hours and reduces the cost of retraining.

One of the problems with C&D facilities is that they don’t fall into a nice neat safety category. Apparently because regulators considered C&D recycling a hybrid of the construction industry, OSHA’s Construction Standard applies. However, in reality, both the General Industry Standard and the Construction Standard apply.

Some C&D facilities resemble factories and have workers on a "production line." Therefore, the General Industry Standard applies. Conversely, C&D facilities use construction-type equipment in the same manner that the construction industry uses it, therefore, the Construction Industry Standard also applies. Picking and choosing the standard to fit your particular business can be a difficult thing to do.

In my opinion, most of the activities at C&D facilities are construction-related, so that most of the standards in a C&D recycling facility have to conform to and will be found within the Construction Standard.

The latest construction industry accident statistics, reported from the Bureau of Labor and Statistics, indicates that in 1992 the construction industry reported 740,000 strains, sprains and tears; 434,000 back injuries, 300,000 falls, and 1.7 million employee days away from work due to injury.

In 1999 the construction industry reported 2,000 fatal work related injuries, 640 fall-related injuries, and 5.7 million non-fatal injuries and illnesses. The rate of injuries per 100 workers was reported to be 2.8%.

Safety problems with the construction industry include high near misses and injury rates, high lost work time, poor management buy-in, poorly structured and implemented safety programs and a "nothing can happen to me" attitude among workers.

In 1992, the National Institute of Occupational Safety and Health (NIOSH) found that indirect and direct costs for safety related injuries and illnesses were $171 billion. Although we do get safer each year, the current cost is still likely to be very high. Indirect cost include increased time for reporting, too much employee caution and low morale, and slower time to finish work tasks. Direct costs include OSHA fines, retraining, lawsuits and increased insurance premiums.

Let’s talk about direct costs for a minute. OSHA fines can be onerous and vary widely across the industry. They can put a recycling company under the microscope for future audits and may result in unwanted "regular" attention from OSHA. Remember, when OSHA comes to investigate a violation they usually look at the entire program, not just the part of the program related to the incident.

Lawsuits are costly to defend, they are usually very public, they damage reputations, and they may take years to recover from, no matter which side wins. Increased insurance premiums are the biggest threat to profits. Lawsuits can be more costly, but are less common.

After an accident, liability insurance premiums may rise. Auto insurance premiums may also rise, and a liable company may pay surcharges depending on the state it is working in. The company may also pay a higher deductible, the insurance may be cancelled, other insurance companies may refuse to underwrite a policy. Then the only option may be to self insure. Self-insuring takes a big chunk of profits and puts it out of reach for future claims.

Workers’ compensation insurance is the insurance that is most affected by accidents. Premiums will increase dramatically and stay high for a period of years, even from one accident. Workers’ compensation insurance is payroll driven and the premiums paid are modified by a company’s safety record.

So what can a C&D recycling company do to stop the situation it is in from continuing or getting worse? The first step is to hire a third party safety consultant to conduct an audit. Choose a company with a good reputation. They should review all the written programs, assess policies and procedures, conduct an inspection of the facility to see how employees implement the program, and assess the operation’s safety record.

The audit should result in a written report that can be reviewed with the firm’s staff and then with the consultant. They can fill in any blanks, answer questions, and go over their various recommendations.

Once the report has been reviewed and its findings accepted, it’s time to find a fix to the problems. But be careful, some fixes aren’t easy and may cause a significant amount of pain to an organization. They can take a lot of time and effort and be multi-tiered. Don’t go into this process without realizing the potential downside.

Attack the big problems first; the ones that give the most bang for the buck. Remember not to give up easily, be creative and "think outside of the box."

Management "buy-in" is a critical part and in our opinion is the key to a successful safety program. If managers only give lip service and don’t adopt a "safety attitude," it affects worker morale and how seriously they view policies or changes to the safety program.

Some of the most common safety programs can be replicated and can satisfy the largest part of the requirements for a safety program, regardless of the standard under which any company operates. They address common OSHA citations.

We as a society need to return to a culture of valuing employees. For too many years, employees have been expendable assets to corporate America. When my father was alive, corporations would hire employees for the long term because they knew that a sense of loyalty was only fostered when the employee felt valued.

The same goes for any safety program. If employees feel they are expendable and

there is no incentive to follow the rules, everyone’s perspective becomes short-term. If employees feel valued and part of the process, they will respond with loyalty. If they don’t, maybe they shouldn’t be working for you in the first place. Don’t be afraid to make an example of that employee by getting rid of him or her. Make sure the other employees know why that person is no longer with the company and that safety attitudes are rewarded.

Also, turn near misses into opportunities for change. Develop a process for investigating them and when the root cause has been determined, make changes that make sense and have a positive affect. Reducing near misses will do more to decrease the accident rate than any other action that can be taken. And don’t forget to provide an incentive for employees to report near misses. A few dollars or tickets to the latest movie go a long way towards letting an employee know his or her efforts are appreciated. C&D