In October 1987, a group of prominent Wall Street investors and stock analysts awaited the arrival of the new CEO of the Aluminum Company of America. And just before noon, their anticipation was met by Alcoa’s new chief executive, Paul O’Neill.
But what followed was wholly unexpected. Because instead of corporate buzzwords and talks about profits and capital ratios, O’Neill was only concerned with one thing: making Alcoa the safest company in America.
Profits, he explained, didn’t matter as much as safety.
But how, they all wondered, could safety dethrone profits?
In time, the rationale behind his approach revealed itself because when O’Neill retired in 2000 to become Treasury Secretary, the company’s annual net income was five times larger than before he arrived, and its market capitalization had risen by $27 billion.
The Facts Behind The Figures
The numbers didn’t – and still don’t – lie: A culture of safety that implements a rigorous safety plan increases profits.
So while many organizations may follow workplace safety standards to avoid penalties from OSHA, going beyond the Hazard Communication Standard minimum would serve to increase productivity and profit.
How? Consider these benefits:
Reduce Accidents and Liabilities
According to the 2018 Liberty Mutual Workplace Safety Index, nonfatal workplace injuries amounted to nearly $60 billion in U.S. workers’ compensation costs – or more than $1 billion weekly. And with just one violation costing more than $13,260 per infraction per day, it’s easy to see how avoiding such infractions can boost profitability – and quickly.
Improve Company Rapport and Reputation
Reduced – or even eliminated – workplace injuries helps build trustworthiness for an organization with business leaders, employees, and consumers. And interestingly, those improvements in rapport and reputation can help a company with another important r-word – retention – as an IBM Institute for Business Values study found that 25 percent of Millennial respondents said their No. 1 career goal is to make a positive impact at their organization.
Lower Insurance Premiums
Although workers’ compensation insurance covers employee rehabilitation, medical expenses and some lost wages due to a work-related accident, the premium businesses pay is due largely in part to their safety history. The more workplace injuries, the higher the premiums and conversely, the fewer workplace injuries, the lower the premiums.
According to the American Society of Safety Professionals, businesses pay more than $2 in indirect expenses for every dollar paid for direct expenses. And payroll takes the biggest hit as an accident may require hiring and training a replacement, paying overtime, and paying any wages and benefits workers’ compensation doesn’t cover. Further, the U.S. Bureau of Labor Statistics reports that absences last a median of nine days.
If there are no accidents or incidents to investigate, damaged property or equipment to repair, and supplies and materials to replace, then productivity can continue, business as usual, with no downtime. That means no delivery and scheduling delays, no reduction in sales or customer satisfaction, and no additional indirect costs that may impact your profits.
An ounce of prevention is worth a pound of cure. Or, in this case, an ounce of prevention is worth tens – if not hundreds – of thousands of dollars added to your bottom line.
Compliance may not be an obvious choice when scrutinizing all the ways to make your business more profitable but when your employees are protected from workplace hazards and are happy, healthy and safe, the bottom line all but takes care of itself.