Recessions and Safety


recession and safety



By Eric Johnson

One of the biggest challenges to developing a robust safety culture we find is built around the value of safety. Unless you are Apple, corporate resources are often quite limited and have competing interests tugging at them, all while trying to demonstrate the best return on equity. Those projects/processes/activities that are best quantifiable are often the first to receive the benefit of resources.
However, it is our position that increasing a focus on safety during economic downtimes can position the organization to gain marketshare when a rebound occurs. It is based on three related observations:

1. Establishing the organization as a leader in safety will attract a safety-oriented workforce
2. When safety is considered a focal point of the organization, operations also improves
3. Once an economic downturn reverses, the organization now has greater experience in developing a safe workplace and has a higher alpha benchmark to increase from than other organizations that chose to reduce safety efforts

Organizations over time develop reputations within their industries simply because the specific talents required establishes a pool of workers, in which information now freely passes due to the internet, union participation, and other sources. And while most potential employees will apply to all available organizations, each organization can focus its efforts on selecting candidates with specific focal points in their background. As an organization that becomes known for safety establishes its reputation in the marketplace, those employees that want to work in such environments will be attracted at rates higher than the industry average. The key to positioning the organization in this role starts at the top. Management must take a defined and deliberate approach to focus on safety even as revenues may potentially fall due to economic conditions.

A recession is not an excuse to reduce focus on safety. In fact, it can be an opportunity to establish the organization as a leader in the industry and attract high-level talent.

This leads us to the second point – that a focus on safety does not always lead to a reduction in output or increased complexity, but can actually do the opposite. A deliberate focus on safety positions operations to examine areas where safety risks occur. By developing a data-driven approach, and using lean and six sigma tools, operations can analyze its own inefficiencies during the safety risk examination, as often safety risks and inefficiencies can be highly correlated. Once detailed and mapped, employees will be tasked with developing solutions that have safety inherently built into the processes. The benefits are two-fold: 1. The safety is now a functional part of the newly develop way of doing business, and 2. employees are more apt to sign-on to the new processes since they were instrumental in developing them.

The above approach is not without difficulty. There will be some managers questioning the effectiveness of increasing a focus on safety, especially if their units have productivity or numbers impacts. It is important here to establish champions but more importantly to clearly outline incentives; if managers are strictly driven by output numbers, they will often sidestep safety. If managers are driven by a balanced scorecard of metrics such as employee input, outputs, safety incidents, and better yet, response to safety incidents, the competing incentives cancel each other out. Incentivization tends to go awry when value is unbalanced. The key here is to promote safety, AND the response to safety incidents.

With the actions discussed, the organization can make its push to become an outstanding leader in its industry. A prime example is how Alcoa, by driving a focus on safety from the board of directors on down, was able to drive safety incidents down from 1.86 lost workdays to injury per 100 workers to 0.125, while profits hit a record high. It is evidence that a focus on safety, if done deliberately, can show concrete financial gains while increasing worker satisfaction and industry positioning.