Return on Safety [ROS] is more difficult to calculate then Return On Investment [ROI].
ROS seldom shows up on quarterly profit-and-loss statements and if it does, it is seen as only an expense. Therefore, organizations have difficulty assessing the ROS's value to their bottom line - something many financial managers and CEO's, under severe pressure for profits, can't get beyond.
ROS requires leaders to have a vision that extends well beyond quarterly reports. These leaders must have a steadfast commitment to safety and the courage to confront short-term and short-sighted 'bean-counter' calculations, and must reject the idea that production and profit which is achieved at the expense of safety is a desirable and sustainable business strategy.
Leaders who respect the value of ROS understand how intimately safety is related to quality, reputation, efficiency, innovation, and employee engagement and loyalty.
The Alcoa Story
Paul O'Neill, CEO of Alcoa from 1987-2000, was a leader who understood ROS and had the wisdom to make it his keystone business philosophy and strategy at his first annual stockholder meeting.
In "How Changing One Habit Helped Quintuple Alcoa's Income", Drake Baer writes:
"O'Neill's emphasis on safety made a dramatic impact. Over his tenure as CEO, Alcoa slashed their 1.86 lost workdays per 100 workers rate down to 0.2 -- almost a 90% reduction -- and by 2012 had reduced it to 0.125%."
"Surprisingly, the impact extended well beyond worker safety. Just one year after O'Neill's announcement of "Safety First" the company's profits hit a record high."
"Focusing on that one critical performance measurement, or what writer Charles Duhigg refers to as a 'keystone habit', created a massive change that rippled through the whole company culture". Duhigg says the focus on worker safety led to updating archaic manufacturing processes which had made low-quality aluminum product and increased worker hazards.
"By changing poor safety habits, O'Neill improved other processes in the organization. When he retired 13 year later, Alcoa's net income was 5 times higher than when he started."
Truly understanding what drives your business requires a more nuanced and careful approach but an organization that has a culture driven entirely by ROI will not ensure continuing success for its owners.
Choosing to gamble and sacrifice the safety and well-being of employees for short-term production profits is always a risky long-term business investment strategy.
SRA and our Associates provides employers with ROI-Based Safety Programs to enhance employee and safety & health and increase long-range company profitability.