Every business needs to make money, so running safety like a business means that safety has to do more than be an overhead cost – it has to make money. Phil La Duke, partner at world-leading sustainability consultancy ERM (Environmental Resources Management) says that may seem ridiculous to some, but consider this: safety affects every business element there is.
“Whenever you have a function that helps another function save money, it’s like you have brought revenue into the organisation. They key is to always remember that if you spend more money than you make (including in cost avoidance) you will go out of business.”
La Duke says there are a number of steps for running safety like a business:
Use Zero-Sum Budgeting
This accounting technique requires you to start at zero and build your budget based on the initiatives you are going to implement that year. You add up salaries, fixed costs, materials, and all the things you need to run the function. When you’re finished you will have a figure that must be less than the financial savings you will get during that same time period. If the cost of your plans exceeds the expected return, you need to scale back your plans.
Understand Your Customers’ Needs
Safety professionals often advocate for things their customers neither want nor need. It can be tough to swallow your pride and ask your customers how you can better serve them, but it’s a necessary part of doing business. Whenever you want or value something more than your customer does, you will fail.
Trim the Fat
Running safety like a business involves making tough choices and paring away anything that doesn’t add a demonstrable value. Before putting something in the plan, ask yourself what value you will see from it. Things like the “children’s safety poster contest” might be something you enjoy doing, but how much does it cost and how much money does it save?
Know the Cost of Everything
If you are going to talk in financial terms you had better have a good idea of how much injuries are really costing you. It’s not just the cost to treat injuries, it’s also the cost of insurance premiums (or reserves), loss of productivity costs – in some cases scrap or loss of inventory, each industry is a bit different – but running an effective business means understanding in minute detail how much the things cost and then striving to control those costs.
Develop a Strategy for Lowering Your Operating Costs
When it comes to business, the only way to succeed is to either increase revenue or cut your costs; you should do both. Look for ways to eliminate waste in your function and root out the things that don’t provide sufficient value. If you make the cuts, it will be far easier than someone else making them for you.
Advertise
Probably the most overlooked aspect of running safety like a business is advertising. It’s not enough to make real gains and save the organisation money, you have to advertise your results. Even if you did poorly (i.e. spent more than you saved), presenting that information to the executives (along with a strategy for turning the situation around) is likely to impress the executives and improve their perception of you. If you negotiated a 15 per cent reduction on PPE, be sure that your executive team hears about it.