Show Me the Money: How to Demonstrate the ROI of Your Safety Program
How do you define success in safety? For most safety pros, a win is seeing safe behaviors happen without prodding, continuously increasing employee engagement, and of course, a decline in injuries, which presently cost employers over $1 billion per week.
But when it comes time to pitch the value of your current program and ask for more investment, the decision-makers typically only want to hear one number: the return on investment (ROI).
You’ve probably heard an old figure from OSHA repeated over and over again. For every $1 you invest in safety, your organization saves $4-6. Those figures look good: a $10,000 investment should save you $40,000-60,000. However, your leadership team won’t take the formula at face value. So, it’s time to dive in deeper and learn how to present a business case, not for any safety program but your safety program specifically.
Let’s get started!
How to Calculate Overall Safety ROI in 3 Steps
To calculate ROI, you’ll use these three steps.
- Tally Up Your Accident & Injury Savings from the Program Year
- How much did you save this year compared to last year?
- Use your direct costs savings (e.g., indemnity payments, liability, litigation costs, property loss, medical expenses)
- Combine with indirect costs saving (e.g., training, increased premiums, fines, legal costs, worker replacement, productivity and morale, work interrupts and shutdowns, cost to other organizational goals)
- Try out OSHA’s $afety Pays calculator, designed to help you identify all the real costs of an incident.
- How much did you save this year compared to last year?
- Subtract Total Savings from Your Safety Program Costs for the Year
- Multiply By 100 to Create a Percentage
Here’s a quick example.
Let’s say you saved $75,000 in 2019 compared to 2018 thanks to lower insurance costs, no fines, increased productivity, and lower legal costs. Your program only costs $50,000.
Your investment gain was $25,000, and your ROI for the year was 50%. Now that’s a number you can take to your boss!
Remember: ROI is an Imperfect Tool
Calculating the ROI of your safety program isn’t a cut and dry calculation. The ROI formula is an imperfect way of encapsulating the tangible and intangible components of your safety program. The National Safety Council’s whitepaper “Preparing the Business Case for Investment in Safety” is an excellent resource for diving into the complicated relationship between safety and money.
Even still, ROI remains an incredibly compelling way to pitch both a safety program and significant updates to it because, as you know, safety saves lives and dollars. Getting to know your company’s economic landscape and the attitudes surrounding safety (and spending) can go a long way towards personalizing the ROI calculation and help you prepare a better business case for your leadership team.
There are few better ways to achieve this than through creating a safety ROI case study.
Demonstrate Value with a Safety ROI Case Study
As we mentioned, ROI is an imperfect tool for describing the value of investing in safety. While it is useful to see a bigger picture, you may find more value in breaking down ROI based on a specific pain point that’s unique to your organization.
There are many ways to approach the case study method, but we’ll talk about two of our favorites in the safety field:
- High-level approach
- Granular approach
Let’s explore each approach!
The High-Level Case Study Approach
If your organization tends to take a high-level approach to safety program funding (i.e., they make decisions based on current financial performance and long-term strategic plans), start the case study process by talking to decision-makers about your organization’s value drivers. These may be profitability, reputation, competitiveness, or something else. Once you have these, you need to find a way to link safety to those value drivers using paint points.
Some of the more standard paint points we see in the market include:
- High workers compensation premiums eat into profitability.
- Clusters of incidents hurt the organization’s reputation.
- High LTRIR reduces competitiveness when bidding.
- Low engagement damaging competitiveness due to higher accident rates and missing skill-sets.
Choose one of these and do a deep dive into the costs. Include the cost drivers, knock-on effects, and direct costs.
The Granular Case Study Approach
Another case study option is to work by incident type or the granular approach. These work very well when you have identifiable incident clusters (either by type, area, or team). You can use a granular study on its own or use it to accompany a high-level pitch, but they typically work best when management has strong safety attitudes.
Here’s a quick example:
Let’s say you had real problems with slip and falls, so you ran a targeted initiative and invested in a few solutions, like anti-slip floor cleaner, more mats for the entrance, and better shoes for workers in that part of the building. Subtract the savings from the slip and fall initiative from the initiative costs, and you have ROI.
Case studies make safety data more tangible, particularly with everyday hazards, so use these regular occurrences to illustrate the bigger picture and bring the investment to life.
Tip: Safesite users can pinpoint their biggest pains with a tap of a button. Advanced safety analytics and OSHA 300 form integration make it easy to see what’s happening and where without creating more work for yourself. Once you ID your target, you can run your safety campaign straight from the Safesite app, so you’ll keep all your data in one place.
Build a Better Safety Program by Finding Your ROI
It takes money to run a world-class safety program, but when the return on investment (ROI) is improving workers’ lives and keeping them safe, then you know that spending is worth it. Demonstrating ROI to upper management, however, is a whole different ball game. That’s why it’s so important to harness your company’s unique data and present it in a compelling way — such as through a case study.
We all see the value in safety, but that value can take different forms depending on your perspective. So, get out there and figure out what matters most to workers, upper management, and the C-Suite, and you’ll be on your way to not only finding your ROI but using it to build a better safety program.