Managers Mistakes - Safety Costs too much money
The second part in our series titled 'Managers Mistakes' looks at an argument we are so often faced with when talking to construction managers, the belief that safety costs too much money. Comments like, "We buy it and they don't use it" or "You can't expect me to do all this and still make money" is often heard.
Interestingly enough, if we are to remove the motivation of Health and Safety being a legal requirement from the scenario, there are still many cost saving benefits to implementing safety programs that we often fail to see.
The Iceberg
Through various studies and lots of research over many years', experts often compare the concept of an iceberg where only the tip is seen above water, with that of the cost of an accident. Now you may ask what the cost of an accident has to do with the cost of Health and Safety. Logic will tell us if accidents are costing us a certain amount (let's say R10 000) or have the potential to cost us that, then spending less to prevent them would be the sensible business decision. The place to start would be determine what accidents actually cost us.
Research tells us that there are 2 types of accident costs, insured costs and uninsured or hidden costs. Experts again tell us that the hidden costs can be up to 50 times more than the insured cost, this taken from research of actual accidents, not hypothetical situations.
Firstly let us take a look at the insured costs, these would be classified as your medical costs or better known as Workmen's Compensation. For information on this we turn to Federal Employer's Mutual Assurance (FEM) who insure a part of the construction industry, they currently list their average claims cost at around R25 000 for 2011. So lets then assume that an average accident takes place on a standard construction site where a residential home is being constructed, the collapse of scaffolding results in an employee getting injured and the insured costs or medical costs of that are around R25 000. The next step is to ask what are the uninsured or hidden costs involved. For the sake of this exercise we will touch on a few of them.
The obvious uninsured costs would be any damage that may have occurred to the scaffolding during the collapse, tools that fell to the ground and were damaged or destroyed; materials that the employee was working with that now can't be used. It would not be difficult when looking at the cost of tools, materials and items such as scaffolding to realise that the cost of the accident including the medical cost could quite easily be R50 000 worth.
When the worker now returns to work he will more than likely take time to build up his confidence again and the speed of his work is likely be slow while his wage rate remains constant. This will cost you money and it is very difficult to put a value to how much. Furthermore with several accidents happening in your organisations your Workman's Compensation premium is more than likely to increase.
I was asked to explain to the manager of a construction company some time back how the cost of his Workman's Compensation can go from R15 500 to R54 000 in 12 months. When the questions were asked it was discovered that they had a garage door in their plant yard that had a faulty mechanism and in the last 18months, 3 people had injured their fingers and hands in the mechanism. The repair costs came to less than R1000 for the mechanism yet cost him nearly R40 000 in insurance premiums.
The above example of course only takes into account when an average type accident happens on your site, but what happens when you have a serious accident or even a fatality. Other possibilities we could take into account is the loss of confidence from a client's perspective, in your ability to complete the job safely. Now in the case of a fatality how do we cost the following:
- Downtime will investigations occur
- Loss of a contract
- Loss of the employees skills, especially if you have spent years training
- Damage to company image
The above now obviously only takes into account a few possibilities but looking over these it is not hard to see how a fatality could cripple or cause massive damage to any company. The costs of the above factors would rise very quickly and could even run into hundreds of thousands or even millions if you lost the contract.
Now knowing that an accident could cost your company this much, it seems it is a smart business decisions to spend a few thousand rand to get a safety program going that has many other benefits other than simply saving you money.
Now as we look forward to the final article in this trilogy of "Safety - Where do we start" it seems crazy not to give your regional office of the Association a call to find out more of what you can do, to get safety going in your organisation.
Gareth Roberts | Midlands Regional Manager
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