Safety professionals can improve communications with the corporate office by learning their language and concerns.

At first glance, the statement or the suggestion to think like “bean counters” will likely appear offensive to some safety professionals. Their concern is genuine, however. Safety professionals are passionate about worker safety. This is not to say, they don’t care about other aspects of business, such as revenue and profits. However, by nature and/or training, safety professionals have intense desire for worker safety and in communications with corporate professionals tend to forget the financial aspect of safety.

Although, well managed or best-in-class companies have well established safety culture, programs, and practices, it may not be the case for other companies. Safety MAY be given a “lip service.” Safety professionals have a formidable task of maintaining worker safety, worker morale, and convincing top brass about vital importance of safety. He/she needs to think strategically — create “safety culture, and tactically formulate detailed steps required for managing safety quantitatively.

Here are tips to thinking like “bean counters.” Please note that the term “bean counters,” is not intended to be derogatory — the term is intended to include accountants, financial professionals and corporate managers.

Understand that “bean counters” work and focus on revenues and profitability. A company has to succeed financially as well as safety-wise to ensure sustainability. It is possible — even likely — a company may be stellar in safety metrics and still end up being bankrupt. On the other hand, a fiscally strong company with lax safety culture will probably not survive for long. Safety should be an integral part of all business decisions.

Think how would you respond to this question from an accountant from corporate: "Can you justify the cost of the safety management system?” The key to answering this and similar “justification,” questions is quantification of cost and benefits. This, in turn, requires relevant data. In communicating to corporate office or decision makers, use “business language.”

Cost-benefit analysis

The following are several key terms relevant not only for cost-benefit analyses but also for improved communication to accounts and professionals in corporate office. For many of the terms listed below, you will need relevant data to quantify cost and benefits of your proposal.

• Return-on-investment (ROI): Simply put, this financial index shows the net monetary gain of a project as a percentage of the total cost of the project or a proposal. Obviously, higher the ROI, greater the justifiability of a project.
• Payback period: This is the time duration required to recover cost of the project. Unsurprisingly, shorter the payback time, more attractive the project.
• Breakeven point: This is the point where cost equals benefits. In other words, this shows how many units of production need to be sold so that the revenue generated equals the cost of the proposal or a project. As the cost of a project increases, its breakeven point goes up.
• Present value: The financial benefits expected to be generated by a project should be viewed in terms of their time frame. If a project generates $1000 benefit a year from now, that is NOT the same as $1000 benefit today. Thus, broadly stated, profits farther in the future have less present value. Present value is often used as a criterion for justification of am project or a proposal. Extending this further, NET PRESENT value is the NET value of a project (revenue-cost) should be positive for a project to be considered viable.
• Future value: Future value is less commonly used in financial justifications, though, it has the same concept as that for present value — time value of money.
• Cost of money: The borrowing cost determined by prevailing interest rates and economy.
• Hurdle rate: This is typically expressed in terms of minimum percent ROI. If a company decides its hurdle rate is 3%, projects below 3% ROI are rejected.
• Interest rates for a company are determined by a combination of factors such as general economic conditions, company’s credit rating, and future potential of the company.
• Productivity: Simply put, it is the ratio of output to input, both in terms of dollar value.

The following are some pointers to enhance communications to/from corporate offices:

• Maintain database of costs — direct and sunk — related to unsafe incidents at your plant. This can be used in quantifying benefits of new or additional resources to avert similar unsafe accidents at your plant. If data is not available for your plant, there are valuable sources including OSHA, NFPA, NSC and others.
• Be aware of the time value of money. You need to adjust future costs and benefits in accordance with the interest rates.
• Not all projects are amenable to strict financial analysis. This is especially true for dealing with potential emergencies.
• Safety and financial justification, both are vital for a profitable organization.

Safety professionals have dual tasks of learning financial jargon and, equally important, introducing financial professionals to vital importance of safety. In the long run, focus on creating safety culture — a culture of openness, trust, teamwork, and financial wisdom.

To sum up, safety should be applied in conjunction with financial considerations. A company’s safety and financial health depends on caring and financially astute safety professionals and safety-minded corporate professionals.