The business benefits of good safety practices are clear and obvious. As the HSE lists them:
- Reduced absenteeism
- Staff retention
- Brand reputation protection
- Increased productivity and profits
- Reduced insurance and legal costs
But, if I’m a Board member of a Forbes 2000 company, is that going to grab my attention? I don’t think so. They’re nice benefits and, of course, I want to keep my people safe but these are just, well, metrics (with the exception of brand reputation) and I have a safety department and line managers to look after those.
By way of comparison, how might I react to the following statements?
1. Visionary companies have outperformed the general stock market at a rate of 15x¹.
That’s got my attention. What’s the definition of a “visionary company”? Where does my company fit against this measurement? Says who?
2. 35% – the probability that companies in the top quartile for racial and ethnic diversity will have financial returns above their respective national industry medians².
Again, I want to know more. How does my company compare? Are we in the top quartile etc.?
3. On average, an industry’s Net Promoter leader outgrew its competitors by a factor greater than two times³.
Another attention grabber. What’s Net Promoter? Where does my company fit?
The difference between the HSE business benefits and those 3 statements? The 3 statements are demonstrating correlation and [possible] causality between each and overall business performance as measured in a meaningful way at Board level. As we stated earlier, the HSE listed benefits are metrics and merely components of overall business performance.
Any one of the 3 can then be turned into a keystone habit within the business – something the business can obsess over to drive overall business performance. For example, becoming a ‘visionary company’ means establishing ‘purpose and core values’ and then hiring to those core values; while a program to drive customer advocacy will put Net Promoter Score front and centre within the business.
The obvious question, therefore, is how to have safety become a keystone habit? Some companies do this through their CEO taking the lead. For example, Alcoa. But, what happens in the absence of such a leader? Where is the research that shows correlation [and causality] between safety performance and business performance? What can we, as a safety industry, rally around and promote into our Board rooms?
There have been some studies performed that do show a link between safety and business performance. One was conducted by Raymond Fabius MD, et al and published in the Journal of Occupational and Environmental Medicine in September 2013.
They took winners of the American College of Occupation and Environmental Medicine (ACOEM) Corporate Health Achievement Award (CHAA) which “recognizes the healthiest, safest companies and organizations in North America” and tracked their stock market performance against the whole.
They found that: “companies that scored high in the CHAA safety category outperformed the market by three times, achieving a return of 314% compared to the S&P’s 105% during the same period.”
So, safety performance can be linked to businesses outperforming the stock market but is there correlation and causality? The study focussed on CHAA winners but do companies with a poor (below average) safety record underperform given the same conditions? How are the CHAA winners measured/selected (might that introduce a bias)? What other data is out there to support/contradict these findings?
We’ll look to answer these questions over the coming weeks in upcoming posts. If you have research that you’re aware of and that adds to the debate please leave us a comment below.
¹ Built to Last: Successful Habits of Visionary Companies, Collins and Porras.
² Diversity Matters: McKinsey & Company, February 2015.
³ The Ultimate Question 2.0, Fred Reichheld.