Safety and Business Performance – Correlation and Causality

Neil HartleyHealth & Safety Issues/TrendsLeave a Comment

Making safety a keystone habit

This post continues our examination of what it takes to make safety a keystone habit within a business, thereby, driving improved business performance while improving worker safety. Note that in this scenario ‘improved business performance’ means significantly outperforming competitors in a sustained manner over a period of several years. We’re not talking a few percentage points improvement in productivity from one year to the next.

Alcoa demonstrated that making safety a keystone habit can produce a company that massively outperforms competitors and their CEO at the time, Paul O’Neill, explained the causality as “discretionary energy”.

“Discretionary energy is delivered when employees are treated with dignity and respect every day. A down payment on that is nobody ever gets hurt here, because we care about our own commitment to our safety, and we care about the people we work with. And it swells up to into everything you do, so it creates the sense of pride about the organisation you’re involved in.”

Alcoa is a data point supported by studies such as the American College of Occupation and Environmental Medicine (ACOEM) Corporate Health Achievement Award (CHAA) that we covered in our last post and which showed that companies ranking highly in the safety category outperformed the stock market by a factor of 3.

We ended that post by asking how the CHAA winners were measured/selected and whether that might introduce bias? Further, we posited whether companies with poor safety records under-perform against the market.

Firstly, the research study is published here. The measurement regime for health and safety performance is rigorous and consistent as you would expect, as is the stock market performance analysis. Where there are limitations in the methodology, the research team have highlighted them and it’s fair to say that those limitations are not material and are unlikely to impact the conclusions.

That said, companies apply for the CHAA and the winners are selected from, presumably, a group of applicant companies who believe they have excellent safety performance. While the correlation between safety performance and beating the stock market is clear and obvious, is the corollary true that companies with below average safety performance will lag overall stock market performance? This wasn’t addressed in the study but we will research this to see if we can prove/disprove the corollary.

Also, correlation is not causality. Does outstanding safety performance cause outstanding business performance?

Or, is it that those companies who are generally excellent will have excellent safety performance and were going to outperform the stock market anyway?

There’s also the possibility that companies that obsess about one thing (a keystone habit such as safety, customer service etc.) become over-achievers in their market regardless of what that habit is. Duhigg in his bestselling book The Power of Habit certainly promoted this thinking and that’s quite possibly a book that has been read by your Board members.

So, why are we obsessing over these questions? Because we’re all about ensuring that people work safely and are safe at work which means arming our readers with the information they need to promote safety to their Boards. Whether that’s through changing culture or providing data showing the correlation between safety performance and business performance, that also means providing the information to address the questions they’re going to come back with, such as:

  • how do those with a poor safety performance perform against the market?
  • doesn’t the data simply reinforce what the power of habit tells us?

The first question is a research question we can directly follow up on. The second is deeper and more difficult and not something we can easily answer. It may be that causality comes from what O’Neill called “discretionary energy” or as Rodd Wagner put it…

“A leadership team that cracks the code on keeping people safe will simultaneously drive higher levels of performance in ways otherwise difficult to accomplish. When employees believe their employer is aiming to keep them safe, it unleashes the kind of reciprocity that affects more than just the accident rate.”Rodd Wagner, Bestselling Author and Executive Advisor at SafeStart

If you’ve seen industry data that addresses a causal link between safety performance and business performance then please let us know via a comment below or via our contact page if you’d rather engage privately. In the meantime we have some research to do.

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