Safety might not be the ‘golden goose’ for business success. We unpack the complexities of workplace safety and its true impact on business performance. In a thought-provoking 2020 paper by Mark Pagell and colleagues, the delicate balance between worker safety and organizational survival is investigated. Drew voices his skepticism about the assumed benefits of safety investments, while David contemplates the long-term advantages, despite short-term sacrifices.
We examine whether a safe work environment truly enhances productivity and engagement or if it stifles business efficiency. Historical incidents like the Union Carbide disaster and BP's Deepwater Horizon blowout are analyzed to question if neglecting safety can still lead to profitability. Finally, we break down the misconception that good safety practices automatically translate to business profitability. We highlight the tangible benefits such as enhanced publicity, stronger client relationships, and improved employee satisfaction, and stress the importance of complex discussions about the actual costs vs. benefits of safety practices.
The Paper’s Abstract
This research addresses the fundamental question of whether providing a 15 safe workplace improves or hinders organizational survival, because there are conflicting predictions on the relationship between worker safety and organizational performance. The results, based on a unique longitudinal database covering over 100,000 organizations across 25 years in the U.S. state of Oregon, indicate that in general organizations that provide a safe workplace have significantly lower odds and 20 length of survival. Additionally, the organizations that would in general have better survival odds, benefit most from not providing a safe workplace. This suggests that relying on the market does not engender workplace safety.
Discussion Points:
Quotes:
“The sorts of things that you do to improve safety are the sorts of things that I thought should also improve productivity and reliability in the long run.” - David
“Which is science, right? That's what it's about. We think we're right until we get a new piece of information and realize that maybe we weren't as right as we thought we were.” - David
“Even though there is a reasonably high volume of research out there, it's really hard to look very directly at the question.”- Drew
“So we know from this data that it's not true that providing a safe workplace makes you more competitive.” - Drew
Resources:
The Paper: The Tension Between Worker Safety and Organization Survival
The Safety of Work on LinkedIn
David: You’re listening to the Safety of Work podcast episode 121. Today, we’re asking the question, is safety good for business? Let’s get started.
Hey, everybody. My name’s David Provan. I’m here with Drew Rae, and we’re from the Safety Science Innovation Lab at Griffith University in Australia. Welcome to the Safety of Work podcast. In each episode, we ask an important question in relation to the safety of work or the work of safety, and we examine the evidence surrounding it.
Today, we’re looking at another paper brought to our attention by Ben Hutchinson. If you like this podcast and what we do, you are also very likely to like what Ben does on LinkedIn and his own website where he does summaries of safety research. He’s got hundreds and hundreds of searchable summaries of safety research. Give him a follow on LinkedIn.
Drew, you picked up this paper from Ben and thought we’d cover it. Do you want to introduce your thoughts?
Drew: Sure, David and hi everyone. This paper and the episode is looking at a cliché that I personally find very annoying. This is the idea that we can justify safety management and the cost of safety management because of the cost to the business if an accident happens.
The typical way that’s presented is, yeah, sure, this might be expensive, but just imagine how much an accident is going to cost us. The reason I get irritated is because it assumes that the particular safety work that we are doing is valuable, and is actually going to prevent that accident happening, or at least reduce the likelihood of that accident happening. And we usually don’t have evidence of that.
What I thought made this paper interesting is it takes an end run around that because it’s not talking about cost versus benefit of safety activity. It’s directly comparing safety outcomes to business outcomes. It’s actually agnostic about how safety is achieved. It’s just saying, do businesses that have accidents actually tend to go out of business compared to businesses that don’t have accidents? Is not having safety regardless of what leads you there, a bad thing from a business sense?
David, your thoughts about this before we get into the meat of the paper?
David: I’ve really liked this. I guess this question is, is good safety good business? The literature review that from my PhD that we spoke about on last episode (episode 120), I found a number of papers that just made that claim. Not so much empirical papers, but lots of theory papers and even safety professional–related publications that just said, good safety is good business.
We’ve talked about this for decades. Dupont has probably been the most vocal in the 90s and early 2000s about good safety is good business. I’ve probably carried that argument myself, maybe a little bit lazy, but my argument that I always had in my mind was, the sorts of things that you’d do to improve safety are the sorts of things that I thought should also improve productivity and reliability in the long run.
We plan work more effectively, we understand the risks and issues, we proactively control for those, we have good communication, good capable workers, good equipment and resources available. The management of work to create safe outcomes, I’d always thought in the long run should create productive and reliable outcomes.
However, in the short run, I always knew that we were sacrificing maximum production to complete this safety work. Do a safety meeting means that production stops, and do an audit and get people involved in an investigation. I always thought that you invested in safety in the short-term to get a better business in the long term. That was carrying that.
Then the third piece that was in my head as I was reading through this paper was just thinking about some of the larger safety events that have happened in the last 40 years or so. Union Carbide and Bo Powell, I think the settlement cost them in real terms, about $20 million, the same year that they made a $720 million profit. It always said that running Bo Powell and the other Union Carbide facilities in a really unsafe way was incredibly profitable for that organization.
BP’s Macondo incident, 11 fatalities, but it was the environmental impacts that did cost the company $70 billion. Even Occidental is still in business today, was operating the Piper Alpha platform, 169 fatalities. It goes to show that you can make a lot of money by not being an overly safe organization.
Drew: From that list, it sounds like an accident may require an expensive rebrand or renaming of your organization, but doesn’t actually put you out of business.
David: Drew, would you like to introduce the paper?
Drew: Okay. Nice, neat title. The paper is called The Tension Between Worker Safety and Organization Survival. There are seven authors. We like to introduce the authors, but I’m not going to go through all seven of them, particularly since they’re from four different organizations.
But just as a bit of an indication of the people we are talking about, the lead author is Professor Mark Pagell of University College Dublin, who’s a management expert, primarily supply chain management, but he’s also done work like this paper looking at safety. He’s got an interesting sideline because he is an editor of a major management journal. He also does thinking and research about what makes high quality management research and avoiding the replication crisis in management.
Some of the other authors, Dr. Mary Parkinson, also a management researcher at Dublin, associate professor Anthony Veltri at Oregon State, who’s written a lot about the cost of safety and about trade-offs between safety and operations. Professor John Gray at Ohio State, did a lot of research in major decision-making in management such as outsourcing and relocation.
General theme here is that these are all management researchers, which comes from a particular point of view, but they’ve also all got interest and expertise in big picture, trade-off–style decision-making, and the effects that that have, whether it’s on outsourcing or supply chains or trade-off between operations and safety. The paper was published in the journal Management Science in 2020.
For this work, having a good team and being published recently in a respectable journal is important when you are trying to read it, because you want them to be providing a fair representation of the current state of the literature. Any one study is probably not going to be a fair answer to this question, but you do want to rely on how that one study updates and compares to other stuff that’s been written. That’s why having this team and being published in a very old, reputable journal is fairly important for the representativeness, if not the quality of the work.
I’ll also add that this paper has 50 pages worth of supplementary material containing math. You really do want good peer reviewers rather than having every reader try to make sense of exactly how the math works.
David: In reading this paper, when I read this paper, I liked a few things about it outside of the content. I liked it was quite succinct. Matter of fact, the authors weren’t trying to claim any conclusions bigger than what the findings suggest. They pointed out a number of limitations from previous research that they’d personally conducted similar to this question saying, we’d done this study but it was in only one industry and only with employers with more than 100 people.
I don’t feel like they’re trying to convince us that they know the answer to this question yet, but I think what they’ve done is laid out a really matter-of-fact argument, and have put quite a bit of time into the end of the paper suggesting what future research needs to consider.
Drew: What I really love about this paper is that the lead author is not just straw manning. He’s on record with multiple publications claiming the exact opposite to the results that they find in this paper. He just goes straight, where’s the evidence lead? Oh heck, I was wrong.
David: Which is science, right? That’s what it’s about. We think we’re right until we get a new piece of information and realize that maybe we weren’t as right as we thought we were.
Drew: Let’s get into the meat of it. The paper starts with just a really single central question, which is, does providing a safe workplace improve or hinder organizational survival?
Now, things to note about this question. Is there not actually saying does it make you more or less profitable? Because that’s a really, really hard and controversial thing to measure. They’re just literally saying, if you have a bad safety record, does that make you likely to go out of business or does that make you likely to stay in business?
This is where the management background of the authors really shines through, because they’re all coming from a market force’s point of view. Basically, from a management science point of view, if you get a large enough sample size over a long enough period of time, the market is going to make things true.
If safety is bad for business, then over the longer time, people who are bad at safety get driven out of business. If safety is good for business, then over a long enough period of time, people who are good at safety are going to survive in business. The market tells you what’s going on rather than trying to read the weekly or monthly or quarterly profit and loss statements.
What it does is it starts off by laying out two different answers to that question based on different arguments. Firstly, it’s got the arguments here, why might safety be good for business? And this is the one that the lead author Mark Pagell has got multiple papers making this argument.
The idea is that in the long term—and David, this is similar to the argument you were making—competitive advantage for a business comes from building and leveraging human capital. What makes your business different from another business is ultimately your people and how well you use those people.
If the work environment isn’t safe, that’s not being great for your human capital, not only are you directly hurting the people and driving them away, but people in those environments are going to be engaging in self-protection rather than working in the interests of improving the organization.
If you provide a safe environment, then instead of trying to look after themselves, your workforce is growing in their ability to support the business. What that means is safety is a necessary condition ultimately for a business to thrive and survive over that long term. If an organization doesn’t provide a safe environment, it’s going to be at a competitive disadvantage and on average it’s going to be driven out of business.
David, do you think that’s a fair representation of the argument? Would you put it differently?
David: I think these two arguments, this one you’ve just mentioned about the argument of how and why good safety could be or is related to good business. These arguments are coming from the literature. Like you said, Mark Pagell in this case. Then the costly regulation hypothesis, which we’ll talk about shortly is the other argument.
I hope our listeners can follow that that could be a very sound, logical argument, that if people are safe, then they can focus on doing the work they need to do and making the business better.
Drew: The other variant of that argument I’ve heard that I find actually a little bit more compelling is the idea that what is good for safety is also good for other things in the business.
That would be the resilience argument, for example, that the sorts of things that keep people safe are also the sorts of things that help the business flow more easily, are the sorts of things that improve quality, are the sorts of things that improve other sorts of business hurting errors, like major mistakes in products or major mistakes in relationships or environmental catastrophes. Being good at safety is also going to help you be good at other aspects of the business.
David: I think the contemporary safety literature would make that argument that the saying safety is an emergent property of the system or of the work. You manage the work and you know that safety and quality and reliability all become emergent properties of how well you manage that work. I think that argument again sounds sensible if something sounding sensible doesn’t make it true.
Drew: Well, let’s see if we can make the opposite argument sound just as sensible. The opposite argument says, why do we have safety regulation in the first place? Safety regulation exists because we don’t trust organizations to provide a safe workplace just out of the goodness of their own hearts. Why don’t we trust them to do that? Because businesses are rational, and if to the extent businesses aren’t rational, they wouldn’t survive and wouldn’t be around.
They’ve learned that the best way to increase productivity is to get more output out of the same costs, which is mainly out of the same workers. You’ve got a direct trade-off there, which is that as we increase the pace of work, as we decrease buffers, as we decrease slack, we increase productivity. But it comes at the cost of an increased likelihood of accidents and other harms.
Organizations that don’t provide a safe workplace gain an economic advantage. They’re avoiding costs, which in the short term are unnecessary, and they’re increasing the pace and volume of work, which means that they’re more productive, making more profits.
To the extent that organizations do have accidents, a lot of them get away without not having any direct penalty from regulators. To the extent that they do, they’ve worked out that the fines and penalties for non-compliance are small compared to the profits that they make.
To the extent that you’ve got these incentives for organizations to basically just ignore safety, then you can’t trust the market to decide whether someone’s safe or not safe. That’s why we have regulators in the first place, because your good business sense doesn’t automatically lead everyone into this safe path.
David: I think even the further argument to that is for the last hundred years we’ve had insurable workplace accidents. Even the direct financial cost of accidents isn’t borne directly by the organization. They pay an annual insurance premium, but they’re not paying them a million dollars to the permanently impaired or killed worker in their family. That’s being paid by insurance companies. You even argue there that they have an accident and they lose a person in their business, they just get a new person and it’s hardly a blink of an eye.
Drew: I guess it is actually possible to believe both arguments. You could believe the second argument and think that, okay, businesses in the short term, the best thing to do is to ignore safety. But in the long term, the best thing to do is support safety. You’d expect some businesses to be very short term going out of business but make profits first, and other businesses to be more long term, accepting the short term hit. Some risk going out of business because of the short term hit, but in the long run surviving more because of their concern for safety.
David: I mentioned these two arguments that are introduced at the start of the paper and really this paper’s just going to say these are two arguments that coexist in the literature in relation to this question of is good safety good for business? So the authors laid out those two arguments and said, well, let’s find out. Is there anything you want to talk about in relation to this question before we maybe introduce the method?
Drew: The only other thing to say is, okay, because we’ve got these two arguments, what would you expect people to have done empirical research on the question before? There are in fact quite a few studies that look at this question in various ways. But as this paper points out, the evidence is indirect, mixed, and weak.
In other words, even though there is a reasonably high volume of research out there, it’s really hard to look very directly at the question. You get some people who research, for example, does stronger regulation lead to increased business performance? Or do more frequent workplace inspections lead to higher or lower productivity?
The big problem is that if you look at it as a snapshot, there are lots of factors that affect the safety of a company and lots of factors that affect the survival of a company. Disentangling cause and effect isn’t easy.
The biggest problem is with most of the studies, you look at them and think, oh, there’s an obvious third factor here. All of the businesses which are safer and more profitable are also bigger. All the ones that are going bankrupt and are unsafe are smaller.
The problem here is the size of the company, it’s not the attention to safety. Or surprise, surprise, lots of small construction companies hurt people and go out of business. But that’s because they’re construction companies. You can’t fairly compare those to supermarkets. This isn’t an easy question to look at.
Let’s look at how these people went about it. We are looking at the US state of Oregon. The authors don’t explain why one of the authors, but not the lead author, is currently working in Oregon. Maybe it’s just because they were able to have a good relationship with the employment regulator and get some really good data.
What they’ve got to start with are 25 years of quarterly data on every organization in the US state of Oregon. What that data includes is the cost of all safety-related claims for each organization. In Australia, that would be equivalent to the workers’ compensation claim. The actual total volume for each organization, as well as when the company started and how long it survived.
They’ve done all sorts of interesting data cleaning because companies move, they change their name, they dissolve and reemerge with a new business number. They’ve done all of the comparisons and cleaning up to get nice, good dates on whether the company actually was in existence at any particular date.
What they’re doing is they’re directly comparing how unsafe the company is based on the size of its accident claims relative to its number of employees, and does it or does it not not stay in business. They’ve got nice, clean data to look at that question.
At the heart of the paper, they’re running two analyses. One is in the short term, if you’re unsafe, are you more likely to go out of business? And the other is in the long term, if you’re unsafe, are you more likely to go out of business? David, anything else you want to say about the method there, apart from like the detail of the math?
David: No. I think, like you said, there are a lot of different factors here, market factors, organizational factors, but at a very headline level, we’re looking at these two big outputs, like what is the actual cost of the accidents from a claims point of view, and do the businesses stay in business?
I think it’s a good starting point for this question. Clearly not an end point, but quite a good starting point. It’s a method that could be replicated in many states and countries around the world. If you’ve got access to workers’ compensation data and access to the financial regulator data, every quarterly report that every company has to submit, then it’d be interesting to see even if this study could be replicated a few times.
Drew: The tricky thing is that often different organizations have got jurisdiction over the different data sets, and they had to make sure that they could carefully match up the companies to make sure that they had the employment data, which is important for the size of the company, the claims data, and when the company was in business.
David: Of course. Okay, so Drew results, findings?
Drew: I’d love to do this blind, David, where you hadn’t read the paper and I could just ask you for your predictions. But yeah, what they say is, in general, organizations significantly decrease their odds and length of survival by providing a safe workplace. Your safe workplace makes you more likely to go out of business.
This effect is more pronounced for organizations that are older, larger, and have zero to moderate levels of growth. The big stable companies are the ones that mostly hurt their chances of survival by being good at safety.
Organizations that are young, small, or are growing at a negative or fast rate gain the least from having claims, and are most likely to see high claims cost harm, survival. If you’re a small, dynamic company rapidly growing or shrinking, then it’s not that bad safety hurts you. It’s just that bad safety doesn’t help you quite as much.
These findings suggest that relying on the market to make workplaces safe is inadequate, and that current regulations do not achieve their aims because they’re not sufficiently incentivizing organizations to protect their workers.
Basically over the short term and the long term, the second argument was true, the first argument is false. You might expect safety to help, but it doesn’t, being good at safety.
I’m beginning to say not to spend money on safety because we don’t know. This is purely based on outcomes. Are they good at safety? Have they hurt people or not? But being good at safety means being bad at staying in business.
David: I also wouldn’t have minded as a thought experiment doing this a little bit blind as well, because now I’m running through a whole bunch of hypotheses in my head about this relationship between safety and business.
There’s the core peripheral work. These large stable organizations that are spending a lot of time and effort on creating safe workplaces maybe aren’t focused on their operation, innovation, growth, and continuous improvement of their core work. Then in these smaller companies, obviously if you have one or two accidents and you’re quite small, then you get pretty hurt financially with the rise in insurance premiums and things like that.
Drew: Before we get too far into that, David, let’s talk a little bit about the math, because I imagine some of our readers are immediately doing the same thing and thinking of possible explanations. The math actually helps to eliminate some of the more obvious alternative explanations for what could be going on.
Firstly, could this just be because of some weird skew in the data? Probably not. The data sources I think are about as good as you can get them. For example, they’re using workers insurance data to measure the total cost of claims, which is not perfect, but is far, far better than any self-reporting by organizations or by workers, which is what usually damns these sorts of studies. You can’t trust an organization to tell you for themselves how safe they are and how profitable they are. You’ve got to use some external data and workers’ compensation claims are really pretty good as an external measure.
The only thing missing from this, which I think is interesting, is it doesn’t cover fatalities. The reason it doesn’t cover fatalities is just that they’re too rare to be useful for this statistical analysis. But it does leave open the question that, okay, maybe if you kill someone, that’s bad for business. Seriously injuring people and having massive cost of claims isn’t bad for business, but maybe killing them tips over that line because it’s got more of a newsworthy effect or something like that.
They also used pretty robust employment data for each firm. The only thing they’ve done there is they’ve ignored really, really tiny firms with five employees or less, which I think is actually reasonable, because your typical sole trader isn’t really investing in safety, and is obviously going to be put out of business by having an accident because your main breadwinner will actually be injured and out of work. So they’re really a separate case.
That left them with a lot of organizations. We are talking over 100,000 organizations for both the short term and the long term analysis. There’s no selectivity here, there’s no cherry picking of the data.
We are not going to go through the math, which I think might reassure David and some of our readers. But what I will say is that they’ve got six pages of appendices explaining exactly how they measured things and another 50 pages of supplementary material.
This is not there to bamboozle the reader. It’s not like complicated math. What they’re doing is they’re testing all sorts of different ways of doing the math in different ways to see if that changes the answer. The idea here is that sometimes your research result comes about because of decisions that the researchers make. We call that the garden of forking paths.
One way to make your results much more robust is you do the analysis lots and lots of different ways. If all of those different ways lead you to the same answer, then the answer is probably some fundamental truth of the world, not some quirk in your modeling or mathematics. It’s really reassuring to see that they’ve done all of these different things coming to the same results. That also gets rid of some of the obvious alternatives.
The results are the same across different industries. It’s not because of the industries. The results do differ depending on the size of the company, but that’s just caused by the fact that big companies are more likely to survive overall. It’s not that we get the result we get because of the big companies.
They do find that both the injury rate and survival of a company depends on where you are in the economic cycle. When you’re going through a boom period, you both are more likely to survive and more likely to injure people. When you go through a bust period, you are more likely to go out of business and you’re less likely to hurt people just because they’re doing less operational work. But that’s been taken into account as well and doesn’t affect the overall result.
That then leaves us with, okay, so what might be going on? Is this evidence not just of the result, but does it actually directly support that argument we were talking about before? Is it because the cost of doing safety hurts the businesses that are doing safety, and that companies become more profitable just by ignoring safety and accepting the risk of something going wrong?
David: Do you want to talk a little bit about what the researchers think may be going on here? And then I’d love to get your thoughts about what you think might be going on here and maybe share some of my own.
Drew: Okay. They give you firstly what they definitely can say. They themselves say that there’s no detail here of the mechanism, so they don’t know for sure what’s going on. All they know is the result.
What we can say at least is that any of the mechanisms that support the opposite aren’t true. We know from this data that it’s not true that providing a safe workplace makes you more competitive. Any theory has to actually account for the fact that providing a safe workplace makes you less competitive. But they do say, okay, that doesn’t mean it’s universal. This is on average. There could be organizations that are doing safety well and as a result are becoming more competitive. But that’s not your average typical organization.
What do they think? They think that most organizations approach safety management as comply, but comply with the lowest cost possible. We’ll do everything that the law says that we have to do, but we’re going to do it as cheaply as possible and we’re not going to do anything else.
Those organizations don’t have a lot of accidents. Just minimal compliance is enough to just have a small number of accidents, possibly even no accidents. But when you view safety as this cost to be minimized, you’re not thinking of it as an opportunity. You’re not thinking of leveraging safety to achieve other things. You are not doing the things that would be necessary to make the positive argument true.
If the positive argument is to be true, your safety program wouldn’t just be keeping people safe. It would be making them feel like valued employees who didn’t need to protect themselves, who could instead focus on helping the business. Minimal compliance doesn’t do that. It doesn’t make people feel safe. It doesn’t make people feel that they don’t need to protect themselves.
In fact, David, you and I have said in some of our other work, the opposite might be true, that your safety programs actually might be driving people into a self-protective mode to protect themselves from blame from the safety program.
But they do feed into the other argument from the costly regulation hypothesis. They have taken on this extra cost, and other organizations are not taking on this extra cost. you are just simply doing something which is not helping your organization except by keeping people safe. Just keeping people safe alone isn’t really bringing benefits to your organization. It’s just an extra cost that, from a very cynical point of view, get rid of. Keeping your employees safe is not actually an important value of a successful business.
Is that you think a fair summary of what the authors at least think, David? And what do you think about that interpretation?
David: I think I would extend some ideas from that. I was just thinking of some experiences I’ve had with organizations just recently. One organization I’m aware of last year had their most profitable year but also had several fatalities. They were struggling with this idea about how can our business be going so well financially when it’s going worse than it ever has before from a safety point of view.
I’ve seen some examples of that, albeit just one-off company examples. This week, I’ve been able to be in the field on some construction sites. I haven’t been that close to the construction industry for a while, but I was quite surprised at what I would consider a low level of physical safety. Just walking around construction sites and looking at the physical levels of safety management was much, much, much lower than I expected.
The current cycle of the construction industry, at least in Australia, is that it’s incredibly difficult to make money in, and lots of construction organizations are going out of business very much are seeing safety that argument of the construction industry in some ways—again this is a generalization from my viewpoint—at the moment are going, how can we comply at the minimum, minimum level of cost and time? I don’t think that safety is what the authors are talking about in terms of the safety that leads to the things that could make the business better. It’s just, we want to do less safety compliance and less time and less money.
Drew: One sneaking suspicion that I had is that one thing that would explain the results is if the causation was entirely the other way round. Even though they’ve taken into account the economic cycle boom and bust, they haven’t taken into account the idea that maybe you’ve got local high productivity.
The businesses that happen to be doing well, regardless of the economic climate are making money and they’re busier, and therefore putting people more at risk. Being successful causes you to not have time and attention to spend on safety because you’ve got so much operational work that needs to get done. These are the businesses, you win the contract, therefore you’ve got no time to spend on safety.
David: And I think that argument has been made in organizations like SpaceX and Amazon as two organizations that I know have been arguing that way. Like with Amazon, for example, the scale and the growth has been heavily criticized for its safety performance. The same with at times SpaceX, the scale and the pace and the growth and things like that.
Maybe just hadn’t thought about it, but having mentioned it, it’s interesting when we talked about the leading and lagging indicators and saying things that a lot of the leading indicators are lagging indicators of the lagging indicator. It would be interesting to see the direction or some of this as well.
Drew: I’m going to avoid making an on-air comment about my perceptions of the cause of safety at Amazon and SpaceX because there are lots of interpretations that might be applied. Some of them are more or less friendly towards the company and their approaches to safety. I just don’t have the evidence to safely comment on that.
David: I don’t either. My comment was based purely around publicly available information from OSHA in the US and (I guess) what we’ve seen in those organizations over a couple of years. Wasn’t to suggest any inside information or or intention on behalf of those organizations.
Drew: You can certainly make the claim based on the statistics that high operations drive lower levels of safety without any decrease in actual attention to safety just because they’re the businesses that are getting the work and doing the work, and therefore also the businesses that aren’t going out of business. You’re not hurting anyone if everyone is just sitting at home waiting for your next job.
David: Okay, so where to from here?
Drew: I think you’ve got to be pretty careful in interpreting what you should do as a result of this. Because the big missing piece is we don’t know what safety work each of the organizations is doing and how much that work is costing.
We know on average the safety outcomes, the organizations are hurting people, and we can reasonably assume that the organizations that are hurting more people have less safety, at least in some statistical sense. But that doesn’t mean that they don’t have a safety management system, or that they’re not doing safety work, or they’re not spending money on safety.
It could just mean they’re taking on riskier projects, or they’re spending less on automation and doing more manually intensive work, or they’re spending less on maintenance. That’s why people are getting hurt. We don’t know what’s causing it. We can speculate about the mechanisms.
I think our takeaways need to be careful that they don’t make claims about the mechanisms, and we just stick with these externally observable facts. Are you here to move to takeaways, David, or is there anything else you want to…?
David: I’d love to talk about the practical takeaways having just said we need to be careful what we do with this, because we’ve seen organizations follow claims like, oh, safety professionals don’t add any contribution to the safety of work. Organizations quickly pick that up and go, oh, fantastic. Let’s get rid of all of our safety people.
There could be a tendency here for people to go, ooh, let’s stop doing any safety activity and we’ll be a more profitable organization. Now, maybe that might be, but again, I think it’d be good to talk practically now because tread with caution.
Drew: I think what we can say at the very least is we should stop claiming that safety is good for business, because that is at best a dubious claim. It’s not rational to say we should spend money on safety because it will help our business.
If you try to make that claim, the risk is someone’s going to pull out research like this and beat you over the head with it, and say you are not talking based on what the evidence says. You’ve then become a very unconvincing and unreliable persuader if you’re relying on that argument and people have access to this evidence. That’s the number one takeaway is just don’t make that claim. It’s not a good claim to make.
David: We can say that good safety is good for safety, but good safety is not necessarily good for business. I think that’s a good one of those just throw-away lines that we can fall into the trap of just espousing for our entire career without critically reflecting on it. Do that or someone might send you a link to this podcast.
Drew: We’ll get onto that a little bit, but there are lots of other claims you can make. You could say good safety is good publicity. You could say good safety is good for client relationships. You could say good safety is good for winning our next contract. You could say good safety is good for keeping our people happy because our people are our greatest asset. All of those things I think are things that you can directly support. But just saying good safety is good for the business as a whole needs some intermediate step because as a global claim, it’s just not true.
Second thing that I think is interesting is even the theory that good safety is good for business, depends on this idea of human capital development. I think we often miss that step. Safety helps the business if, and probably only if it moves people out of self-protection into feeling motivated and capable to take risks and improve the business.
If your safety program is keeping people safe by making them scared, or keeping people safe through the threat of punishment, or keeping people safe by putting them under strict restrictions, or making them feel that they need to document everything to protect themselves, then your pathway for safety to be good for business is broken. It still might be good for safety, but it’s now definitely not good for the business.
David: And the third one, Drew?
Drew: Third one is I think safety professionals as part of our job need to be ready to have more sophisticated conversations with the rest of the business about profitability. This means being able to answer questions like what is the actual total cost burden of safety work in our business? Not just what’s our headcount within the safety department, but what are our statistics on how much time this takes up for other people and what’s that time worse?
Can we answer the question, which parts of our safety system are strictly legally necessary? And which ones are discretionary or voluntary? We ought to be able to answer that question. For the ones that are discretionary, we need to have a business rationale. Why are we doing this stuff that the law doesn’t make us do? It’s not enough to say, oh, it’s good for safety and therefore it’s good for the business. Why is the business taking on that extra responsibility?
Lots of reasons they could be doing it. They could be doing it because the client wants them to or because they think it’s good for winning future clients. They could be doing it because this is something that makes our company distinctive and makes us stand out. Our competitors just do what’s necessary. We do extra stuff. That’s what makes us special.
It could be that we as a company want to have more investment in human capital. You compared to our competitors. We want to keep people for longer, develop them more, have less turnover and higher human capital investment.
All of those are business-like arguments that make a business case for discretionary safety. But safety people need to be willing and able to have those sophisticated conversations about the business case for safety, not the naive and factually wrong case about the business case.
David: I really like that takeaway, and was recently involved with an organization looking at some safety practices, in particular, like incident investigation, very large organizations, over tens of thousands of incidents, and 8–10 hours of investigation per incident. It was something like 250 full-time roles to manage those investigation processes.
There were tens of thousands of administrative actions as a result, every time an alert got sent around the business and the five minutes to read out that safety alert at toolbox talks all around the world. When you look at what the actual law requires, it requires you to report those events. It doesn’t require you to do any of that investigation, communication, and administration around it. This was literally tens of millions of dollars for that one incident investigation process.
This idea of sophisticated conversations and how we think about safety work, safety clutter, the contribution, the cost, the compliance, the confidence in all of these practices, I think there’s an amazing opportunity for the safety profession to just look across the landscape of safety work activities in your business and be really businesslike about it. I think you’ll be well received by your organization by starting to have those conversations.
Drew: And being businesslike doesn’t mean that we need to get rid of loads of stuff. It may be that there are good business reasons for a lot of that discretionary activity, but we should be able to clearly articulate what those reasons are.
The final thing I want to throw in, David, this is something we don’t do a lot, but I don’t want people to misinterpret this particular piece of research. Because I think some people might read findings like this and say, oh, the way to fix this is we just make businesses pay more every time they have an accident, and we rebalance the equation by having massive fines coming from the regulator.
But that isn’t supported by this research. It would only work if businesses are knowingly making very specific trade-offs to reduce safety, to increase profits. This is your image of the fat cackling managers in the back room saying, we’re going to hurt people because the regulators are only going to find us $10,000 and we’ll make $30,000.
To the extent that such people exist, they think they’re going to get away with it anyway. They’re not assuming that they’re going to get caught. They’re assuming they’re not going to get caught. If people don’t think they’re going to get caught, they don’t get deterred by large fines. You’ve got to be really careful with using fines as a way of balancing externalities in business decision-making.
We could go into a whole heap of regulatory theory about why that’s so hard to work out the best way to do it, but you can’t just simply fix an externality like safety by imposing an external cost that usually drives really quite perverse behavior on the part of businesses rather than drives the desired behavior, not just in safety, but in all sorts of areas of regulation.
David: I think that’s true on the enforcement side, but on the regulation side itself, which is the rules and requirements for businesses, I think this research does mean a lot for regulators, to what level is regulation pitched at. and is it enough, because this research will suggest that safe businesses are not safe because it makes them more competitive or financially more successful businesses. They’re safe because they’re just morally wanting to run a safe business. That’s really what they care about being safe.
As a regulator, if you’re saying, well, the minimum level of safety provided by the regulation isn’t enough, then I think the regulator might be saying, yeah but the market will take over from there and say it could be a good business. The regulator now needs to probably have a real rethink going, well, if good safety isn’t good for business, then are our current regulations enough?
Drew: That’s a very valid point, David. If you buy the argument that the authors are making, interpreting their own work, then one of the solutions would be you’ve got to lift the minimum standard so that businesses are operating on a level playing field, and you’ve got to enforce that standard very heavily.
In other words, you are regulating to enforce compliance with a higher compliance standard. You are not punishing people for the wrong things happening. You’re regulating based on making them spend the money in the first place, not on punishing them for the bad outcomes that might or might not occur, or they might or might not get away with.
David: So Drew, the question we asked this week was, is safety good for business?
Drew: The short answer is, on average, no. At least according to this study, businesses are more likely to survive in the short term and long term if they’re hurting more people more seriously.
Take it from the Safety of Work podcast. If you want to be a successful business, it might not be the answer we’re all hoping for or in my case even expecting, but we hope at least you found this episode thought-provoking, and ultimately useful in shaping the safety of work in your organizations.
As always, you can reach us on LinkedIn or Safety Exchange, or send in any comments, suggestions, or ideas for future episodes to feedback@safetyofwork.com.