Voice of Experience: The Cost of Business
Sadly, accidents in our industry continually occur even though they are avoidable. I have spent the better part of 46 years teaching safe work practices, rules and regulations in an effort to prevent accidents from happening. However, in all the time I spent on the job, from my start as a helper on a line crew until I was promoted to line crew supervisor, I never really considered the costs of injuries or property damage. Due to the culture of the industry, the costs were seen as just part of doing business. In this article, I want to take a few minutes to share with you the costs of accidents.
I found out a long time ago that mentioning the costs of accidents while presenting safety training is like opening a Pandora’s box. I’ve heard you should never mention the costs of accidents, injuries or fatalities because it sends the wrong message, but in fact, we need to consider how accidents affect the bottom line. The profitability of a company determines how resources are acquired and wages are determined.
Who You Work for Makes a Difference
We may all do the same type of work, but the consequences of costs are not at all the same. If you work for a contractor, costs are everything. The company will cease to exist if it is not making a profit. If incident and accident rates drive up the experience modification rate (EMR), the company can’t qualify to bid on jobs because an EMR of >1 is an automatic disqualification with federal and state government jobs and with many investor-owned utilities. The perceived risk is greater with a higher experience rate.
OSHA’s multiemployer citation policy must be considered because the host contractor is at risk for citations if the contractor exercises unsafe behaviors and unacceptable work practices, which can lead to accidents and injuries while working on the host’s system. Also, the contractor can be influenced to operate in a production culture, in which people believe that production is of greater importance than safety. That type of culture will ultimately lead to catastrophe.
Tools, trucks and materials are often treated as necessary expenses, but employees and safety training are viewed as operating and maintenance expenses that may be considered optional and unnecessary. In reality, anytime contractor companies reduce expenses by increasing production by safe, efficient employees, they increase profits. Personal and vehicle accidents that result in injuries and property damage are costly and preventable. A reduction in accidents would certainly position the company to be more competitive and allow management to spend the money on needed resources to increase profits even more.
Investor-Owned Utility Employees
I worked for an investor-owned utility for 40+ years and can honestly say the true costs of accidents were never realized by field employees. Public service commissions are limited to a certain amount of profit or return on investment. Also, if the state or area you operate in is deregulated, there is even greater emphasis on a company’s profits and expenses. In the past, depending on the company and how profit centers were budgeted and managed, the workers’ compensation costs were not even known to business unit managers because workers’ compensation was funded and bills were paid from a corporate business unit under risk management or workers’ compensation. Employees certainly shared concerns regarding the injured, vehicle accidents and third-party property damage, but we never realized the true costs because we never had knowledge of the amount of money that was paid out.
A good friend who also was a mentor to me early in my safety career developed and shared with our safety and health staff a formula that helped us understand the hard costs. It didn’t, however, consider the soft costs of accidents and injuries. The formula used only the average cost of all OSHA recordable medical attentions. By adding up all costs of OSHA recordable accidents and determining the profit margin on the sale of residential rates for electricity, you can determine how many houses of revenue the company loses per year to pay for a medical attention. It will certainly surprise you, but this still doesn’t reflect all the costs. I have read in many articles that a fatality costs an average of $1 million in hard and soft costs. When an employee dies, it is a tremendous expense because not only does a company lose the production value of that employee, but another person must be hired and trained to replace the deceased employee.
Cooperatives and Municipals
Employees who work for cooperatives and municipal utilities have to answer to their board of directors and customers. Every penny of additional expense increases the rates the customers pay and decreases the amount of profit sharing available for redistribution to the customers. All the other facts in the previous section also apply here.
Anytime a business unit increases costs due to unnecessary expenditures on vehicle accidents, property damage, injuries or fatalities, the company reduces its ability to provide additional resources to employees to increase safety and productivity. This is extremely unfortunate because every employee taking on a safety leadership role can make a real difference in accident prevention. Imagine for a moment that all medical attentions were eliminated and that all vehicle accidents no longer occurred because every employee stepped up, accepted responsibility and accountability, maintained focus, recognized all hazards and took measures to prevent possible incidents. What would happen to not only the bottom line, but to the utility family?
I am sure none of your written job descriptions or expectations require anyone to be injured, be involved in vehicle accidents or cause property damage to perform their work. In this hazardous industry, it’s extremely difficult for an employee to go their whole career without being involved in any type of incident. There are employees who have done it, and I commend them. It wasn’t just the so-called “luck bucket” that helped them with their accomplishment. The challenge to all of us now is to work smarter, not harder, to prevent incidents from happening. Today’s workforce is as intelligent as any have ever been. Use all of your resources, be your brothers’ and sisters’ keeper, and don’t let anything happen to anyone around you. The costs of business will be reduced and employees will reap the benefits.
About the Author: Danny Raines, CUSP, safety consultant, distribution and transmission, retired from Georgia Power after 40 years of service and opened Raines Utility Safety Solutions LLC, providing compliance training, risk assessments and safety observation programs. He is also an affiliate instructor at Georgia Tech Research Center OSHA Outreach in Atlanta. For more information, visit www.electricutilitysafety.com.