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HOW MUCH IS SAFETY WORTH?

By Dean L. Gano

Many safety professionals have been asked to determine the dollar


value of Apollo Root Cause Analysis (RCA) training. They know it is
the best process on the market; they know it will improve their
incident investigation process by an order of magnitude; they know
everyone will buy into it once they see it, yet doing a cost benefit
analysis is often very difficult. For those decision makers who do
not see the inherent value of increasing every employee's problem
solving skills, it may be necessary to provide a cost analysis. I
recently found myself in just such a position, so I will share what I
learned.

The following sensitivity analysis provides the elements needed to


do your own assessment while using an example company size of
1000 employees. All numbers, including the cost of Apollo Root
Cause Analysis training, are relative to any given situation, but this
analysis gives us the rules of the game and a ball park to play in.

Return On Investment (ROI) = Money Earned/Money Spent X 100

In Safety, Money Earned becomes Money Saved because we will


prevent the problems from happening again. Unlike other problem
solving methodologies the Apollo RCA method will prevent
recurrence of problems every time you have enough data to
understand the causes. Statistically this occurs about 95% of the
time. Money Spent is the cost of institutionalizing Apollo Root
Cause Analysis.

To calculate Money Saved we can use the National Safety


Council's number for cost of injuries. In 1997 the number was: Cost
of Injuries = $960/worker-year*

“How Much Is Safety Worth”, Reasoning and Problem Analysis –September, 1999
Copyright © 1999 Apollo Associated Services, Inc. All Rights Reserved.
Page 1 of 3
*This figure indicates the value of goods or services each worker
must produce to offset the cost of work injuries. It is an average
number derived from looking at all injuries from all work sources.

To calculate your annual injury loss, multiply your total number of


employees times $960. For example:

Total Employees ¥ $960 = Annual Cost of Injuries

If we could prevent each one of our injuries from happening again,


this calculated annual cost of injuries becomes the Money Saved.
However, since nothing is perfect, we should figure some kind of
program effectiveness into the calculation. Let's assume an
effectiveness for the first year to be 85%.

Money Spent on training to realize the Money Saved is a function of


the size of a company, but to get a handle on which ball park we
are in, let's assume a company size of 1000 employees. To
institutionalize the Apollo problem solving methods for a company
of this size a conservative cost estimate is $75,000 the first year.
To calculate the ROI, we now have a new formula:

ROI = (Program Effectiveness)(Cost of Injuries)/(Money Spent on


Training) X 100

For each 1000 employees, the cost of injuries is $960,000. (If you
have actual cost of injury losses for your company use them
instead.)

ROI/1000 employees = (0.85)($960,000)/($75,000) X 100 = 1,088%

Most companies will make capital improvements if the ROI is above


15%, so a training ROI of 1000% should be a no brainer. Please
note, this is a sensitivity study, not a detailed analysis of your
situation. We can use it to understand order of magnitude changes.

“How Much Is Safety Worth”, Reasoning and Problem Analysis –September, 1999
Copyright © 1999 Apollo Associated Services, Inc. All Rights Reserved.
Page 2 of 3
For example: if we were to decrease the effectiveness or the cost of
injuries by a factor of ten we would still get an ROI of about 100%.
If we apply the Apollo method to near misses the number of
problems is reduced by a factor of ten and the savings is tenfold.
With Apollo RCA, employees understand that stuff does not just
happen but rather everything has a cause and it can be known and
documented in a simple chart. This knowledge will prevent
problems in the first place and increase your ROI even more.
Training everyone in your company to be more effective problem
solvers should be one of your highest priorities and the cost is
insignificant when compared to the return on investment.

“How Much Is Safety Worth”, Reasoning and Problem Analysis –September, 1999
Copyright © 1999 Apollo Associated Services, Inc. All Rights Reserved.
Page 3 of 3