Investing in Leadership and Safety: The Secret Ingredient to Success

Episode 064

Mar 13, 2024

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Investing in Leadership and Safety

Is it just another tick-box exercise, or can it be the secret ingredient to your organisation's success?

"What happens if we spend the money to train them and they leave?"
~ CFO ~

"What happens if we don't train them and they stay?"
~ CEO ~

The question of return on investment (ROI) in business is crucial.
Businesses aim to make a profit, be sustainable, and fulfil their company's mission.

However, quantifying the costs of not investing in certain areas can take time and effort.

Sometimes, these areas may seem unnecessary or can wait, especially when everything is going well. Yet, when something goes wrong, we often wish we had invested the "blue money" – the funds that could have prevented the loss in the first place.

On the other hand, we spend "red money" when something goes wrong, which can be expensive. Considering the cost of safety versus accidents, the latter can hurt significantly [listen to podcast E035 in the resource section below for more on Red, Blue, & Green Money].

Hindsight is always apparent; we often wish we had done things differently. It's like the inevitability of ageing – we may not believe it will happen to us until signs start to show.

Similarly, exploring the topic of ROI in safety as a secret ingredient in an organisation requires reflection and proactive action.

Consistency is key. It's not about making sudden changes today and expecting better results tomorrow. Instead, it's about taking proactive steps every day to achieve desired outcomes in the future.

Despite the pressure for instant results in business, it is essential to take a brave stance toward proactive, consistent safety measures.

In our discussions and research, we've found that investing in leadership and safety is not just good practice; it's good business.

We aim to share this wisdom with you today through case studies and discussions on why investing in safety leadership and safety culture development is crucial for ROI.

We start with the BP Trans Ocean Deepwater Horizon Disaster of 2010.

One of the worst environmental catastrophes in US history, resulting in 11 fatalities and the release of 4.9 million barrels of oil into the Gulf of Mexico.

While approximately 160 individuals were safely evacuated, the incident prompted an extensive overhaul of safety protocols and operational practices within BP and Trans Ocean, costing the company over $65 billion in cleanup efforts, fines, and compensation.

This disaster underscores the importance of proactive safety culture and investment, highlighting the need for continuous vigilance and improvement in safety protocols to prevent similar catastrophic events in the future.

We can't predict the future as much as we'd like to, but safety leadership was a crucial component in this situation.

What could they have done differently to avoid years of challenges, not just in terms of immediate financial costs but also in the long term, including reputational damage?

People lost their jobs, and aside from the loss of lives, there were many other negative impacts. While we often focus on significant catastrophic events like the ones we're discussing today, it's essential to consider the smaller day-to-day events in our operations.

How do we improve efficiency, effectiveness, conversations, leadership and safety, so that we continually look at what is the best ROI for safety, leadership and our culture?

The 4 key areas of the Return of Investment [ROI] for Safety, Safety Leadership and Safety Culture

1- Do you understand the true cost of incidents and accidents?

The true cost is terrifying when you start to ask the questions because there are the visible direct costs, such as:

  • lost time at work
  • evacuations
  • medical expenses
  • legal services
  • claims

However, there are indirect costs and potential consequential losses that we need to take into consideration, such as:

  • equipment/product damage
  • loss of production
  • loss of people
  • light duty or slow work
  • company reputation
  • insurance premiums
  • shareholder value
  • additional supervision time
  • additional investigation time
  • HR issues
  • temporary labour
  • overtime
  • loss of clients
  • loss of contracts

You can calculate the cost per worker for a particular incident or accident by considering all associated expenses. However, many companies fail to consider the estimated value of goods or services that each worker must now produce to offset these costs. 

This concept of cost-offsetting adds another layer to the true cost of the incident, including not only monetary costs but also emotional, psychological safety, and mental health costs.

Looking into root cause analysis reveals the terrifying complexity behind incidents and accidents in our complex world. 

Investing time and resources into understanding these root causes can prevent future expenses. The true impact is often felt when incidents occur unexpectedly, leading to calls for action. 

So, when considering costs, it's essential to evaluate the investment needed in safety measures, leadership support, training, equipment, maintenance, and effective safety programs. 

When viewed in this light, the investment cost becomes insignificant compared to the potential consequences of neglecting safety measures – what we call "blue money."

1~ Take the costs and work out what the cost per worker is.
2~ Estimate the value of goods/services each worker must produce to offset this cost.
3~ Add these two together, and you get the total cost per worker for your current incidents, which is the cost of your accident/incident.
4~ Then consider investment in safety measures: training, safety equipment and safety leadership programs.

Listen to the podcast for:
~ Example:  BP Texas City Refinery Explosion (2005)

2- Safety Leadership as a Catalyst for Cultural Transformation

Safety leadership is often associated with frontline supervisors ensuring compliance and promoting safety in the moment. However, it extends beyond mere compliance; it involves creating a culture of safety within the organisation.

The pivotal role of leadership, starting from the top, encompasses modelling safety behaviours, setting expectations, and impacting organisational culture.

A strong leadership presence permeates the organisation, shaping its culture and influencing how individuals feel about challenging the status quo. Safety leadership serves as a catalyst for organisational transformation, encouraging open communication and innovation.

Investing in safety leadership involves both time and money. It allows individuals to develop their skills and contribute to a sustainable operation.

Creating an environment where everyone feels safe to speak up is crucial.

Listen to the podcast for:
** Nuala's story:  Speaking up in uncomfortable situations
** Example: Alcoa, Paul O'Neill - Transformation Through Safety Leadership
** Example: DuPont's Safety Transformation

3- The Ripple Effect of Safety Investments

We've delved into the ripple effects of safety failures, both direct and indirect costs.

But what about the ripple effects of safety investments?
Sometimes, the impacts are subtle, akin to sprinkling fairy dust.

Investing in safety enhances safety measures and boosts quality, efficiency, and team dynamics.

Trust and cooperation among team members flourish, leading to improved performance and streamlined operations.

Consider the example of Chevron, which implemented an operational excellence management system. By prioritising safety standards, employee training, and leadership accountability, Chevron saw reduced operational risks, enhanced efficiency, and long-term financial growth.

Continuous improvement is key; implementing safety systems is just the beginning. It's about ongoing adaptation and refinement to maximise efficiency and profitability.

Reflecting on past projects, we've seen the positive effects of safety-focused approaches firsthand. By holding individuals accountable and fostering meaningful conversations, trust is built, efficiency is enhanced, and incidents are minimised.

This underscores the importance of recognising the positive ripple effects of safety investments and incorporating them into organisational practices and culture.

4- Quantifying ROI: Beyond the Numbers

How do we quantify the impact of safety investments beyond mere numbers?

In industries with stringent regulations and a focus on fine-tuning processes, it can be challenging to see beyond the numbers and understand the human element of safety investments.

When margins are tight, training and development initiatives are often the first to be put on hold, raising questions about the best use of resources.

Yet, safety investments yield qualitative benefits that go beyond financial returns. Some positive outcomes are enhancing reputation, building trust, and improving employee satisfaction.

However, feedback is essential. Actively listening to and acting upon feedback fosters a culture of improvement and accountability.

Measuring the effectiveness of safety investments requires a blend of quantitative and qualitative data. Engaging in meaningful conversations with employees provides valuable insights beyond surface-level statistics.

Companies committed to understanding both the statistical and human aspects of safety often embark on safety culture transformation journeys.

For example, Trimec Transportation, a leading Canadian logistics company, underwent a profound transformation after experiencing a frightening incident.

Through deep assessment and targeted improvement efforts, they achieved significant results, including reduced safety spend, lower insurance premiums, and increased client satisfaction. Continuous improvement initiatives and ongoing performance monitoring have become integral to their safety culture.

While navigating the complexities of safety investments may require assistance, the long-term benefits far outweigh the costs.

Trimec's success story demonstrates the tangible rewards of prioritising safety culture and continuous improvement initiatives, inspiring others in the industry to follow suit.

What lessons can we draw from these insights and stories?

Investing in leadership and safety yields positive outcomes and underscores the dire consequences of neglecting these crucial areas.

Prioritising safety catalyses productivity, efficiency, and profitability improvements, directly impacting the workforce.

By reducing human and financial costs - such as compensation, fines, and reputational damage - companies foster a culture of sustained commitment to operational efficiency, leading to cost reductions over time.

Investing in leadership and safety transcends mere regulatory compliance or ethical obligations; it is a strategic investment that offers substantial financial returns, operational excellence, and a sustainable competitive advantage.

Companies that continually strive for improvement and deliver superior results attract partners and stakeholders who value their commitment to safety and excellence, fostering long-term success beyond financial metrics.

Looking ahead, as operational excellence and sustainability take centre stage, investing in safety, safety leadership and safety culture becomes not just compelling but critical.

Our mission is to empower organisations to safeguard their most valuable assets - their people - while ensuring operational and financial resilience.

After all, without prioritising safety and operational efficiency, there is no sustainable future.

It's about striking a balance between operational importance, efficiency, and safety, ensuring their consistent and equal focus for long-term success.

What steps can you take to invest in your organisational Leadership and Safety?

Firstly, it's crucial to understand your current position.
Every organisation is unique, so making the invisible visible is key.

Start with assessments.

Our website offers a complimentary safety culture quiz, providing a starting point based on individual perceptions. Feel free to use it within your organisation and encourage multiple participants to gain a broader perspective.

If you want to delve deeper, consider comprehensive assessments to measure your safety culture and organisational learning.

Engage in conversations with us to align with your people and co-create the way forward. Your employees hold valuable insights and can contribute to shaping a safer workplace culture.

For those not ready for assessments, on-site expert observations can offer valuable feedback. Our team conducts observations, interacts with employees, and provides coaching and support for leadership development.

Many frontline workers lack support in their roles, so investing in leadership training and development is crucial.

Join the waitlist for our Safety Leaders Hub, designed to provide ongoing support and resources for leadership growth.

Remember:  Investing in safety leadership isn't just a good practice—it's good business.

Don't wait until you're dealing with the repercussions of neglect.
Start investing in "blue money" now to prevent the need for "red money" in the future.

We are here to help you design your journey towards developing your safety secret ingredient.

Resources

Related Pages

Related Podcasts

  • E020 - Workplace Safety - What level of responsibility do you have?
  • E021 - The Power of Language and Metaphor in Shaping Your Safety Culture
  • E028 - Use the GROWTH Coaching Model to Move from Inspiration to Action
  • E035 - Being Proactive: Red, Green & Blue Money - It's Not What You Think
  • E044 - Compassionate leadership and Empathy: Just a nice to have or a superpower?
  • E045 - Leadership Responsibility: Part 1 of Leadership in High-Risk Industries
  • E046 - Leadership Accountability: Part 2 of Leadership in High-Risk Industries
  • E053 - Who doesn't love an acronym? T.A.L.K. a leadership power tool
  • E062 - What is your experience with leadership promotion? What help did you receive?
  • E063 - Boosting Supervisors: 8 Tips to Better Understand Yourself, Others and Create Inclusion

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About the Show

Our purpose in sharing this podcast is to have a chinwag (conversation) to help people change how they think and behave about safety. 

We do this by engaging in dialogue and testing the levels of trust and psychological safety, which are core to organisational culture. Making safety part of your DNA so that your people speak up, show up, do right, and become safer every day for yourself, your team, and your business.

We will explore topics related to organisational and safety culture, leadership, the language of risk, emotional literacy, psychological safety, conversational agility, intercultural intelligence, and whatever else pops up during our conversations—sharing our experiences and learnings. 

We intend to share nuggets of wisdom that will challenge your perspectives, potentially solve a nagging problem, share actions you can implement, and give you at least one aha moment.

And, if you enjoyed the show and gained value, please share with just one other person to help spread the word.