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Making the Business Case for Safety Management Systems

Effective safety management systems (SMS) have been found to lower insurance and operational costs, make more effective use of investments and increase employee morale.

These are benefits that can be realized by any company, regardless of its size. Implementing a strong SMS should be a compelling part of doing business.

Here's how to make the business case for a SMS at your company:

Fewer Incidents, Happier Employees

Incidents on site are bad for everyone. As the National Safety Council (NSC) noted in a recent white paper, when an incident happens, the injured employee suffers, morale takes a hit  and the company incurs costs for lost production and workman’s compensation.

A SMS can work to avoid these consequences by preventing the incidents that cause them. While no system can comprehensively prevent every incident, most can account for the leading causes of incidents.

Incidents and production delays can demoralize workers and create a culture of unsafe behavior. In smaller businesses, as the NSC notes, even a single incident involving one employee can slow or stop operations, challenging everyone else to fill in gaps.

Workers are satisfied when they can do their job safely and rely on their team, making a strong SMS an important part of your workplace culture.

More Productive Operations

Productivity is an indicator of how well an organization meets its goals. Incidents slow or stop production, taking important employees and financial targets with them.

In a survey of Chief Financial Officers, the NSC found that 40% said productivity was the greatest benefit of an effective workplace safety program. When a company can deliver on safety – and deliver reliably – it is more healthy and robust. An effective SMS strives to increase productivity by preventing the most common causes of downtime and harm to employees.

Less Risk and Insurance Payout

Implementing a SMS does not just prevent individual incidents but costs associated with an incident. Drawing on research from OSHA, the NCS white paper noted that preventing each lost time injury or illness saves a company $37,000, a significant sum for any business. The most unfortunate incident, a workplace fatality, can cost nearly $1.4 million on average, the white paper found.

While lost productivity can often be recovered, a costly insurance payout can affect a company for years. With a SMS in place that works to prevent common incidents, your workplace is more likely to avoid the types of injuries that require compensation.                                           

Fewer Fines and Lost Investors

A SMS can also result in fewer fines and more interested investors. The NSC white paper found that some investors are already screening target companies by looking at their workplace safety and health measures. They can screen out potentially underperforming investments by assessing safety incidents and the company’s likely returns.

The Occupational Safety and Health Administration (OSHA) has long levied fines on companies for safety violations. Now those fines will be much more costly. In 2015, Congress mandated that federal agencies revise their fines for inflation on an annual basis, and OSHA's maximum penalties, which had last been increased in 1990, are now 81% higher in 2017.  State run OSHA plan states  must at a minimum adopt the new federal annual maximum penalty levels. Under the new rates, which took effect January 13 of 2017 , the maximum penalty for a serious or other-than-serious violation is $12,675 per violation, for failure to abate $12,675 per day beyond the abatement date, and for willful or repeated violation is now $126,749 per violation. 

Implementing a SMS is the right choice to boost employee satisfaction and morale, save money across the company and build public trust.

Find even more information you can use to help make informed decisions about the regulatory issues you face in your workplace every day. View all Quick Tips Technical Resources at www.grainger.com/quicktips.

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DISCLAIMER:The information contained in this publication is intended for general information purposes only and is based on information available as of the initial date of publication. No representation is made that the information or references are complete or remain current. This publication is not a substitute for review of the current applicable government regulations and standards specific to your location and business activity, and should not be construed as legal advice or opinion. Readers with specific questions should refer to the applicable standards or consult with an attorney.

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