The Price of Imbalance: Profit Achieved at the Expense of Safety

Dec 11, 2018 9:58:00 AM

My management team just finished the arduous task of producing next year’s business plan and budget. Time, effort, forward thinking, compromises and multiple revisions all played a role in accomplishing this yearly forecast. Each year, several key projects (think $$$s here) are identified, which we believe will bring value to our clients and the company as well. Of course, from my vantage point, one of the responsibilities I have is to challenge management on what the Return on Investment (ROI) will be for these new projects. From here we prioritize and decide which ones to pursue and implement in the coming year.


ROI - Return Of Investment - Written on Blue Puzzle Pieces. Business Concept.No doubt your company goes through a similar exercise. The ROI consideration underpins so many of the final decisions on how to proceed. In many, if not most, corporate cultures this will shape the business strategy along with decisions made during the upcoming year. It will also have a significant influence on how managers and employees conduct themselves.

For anyone who has either direct or indirect responsibility for fleet safety, too often this singular ROI focus results in the unplanned consequence of limiting efforts to create and sustain a culture of safety. However, when properly understood, a focus on safety can actually deliver significant additional dollars to the corporate bottom line.

A way to address this imbalance is to introduce the Return on Safety (ROS) performance metric when developing your annual business plan. This metric applies to every business and, especially for fleet operators, provides a meaningful and thoughtful balance to ROI. Year after year, reports show that fleet drivers have one of the highest incident and mortality rates related to on-the-job activities. ROI and ROS do not compete but actually support each other in helping businesses achieve their financial goals. ROS helps management focus on what is truly important: keeping employees safe and productive by eliminating the imbalance created from staying narrowly focused on ROI alone.

Here is an example from an actual case to help simply illustrate the point. Employer X has a safety policy which outlines the permissive use of hands-free cell phones while driving. This employer pays for the cell phones and connectivity service, with the costs hitting the vice president of sales’ budget. While changes were discussed to adopt a no-cell-phone usage policy while driving, the sales management team made the case they would lose productivity from this “downtime” and it would affect their bottom line (ROI on cell phone fees). No change was instituted.

By implementing the ROS metric for analysis, Employer X would have discovered that the number of incidents occurring while their drivers used cell phones and the associated costs were significant. The sales department would need to increase their annual revenue projection by 18 percent just to cover the costs of these incidents! How was the ROI vs. ROS imbalance finally discovered? A serious at-fault crash attributed to cell phone use (distracted driver) resulted in a seven figure liability lawsuit. Sadly, this was a very expensive way to learn about the price of imbalance.

The following are some warning signs of an ROI imbalance:

  • • Leadership seldom promotes safety at their meetings
  • • Driver supervisors fail to regularly emphasize road safety or are slow to adopt various safety related initiatives
  • • The senior fleet safety person does not have access to the president
  • • The employer’s safety vision is not part of its mission statement, acknowledged business strategy or even worse, non-existent
  • • Lack of regularly recurring driver safety training
  • • No systems and metrics in place to identify at-risk drivers

If these conditions are present, it is very likely that ROS is not a metric that is currently used by your company. It may not be easy to calculate using your current financial parameters because it does not show up in your P&L statement and safety efforts are typically treated as an expense item. So how do you proceed with integrating this metric into your business plan? As always, start at the top. Accepting ROS requires senior management to have a vision that extends beyond P&L statements, one where safety becomes a mission and an integral part of the company’s culture.

If senior management is not attuned to or even aware of ROS, consider making it your mission to bring it to your organization. Fleet operators will only succeed with the help of individuals who have an unwavering commitment to driver safety, the fortitude to confront a short-term ROI mindset, and can demonstratively provide a vision which rejects the idea that profit achieved at the expense of safety is a sustainable business plan.

Art Liggio

Written by Art Liggio

Art, CEO and president at Driving Dynamics, is a risk and insurance management executive with more than 30 years of experience helping fleet-based operations manage risk and mitigate losses. Over the past decade, Art has consulted with executives and safety professionals regarding fleet safety and driver risk management covering a broad range of subjects from creating driver safety policies to establishing protocols for driver risk identification to regulatory compliance. He has orchestrated the development of a number of innovative web-based risk management / risk mitigation applications, in use today at Fortune 500 companies, property/casualty insurers and investment institutions, as well as an award-winning, online driver safety educational series that has been delivered to thousands of drivers worldwide.