Producing a business plan and budget requires time, effort, forward-thinking, compromises, and multiple revisions in accomplishing a yearly forecast. Each year, companies identify key projects which they hope will bring value to their organizations and customers. One of the responsibilities of leaders 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. 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.
The ROI of Safety
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:
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.