Beyond Compliance: Part 3 - The Economy of Safety

In my 26 years in the EHS biz, there are a few things I now know to be true.  One of them is the dynamics in play within an organization are the reason a certain behavior - good or bad - is seen.  This is particularly true for behavior that directly affects employee health and safety as well as overall public health.

Because safety directly impacts both the individual as well as the employers bottom-line, certain basic economic principles come into play. Greg Mankiw, a professor of economics at Harvard University, identifies four factors in how decisions are made.

• People Face Tradeoffs. To get one thing, you have to give up something else. Making decisions requires trading off one goal against another. 
• The Cost of Something is What You Give Up to Get It. Decision-makers have to consider both the obvious and implicit costs of their actions. 
• Rational People Think at the Margin. A rational decision-maker takes action if and only if the marginal benefit of the action exceeds the marginal cost. 
• People Respond to Incentives. Behavior changes when costs or benefits change.

In the economy of safety, the value placed on "it" will dictate the dynamics put into play and the behavior - or culture - obtained.  If the four principles outlined above are true, then you can see how difficult the job is for the EHS manager.  Lets look at the first bullet:

• People Face Tradeoffs.

Now start with the first sentence.  "To get one thing, you have to give up something else."  In other words, taking this basic attitude of behavior, to get employee safety, you have to give up time, comfort, efficiency, money, profitability....

I mean, what other way can one see it?  To require my radio tower climber to go above and beyond the OSHA requirements by mandating he use 100% fall protection, the climber and the company has to give up something.  So in this situation we have three actors who have three different perceptions of the second bullet also in play:

• The Cost of Something is What You Give Up to Get It.

If as the EHS guy I demand 100% fall protection, the cost to me is relatively nil.  I am asking the climber to give up speed (and in some cases also his 'manliness') and I am asking my employer to absorb the cost in extra time and equipment necessary to meet my cost.  That - in a nut shell - is what is given up.  The "it" on the other hand is a reduction in the risk of the climbers death (likely) or injury as well as protecting my employer from the lawsuit(s) and costs that will most likely result if the climber falls.

So it is the "get it" where the value has to be assigned.  "Safety First" can be a slogan only or it can be a mindset.  If the culture within the organization does not place a value on safety that exceeds the value of everything else it strives for, the dynamics put into play will only be as much as the value assigned.  Which leads to the third bullet:

• Rational People Think at the Margin.

Define rational please?  Do you really think the radio tower climber in my previous post is a rational decision-maker?  To him and to many of his cohorts, he most certainly believes himself a rational person.  Were the OSHA employees responsible for putting in the "qualified climber" exemption for 100% fall protection rational?  What about the employers who know their employees climb without 100% fall protection, do they not see themselves as rational?

So again, we are at a cross-roads on how much value is to be assigned to safety.  That value is what will drive the given that a "rational decision-maker takes action if and only if the marginal benefit of the action exceeds the marginal cost".  What is the benefit of 100% fall protection in the case of this particular radio tower climber?  Will 100% fall protection only provide a marginal benefit?  Will that benefit exceed the cost?

For the life of me, I cannot see how anyone could look at that radio tower video and not come to the conclusion that 100% fall protection provides a benefit that exceeds the cost.  But the reality is that people come to a conclusion that the cost of 100% fall protection is too great a price to pay.  Hence the video.

And the question is why?  There are a whole gaggle of explanations for this, including:

• I have never had a problem all the other times I've done it.
• Our competitors don't use it.
• If it was that serious, OSHA would require it,

So here we are back at square one.  It is my job as the EHS guy to look at things based on a rational that places the highest value on something that is hard to quantify; risk.  Everything presents a risk to something perceived as valuable.  There is no such thing as zero risk, so every time you are sent out to do a job, there is the chance that you will be injured or killed.  It is my responsibility to minimize that risk based on making rational decisions where the benefit (employee/public health) will exceed the cost (time and money).

So when it comes to the mantra of "Safety First" I am your one and only rational decision-maker.  Which leads to the most important factor in how people makes decisions:

• People Respond to Incentives.

Behavior changes when costs or benefits change.  I can easily force an employee to do it my way if I have the power to fire them.  This, however, requires my 100% attention to their every effort.  Ask any parent of a toddler how difficult it is to keep them safe 100% of the time.  No, forced behavior will not work just by itself, instead it needs something else, more of a carrot on a stick.  An incentive.  You would think that the incentive to live would be motivation enough for a radio tower climber, but the reality shows otherwise.  No, something else is needed, just what that "something" is depends on a number of factors in play.

Bottom line - EHS speaking that is - is that behavior will not change if the perception by both management and employees - that safety - or the environment - is not seen as valuable.  I am making the argument here for beyond compliance - that doing more than what is required has a benefit.  Unfortunately that benefit is never going to be seen if you do it my way.  I can lower your workers comp only so much by my effort, after a certain point the very nature of the business dictates the cost.  What you will never see - if I do my job correctly - is an unnecessary or preventable death, injury, illness, or environmental impact.  How do you quantify something not happening, especially if has never happened in the past? 

 To be effective, EHS must live in a culture that values it the same way it values money.  Upper management is critical to this endeavor.  The shift away from incentives to enforcement by the EPA and OSHA is not going to reap the benefits they think it will.  Most simply because of bullet number four:

• People Respond to Incentives.

The loss of EPA's Performance Track and a new emphasis on enforcement will make the EHS managers job much harder in convincing management to go above and beyond what the regulatory agency holding the hammer is asking for.  It is all about the perception of value here.  Like it or not, that's how we humans roll.

I can give my employer peace of mind, I can give employees a safe work environment, I can protect public health and minimize environmental impacts.  I can do all of these things if - and only if - I don't ignore some basic economic principles.  But even if I take them all into account, nothing moves forward without a commitment to a principle; Safety First or Beyond Compliance.  This type of culture will all lead to a better work environment.  You just gotta believe it will, or- bottom-line speaking - see it as valuable.

Next post:  Risk perception vs. cost:  Cheap graphics to illustrate a point.

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