An economic approach to prevention
Joel Poix, OPPBTP
Risk prevention is of major importance in the improvement of the health and safety of those working in Building and Civil Engineering (BCE). In difficult economic times, it is generally perceived as a net cost for companies. However, at OPPBTP but also within several pro-active companies which we support, there is a feeling that prevention is rather a factor of economic performance.
Our proximity to construction site, thanks to our 180 advisors who accompany more than 8,000 companies each year, gives us the chance to monitor precisely the situation in the field .Through meticulous work underpinned by quantified analyses, validated by the companies in question, an OPPBTP team has compiled an initial collection of 101 cases of preventive action. While one must be wary of mathematical extrapolation, the results across the board are convincing: prevention does typically contribute to improving the economic performance of the company! The study’s figures demonstrate it. Prevention should not be seen solely through the economic lens, since it is clearly neither its role nor its aim. Neither should it be considered as likely to hamper competitiveness. This study testifies to that.
How can economic performance become an argument in favour of prevention?
Preventing professional risks is an absolute necessity in BCE where danger is a daily reality due to the physical dimension of the works involved. Protecting the health and safety of the women and men on our work sites is first and foremost an ethical and social requirement. It is also a clearly spelled out regulatory requirement, governments ensuring that a strict and comprehensive framework is in place within the Labour Code because of the high risks entailed. However, in many BCE companies, management and employees consider prevention as a net cost to the company. How therefore, given this context, can they be convinced to act beyond the regulatory or ethical aspects in this field? If prevention is perceived as an anti-profit measure, it is vulnerable in the world of business where economic constraint is inevitable. It is therefore important to study the link between prevention and company performance, and within that, economic performance.
The OPPBTP approach
Conventional economic arguments put forward in favour of prevention are almost exclusively cost-based: costs avoided, from potential accidents, and reduced costs, from absenteeism, for example. These arguments are not worthless, whether they be regarding reduction in WA/OH payments (workplace accidents/occupational health) or acting to reduce the number of BCE employees off-work, estimated in France at more than 35,000 per day on average. But this cost-avoidance approach is not enough to engage all companies in prevention.
OPPBTP wished to go beyond that sphere by speaking of economic performance and by also assessing the positive economic factors brought about by preventive action. A study was therefore launched in 2010 with the aim of researching a potential link between prevention and performance. The field work consisted of researching examples from within companies, in an attempt to measure the link, in order to establish a method for understanding, replicating and convincing.
In this way:
- the study covered the 27 companies visited, encompassing 90% of the occupations in the sector, and 101 preventive actions were studied in detail;
- a methodological tool was designed in order to identify and characterise a preventive action, and to gather the data enabling all the economic impact of those actions to be assessed; each case was characterised based on the company(size, occupation...) and the action itself (its OTH type-Organisation, Technical, Human; its motivation; the risk involved);
- an economic analysis was then made, per action, based on a before/after state of all the positions impacted and the results obtained regarding prevention (risk eliminated or reduced).
Prevention is also a factor of economic performance. An exemplary prevention record
Of course, we focused, initially, on qualifying the impact in terms of prevention of the actions in the cases under review. These impact were categorised according to four criteria:
- level of physical safety prevention, in other words the aptitude to prevent an accident able to alter the physical aptitude of an employee;
- level of health prevention, in other words the aptitude to prevent the alteration of an employee’s health; this deals with differed risks capable of provoking an occupational health issue;
- level of stress and strain prevention;
- level of staff development of each employee concerned.
The prevention analysis of the 101 cases assessed is indeed excellent, with the risk being eliminated or significantly reduced in 67% of the cases, and positive results across the board.
An unequivocal return on investment
In the vast majority of the cases analysed, we were able to measure the economic impact of preventive action undertaken, and the most common outcome was a net positive impact. When this was not the case, profits were indeed generated but did not cover all the costs.In order to level out the differences in values (the sums in question ranged from 100€ to 600,000€), we chose a relative indicator, the return of prevention: profits over costs. Consolidating the outcomes of the 101 actions reviewed, weobserved an overall return of 2.19, in other words for every 100 Euros spent on preventive action, the economic benefit is219 Euros.
Purchases: better exploitation of resources enables gains to be recorded against this key item.
Quality: 80% of the actions reviewed are related to gains linked to quality, although it was not always possible to quantify these.
Profit: 13% of the actions reviewed enabled higher company turnover and profit to be achieved, by opening the door to associated activities enabled by the action in question. These benefits were re-allocated and put to their best possible use by the companies involved: recruitment (43% of them),investment, to maintain profit and competitiveness when faced with widespread rising costs.
Prevention is within everyone’s reach
Prevention is accessible: 24 actions reviewed represent costs of less than 5,000€. And they are the ones with the best return (more than 20!). The actions with the best return were related to product changes and method changes.
Small businesses have even more to gain: small businesses are very aware of this since, in our sample, they are theones which benefit from a return greater than 3.
Cash flow is balanced: the average payback, the speed at which the expense is covered by earnings, is 1.5 year. This short time frame enables funds to be spent without implying a long period of cash flow burden during difficult financial times.
Regarding quality which only accounts for 2% of positive benefits, it was often difficult, or even impossible to quantify the impact in figures, without simply making unverifiable hypotheses in the short term. However, the qualitative assessment of each of the 101 actions shows that 80% of them have an impact on quality. If the raison d’être of prevention is acting against risk, its implementation is also to the economic benefit of the company.