Management System Success is Management Success

   

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Interested? Go to the Succes in Safety page and have a look at PDF copies of my two books:

Risk Management, Safety and Control of Loss - Protecting Your Organization

Making Your Future - In Business and in Other Parts of Life 

 

 

 
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Unwanted Event Consequences

Unwanted event consequences could be many and multiple and, depending on the character of the event and the circumstances that are present during and after the event, may include:

  • Property damage to product, buildings, installation 
  • Environmental damage 
  • Personal injury, fatalities 
  • Loss of information 
  • Damage to company image 
  • Liability claims, product, contractual, other 
  • Delivery problems 
  • Loss or disappearing of goods 
  • Loss of customers 
  • Loss of market 
  • Loss of work days 
  • Personnel turnover 
  • Production delays
  • Quality problems
  • Waste

 

Peter Drucker

The first duty of management is to survive and the guiding principle of business economics is not the maximization of profit – it is the avoidance of loss

 

Unwanted event consequences are not limited to the more visible losses, such as: injuries and property damage, and may occur during the execution of work and decision making at every level in the organization and within each discipline. Not properly carrying out work may mean that one person cut off his own thumb, another person may close an unfavorable contract while the third takes unnecessary risks by marketing an insufficiently tested product and others may design an unsafe product or purchase materials with unnecessary risks.

 

Risk identification should be the first step in preventing unwanted event consequences.

Unwanted event consequences, result of improper functioning of the management syste 

The often preventable and unnecessary costs of accidents, incidents and other unwanted events can have an important influence business results, ranging from reduction of financial results to termination of activity. Although exact figures are often missing as most companies do not register those - unnecessary – costs, there are indications that these costs could reach 5 to 10% of the gross national product, or 20% or more of production of individual companies. Preventable “failure costs” in the construction chain in The Netherlands, has for years been between 5 and 10% of turnover and increasing from 7,7 % in 2001 via 10,8% in 2009 to reach 11,4 % in 2010.

Different losses - common causes

At the beginning of this page, I listed different type of losses resulting from accidents, incidents and other unwanted events. Different losses, but often with common causes. Just find out by yourselves what causes - on the horizontal - may have contributed to the losses - on the vertical.

Different losses - common causes

Accident Triangle or Pyramid

There are many accident triangles or pyramids. If you search on the Internet you will find them with different descriptions and different numbers. One of the first was the accident ratio study that was carried out in 1969 under the guidance and supervision of Frank E. Bird, Jr. at that time Director of Engineering Services for the Insurance Company of North America (INA). The study included analysis of over 1 3/4 million accidents that were reported by close to 300 companies that represented over 20 different groups and employing close to 2 million employees working over 3 billion hours during the exposure period analyzed. The result is shown below as the "accident triangle".

Accident Triangle showing relation between unwanted events 

 

 

The message in this is that you can gain tremendously if your accident, incident and other unwanted event cause analysis goes deep enough - into the basic or "root causes" and the management system. Use a classification system to pick out the events that are serious enough to get serious attention and broaden your scope to get the multiple benefits from an in-depth single event cause analysis; consequences of unwanted events are often consequences of management system failures and can be prevented.

 

 

Accident triangles or pyramids tell us this: there are many more accidents or unwanted events than there are lost time injuries which are traditionally the focus of industrial safety.

 

The bottom of the triangle is formed by "incidents", substandard acts and conditions where "substandard" means that they are not in line with proper work methods, instructions or procedures, possibly because these methods and procedures are not correct or outdated or maybe even not available.

 

Please bear in mind that the consequences of an unwanted event may range from no visible loss (an "incident", "near miss" or "near loss") to catastrophic and will depend largely on:

  • the circumstance at the time of the event
  • the effectiveness of the emergency actions and Post Event plan

These incidents are unwanted events that could have resulted in property damage, injury or other loss under different circumstances. They can be a good learning source to also improve the management system. Use risk classification to select the incidents that are worth an in-depth investigation and cause analysis.

 

Including property damage, other losses and substandard acts, conditions and behavior of people as part of controlling unwanted events offer much greater potential for improvement than only looking at the injury type event.

Accident Cost Iceberg

Experience in North America and other countries has led to the assumption that the costs resulting from accidents could be 50 times or more than the costs associated with injury alone (medical costs and compensation costs).

 

 

Louis A. Allen

Minimizing loss is as much improvement as maximization of profit

 

 

In 1966 Frank E. Bird, Jr, when working for Lukens Steel wrote the book "Damage Control" to in fact say: "hey guys there are much more accidents and they cost a bundle". Did his message come across? Hard to say .. in 1997, 30 years later, he wrote the book "The property Damage Accident" with the same message. Even today and in high hazardous industry, safety is still measured by red and green lights at the gate referring to lost time accidents: one million hours without an accident meaning one million hours without a reported lost time injury.

 

While there are more of these accidents costs icebergs to be found through the Internet, they all point into the same direction: the cost of substandard work and conditions is much greater than those of injuries alone. It follows then that there are much greater cost reduction opportunities by having a broad look at accidents, incidents and other unwanted events.

 

 

 

 

Depending on your profit margins you may have to sell quite a lot to make up for the costs of accidents, incidents and other unwanted events. The table below indicates this.

 

 Sales figures to make up for losses

 

Do you know the annual losses caused by accidents, incidents and other unwanted events?

If annual losses from accidents, incidents and other unwanted events total $ 10.000 and your profit margin is 4 %, your sales people have to bring in $ 250.000 in addition to what they are doing already. Realizing this, you will understand the quote below from management guru Peter Drucker.

This cost of accidents calculator may give you an indication of what the the financial consequences are of accidents in your organization. Please note that the basis for these calculations comes from data applicable in the USA. Also look at information provided by the United States Department of Labor (OSHA).

 

 

Peter Drucker

In case of keen competition and low profit margins, learning from accidents can contribute more to profits than an organization’s best salesperson.

 

 

An effective (safety) management system can help you to bring down the unnecessary cost of unwanted events. The 17-step process may be your guide to set up such management system.

 

 

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