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12 Questions Every Director Should Ask About Workplace Safety

By Tom Krause, John Balkcom and John Henshaw

The health and safety of the worker underpins the ability of any company to claim excellence in its dealings with customers, employees, investors, and the public.

Tom Krause

John Balkcom

T he globalization of terror, the fear of potential pandemics, and the public’s concerns over corporate misconduct have brought new gravitas to the question of safety and health in every workplace. To some, worker safety may seem a mundane issue in an increasingly knowledge-intensive economy. But in our experience, the health and safety of the worker underpins the ability of any company to claim excellence in its dealings with customers, employees, investors, and the public.

This article suggests the twelve primary John Henshaw questions every

director should ask—and expect to have answered thoroughly and well—about safety in any company. The first five frame the relationship of safety-to-value creation. The remaining seven address the

capabilities and processes whereby a firm either instills safety in the day- to-day mindset of every executive and employee—or creates an unacceptable risk of catastrophic failure and organizational incompetence.

What is the relationship between worker safety and other performance metrics in this company?

While this question may be interesting from a purely theoretical point of view, we pose it solely as an empirical question. That is, we seek to determine what longstanding statistical relationship exists between variations in safety and health outcomes (e.g., the rate of OSHA- recordable incidents) from month to month and quarter to quarter, and contemporaneous changes in financial results. The latter include earnings, cashflow (and its working proxies, such as EBITDA), and unit costs of production.

Our experience suggests these merely statistical relationships are idiosyncratic to the operations of each company, that no two companies have identical patterns. Moreover, these unique relationships when traced to root causes within a given company can be highly revealing of the organizational

impediments to both safety and profitable growth.

What should our safety goal be?

Experienced observers believe that companies that are highly successful in safety performance are also successful in operational performance. Leading companies that are viewed as “socially responsible” set tough targets to challenge the organization continuously and improve safety performance the same way they set other operational targets.

For example, DuPont is well known for striving to achieve zero workplace injuries and illnesses based upon the fundamental belief that “all injuries are preventable.” Alcoa, under the leadership of Paul O’Neill, set stringent goals for safety and reduced its lost-time incident rate from 1.86 in 1987 to 0.12 in 2002.

Even the largest and most tradition- bound organizations are capable of order-of-magnitude changes in safety performance. In addition to ensuring that a safety goal is set, a director should feel free to ask what benchmarking was done in establishing a safety goal, what such a change would mean in his or her company, what is blocking its accomplishment, and when a

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