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Cost Justification: Speaking Management’s Language

If you’ve had an injury at your facility, chances are management was more than willing to spend a reasonable amount of money to fix the issue after the fact. While taking action is a step in the right direction, unfortunately, it comes too late for the injured person, and the company. By this time, the injury and resulting costs have already occurred. Alternatively, when you talk to the same management about being proactive and investing money into an area where there is risk of injury which has not yet occurred – what is their reaction? Do they balk at your request?

Traditionally, most Health & Safety professionals rely solely on the cost of injuries – direct medical and worker’s compensation costs – to justify the money needed to make changes. But how do you do that when you are trying to be proactive, rather than reactive? How do you predict the number of injuries that will occur on a job? Can you really blame management for being unwilling to invest in an area where they may or may not see a return on their investment?

Instead of getting frustrated or giving up, try taking a different approach. Speak in terms that managers will understand – how does it affect their bottom line? What are the key measures they are responsible for: Productivity? Quality? Material Costs? What areas will affect their success? A few key measures to consider include:

1. Cost / Benefit Ratio: Compare the cost of the issues (quality, productivity, etc.) related to the job to the cost of the solution.
2. Payback Period / Return on Investment (ROI): Calculate the length of time it will take to recover the cost of improvements. Benefits can be calculated by using potential quality improvement savings, delivery improvement savings, materials, etc.

When in doubt, ask your financial or account representative if there is an accepted method for calculating the Return on Investment (ROI) for other purchased equipment. If you can show improvements in your organization's key measures through the changes you need to reduce the risk of injury, then you are creating a win-win situation. You can show that you not only care about reducing the risk of injury, but you are also conscientious of how you spend the company’s money. By using key measures other than injury costs to justify your project, you will be much more likely to get management’s attention – and approval!