How Your Construction Company Can Make Safety Pay

For Roger Friede, saving more than $12,000 per employee in workers’ compensation premium costs over the past ten years only partially explains his strong commitment to safety.

Friede, president of Friede & Associates, LLC, a thirty-employee commercial construction firm in Reedsburg, WI, says what drives him the most in emphasizing safety is that “I don’t ever want to have to explain to somebody why that person’s father or husband isn’t coming home that night.”

On May 15, 2009, Friede’s company, which has never had a job-related fatality, celebrated six and a half years with no lost-time incidents. In an industry where serious hazards are an everyday part of the job, Friede & Associates’ example shows that making safety part of your company’s corporate culture can significantly reduce costs and save lives.

“Most people look at small businesses and see safety as being challenging because of resource issues. This is understandable. They are resource limited,” said Mei-Li Lin, executive director of research and statistical services at the National Safety Council. “However, small businesses are a lot more sensitive to safety and health outcomes. If there is an injury, they do not have the luxury of having somebody to replace the injured person. Also, every loss has a huge impact on small businesses.”

Friede & Associates, which has an experience modification rate (EMR)* that fluctuates between .71 and .85, estimates that it has spent approximately $3,825 per employee for its safety program over the past ten years. Even with those expenditures, the company has realized a net savings of $8,233 or more per employee during that period (the $8,233 assumes an EMR of .85) due to its low EMR and corresponding workers’ compensation premium rate.

Tip of the Iceberg

Friede & Associates, a company with roots dating back to the late 1890s, has focused on commercial construction the past sixty-four years. But it wasn’t until 1987 when Roger Friede became president, that the firm began proactively looking at safety from the top on down. “Just before that, one of our workers fell through the roof at a commercial construction site. He was seriously injured and later came back to work, but this was a wake-up call for us,” Friede said.

Over the years, the company learned what many construction companies learn: That even a minor injury results in much more than the direct medical costs covered by workers’ compensation.

“The direct, insured costs are just the tip of the iceberg,” said Ginny Frings, Ph.D., coordinator of the Center for Entrepreneurship and Innovation at Xavier University in Cincinnati, OH. Hidden, out-of-pocket costs borne by the employer typically also include such items as time lost from work by the injured employee, co-workers and the injured person’s supervisor; reduced production; recruitment and training costs for new replacement workers; damage to tools and equipment; overhead costs while work was disrupted and the failure to meet customer deadlines. These and other hidden costs often range from four to five times the direct costs of an injury/incident.

In Friede & Associates’ case, the company decided not to wait for another serious injury to occur. Instead, it began building what is now a very strong safety program. Its many key elements include such items as pre-job safety planning, company safety goals, safety training for employees, superintendent safety performance audits and a once a year external program review.

The first step the company took was to see what resources were already available. It joined an area council comprised of representatives from both construction and general industry. It also became involved in an industry trade association which provides members with “toolbox” safety talks, sponsors safety training classes, assists in evaluating the company’s safety efforts on an annual basis, and serves as a resource for questions about the Occupational Safety and Health Administration (OSHA) regulations.

Another key step Friede & Associates took early on was to put its safety program into writing. This written program, which has undergone many revisions, additions and regular reviews, includes the safety responsibilities of everyone in the company, said Terry Greenwood, Friede’s general superintendent and safety director.

“One of the first pages of our written plan lists the responsibilities of the president of the company, our safety committee and our field force,” Greenwood said. Among his safety responsibilities are to document the types of training each employee has completed (such as fall protection or confined spaces training), then let the person know if refresher training is needed; regularly monitor jobsites for the use of required personal protective equipment (PPE);  accompany employees to external safety meetings and safety presentations and work closely with all jobsite superintendents.

The latter includes planning in advance of starting a job to identify potential hazards and  whether specialized equipment will be needed, then ensuring it is at the jobsite when work begins. This helps prevent delays and reduces the risk that crew members will take shortcuts. “You are going to take shortcuts when you don’t plan properly,” Greenwood said-shortcuts which could result in serious injury.

One result of all of Friede & Associates’ safety efforts over the years is that crew members look out for each other in the field, both Friede and Greenwood say. They see top management “walking the talk,” which includes many small efforts that don’t cost much money, such as bringing doughnuts to a jobsite with a note on the box that says: “Thanks for being safe.”

“It’s continuing reinforcement,” Friede explained. “Once you start getting past that one year mark, your employees are looking out for each other. Once your safety program is out there a couple of years, no one wants to be the one to undo it.”

Steps to Take For Safety Success

• Ensure that top management is truly committed to safety. It is critical that top management be involved in safety and that a program be developed that assigns responsibilities, provides access to safety training and supports your company’s safety goals. Safety can be approached from a return-on-investment (ROI) perspective. Frings suggests that you review injuries and other incidents (such as property damage incidents) in terms of numbers of insurance claims, length and size of claims, reduced productivity, lost personnel time and similar factors. Next, determine how much you will invest in your safety program and forecast the savings/benefits. If you have never done this, ask your insurance agent or workers’ compensation insurance company for assistance. Note: ROI approaches are more difficult to measure for health hazards such as hearing loss and silicosis.
• Involve your employees. “Engaging employees at all levels in the design, promotion and adoption of your program will result in greater ‘buy-in’ to the process,” Frings said. It is important for company management to “have employees identify opportunities themselves. Then everybody becomes the ‘eyes and ears’ for continuous improvement,” Lin added. Among the specific ways you can do this are to develop a safety committee that includes representation from all levels of your work force, encourage crew members to assess jobsites for hazards on a daily basis and brainstorm on ideas for improvement, and have employees lead toolbox safety talks.
• Be familiar with all of the OSHA regulations that affect your operation. To link to federal OSHA’s construction standards, visit www.osha.gov, then click on “Regulations” at the top of the home page, then on “Part 1926 Safety and Health Regulations for Construction.” Note: It’s important to know whether any of the states in which you do business fall under a State OSHA Plan. State OSHA Plans’ standards must be at least as strict as federal OSHA standards but are often stricter. Visit www.osha.gov/dcsp/osp/index.html for more information.
• Identify the other free resources available to assist you. In addition to your insurer, trade organizations and local safety organizations, don’t be afraid to talk to the general contractor down the road about what his or her company is doing to promote safety, Friede suggests. Many other free resources are also available. These include:

•         OSHA resources. The OSHA On-Site Consultation Program, www.osha.gov/dcsp/smallbusiness/consult.html. This program offers confidential advice to small and medium-sized companies with priority given to high hazard work sites. OSHA’s Small Business Web page, www.osha.gov/dcsp/smallbusiness. OSHA’s Safety and Health Topics Web page, www.osha.gov/SLTC/index.html. Then search for “Construction Industry,” where you can find additional OSHA resources such as construction eTools. OSHA’s $afety Pays Program, www.osha.gov/dcsp/smallbusiness/safetypays/index.html, is an interactive system that assists employers in estimating the costs of occupational injuries and illnesses and the impact on a company’s profitability.
• National Institute for Occupational Safety and Health (NIOSH) resources. The NIOSH Safety and Health Topic: Small Business Web page, www.cdc.gov/niosh/topics/smbus, where you can link to numerous resources aimed at assisting small businesses, including the “Safety and Health Resource Guide for Small Businesses.” The NIOSH Safety and Health Topic: Construction Web page, www.cdc.gov/niosh/topics/construction, where you can link to many documents (some in both English and Spanish) on such specific hazards as falls, electrocution, silica dust/silicosis and ergonomic injuries.
• Center for Construction Research and Training. Electronic Library of Construction Occupational Safety and Health, www.elcosh.org. Hazard Alerts (on a number of topics in both English and Spanish), www.cpwr.com/rp-hazardalerts.html.
• WorkSafeBC Safety at Work Construction Information. www2.worksafebc.com/Portals/Construction/Home.asp (for toolbox safety meeting guides and other materials).

* An EMR of 1.0 means a company has an average safety record compared to other companies with similar characteristics in the industry. Anything above that means a company’s injury/incident rate is above the norm for its industry. The EMR is one factor used by all insurance companies to calculate the cost of an employer’s workers’ compensation premium.

Construction Business Owner, December 2009