Return on Safety Continued from page 37 here is an assessment of the success of our safety mea- sure. This just adds another component to the equa- tion to account for most mitigations being less than 100 percent effective. Think of training or personal protective equipment (PPE) as examples, both of which rely on human behavior for implementation. Fair warning: the calculations used in this article make some assumptions; they’re scientific, educated guesses. So are the financial models we use every day, though. As long as we’re using these tools with eyes open, we can use ROI estimates—even imperfect ones—to supplement other information toward better decision making. After all, safety management systems are intended to provide a risk-based, businesslike set of tools for managing safety. With the appropriate caveats in place, let’s look at an example problem in a fictitious company with 22 locations across the continental U.S. providing air- craft maintenance and FBO services. Our make-believe company has just under 1,000 employees across its bases, and is currently experiencing the following: On-the-job injuries Aircraft damage events Count Average Cost Annual Total 24 $ 38,000.00 $ 912,000.00 9 $132,275.18 $1,190,476.62 2017 Total: $2,102,476.62 OSHA reports that the average cost of a recordable injury, inclusive of wages, lost time and medical costs, is $38,000. Including reputational cost, consequential damage (like loss of use or diminished value) and repairs for aircraft damage, the average cost of ground damage in general aviation is just over $132,000. The company safety committee and safety manager have worked together to identify common themes, and they believe there are three risk treatment strategies worth investigating: fatigue management training, addi- tional line personnel and contrasting paint on hangar beams. Of course, not all mitigation efforts are the same, and some may require a learning curve, but the committee believes that 25 percent of aircraft damage events could be prevented by having an additional line technician on the busiest shifts; that fatigue management training would reduce five per- cent of aircraft damage events and 15 percent of on-the-job injuries; and finally, that contrasting paint on hangar beams would reduce five percent of aircraft damage events. All of these are estimated effects, as noted, but they are realistic estimates supported by data and experience. We’ll also want to adjust effectiveness based on things like train- ing completion time, implementation time for painting, and turnover’s effects on the hiring or scheduling process. For this calculation, let’s assume the committee has assigned effectiveness probabilities of 80 percent for fatigue manage- ment training, 75 percent for additional line personnel and 85 percent for contrasting hangar beams. Items that may affect the project’s success are factors like budget authority, a strong commitment from senior leadership, agreement on project deliverables and objectives, and past experience of the implementation team. Remember that assessing the probability of success isn’t a requirement for calculating ROI, so you may choose to ignore it for your own project. Based on our assumptions, our formula now looks like this: ROI= (R(LSTs) x Ps + R(Training) x Ps + R(Paint) x Ps) - Costs Costs Where: R(LSTs) = Returns on scheduling additional line service staff R(Training) = Returns on fatigue management training R(Paint) = Returns on painting hangar beams in contrast Ps = Probability of success as a percent value To complete the formula, we must calculate the costs (based on reductions in damage and injuries) and then input costs. The safety committee’s review reveals that over the next year adding a training module on fatigue management to the learning management system will cost the company $36,000, time and materials for paint- ing beams will cost the company $22,000, and addi- tional labor costs to add personnel to busy shifts at targeted locations will add $300,640 in expense. ROI= (.8(297,619) + .75(196,324) + .85(59,524) - 300,640 300,640 ROI= 0.45 or 45% So, with conservative, weighted estimates, we’ve cal- culated that implementing all three suggested measures Continued on page 40 Aviation Business Journal | 1st Quarter 2018 39
