Economic Analysis by ProQuest

VIEWS: 67 PAGES: 10

More Info
									    Business of Safety
 Business of Safety


                 Economic
                 Analysis        Make the business case for SH&E
                                                   By Anthony Veltri and Jim Ramsay




                       T     THE STREAMS OF RESEARCH that examine busi-
                             ness outcomes and SH&E outcomes should overlap,
                             but they do not. During the past 20 years, the need
                             to make a business case for confronting and manag-
                             ing SH&E issues and practices has grown (Henn,
                                                                                        ers cannot make fully informed business and opera-
                                                                                        tional decisions when it comes to investing money in
                                                                                        confronting and managing SH&E issues and prac-
                                                                                        tices. The concern for making a business case for
                                                                                        SH&E has resonated in the safety community for
                             1993; Cohan & Gess, 1994; Warren & Weitz, 1994;            some time (Jervis & Collins, 2001; Smallman & John,
                             Cobas, Hendrickson, Lave, et al., 1995; Brouwers &         2001) and the economic value of SH&E practices has
                             Stevels, 1995; Mizuki, Sandborn & Pitts, 1996; Lash-       been addressed by many researchers (Behm, et al.,
                             brook, O’Hara, Dance, et al., 1997; Hart, Hunt,            2004; Calow, 1998; Jones-Lee, 1989; Fischoff, Lichten-
                             Lidgate, et al., 1998; Timmons, 1999; Nagel, 2000;         stein, Slovic, et al., 1981).
                             Warburg, 2001; Adams, 2002; Veltri, Pagell, Behm, et           Despite the importance of enhancing ways to
                             al., 2007). To date, however, the economics of those       present the economic soundness of SH&E, firms lack
                             issues and practices is one of the least-understood        SH&E financial modeling tools to guide their deci-
                             subjects (Tipnis, 1994; Asche & Aven, 2004) and little     sion making and operating action capabilities
                             has been done to create economic analysis models           (Surma & Vondra, 1992). Several noteworthy conclu-
                             that systematically link SH&E issues and practices         sions can be gleaned from the literature review;
                             with business outcomes (Epstein & Roy, 2003).              these provide the current level of understanding
                                 SH&E tends to tie its outcomes to the overall cul-     concerning ways to make the business case for
                             ture of the organization (e.g., managerial commit-         SH&E investments (Veltri, Dance & Nave, 2003a, b).
                             ment to programs and practices) (Zohar, 1980, 2002;            1) Private-sector companies are less effective than
                             Hofman & Stetzer, 1996; Oliver, Cheyne, Tomas, et          they would like to be in presenting the economic
                             al., 2002), but not to business outcomes (Behm, Veltri     soundness of SH&E investments and in using the
                                                     & Kleinsorge, 2004). In this       information to maintain a balance between externally
      Anthony Veltri, Ed.D., M.S., CSHM, is an patchwork of research activity,          driven SH&E and internally driven competing busi-
  associate professor of environment, safety and the authors believe that many          ness performance. Organizations must understand
health at Oregon State University. He specializes business questions are left un-       the cost burdens associated with new, existing and
in assessing and formulating SH&E strategy and answered such as:                        upgraded products, technologies and processes, yet
              its economic impact on competitive        •Which products, tech-          such understanding is rare. The information support-
performance. Veltri is a professional member of nologies, processes and servic-         ing such decision making should come from design
            ASSE’s Columbia-Willamette Chapter. es tend to drive SH&E life              and process engineers who are in a strategic position
 Jim Ramsay, Ph.D., M.A., CSP, is a professor in cycle cost?                            to supply this essential data. However, if design and
        and coordinator of the homeland security        •Which SH&E manage-             process engineers are not provided tools that enable
program at Embry-Riddle Aeronautical University. ment strategies and technical          them to profile SH&E costs and profitability potential,
 He has also held faculty positions at University of tactics should be pursued and      they cannot contribute effectively to decision making.
  Wisconsin, Stevens Point, and Indiana University what level of investment will            2) Critical business decisions are incomplete when
   of Pennsylvania. He is the chair of accreditation be required?                       SH&E costs and profitability potential are not dis-
    for the Homeland Security Defense Education         •What is the potential busi-    closed throughout the life cycle of products, tech-
Consortium Association and a charter member of ness contribution over the               nologies and processes. Organizations must account
      ASSE’s Academics Practice Specialty. He holds long and short term?                for and link the activities that drive SH&E costs to the
          a Ph.D. in Health Services Research from      As a result, a firm’s invest-   products, technologies and processes that generate
                  University of Wisconsin, Madison. ment allocation decision mak-       them. A clear understanding of their total economic
 22    PROFESSIONAL SAFETY SEPTEMBER 2009 www.asse.org
impact enhances decisions about which products to         ating independent of and usually in opposition to
manufacture, which technologies and processes to          one another. However, the actual interdependence
employ, and which chemicals and materials to use.         between these concerns increasingly highlights the
    3) Conventional accounting practice tends to          need to show some type of an economic relationship.
aggregate SH&E costs in general overhead accounts.            Generally, SH&E specialists have not incorpora
								
To top