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Building the business case and return on investment for preventing MSDs

Musculoskeletal Disorders Symposium 2017

Olivia Yu

Presented by: Olivia Yu (UQ)

Run time: 35:01

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Presentation 9: Building the business case and return on investment for preventing MSDs

Presented by: Olivia Yu (UQ)

[Start of transcript]

Madonna King:

Okay. So welcome back to the last break out section of the day, and this is Investing in MSDs. Is it worth it? presented by Olivia Yu. And Olivia is a UQ PhD student who's undertaking her project called Evaluating the role and benefits of calculating return on investment of workplace health and safety in Australian businesses.

Olivia is currently working with the Office of Industrial Relations' Data and Evaluation Branch, and today she's going to discuss some of the common elements of a cost-saving MSD prevention solution and demonstrate a practical way to measure a variety of factors to justify the costs and benefits.

Ladies and gentlemen, please welcome Olivia Yu.

(Applause)

Olivia Yu:

Thanks Madonna.

So, why do we invest in MSDs? So the obvious answer to that is obviously we want to get home safe and sound at the end of the day. We don't want to be injured. And obviously we want to prevent further injuries and illnesses from happening in the workplace if they have happened in the workplace in the first place.

But to understand why we actually invest in the first place, we have to understand the barriers and the drivers, so basically the motivating factors behind putting money in towards MSD preventions.

So insufficient resources is usually one of the largest factors, and that's including human resources. So obviously looking at whether you have the right skills, so either ergonomic expertise or hazardous manual task competency. And so if you don't have the right person for the right job, obviously you're not going to be able to assess and evaluate the risks in the workplace effectively.

Second obviously is cost, so monetary resources. So if you don't have enough money, you're going to have to find I guess inventive ways of assessing these risks and managing the risks. Regulatory compliance – obviously we have our Work Health Safety Act and Regulation. It's our duty of care to ensure that we manage our hazardous manual tasks in the workplace. Obviously we have to comply to these laws otherwise we go to court.

Lack of cost benefit or calculation methods or return of investment methods – so this is obviously looking at how do you actually evaluate it. A lot of safety professionals don't understand where to start even in terms of justifying some of the costs and benefits, and so thereby they just put in a couple of numbers, they hope for the best, they hope that I guess the ethical and the moral reasoning behind investing in MSDs is enough sometimes. And that's usually for your smaller businesses.

And the fact that workplace health and safety isn't profitable – so that sort of obviously ties in to the regulatory compliance as well. They see that investing in MSDs or health and safety in general is just ticking the box. They do it because they need to, not because they really want to.

So some of the drivers which we obviously as health and safety professionals understand is that legal compliance, yes, that is a driver, we have to do it, but that ties into your corporate social responsibility and your reputation and public image. Looking at Dreamworld, that's obviously a business you don't want to be when an incident happens. So their reputation and their public image has taken a huge hit because they didn't manage media. They also didn't manage the actual incidents and the follow up and the return to work properly.

It's cost-effective. A lot of businesses do see that with investing in MSDs in hazardous manual tasks there is a huge productivity gain and improvement. And so as Robin mentioned, in participative ergonomic programs they see that one of the major I guess buy-ins is the fact that there is productivity gains and of course health outcomes. So reducing strains, sprains, tendonitis, things like that, obviously is one of the major reasons why we actually invest.

So ROI, basically it's a glorified cost benefit analysis. So performance measure – that effectively measures and evaluates the efficiency and the cost effectiveness of an intervention. So basically it evaluates whether your intervention is even going to generate a profit. So it's often used to compare multiple options, dollars to dollars. It's obvious to people. It's easily understood. And it often expresses a percentage or a ratio. So dollars of benefits to dollars of costs. So basically am I going to get more benefits in terms of dollars over my costs that I invest?

So the reason why we even justify these costs or evaluate and I guess do return on investment evaluations is to answer questions like how much does it cost upfront? What about some training? How long is it even going to take to roll out? How much will it cost over the lifetime of the project? So you're putting in a million dollars, the project's five years. It's $250,000 a year. Is it even worth it? How does this impact on our KPIs? Obviously a lot of senior management have KPIs regarding putting money in towards health and safety initiatives. Also looking at I guess how many you do as well. Does it benefit the business in any other way? So not just looking at reductions in injuries and illnesses, but also productivity gains, reductions in workers' compensation savings. That's usually a huge cost saving there as well.

How much of our budget is it going to use? That's self-explanatory. Is productivity going to be affected negatively or positively? If you're going to implement something, is it actually going to take time off from your workers in performing their actual jobs, or in fact does that even matter because the amount of time that they save after implementing this program is actually going to save you a lot more?

And what are our options? Give me a comparison of the cost-effectiveness. Obviously you usually compare option A versus option B, and seeing which one is either more effective in terms of I guess positive health outcomes or either in dollars.

So we all know what should be generally included in a cost benefit or a return on investment, but how do we actually go about doing it? And these are some of the major I guess elements that are included in it. So I guess this presentation gets down to the nitty gritty, the numbers of what should be involved in a cost benefit or a return on investment, and so hopefully that's what you're actually here for.

So things like training costs – does it actually require you to train the workers to use this new intervention that you're implementing? The cost of the intervention – so either with hiring an ergonomic consultant, the actual capital expenditure that you're forking out. Cost to actually implement – so the amount of time I guess that you've consulted with your workers, consulting with senior management, actually putting it in place, getting labourers in to maybe install whatever it is. And also obviously maintenance as well – do you require it to be maintained every six months, a year, or if the lifetime of the fixed plant is 10 years do you even need to maintain it, unless it's every five years. So it's pretty low maintenance cost there obviously.

And some of the major benefits that we found, especially in not just industry but also research as well, are sick leave reductions, so absenteeism, avoided cost of injury – so you're obviously implementing something to reduce the number of injuries, so you're going to prevent I guess you forking out the amount of money to actually manage the injuries, for example return to work, replacing these workers. Productivity improvement – so efficiency gains, is there going to be a 10 per cent, 20 per cent improvement in productivity, are they going to move faster. Quality improvements and obviously workers' comp reductions – so savings of anywhere between $2,000 to $20,000, just depending on the type of business and obviously the severity of the injury itself as well.

So unfortunately I can't name the business as they haven't allowed me to use their name, but the business itself, they're in that sweet sort of small/medium enterprise type of manufacturing industry with about 76 employees. So these are blue collar workers, labourers.

So a bit of background, statistics of their injuries. From 2012-13 to 2016-17 the number of claims actually reduced by about 40 per cent. So that's really good results, and that's because their business found that because obviously the number of claims was quite high, they decided, 'We need to do something about it'. And their major injuries were to the upper limbs, so the shoulder, the wrist and the hand. However as you can see, the average cost of claims actually increased by 120 per cent, and that's because the severity of the injuries actually increased. And so this was a major issue and they sort of were like, 'Well what can we do to actually reduce that cost of these claims?'

So the task itself. So they make roller doors, like commercial and retail to garages, shedding, warehousing and all that kind of thing. So they have a set up where these parts of the door are lined up in about two or three rows, and so workers go around with the trolley with a cardboard box and they pack and pick out stuff from these different boxes. And the reason why they have to actually manually pick it out is because they get these orders and all these orders are different because they're different types of doors. And the fact also is that the imports of these parts, a lot of them come from China, and so the I guess dimensions and load is quite bearable, ranging from anywhere between 10 kilos to 50 kilos, and so size of boxes as well. And so they manually pick out these things, and that's on their little trolley.

And then they put it on a scale. So they pick up this box, and this box weighs anywhere between nine to 16 kilos, put it up on to the scale from the trolley they're put on, on to a scale and then on to a pallet, which usually is on the ground. So the actual task itself takes about two minutes, and so they were doing this for about an hour and a half every single day 48 weeks of the year.

So obviously as you've already assessed there are issues with posture, with duration, and so they decided to buy pallet lifts, so bringing up the pallets from the ground to the waist level. They purchased trolleys with inbuilt scales, so they're eliminating that entire task of moving it from the trolley to the scale. And also invested in a vacu-lift, so instead of them handling the box itself, 15 kilos – I definitely couldn't do that all day – so using the vacu-lift and then placing it on to the pallet where it would then be shrink wrapped and then delivered to whoever ordered the orders.

That's them placing it.

So this is the nitty gritty part of it. This is where the numbers come in and where a lot of the micro-factors I guess as part of this evaluation, the return on investment. So what they did with the initial implementation and the initial identification and assessment is that the safety and rehab advisor went to a PErforM workshop run by WHSQ. So she took the knowledge and the skills back to the workplace and did a PErforM assessment. And so this actually took a bit of time, because she did it with 10 or so employees and did it properly to ensure that everything is all good and dandy. And then decided to purchase a mini forklift. So that would carry the wooden pallets into the workspace. Because it used to be two workers carrying in these heavy wooden pallets on to the ground and then lifting boxes from the ground to the scales and so forth.

They bought 11 of those pallet lifts to bring it up to waist height – obviously that's reducing repetitive motions and your awkward postures – two of those trolleys with inbuilt scales. So it's a department of about four or five workers, so they could easily share that around. So there's two trolleys with inbuilt scales eliminating that task of manually lifting those boxes from the trolley to the scale. And then also the vacu-lift as well. That's really easy to use. You're just literally pulling like it's a bit of a lever, sucking it on and then moving it on to the pallet.

And the training – it's really easy to use, so it took them maybe not even an hour per person to actually do this. But the important fact in evaluating this part is that you're also looking at not just the workers' time but also the safety and rehab or the trainer's time.

And so they experienced very little ongoing costs because the life of their vacu-lifts and the pallet lifts and the forklift is 10 plus years. So they don't really need to do maintenance more than every couple of years, unless they want to I guess go above and beyond their duty in terms of maintenance. And ongoing training – it's not exactly hard if they do hire someone else to learn how to use the vacu-lift.

So I guess this is one of the major parts which I guess you don't really think about sometimes when you evaluate the cost of your intervention, and that is avoiding the cost of your injuries. And so that's looking at reducing your hazardous manual task risk factors, reducing severity, so introducing no new risk factors but also making sure that we're reducing or in fact eliminating these awkward postures, the repetition, the durations and so forth, and as well as disruption to work. So we're also reducing the lost productivity, because obviously when an incident occurs usually there is some down time, whether that be half a day, a whole day or even a week.

So some of these immediate costs we're looking at obviously is attending to the injured worker, so looking at first aid, transporting to a hospital or a doctor's clinic or a physio, depending on the severity of the injury, and that obviously includes the worker's time and the manager's time, or whoever is accompanying the injured worker to the medical clinics. Lost productivity – so they I guess don't work in a particularly high-risk environment, so there's not much lost productivity in the fact that I guess no psychological side effects to other workers in terms of not being able to do their work after an incident occurs, because usually these are just major sprains that mostly impact the worker themselves. Making the area safe and other costs as well.

So just because they have relatively low costs, however what if you're in a rural area? So obviously you don't necessarily get access to doctors, to physios, to nurses all the time unless you actually have one on site two or three days of the week. Well what if it happens outside of those two or three days of the week? So that's definitely where you want to put your cost towards.

Investigating it – obviously no one wants to investigate an injury, but you have to because obviously it's your duty of care to prevent an injury, but also I guess in this area the possibility of identifying other risks and other hazards. And so obviously paperwork is the bane of everyone's life. You know, it's tax time now. Everyone's got their receipts out and giving it to their accountants. But no one likes doing it, but you have to I guess. And I think just because you might not necessarily like the small details and the numbers, however senior management does. They want to know every single dollar and every single cost and exactly where it's going. So you're looking at completing reports, other paperwork to WorkCover for example, depending on how serious the incident is, obviously liaising with the family to ensure that they understand the situation, and also follow up meetings as well, return to work coordination and things like that.

So theirs is relatively low, and that's just because of the type of injuries that they experience, which is just usually back strains and also I guess arm and tendonitis.

So they also I guess experience relatively little damage, however obviously if you're, I don't know, a mining company, you've got Caterpillars, a large piece of plant, obviously they're quite expensive, so your damage to either structural plant or even mobile plant might be quite high. However for them it's just parts of a roller door, so it's relatively easy to replace and obviously relatively easy to import that in.

So you're looking at assessing your damages, repairing any of those parts if you can, and coordinating those repairs. So that might take a bit of time just because you have to call up, you're waiting for it, and therefore you're also reducing your productivity as well.

And one of the major issues is replacing the job task of the worker who's been injured. So this particular worker has been injured on and off for about five years. And so that's because of pain to the back, and so they weren't able to lift these boxes and that was a major part of this job. However, obviously with these pallet lifts and the vacu-lift they're able to even do that themselves. But because this particular business had a really good return to work program, they were able to be put on suitable light duties really easily, and because it's relatively a small department, they understand each part of the business really, really well, so it's quite easy to integrate between different workers.

Productivity loss is one of the major issues with injuries, and so lost productivity – so that's obviously in terms of work stop time – but also managing your injury claim. A lot of time and hours goes towards filling out reports by yourself and also managing the worker themselves as a safety or return to work coordinator. And also the capacity of the worker upon return to work – so this is where the major cost comes in, is that they aren't able to do that. And because of the worker not being able to perform that work, they actually lost a lot of time in terms of servicing the orders. So instead of say completing 8,000 orders in an entire year, they actually had to negotiate with their customers to actually either delay the time to actually service it or just to not do it I guess at all. And so that cost them about $25,000 over a year, which is not exactly a small number for a relatively small business.

But the pros of implementing a program like this is that there are huge productivity gains. This was the major thing. So they actually found a 67 per cent or two third reduction in the time required to perform the task. So it went from an hour and a half down to 30 minutes, and so they get to use that time to do other job tasks they normally don't get to do. And so that's a huge saving for them for sure. Reduced absenteeism as well. So you expect I guess less injuries and illnesses to occur because of these changes. So you're eliminating these risk factors and so you're expecting that you're not going to get these injuries.

Workers' comp savings is because they don't have these injuries anymore. They expect to save $20,000 a year. And other costs, including – so quality improvements. So because they weren't manually picking up these boxes and putting them on I guess a ground level wooden pallet, they're not damaging the products themselves as well and the boxes as well. And so because I guess the boxes were in better condition, customers were also happier as well. And so that also led to more orders from the customers.

So overall their total value of costs was about $50,000, however the total benefits was $3.5 million in terms of mostly productivity gains and avoiding the costs of these injuries. Because they expected them to reduce the number of injuries by about 10 per year, and so avoiding the amount of investigation costs, managing the injured worker, return to work coordination as well, these are huge gains for them. But this is obviously over 10 years, and so if you're a small business you don't usually have 10 years. Most sort of go bankrupt in about five years or they're no longer in existence in three years' time.  But for large businesses this is obviously a huge boon to them. So return on investment was about $70 per dollar of cost, and they basically essentially get a payback period, so how long it takes for them to recover the costs that they've actually put out, in about two months.

So obviously not every single benefit is going to be able to be quantified. And so that's obviously one of the major issues with health, and health and safety in general, is that we can't quantify some of these costs. However they're obviously still perfectly valid reasons I guess to make a case to actually invest in a particular intervention. And so improved productivity – so obviously they have more streamlined processes by reducing their job tasks from an hour and a half down to 30 minutes. Surpassing customer expectations and improved service delivery – so because their products were in better condition, customers were a lot happier and so therefore you get repeat business. So you also get that with repeat, I guess, tenders as well. So for example just being certified with OHSMS and auditing to Australian Standards for example, that's what you get with your repeat tenders, is just because you're certified in a particular standard.

Reducing the time to investigate incidents obviously, and reducing the risk of injuries – so can we really put a price on, you know, if you're going home happy and if you're going home uninjured. I guess that's an internal question that's really hard to answer. So obviously we try to, in research anyway, look at quality of life years and things like that, but can we truly actually put a price on it. Everyone's quite different right, so the different factors that go into modelling this equation is different for everyone depending on their own environment and circumstances.

And greater worker participation and hazard identification. So because they used the PErforM program, a participatory ergonomic program, workers are I guess happier with the work they are doing themselves, but also happier to raise issues. And so that was definitely one of the major findings, is that they had a cultural change in that workers were just more willing to report either near misses or that an issue did occur.

So just a bit of a summary of the elements of a cost-saving program is that I guess for one that is going to be a major cost saving program, is that you're going to have greater worker involvement, so actually consulting workers, management commitment, or rather at least management buy in. So this particular business, every time they want to spend more than $1,000 they actually have to justify their costs, and that's obviously quite a lot of time and effort being put into it every time you want to purchase a new forklift. And so they have to put in all these numbers, but they're like, 'Well you know, where do I even start?' So something like this and this process that you're going through actually really makes it easier for them to justify why they're purchasing a new forklift or they want to invest in a new automated conveyancing belt for example.

Ergonomic expertise or hazardous manual task competency – so for example just being either a qualified ergonomist, a CPE for example, or even if you're not, but also going to PErforM workshops for example or other ergonomic workshops really does obviously help with that. Implementing easy or low cost interventions first – so what they did is that their workspace actually remained the same, and so there was no change to the amount of space that they did their work, it's just that they just made it easier to do the work by lifting up the pallets for example to waist height and also just buying trolleys with inbuilt scales. And so they're not changing anything I guess majorly in terms of workflow, but it's just made the actual task easier. And from that obviously your human centred design versus technology centred design, so ensuring that the designs and the changes that you're making are obviously impacting the workers and how they do work as opposed to just buying plant for the sake of it.

So some free tools that you can easily access on the web. So one is WHSQ's e-tools. I'm sure you've probably either heard of it or seen it maybe. They have a massive banner outside with some advertising and promo for it. So essentially, you chuck in what the intervention is, do you expect to reduce any injuries or illnesses with implementing this, what type of industry you're in. And also it's online, essentially a glorified Excel spreadsheet. So the calculations behind it – it takes all the numbers in, for example with providing first aid for example and all that sort of good stuff, and it spits out the return on investment number and the payback period at the end.

So the Puget Sound Chapter from Washington, so in the States, they have an ergonomics cost benefit calculator, and one of the good things about this is that you can easily compare two or three options, and also it looks at I guess more specifically the body itself, so looking at what type of injuries they are. And so you just chuck in how many number of injuries you expect to reduce with the program, average out the salary, how many number of employees will be affected by this intervention, and it spits out the return on investment – so reduction in claims, what you expect the workers' comp reduction is, annual savings, as well as a nice little graph telling you what your average return on investment is as well over one year, three years and five years as well.

So Cornell, so in the States as well, the state of New York. So they have a very simplistic cost calculator. So what this looks at – so you probably want to use this only if you have an intervention or a program that's going to impact all employees sort of equally, because you're only plugging in seven numbers. So you're looking at for example $1,500 for, I don't know, say some new sit/stand desks for example. It's going to impact 50 employees and the average salary is $60,000. So it's very simplistic and a quick way to estimate will I get a return on it and how quickly will I actually recover my costs.

But obviously there's some limitations to doing return on investments, and ROIs and cost benefit analyses and numbers aren't the be all and end all. Obviously they should definitely be used in conjunction with your normal risk management and hazard identification processes. And so obviously time is a huge factor to do these CBAs, cost benefit analyses, or ROIs, because you are collaborating with a lot of other departments in terms of getting wages and salaries and operations and also workers as well in terms of how long it actually takes to do specific work tasks. If you aren't very sure I guess, or you aren't very involved with daily operations, intangible benefits – obviously it's not easy to quantify, and so a lot of benefits are qualitative and that's obviously quite difficult to quantify and include in a cost benefit and to justify in terms of exact monetary cost benefits.

Incomplete and inadequate data – your business might not even collect this data in the first place, and so it might be quite difficult for you to complete something like this, because a lot of them will be guesstimates or best guesses. And the lack of evaluation and I guess tools that are available, or rather even I guess the education in actually doing these cost benefit analyses in the first place as well. So if you don't where's a good place to start, I guess those three free tools are definitely a good place to start as well.

Yeah. In the end price is essentially what you pay, value is what you get. That definitely holds true in the health and safety arena, because obviously you want to reduce the number of injuries and illnesses, and everyone wants to get home safe at the end of the day. So what's monetary cost really in terms of that? Thanks.

(Applause)

Madonna King:

Thank you Olivia. And I'm hoping we've got lots of questions. We've got about eight or nine minutes before afternoon tea. If you've got a question can you just raise your hand? I mean I don't know if anyone else thought it was weird that all those workers looked like they were from the same family didn't they?

(Laughter)

I'm glad someone laughed. It's pretty sad really as a joke. Who's got a question for Olivia?

For those looking, it's the Mochi family. I'm just explaining it. Who's got a question?

Alright. So I'll ask one and I'd love it if someone's got one after that. But you've given us a snapshot in time involving a particular company. I'm wondering from your theory research behind that, whether there is a particular industry or a particular sized organisation where the return on investment is greater?

Olivia Yu:

So usually we do see the greatest I guess return on investment with small businesses, and that's because I guess the impact level is greatest because most employees are involved, as opposed to a larger organisation with more employees because you're only impacting a certain site or a specific department or sector. So yeah, we have found that the greatest I guess proportional return on investment figures are greatest with small businesses, but I think in terms of evaluating it it's much easier to do it in a larger organisation because they have the capability and capacity to be able to collect this information in the first place. And so that's when you get your more quality and consistent data.

Madonna King:

Are companies voluntarily doing this because they can see the value in it, or what's the impetus for them actually going and investigating the return on investment?

Olivia Yu:

Mostly I think those that are involved with my research, my PhD research anyway, is those that actually find value in – I guess they actually believe in actually justifying costs and benefits or they've had issues themselves with trying to justify purchasing a particular intervention to senior management. And so I think that's probably where it is as well, as well as they've had a lot of interventions and they don't know what's actually working and what isn't. And so I think that's probably why they're really keen to actually participate.

Madonna King:

Who would like to ask a question?

Yes sir. Thank you.

Audience member:

I was just wondering, because we're talking about money and, if we went to our accountant, the accountant looking after the business and said, 'Can you help me with an ROI,' would they be familiar with the sorts of things you were telling us today?

Olivia Yu:

Absolutely. This model itself, or I guess the factors that we're taking into account, is based on an accountancy sort of framework, or accounting framework rather. And also the model and the calculations behind it is a generic cost benefit model itself, so that's also quite standardised that way as well.

Audience member:

Would they be aware of the individual things that you were…

Olivia Yu:

I think it's quite dependent on the accountant themselves and depending on how well they are versed in health and safety as well. But injury cost calculators and the specific factors is quite well researched, and so it is detailed in for example research methodologies with Safe Work Australia as well as HSC as well in the UK. Yep.

Madonna King:

So if people here wanted to go back and actually do what that gentleman suggested, is there an industry cost calculator that you would recommend that they suggest being used?

Olivia Yu:

I think the WHSQ one is quite – I guess that's probably where the most detail comes in, and that's because it also not only looks at avoiding the cost of injuries as well, but also looking at productivity gains. I like the Puget Sound one because it does have that comparison, side by side comparison. Yeah.

Madonna King:

Ladies and gentlemen, please put your hands together for Olivia Yu. Thank you Olivia.

(Applause)

So just to let you know what's happening next. We're going to have afternoon tea for half an hour, or 32 minutes in your case, and this is your last chance to actually visit the sponsors and exhibitors. So don't forget to get your passport signed. Once it's signed, drop it off at the registration desk, because after afternoon tea we will announce the winners of that competition.

And can I say thank you again to our sponsors Safe Work Australia and silver sponsors Axis and Connect. See you in the big room after afternoon tea.

[End of transcript]