The Introduction of Programmes to Prevent Accidents at Work: A Strategic Analysis

Abstract

Introduction Every working day in Ireland there are, according to the 1993 Labour Force Survey, 62 work-related accidents, injuries or other incidents damaging to health. These have resulted, among other things, in around 3,000 people being off work for more than 60 days. In 1994, 50 people lost their lives due to accidents in the workplace. It is likely that a large amount of the human suffering inherent in data like the above could be prevented by the introduction into firms of structures and systems designed to obviate work-related accidents and ill-health (WRAIH). Such structures and systems would also have another effect: a reduction of the substantial costs incurred, both directly and indirectly, as a result of WRAIH. In addition, obvious concern on the part of firms' owners or managers for the welfare of staff can prevent the deterioration of morale and may have a positive influence on output. It is clear from the efforts of some firms that they are aware of the need to identify and eliminate the causes of WRAIH. But the data suggest that many decision makers are unaware of the risks or, if they are aware, believe that attempting to prevent WRAIH would cost more than it would save. This article will briefly outline the reported costs of accidents in the workplace and then, using a simple game theoretic approach, will examine the choices facing the firm when deciding whether to pursue a strategy of accident prevention(1). The object of the exercise is to contribute to our understanding of why some firms do, and others do not, adequately attempt to prevent WRAIH. The Costs of Accidents in the Workplace The costs of accidents in the workplace are borne by the employee or injured person, by the employer, and by the state in terms of health costs and social security payments. For the purposes of this article, however, we will be concentrating on the cost to the firm. There is as yet little information on the costs of accidents in the workplace in Ireland(2). However a study undertaken by the Health and Safety Executive (HSE) in England estimated that accidents in the workplace (including those that did not involve personal injury) and work-related ill health(3) cost employers between L170 and L360 per person employed, or up to L9 billion a year in total (Davies and Treasdale, 1993). These costs include direct expenses such as sick pay, repairs, damaged or lost product, and compensation(4). But there is also a whole realm of indirect or hidden costs such as those incurred in employing replacement labour, paying overtime rates to make up for lost production time, spending management time investigating accidents, completing insurance forms and attending court cases, as well as immeasurable costs such as loss of corporate image and/or goodwill. Many of these indirect costs are not insurable and are usually not included in firms' assessment of the costs of accidents. Yet the HSE report showed that they are often far more substantial than direct costs. In the four case studies undertaken by the HSE, the lowest ratio of insured costs to uninsured costs was 1:8 and the highest, 1:36. In other words, the evidence suggests that the hidden, uninsured -- and probably uninsurable -- costs of accidents are at least eight times greater than the direct costs. Workplace accidents have considerable cost implications for firms, therefore, and insurance policies protect firms against only a small proportion of these costs. In light of these findings, this article is concerned with the reasons why firms do or do not implement accident prevention programmes, and the conditions under which implementation of such programmes is the optimal choice to make. What motivates the firm to take preventive action? Reasons why firms make the decision to pursue an accident prevention strategy include: * legislation and the fear of the consequences of not adhering to such legislation * awareness of the true costs of accidents to the firm and a belief that it is cheaper to act before the accident rather than reacting to it -- the firm spends today to save tomorrow * moral or ethical belief on the part of the firm's decision makers that they have an obligation to make the work environment a safe place to be; or, with similar effect, responsiveness on the part of these decision makers to union or employee representation making this an important issue * consideration of the long-term business strategy of the firm, incorporating the possible strategies of the firm's competitors. …