How many times do you think your accounting staff, human resources director, president or CEO have uttered the words, "This is the cost of doing business." But are the costs that are driving down your profits, creating rework, increasing the expense of waste removal, reducing your productivity, increasing quality issues, and creating employee dissatisfaction and turnover really the costs of "doing business?" Or are they the result of a lack of education and understanding that these are manageable or even avoidable costs?
Suppose you are a director of a board for a large corporation. At a board meeting, the presenter is talking about the millions of dollars being spent in workers' compensation and disability costs, the tremendous losses on the part of the company financially and the falling stock prices. How would you react? Would you feel the need to get some additional information to assist the company?
Management can use some direction in response to these issues. As a safety director or ergonomics consultant to any company, you play a role in providing management and the board with an understanding of the cost benefits that can be achieved through ergonomics. Good news travels up the corporate ladder very rapidly. Everyone in the company gets excited about a large new product sale, new product coming to market or next best widget. However, when the news is not so good, the filters are in place to keep those in power from understanding the real truths until sometimes it is too late. That can often be the case with workplace injuries and illnesses.
To understand fully how ergonomics can benefit a business, we need to understand knowledge management, intellectual and human capital and some of the other economic buzz words being used today that are very well applied to ergonomics.
Let's begin with an explanation of economics. We first have to have a definition of economics because we are talking dollars and sense (sorry, I couldn't resist).
Economics is the social science that studies the production, distribution, and consumption of goods and services in terms of the trade-offs between competing alternatives as observed through measurable quantities such as input, price and output. The field of economics comprises a number of potentially irreconcilable theories about systems of production and distribution, but as a general rule, economists study human behavior and welfare as a relationship between ends socially required and scarce means which have alternative uses (Lionel Robbins, 1935).
In the late 20th century, one of the areas of study that produced change in economic thinking was the examination of a risk-based rather than price-based model. The study of risk, which viewed variations in price over time as more important than actual price, has been influential. This particularly applies to financial economics in which risk-return tradeoffs are the crucial decisions to be made.
Ergonomics similarly deals with risk-return trade-offs. As ergonomics engineering consultants, we mitigate risk by engineering out a problem. By removing the risk, we end the potential for additional costs and labor problems and can manage and control the expenditure for the solution. Risk can be transferred through means such as insurance coverage. With this method, you are paying the insurance company to assume the risk but you still pay.
Would you be happy to spend $10,000 on a solution to prevent a $100,000 back injury? Would you spend $400,000 on a capital improvement on an assembly line to prevent a recall of insurmountable dollars?
Now let's move on to knowledge management and understand where this fits into the picture. Knowledge management is a business activity with two primary aspects:
1) Treating the knowledge component of business activities as an explicit concern of business reflected in strategy, policy and practice at all levels of the organization. Relating this to ergonomics, you develop an ergonomics process that fits your organization and includes the written goals, objectives, policies and procedures for the organization to understand. This takes into consideration the experience and knowledge of your employees as contributors.
2) Making a direct connection between an organization's intellectual assets both explicit (which can be articulated in language and transmitted among individuals) and tacit (personal know-how). In ergonomics, this can be viewed as including employees in the "team" to identify and assist in developing solutions to problems in the workplace.
In traditional perceptions of the role of knowledge in business organizations, tacit knowledge is often viewed as the real key to getting things done and creating new value. (Utilizing the knowledge base of employees, risks can be mitigated through assessment, identification and reduction, prior to injury, labor and production issues.)
A significant element of the business community also views knowledge management as a natural extension of "business process reengineering," a fact underscored by the March 1997 announcement that John Wiley's Business Change and Reengineering had been retitled Knowledge and Process Management.
Now that we have a definition of knowledge management, why do we need it? Some of the experts list the following reasons. I have added, in parentheses the ergonomics applications:
- Marketplaces are increasingly competitive and the rate of innovation is rising (reduce the costs of doing business and put additional dollars into innovative ideas that rise above the competition for greater market share).
- Reductions in staffing create a need to replace informal knowledge with formal methods (get those job descriptions updated and formally assess jobs in order to reduce risk factors and hidden problems).
- Competitive pressures reduce the size of the work force that holds valuable business knowledge (we have aging work forces which are expected to perform more tasks. Here is a real need for ergonomics.)
- The amount of time available to experience and acquire knowledge has diminished (make time and focus on getting people trained in ergonomics in order to raise the competency bar)
- Workplace injuries, early retirements and increasing mobility of the work force lead to loss of knowledge (by applying ergonomics processes, senior employees might work longer and be used to mentor new hires. By transferring their experiences and nuances of jobs to new hires and training the younger work force, senior employees reduce the formal training time necessary and prevent injuries and production losses.)
As these issues show, there is a recognition that information and knowledge are corporate assets, and that businesses need strategies, policies and tools to manage those assets. We also need to understand that what was deemed a "cost of doing business" in the past may instead be a source of savings or profit manageable through ergonomic processes.
The need to manage knowledge seems obvious, and discussions of intellectual capital have proliferated, but few businesses have acted on that understanding. Where companies have taken action (and a growing number are doing so), implementations of "knowledge management" may range from technology-driven methods of accessing, controlling and delivering information to massive efforts to foster changes in corporate cultures for cost reductions.
An engineering ergonomics consultant can foster continuous improvement in any organization by using the science for changing a corporate culture through the education and transfer of knowledge. Training an organization's engineering staff in applied ergonomics for processes, product design, design for manufacturing and assembly, equipment design and selection, supply chain management, facility environments and maintenance can produce a variety of benefits. Other personnel such as health, safety, maintenance, purchasing and production employees need to be trained after the engineers. This allows a natural, logical chain of events whereby an employee identifies an ergonomic risk factor and the engineer has the knowledge to understand and develop the solution to reduce or eliminate the hazard. Otherwise, labor and management may have a real schism when a risk is found and no one can change it.
The ability to manage ergonomics knowledge represents one of the primary opportunities for achieving substantial savings, significant improvements in human performance, and competitive advantage.
Don't think this is just about the large companies with thousands of employees. Small and midsize companies need formal approaches to knowledge management even more, because they don't have the market leverage, inertia and resources that big companies do. They have to be much more flexible, more responsive, and make better decisions to reduce costs because even small mistakes can be fatal to them.
Intellectual or Human Capital
Human capital is a way of defining and categorizing peoples' skills and abilities that are used in employment and otherwise contribute to the economy. Some economic theories refer to it simply as labor, one of three factors of production, and consider it to be a commodity that is easily interchangeable. Human capital is like the "physical means of production," e.g., factories and machines: an individual can invest in it (through education, training, medical treatment) and his/her income depends partly on the rate of return on the human capital he/she owns. Thus, human capital is a stock of assets a person owns. It allows that person to receive a flow of income, which is like interest earned.
Intellectual capital represents the knowledge assets of an organization in terms of data, information and wisdom as well as the tools that augment the use of this information/knowledge.
An organization's intellectual capital may be divided into three elements that can be measured and targeted for investment: human capital, structural capital and customer capital.
It is also defined as the sum of everything the people of an organization know which can be converted into value or formalized, captured and leveraged to produce a higher-valued asset. This translates to the value of all the knowledge held in the minds and experience of employees. Thus intellectual and human capital are interchangeable and necessary for success.
During the year 2000, intellectual capital accounted for over one-tenth of the U.S. gross domestic product, or $1 trillion. A group called KLM Inc., has divided intellectual capital into seven areas. I have listed their seven areas and then added the ergonomics relationship in parenthesis:
The brand is an on-going identity conveying the values of the enterprise, its products and services, and ultimately its role in the customer's or consumer's lifestyle. (With an ergonomics process, a company is known as "one that cares about their employees and their customers." Thinking, time and money went into the development and manufacturing or service that the "brand" offers. Recalls can seriously hurt and create unnecessary havoc to a brand.)
Intellectual property and goodwill includes trademarks, patents, licenses, trade secrets and intellectual property strategies. (Ergonomics promotes thought processes within the entire employee base and throughout the organization. Continuous improvement through ergonomics may lead to additional intellectual property gains.)
The active intelligence, energy and creativity of an organization includes its knowledge, know-how, trade secrets, information, data and the ability to innovate and to take products and services to the marketplace. (Ergonomics allows both industrial and service companies to create innovative solutions and produce products that are more intuitive and "fit the user.")
Corporate culture represents an organization's ways of doing business, its rituals and its practices. (Ergonomics promotes best practices within the organization and allows continuous improvement to be developed within the fabric of any company.)
The people bring their abilities, talents and relationships. (Ergonomics increases the intellectual property of the employees and the value of the company through additional corporate assets.)
The experience and history of the organization and its "corporate memory" is the next asset. (With an ergonomics process, employees can remain working longer and impart knowledge learned to younger or newer employees)
Intellectual materials, or the work product of the day, represent the new capital used to create new wealth. (Ergonomics allows for production and service facilities to be error-free and without quality issues. The work product of today will not be recalled tomorrow.)
In a strong and successful ergonomics process, the entire organization is trained to identify problems and report issues prior to having an OSHA recordable or production and quality problems.
In a successful ergonomics process, the employees are not "blamed" for injuries and/or waste, but the jobs themselves are assessed and changed when needed. Employees are one of the most expensive and yet the greatest asset to any organization. They develop a set of skills that is acquired on the job through training and experience, and which increase that employee's value in the marketplace. By maintaining the employees' intellectual capital, we raise the value of a company.
The ergonomics consultant can provide the roadmap to cost reduction by imparting the knowledge and increasing the intellectual capital for all employees. By using intellectual capital to reduce costs, we can maintain experienced employees rather than the "revolving door" syndrome, create solutions to jobs that produce risk factors to the human body, understand "upstream" design prior to cutting a piece of steel in the plant, train office employees in the proper adjustability of their equipment, educate healthcare workers in proper lifting techniques, take warehousing and supply chains and design in solutions while designing out problems. These are just some examples of applied ergonomics.
There is a financial value that human innovations, inventions and intelligence bring to a business enterprise. This is an objective measurement and an ergonomics consultant can cost justify the benefits and savings to any organization. We might be able to utilize our knowledge management and human and intellectual capital to stop the bleeding of jobs sent out of the United States based on increased costs and reduced revenues. Let's begin to educate and share the results of strong ergonomics processes and the financial benefits it brings to any organization.
No longer do all of a company's costs fall "legitimately" into the "cost of doing business" category. The longer the results of ergonomics continue to be made public, the better the data will become and the more economics can be built around an ergonomics process.
Cynthia L. Roth is president and CEO of Ergonomic Technologies Corp. (ETC), an ergonomics consulting and training firm based in Syosset, N.Y. She is a member of Occupational Hazards' Editorial Advisory Board. She can be reached at (516) 682-8558 or via e-mail at [email protected]