Communicating your Safety Business Case with Dr. Georgi Popov
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Call it ‘lost in translation’ when speaking to executives about safety improvements. More and more organizations recognize safety and prevention measures as an essential role that needs to be effectively communicated to upper-level management. Dr. Georgi Popov talks about safety prevention through design standards, business cases for change, and the next level of safety performance.
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Hi, welcome to the Safety Guru today. I’m very excited to have with me, Dr. Georgi Popov. He’s a professor at the University of Central Missouri, holds a Ph.D. from the National Scientific Board of Bulgaria, as well as a master’s in nuclear physics from Defense University in Bulgaria. So, Georgi, welcome to the show. Really excited to have you with me as your professor in safety Sciences. I’d like to start out with you, maybe sharing a little bit about your story and how you got started into safety and your passion around safety.
Well, thank you and thank you for your invitation. So, like you said earlier, I graduated from the Defense University in Bulgaria with a master’s degree in nuclear physics way back in 1019 and 91. That tells you how old I am. I was selected to go to Cambodia and serve as United Nations Environmental Health and Safety officer. It was one of the longest and most successful missions of the United Nations. So, in these days we call it EHS for short instead of environmental health and safety. So, we’ll go with that for the next couple of minutes.
So, I worked with many different officers from different countries. They’re addressing variety of risks. You can start with heat stress. Think of 110 degrees Fahrenheit, we’re almost 44 degrees Celsius and 100% relative humidity. Think of contaminated water with biological and chemical contaminants, not to mention the variety of safety issues. Then two years later, I ended up working for Defense Research Institute in Bulgaria, where we had to develop a variety of protective clothing, respiratory protection, you name it. And at that time, I started working on NATO project, so I had to go to process a couple of times to work with other nations on respiratory protection.
So that was a very interesting time. And during that time, I started working on my Ph.D. in chemistry, and I successfully defended my dissertation in January 2000. Then the very next month, I won a competition to attend the Command and General Staff College here at Fort Leavenworth. And while I was studying here at the Command in General Staff College, we discussed many different safety issues, including risk management. And we have used the Army Techniques publications 519 to be more precise, we have also used the military standard 882, which is widely used in the safety field even to this day.
At that time, there was no international risk management standard. And as you can imagine, as a chemical officer, you must think two levels up. And then in 2001, I was before 911, we were downsizing the armies. And I had to work in a private company. And I found a very interesting position with an environmental company here in Kansas City area. And there in that company, I learned the importance of the business case for safety. And the very next couple of years later, University of Central Missouri needed somebody on an emergency basis.
Sure enough, I agreed to do that for one year. And here it is, 16 years later, I’m the interim chair of the safety Census programs at the University of Central Missouri now.
Excellent. Well, thank you, Georgi. Tell me you touched a little bit on the business case for safety. Tell me a little bit more about why organizations need one, and more specifically for more mature organizations, organizations that have done well already in safety. And looking at the next level of performance.
Well, that’s a very interesting question. Let me ask you that how many times you had to go and ask your upper-level managers for half a million dollars to invest in safety? And what kind of answer you’ll get? I’m sure many of you have done that. And some of you had to ask for 5 million or even $50 million for bigger projects. But while I was working for the environmental remediation company at that time, I was early career what we call now occupational safety and health and environmental professional.
And I was thinking, okay, well, that should be easy to justify such investments, right? It’s safety after all. So, I did buy the book Job hazard analysis. I identified probably 70, 80% of the hazards, not these hazards that were at that time associated with that project. And I was so proud. As we all know, job hazard analysis or job safety analysis are not that difficult. You identify the hazards; you identify the potential consequences. You identify one control measure. Sure enough, that control measure was to put everyone in personal protective equipment, right?
That should be enough. Next thing to do is to go and tell your manager, consider one level up from my position that, see, I have identified all these hazards. That’s what I said back then they will have to invest the money to fix the issues. So, we’re in compliance with OSHA regulations. Well, you can’t imagine how wrong I was. So, my manager told me, well, sure. Go and explain that to the CEO and that’s a midsized company. We knew each other. So, most of the OSH or BBS professionals have at some point in their career handed upper-level management a list of hazards or compliance issues that were found and all that in response.
It is very likely that the upper-level management handed that list back to them and said, what does that mean? And that was my exact experience. So, I must explain to my CEO that, hey, if we don’t address all the issues, there is a possibility that the company will be inspected by Ocean and find a few thousand dollars for each violation. And I also listed regulations that may have been violated. Like you start with 29 CFR 1910. One, three, four respiratory protection says we need to do this and that.
So, he told me, why don’t you go back to your office and work on a risk assessment, spreadsheet, work on a business case, and then present the findings to me. So, he also said, by the way, prepare a full cost-benefit analysis for me. So, there was an accountant during that meeting, and the accountant told me, no, you prepare benefit-cost analysis. The benefits come first for the accountant. My manager probably knew what was going to happen when I tried to speak a compliance language in the CEO’s office.
Lessons learned for me, I realized I had to learn different language, and that’s not because of my accent. I went back to my office. I found a very interesting OSHA presentation that was titled Business Case for Safety. It was published actually and made available in 2004. And there it was. In that presentation, I found the answer why the compliance is not the way to ask for investments in EHS initiatives. Very quickly, I had to learn the business language, and I have never done cost-benefit analysis before.
I have never done EHS risk assessment before. I quickly realized that to convince the CEO I needed to learn that new language. If you ask me, DHS professionals should be speaking in a language that upper-level management commonly uses. And in this case, that is risk reduction dollars, nonfinancial benefits. So, after you address all that, it’s more likely it will be better accepted than the compliance language that I tried. At first, to be honest with you, even the financial analysis was not sufficient.
So, when I completed that’s what it was back then cost benefit analysis. I found out that we had to invest about $100,000 to avoid $7,000 OSHA fine.
So, I discussed the findings with my manager, and he was smiling and told me, well, good luck convincing the CEO with these numbers. So, I added the component of nonfinancial benefits, the personnel risk, the operational risk, the financial risk, the strategic risk for the company. So, I did my homework. And next time I presented the case to the CEO, I had benefit cost analysis, noticed that and the risk assessment completed. He looked at the numbers and said, well, why didn’t you tell me that the last time we had that discussion?
Now I can understand it. I must admit, it wasn’t a perfect risk assessment. It wasn’t perfect benefit cost analysis. But it worked. I had to use back then very simple qualitative risk assessment process, something very similar to what I have seen in the military and, the interesting thing was the risk assessment matrix that I converted from the military standards was very similar to the one that is required by US Army Corps of Engineers. The next time we had to bid a core of engineer’s project, the CEO told me, now you go and do the risk assessments and you do the benefit cost analysis.
And it turned out that risk assessment is required for any core of engineer’s project. They caught activity hazard analysis but includes the qualitative risk assessment matrix. And sure enough, we must justify the financial component of any project. Now, that was before 2009. The reason I mentioned that year. It is very important for me personally, because in 2009 published the first risk management standard. And with that standard comes another companion. If you will, I saw 31,010. And in that standard, you will find a cost benefit analysis, for example.
Now notice they do call it cost benefit analysis, but our accountants like the benefit to be first, indeed.
So, it’s interesting because I love what you mentioned about speaking the language of business. I think that’s something that’s often missed and speaking the language of regulatory versus the language or compliance towards something that other leaders can connect. So, I think a big component is what you talk about in terms of the business case for change. But it’s also how as safety leaders, we connect with different executives. Would you agree?
Yes. Absolutely. That’s a very interesting observation. And we must do something what we call consider your audience. So, when you talk to wine employees, we must use different language. When we talk to the CEO, we must use different language. And I had a very interesting discussion with one of our local section safety professionals. And they told me, well, we think that they should send all the CEOs and the business leaders back to school so they can take safety classes.
I went to ask our business schools how many safety classes do you guys take? And that’s zero. But if that makes you feel better, we’ll multiply it next year for you. So that’s how it works. But I would encourage early career professionals to become familiar with the risk assessment methods and the business case development methodologies. Notice how I mentioned the job hazard analysis before. Job hazard analysis is very widely used, but it’s not considered a risk assessment method in the latest Prevention through Design standard, which, if we have time, we’ll talk about that later.
We converted the job hazard analysis to job risk assessment method because the original form of job hazard analysis only includes hazards and consequences and simple control measures. It doesn’t include the likelihood and risk level. And that is what I did not include in my first conversation with the CEO. He looked at that job hazard analysis form and said, well, it’s very unlikely to happen. So, he told me to use simple color coding. They like traffic light color coding. Green is good yellow, not so good red don’t even go there.
So, when I started developing these risk assessment tools, he invited me to upper-level decision making meetings. And there I was not only thinking two levels up, but I was also talking to the decision makers. And to be honest with you, that business case for Safety OSHA presentation that was published way back when in 2004 can teach us the different terminology that is used in the decision-making process. And one of the conclusions was that safety should not be considered a cost should be considered an investment.
So, I wish I had an effective risk assessment and business management education. I had to learn all that the hard way. But to this day, I don’t have MBA degree. However, I took a couple of continuous education courses, and you learn quickly. So, the business case development methodology was not in the EHS textbooks page then. In fact, even to this day, 95% of the safety textbooks are hazard based and compliance based. And like I told you, the compliance didn’t work for me. Think about that CEO question.
Why would I invest $100,000 to avoid $7,000 or fine? Well, not to mention that I was told that we have good lawyers. Probably that $7,000 ocean will be negotiated down to around $1,000. So probably let me share my experience with a couple of business cases.
That would be good.
So, I have done many business case development projects now. And some of you probably remember that we used to consolidate trash in big black plastic bags and then we take it to the driveway and then the waste collection company comes in and they must lift the heavy black plastic bags. In some cases, in some counties, they had different colors and that, of course, teams to Ergonomics type problems. And one of the waste collection companies wanted to reduce the Ergonomic disorders and automate the process. So, think of the automated waste collection trucks that we have now that required significant investment.
About four and a half million dollars, I think, was the figure at that time for the company. So, I had to estimate their risk reduction percentage to calculate net present value, internal rate of return, payback period and many other variables. And net present value was positive. Internal return was amazing. The problem was the payback period was four and a half years. So, the CEO didn’t like that. So, I was puzzled. I said, well, look at the net present value. Look at the internal rate of return.
Well, here it is. Homework. Again, it turned out the average job expectancy for a US CEO is, what do you think? Two and a half years. So now I know what they were thinking. Why would I invest all that money to make my successor look good? While I look like the CEO who spend all that money later, I worked on many different cases. I should mention probably welding was one of them. Where again, we had to calculate net present value and internal rate of return and the payback period license one.
I gave them a couple of different options the next time, not just one because they believe it or not, decision makers like options. They want to see the different variables there. You can start with, and I show them well, if we do personal protective equipment for the welding operators, it’s going to cost us that much money. But every year you must continue to invest in personal protective equipment and respiratory protection fit testing, and you name it so that net present value didn’t look great.
You can imagine. So, the next option was put better ventilation system that created different problems. Again, that looked much better. The payback period was close to two and a half years. But the problem was that the better ventilation took the fumes away from the welded materials and the Weld quality was not that great. So, the operations manager didn’t like that. So, I gave them a third option. Why don’t you do complete enclosure and use welding robots? And they looked at me and I said, who can’t afford that?
That’s a couple of million dollars. But when we ran the numbers, it turned out that was the most financially beneficial option. Risk reduction was greater because there is no exposure to the welding operator, two parts spray painting, but one thing that I can remember very well as a coal mine business case study in Colombia and that’s Columbia in South America. When I told our faculty members who would like to work on that, and that sure, we’ll go to Colombia tomorrow. And that’s not Columbia, Missouri, when I told them it’s in a different country.
But I worked with a very knowledgeable individual in Colombia. He is a CEO of a consulting company. We developed a very interesting business case study where luckily, he had MBA, so I was lucky to work with him. So, we developed all these financial calculations. We are in different analysis, but at the end of the day, they found out that it’s more beneficial even financially, to install an engineering control, which is a ventilation system for each of the dozers. That’s an open pit coal mine in Columbia.
And think about 146 dozers a couple of thousand doors for each one of them. Suddenly, you are talking about real money. But it turned out that ventilation system reduces the noise, so added benefits. We liked that project, and we developed a poster presented that poster at an American Industrial hygiene conference, won AHA award. I’m currently working with AHA and NIOS to develop interactive business case tool, and after beta testing phase, we’ll make it available free of charge. It is coming good very soon.
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So, these are great illustrations of the use of the business case and even how it could inform different options, different scenarios that an organization could look at. I love how you are talking about the way to connect to the account, to the CEO, to the C suite in general. But let us talk maybe about some more mature organizations because I’ve come across organizations obviously that essentially you mentioned it before. The safety is an investment. They do not necessarily look at it as something I need to do a return on investment, then maybe more willing to accept a later payback period and so forth.
So, can you share some examples of how you have seen that show up in organizations that are more mature and really bought into safety?
Well, I was really impressed with Alcoa, of course, sustainability report. I had listened to some of your podcasts and that was mentioned number of times. And of course, you hear about their sustainability reporting matrix. But if you look at that report, safety is front and center and left and right. And for more mature organizations, we must consider something that is called enterprise risk management. So, they will consider occupational hazards and risks, the operational hazards and risks, financial risks, and the strategic risk. So, when you think about more mature organizations, from that perspective, you see all these issues in the sustainability reporting for more mature organizations. And of course, that’s an amazing example. But they’re not the only ones many organizations will consider the enterprise risk management model. Think about safety. Where is safety in that whole model? Is it in the hazard category? Is it operational risk? Is it financial risk? Is it strategic risk? And when you picture the four quadrants of the enterprise risk management model, if you insert safety right in the middle, you will find that that’s where it belongs because it will affect the hazard insurable risks. It will affect operations.
If we don’t have safe operations, picture that open pit coal mine in Colombia, they were able to improve operational efficiency by I don’t remember 70%. They were able to improve financial performance because the more co we produce, the more profitable we are and think about from strategic perspective, for reputation of the company. Now everyone is talking, well, the management made that decision that improved safety, reduced risk. We don’t have to use respirators anymore. So yes, I think for more mature organizations, you must consider that enterprise risk management.
I think it’s a good point. The scenarios you shared is also that I think we had Professor Steve Spirit speak to that a couple of episodes back that you end up investing in safety, and it has corollary benefits in all sorts of other areas. As you start eliminating ignorance, you start getting better at reducing hazards. Your operation gets better, which is hard to necessarily demonstrate in a business case because those corollary benefits tend to show up from more of a cultural lens.
Absolutely. So more than one variable to consider. And if you think that financial benefits only are the way to go based on my experience, I can tell you in some cases, nonfinancial benefits are also absolutely.
I want to make sure we spend a bit of time on a topic that you’re very passionate about. It’s really this. And you spend a lot of effort developing the concept of prevention through design standards. Can you maybe touch on the importance of it and why organizations need to start thinking about prevention through design?
Well, I really appreciate the opportunity to share a little bit about the updated version of the Prevention Two design standard, which was published in September this year 2021. Now we have occupational health and safety management system standards like ISO 45,001, NC Ten. They provide big picture management system implementation process. Absolutely amazing standards. However, the Prevention through design is a more specific implementation standard. It is based on risk assessment, risk management principles, and the hierarchy of risk treatment. It used to be hierarchy of controls, but we all agree that if you avoid the risk early in the design stage, you don’t have to control it.
That’s why it’s more aligned with ISO $31,000. It is called risk treatment. And now that’s why we call it the hierarchy of risk treatment. And our profession is changing. We used to be separate safety function, separate industrial hygiene function. We used to have environmental engineers that’s kind of the Silo approach, don’t you think? And now when you blend everything together today’s, employers want us to do all the above. And that’s why, EHS, environmental, health and safety or occupational safety and health and environmental and many different variations.
And you start adding Lin six Sigma to it and even business knowledge these days. So, with that standard, we wanted to provide guidance on including prevention through design concepts within an occupational safety and health management system. And with the application of this concept, we must make decisions pertaining to occupational hazards and risks, and they must be incorporated into the process of design and redesign of tools, equipment, machinery, substances, work processes. You name it in a way we cannot apply that Silo approach anymore.
We must work with engineers. We must work with accountants because for quite a bit of the prevention through design initiatives, we’re going to need significant help with financial justifications. We have to educate the CEO on how investing early in the design phase will save us quite a bit of money later on. And this standard provides guidance for a life cycle assessment. And it’s a design model that balances the notice, environmental, and occupational safety, and health goals over the lifespan of a facility process or a product.
And these standard complements but does not replace the performance objectives for existing or other more specific standards and procedures. And with this standard, we have a number of goals, and the first one is to achieve an acceptable risk level. So, what’s acceptable for one organization may not be acceptable for another? We also want to prevent notice that prevent or reduce occupational related injuries and illnesses and fatalities. And we want to reduce the cost of retrofitting because retrofitting is always more expensive than doing it right. One of the important things to mention for this standard is the terminology.
So, we must learn to use prevention rather than mitigation, and you will see in many standards in many textbooks. These two terms are used interchangeably. However, when you start digging into the terminology, you’ll find out that prevention is before the event had occurred, undesirable event, whether that’s injury or illness or let’s hope we don’t have to mention fatalities, but we want to prevent that from happening. And if any of this happened, then we can mitigate. But mitigation is never as effective as prevention. So, in a way, the standard encourages us to become more involved in the design process and apply higher levels of controls, especially avoidance elimination reduction or control of occupational safety and health hazards and risk.
And we must do that early in the redesign process into our earlier conversations around getting executive buy in.
How have you seen organizations communicate and sell the importance of doing prevention of the front end from a design standpoint, which is critically important?
Well, that’s a very interesting topic to discuss, and I wish we had 8 hours to discuss that, but not going to happen. So, we included one specific tool that we think it’s important that we can use for communication with upper-level managers. And that is the striped bow tie analysis. So, in a way, you start with the hazards, you start with the preventive measures and then you have the top event. And if that happens, that undesirable top event, then we have event three analysis on the other side of the Baltic mitigation measures and the consequences.
So, once you put that in a visual format, managers understand sure, they can see the hazard, they can see the consequences, what might happen? And do we have sufficient preventive measures? And then you can explain you can invest your money here upfront in the prevention side, or you can spend a lot more on the mitigation side. And that is a very good risk communication in my opinion, and my personal experience is that they do understand that. And even if you look at some of the COSO guidelines and some of their publications, you will notice that they do understand risk matrix and the color code I mentioned earlier, and when you include that and incorporate that into a bow tie, which was one of the methods they mentioned in 2012 publication, it’s an eye-opening for a lot of the upper-level managers.
Well, Georgi, I really appreciate you coming on the show. Sharing about really, the need to communicate to executives in a language that they understand, talking about business cases IRR and all the net present value, et cetera. All language of finance, which is so critical and important but also touching on this important topic of prevention through design. So, thank you for the work you’re doing in safety and thank you for joining the show.
Well, thank you. I really appreciate the opportunity.
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ABOUT THE GUEST
Georgi Popov, Ph.D., CSP, QEP, SMS, ARM, CMC, FAIHA is the interim chair of Safety Sciences at the University of Central Missouri. He is co-author of Assessing and Managing Risk – An ERM Perspective; Risk Management Tools for Safety Professionals; and Risk Assessment – A Practical Guide to Assessing Operational Risk. Popov holds a Ph.D. from the National Scientific Board, an M.S. in Nuclear Physics from Defense University in Bulgaria, and a post-graduate certification in environmental air quality. He graduated from the U.S. Army Command and General Staff College in Fort Leavenworth, KS. Popov is the chair of ANSI/ASSP Z590.3, vice-chair of ISO 31000 U.S. TAG, a professional member of ASSP’s Heart of America Chapter and a member of the Society’s Risk Management/Insurance Practice Specialty. In 2017, Popov received ASSP’s Outstanding Safety Educator Award.
Georgi Popov, PhD, QEP, CSP, ARM, SMS, CMC, FAIHA
Professor, GPS Chair (Interim)
University of Central Missouri