Minimize Risk to Maximize Profits and Survive in Business

April 22, 2009 by  Filed under: Management 

Business survival and growth require eliminating unnecessary costs and controlling losses. Two major drains on the profits of small businesses are healthcare costs and costs of musculoskeletal injuries. By recognizing these sources of loss, small business owners and managers can improve business profitability.

Indirect Costs of Worker Illnesses

Chronic diseases are responsible for the majority of business healthcare costs. But the indirect costs associated with chronic diseases among employees are much greater than the direct healthcare costs. Business owners and managers may not realize how much their businesses are suffering due to these indirect costs, most of which come from reduction in productivity because of illness.

Indirect costs that result in increased costs and losses in productivity and quality include:

* Absenteeism. When employees miss work due to illness the business accomplishes less and misses deadlines and opportunities. Team processes cannot proceed normally. Replacing workers is expensive; temporary replacement workers usually do not provide the same quantity and quality of work as regular workers.

* Presenteeism. Employees who are present but not working to capacity because they don’t feel well cost the company more than absentees cost.

* Replacements. It can cost up to a full-year’s salary to recruit, hire, and train a permanent replacement.

* Administrative costs. Medical case management and replacing workers, whether permanently or temporarily, takes the time of human resources staff.

* Accidents. Workers with chronic illnesses are more likely to have accidents on the job. Indirect costs for job-related injuries include workers’ compensation premium increases, replacement of damaged equipment and materials, negative publicity, and possible citations and fines.

* Insurance costs. High healthcare costs are likely to increase costs of health insurance. Health insurers may reduce premiums for employers with lower healthcare costs.

Costs of Musculoskeletal Injuries

Musculoskeletal injuries-sprains, strains, tendonitis, carpal tunnel syndrome, low back pain, and others-account for the majority of work-related injuries in many industries. Musculoskeletal injuries result from work that involves awkward movements, moving heavy loads, vibration, or staying in one position for long periods of time.

Employers can realize considerable saving by implementing changes to reduce the risk of musculoskeletal injuries. These changes will be part of an ergonomics plan that looks at how people do their jobs and the equipment they use. Often small changes can result in big savings.

Here are examples of how businesses saved money by implementing ergonomic changes:

* A manufacturer bought waist-high carts for carrying goods to wrapping machines. This reduced bending and created a 400% rise in productivity.

* An industrial repair service invested $35,000 in equipment, including a vacuum lift, anti-vibration gloves, keyboard trays, and anti-fatigue mats. Strains went down 23% in one year, for a savings of over $87,000 and a return-on-investment of 2.5-to-1 in the first year.

* Adjustable tables made it easier for assembly workers to reach parts and raise and lower their worktables. Over five years claims went from twenty to two.

Entrepreneurs can maximize and protect profits by minimizing risks and losses. Stopping the flow of losses can mean the difference between business failure and survival in this time of global recession.

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