A Process to Prove the Payback on Safety Interventions

Federal AviationAdministration

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A Process to Prove the Payback on Safety

Interventions

Dr. Bill JohnsonChief Scientific and Technical AdvisorMaintenance Human [email protected]

+1.770.500.8217

Shell Aircraft Safety Seminar 2012Human Factors –Safety’s Vital IngredientThe Hague, Netherlands11-12 October 2012



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Presentation Plan• Finance and Safety

• ROI Challenges - Solutions

• Calculating ROI (A detailed example)

• Other Examples

• Cautions

• Q&A



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Why care about ROI

Investment

in Safety

Continuing/

Improving Safetyand/or

Expense Reduction

and/or

Revenue Increase


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Why care about ROI?

“If you want to implement/revise safety

programs you must show the payoff.”


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Challenges to ROI of Safety

Intangible

Cause and Effect

Integration-Combination

TimeShell Aircraft Safety Seminar 2012Human Factors –Safety’s Vital IngredientThe Hague, Netherlands11-12 October 2012


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ROI Solutions

SMS Data Emphasis

Voluntary Reporting

Acceptance


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• Other Examples

• Cautions

• Q&A


ROI: Any Questions


ROI: From Words to Numbers


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Example: Fatigue Awareness Training at MRO



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A Few More Challenges to ROI

Financial personnel assume ROI responsibility

Executives do not demand ROI

Corporate culture and ROI

Perceived value of ROI

Fix problems rather than assign costs

Focus on costs

Focus on production and schedules



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Example ROI Summary

Reduction in A/C damage: $935K (10% of 2010)

Reduction in OSHA injury: $119K (10% of 2010)

Financial ROI: 312% Probability of success: .8 +/- .1

Reduction in A/C damage: $3M (30% reduction)

Reduction in OSHA injury: $184K (15% reduction)

* Does not include a 1% system-wide efficiency improvement of $900K

Fatigue Awareness Training to 2,500 @ 2 hours eachCost was $205 K during 2011

Investment

Benefit Forecast*

Actual*


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ROI: Fill in the Boxes


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The ROI Menu


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Investment QuestionsHow many personnel trained?

How long is training in hours?

What is the average hourly rate for trainees?

Were there missed opportunity costs during training time?

Count time for management and support ? Rate?

Cost of special hardware? Amortize?

Costs for training development & facilities? Amortize?

Schedule for training over time?


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The Investment

Investment to deliver training$204,500.00

Investment to deliver training$204,500.00


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Expected Return QuestionsWhat are the safety benefits?

How many current safety incidents?

How many safety incidents can be reduced?

What are the metrics to measure these changes? (e.g., aircraft damage, rework, delivery delay, OSHA injuries,…)

Costs associated with each metric?

How much will personnel efficiency be improved?


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The Return - Benefits

Investment Benefits$1,053,702

Aircraft DamageOSHA Reportables

$ 934,500$ 119,20210%


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The Directions to ROI


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Project Summary (1 of 2)

Break Even Point

$204.5K

$638,461/$204.500 = 3.12


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Project Summary (2 of 2)


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Recent ROI Findings

Reduction in A/C damage: $935K (10% of 2010)

Reduction in OSHA injury: $119K (10% of 2010)

Financial ROI: 312% Probability of success: .8 +/- .1

Reduction in A/C damage: $3M (30% reduction)

Reduction in OSHA injury: $184K (15% reduction)

* Does not include a 1% efficiency improvement of $900K

Fatigue Awareness Training to 2,500 @ 2 hours eachCost was $205 K during 2011

Investment

Benefit Forecast*

Actual*


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• Other Examples

• Cautions

• Q&A



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Need More Examples?Org.

Type

Topic Invest

$

Return

$

Break

Even

ROI 2Q %

ROI 4Q

%

ROI 5Q

%

MRO FRMS

Training205 .0 K 1.1 M 1.5 Qtr. 224 274 312

Airline Wheel

Installation24.5K 1.7 M 0.6 Qtr. 2896 5556 6938

MRO Windscreen

Service1.8K 75.1 K 1.0 Qtr. 1908 3514 3916

Airline Ramp

Comm.3.1 M 6.8 M 5.0 Qtr. 0 77 120

Airline Paint

Hangar16.0 K 120.0 K 1.0 Qtr. 169 598 650

Airline Hangar

Damage56.0 K 390K 2.0 Qtr. 96 381 426


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Cautions

• Real world vs. Controlled laboratory

• Diligence on estimates

• Be conservative

• Expect surprises


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What you can do next


• Your SMS provides the data

• Try the formula

• ROI considerations will increase

• Knowledge equals power


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Presentation Summary• Finance and Safety



• Other Examples

• Cautions

• Q&A



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Why care about ROI?

“…safety and profitability are the mutually

inclusive #1 priority for most industries

especially transportation…”

B. Johnson, Paragraph 1 of this conference paper.


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Questions - Discussion

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A Process to Prove the Payback on Safety Interventions

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