This explored whether providing a safe workplace improves or hinders organisational survival (survival being how long the company lasts/remains financially capable).
They studied over 100,000 firms over 25 years in Oregon, measuring links between a firm’s short-term claims cost (STCC) and long-term claims cost (STCC) for disabling injuries, with an interest in a firm’s risk of failure or time-to-failure (survival).
They reason that providing a safe workplace can be partly modelled via short-term and long-term cost of claims history, because: a) cost has been shown to be a good proxy for claim severity and b) as costs go up, either the claims are more numerous or more severe.
They also applied a number of statistical controls and methods to check the robustness of the results…too many to mention.
It’s argued that “organizations that do not provide a safe workplace gain an economic advantage by avoiding burdensome costs and being more productive” (p2).
They also cover some research around the impact of regulation/regulators on organisational safety performance. Inspections were found in one study to decrease accidents in the short-term, while having no impact on organisational survival in the long-term.
Another study found regulation improved short-term safety but not sustained in the long-term, and in another study regulatory inspections that did not lead to sanctions were found to not influence accident risk (or lead to slightly higher risk of accidents).
Results
According to the study, “in general, organizations that provide a safe workplace have significantly lower odds and length of survival”. Further, “relying on the market does not engender workplace safety” (p1).
That is, providing a safe work place doesn’t support the assertation that it will enhance competitiveness and according to the results, “generally hindered organizational survival” (p.8)
A reduced risk of failure was associated with a higher STCC. However, younger organisations benefitted less from higher STCC and are more susceptible to large claims harming survival. Reduced risk of failure was also amplified by organisational size. In the short-term, smaller organisations get no or minimal benefits from claims, whereas larger ones benefit from having higher claims.
On average, an increase in claims cost is linked with an increase in survival and this is amplified for older and larger companies, and companies with zero to moderate growth. Conversely, companies are negatively impacted by greater claims if they are younger, are smaller or have fast growth.
Although they couldn’t directly answer *why* these associations were found, they argued that in alignment with the costly regulation hypothesis, organisations may trade-off safety for production and squeeze more production out of the same workers; reducing buffers and slack. Therefore, gaining an economic advantage.
Also suggested is that some firms “are presently benefiting in the short and long term from externalizing their costs of poor safety on society” (p11). Authors argue that although firms are unlikely to intentionally harm workers, their results indicate that these firms “are, on average, also correct in concluding that the costs of preventing all harm is higher than the costs of not doing so” (p11).
That is, addressing more optimal safety resourcing and trade-offs is more expensive than not and it can be more cost effective to have accidents.
Although this study has many limitations – such as not directly measuring internal management and safety practices, a strength is that it captured virtually all organisations in Oregon over 25 years. It’s thus predictive but not explanatory.
Further, given issues of skewed reporting and under/overreporting and similarly with claims, the authors sought to reduce under-reporting of minor events by focusing only on disabling injuries.
Authors: Pagell, M., Parkinson, M., Veltri, A., Gray, J., Wiengarten, F., Louis, M., & Fynes, B. (2020). The tension between worker safety and organization survival. Management Science, 66(10), 4863-4878.
Study link: https://doi.org/10.1287/mnsc.2020.3589
Link to the LinkedIn article: https://www.linkedin.com/pulse/tension-between-worker-safety-organization-survival-ben-hutchinson
SafetyInsights.org 