Safety Should Be a Performance Driver

Safety is universally regarded as an indispensable right for customers and employees alike. Government agencies exist to enforce standards, and firms spend millions every year testing their products and making their workplace environments physically and psychologically safe.

And yet considerable evidence suggests that most companies mismanage safety. For all the policing and investment in compliance, products are frequently recalled, and workplace accidents continue to happen. In 2023 in the United States 3,300 recalls affected more than 135 million products, a high not seen since 2016. U.S. employers reported 2.8 million injury and illness cases in 2022, a 7.5% increase over 2021. The United States saw 5,486 fatal work injuries in 2022—the equivalent of one death every 96 minutes. Why aren’t companies doing better on safety?

Most executives frame safety as a compliance issue. They see it as a cost and, consequently, they underinvest in it. To make matters worse, they tend to treat safety more as an abstract value than as a driver of performance. Finally, when a company is hit with a safety crisis, it often responds by introducing financially and managerially unsustainable measures that are aimed more at managing its public image than at resolving the underlying issue, and even those measures are eventually abandoned. To help companies get out of this rut, we present evidence that safety can be a key driver of performance, and we offer a five-step process they can use to turn safety from a constraint into a source of competitive advantage.

What Companies Get Wrong about Safety

To understand how companies manage safety, we interviewed 76 executives from about 30 companies in different industries, including distribution, education consulting, health care, facilities management, oil-field services, finance, IT, and manufacturing. The findings were troubling. Without exception, every executive described safety as a cost to be incurred today to mitigate losses tomorrow. And although 94% claimed that their company viewed safety as a core value, only 17% said that safety was an explicit part of their company’s strategy. Equally disturbing, safety was not widely measured: Just 35% said that their company monitored one or more safety metrics, and only 4% reported that it linked safety metrics to employee incentives and accountability. It’s perhaps unsurprising, therefore, that none of the executives we interviewed reported having any empirical evidence linking safety to key performance drivers such as customer satisfaction, sales, margins, and employee retention.

At the other end of the corporate hierarchy, a 2022 study of U.S. workers by AlertMedia found that 97% considered physical safety at work important, but only 54% believed that their employers shared that opinion. The proportion who said that their company was expending more effort on safety relative to the previous year has declined, from 55% in 2022 to 40% in 2024.

The tendency to view safety as a constraint is exacerbated at the middle-management level, where siloed functional departments implement safety—departments such as Health, Safety, Security, and Environment (HSSE); HR; and Quality, Safety, and Environment (QSE). In our interviews with 20 department heads, they told us that they saw their roles primarily as enforcing rules, investigating incidents, conducting trainings, and tracking indicators such as injury rates and lost workdays. Although those activities are important, the language many of these executives used suggests a heavy focus on compliance and reacting to problems rather than on proactively managing safety as a driver of customer value or strategic performance. Chief safety officers spoke of “minimizing risk,” “enforcing regulations,” and analyzing “what went wrong.” They described process safety management as an exercise in “hazard mitigation” and identifying “root causes.” And consider the language SkyWest Airlines used when talking about safety in its 2018 10-K filing: It noted “new certification requirements,” “additional emergency training,” “availability of pilot records,” and “stricter rules to minimize pilot fatigue” but made no connection between safety and customer value, overall strategy, or financial performance.

This mindset has pernicious consequences. A study conducted by one of us found that managers allocated 60% fewer resources when an investment was presented as a way to mitigate future losses than when it was presented as a way to boost performance. That tendency is further compounded by well-documented cognitive biases. Behavioral research shows that people often underestimate their vulnerability to negative events, leading them to neglect, defer, and underspend on precautions such as wearing seat belts, getting flu shots, or undergoing cancer screenings.

We saw this bias among the 76 executives we interviewed. More than 70% framed AI as a growth investment and safety investment as loss avoidance. “We need to invest, and invest heavily, to realize the benefits of AI,” declared the CEO of an oil-field services company in Houston. Compare that with his characterization of safety: “Safety is a core value. We constantly review our safety expenditures and processes to optimize them for the future.”

What the Data Says

CEOs can flip the script on safety and reframe it as a performance driver to be invested in. Plenty of evidence supports this claim. A landmark study of the U.S. auto market in 1996 found that consumers pay significantly more for vehicles that have features such as airbags and antilock brakes. A 2015 study of 16,576 choices made by 540 airline passengers revealed that safety information drives carrier choice.

Our own research across industries supports this framing. A 2021 study of 11,451 customers across 1,785 companies in 65 industries conducted by one of us found that safety is associated with a 9% lift in overall customer satisfaction, which in turn drives a 13% increase in sales. A 2024 study of 2,484 B2B purchasing decisions found that customers are more likely to choose vendors with better safety training. And a 19-year panel study of 619 publicly traded companies revealed that firms with better employee-safety records enjoyed significantly higher customer satisfaction than companies with lower safety records. Customer satisfaction is strongly associated with sales growth, bigger margins, and superior shareholder returns. A 2016 longitudinal study that one of us worked on, which looked at 4,643 firms over the period 1994–2010, found that companies that reduced safety lapses for both customers and employees had higher long-term valuations.

The language many executives use suggests a heavy focus on compliance and reacting to problems rather than on proactively managing safety as a driver of customer value.

We haven’t even mentioned the immediate and tangible benefits from reducing worker downtime: Our 2023 analysis of 32,061 construction sites across New York City found that mandatory safety training reduces worker injury rates by 15% to 18%, delivering $18 million in annual savings and a 42% return on investment. A second longitudinal study of 1,921 industrial facilities of a major oil-field services company showed that a 10% increase in monthly training hours led to a 6.5% to 10% reduction in employee safety hazards over the course of 128 months.

The empirical case for framing safety as a performance driver is clear: Safety investments are linked to increases in customer satisfaction, employee welfare, sales, margins, pricing power, market share, and long-term firm value along with reductions in health care and litigation costs. Some companies have already figured this out.

ExxonMobil, for example, has elevated safety to a strategic priority (succinctly naming the core value “Nobody gets hurt”). The company has integrated safety into its decision-making and uses a comprehensive Operations Integrity Management System (OIMS) to manage performance. The system tracks a range of metrics such as near misses, safety observations, and hazard identifications to spot potential safety issues, ensuring that safety is incorporated in employee evaluations and decision-making at all levels. ExxonMobil has an industry-leading personnel-safety performance with a lost-time incident rate of 0.02 per 200,000 work hours in 2022.

When adopting safety as a strategic goal, however, managers should avoid making it a stand-alone initiative. Doing so will only serve to divorce it from the core business strategy. In our experience, when safety is treated as a separate initiative, it quickly becomes an exercise in cost reduction and compliance. Employees see it as an additional burden, not an integral part of their job or the company’s strategy, and resources are cut at the first sign of financial pressure.

How To Make Safety a Performance Driver

For safety to be an effective performance driver, an organization must ensure that everyone is aligned on what safety means and on how to measure success. It must also introduce practices to anticipate risks and prevent incidents before they materialize, target training on those practices, and incentivize employees to improve safety.

Align on meaning. It is essential to clarify your definition of safety so that everyone understands precisely what it means for your organization. Alcoa provides an excellent example of such clarity. Former CEO Paul O’Neill made safety a cornerstone of the company’s overall strategy and defined it as achieving zero workplace injuries. With everyone aligned on that definition and goal, workplace safety metrics were included in every aspect of decision-making and accountability, from the shop floor to the boardroom.

A school district in Texas we advised took a similar approach. The district had been experiencing outbreaks of bullying, and concern was growing that they were affecting educational outcomes and attendance. To address the problem, the superintendent and the school board decided to put students’ physical and psychological safety on campus at the core of the district’s strategy, framing it as a driver of academic-achievement outcomes, parent loyalty, and student attendance.

To begin, the board included safety metrics in the superintendent’s performance evaluation, making one-third of his $75,000 annual bonus contingent on meeting certain safety goals. To ensure organizational alignment on the definition of safety, the superintendent met with the school principals, and each one made student safety one of three strategic priorities. Next, the school principals met with their teachers and staffers in small groups to emphasize how reducing bullying would ultimately improve academic performance and student retention. At the meetings participants voiced their concerns, offered ideas for combating bullying, and shared success stories—all of which created alignment around what safety means to them. Finally, teachers and staff members used social media and community-engagement meetings to communicate with parents and students. They listened to concerns, explained the connection between reduced incidents of bullying and improved academic outcomes, and shared stories of students who had benefited from safer schools.

Agree on metrics. Of course, for people to buy in to the goal, you must be able to demonstrate that safety translates into improved performance. General findings, like those cited above, are helpful, but operational managers in a commercial business, for example, will need to know that safety, as the company defines it, delivers positive numbers in terms of productivity and market share.

A nursing-home system we worked with in Pennsylvania provides a good example. It defined safety as decreasing the number of falls and lowering the incidence of bedsores among residents. The chain developed operational measures of bedsores and resident falls and statistically correlated them with a measure of residents’ quality of life (as reported in interviews with residents). The quality-of-life measure was then statistically correlated with resident retention, business growth, and margins, thus providing a link between specific safety metrics and the organization’s operational success measures (Did more people want to go there? Did they want to stay longer? And did the organization benefit financially as a result of reductions in bedsores and fall rates?). As one of the nursing-home directors explains, “Aside from helping our residents, we now have a business case for our safety strategy. We track falls and bedsores for each shift—improving safety helps residents and it helps our bottom line.”

Companies often fall into the trap of tracking too many generic safety metrics that are not clearly linked to specific outcomes. When that happens, employees quickly become cynical about such measures, viewing them as bureaucratic box-checking that eats up their time rather than genuine efforts to improve safety. The nursing-home chain initially had this problem—it was tracking more than 15 safety metrics, many of which had no clear connection to reducing the number of falls or bedsores. For example, some of the original safety metrics pertained to front-desk monitoring, parking lot incidents, safety measures reported by vendors, and even neighborhood-crime tracking.

Once management realized its mistake, it dramatically simplified the measurement system. The chain focused on just a few key metrics that were statistically linked to the outcomes it cared about. By jettisoning measures that weren’t adding value, leaders could focus employee attention on the ones that mattered. The Texas school district went through a similar winnowing process. Initially each school was required to track more than 60 safety metrics; of them, only five were statistically predictive of student bullying and physical safety. By ruthlessly prioritizing a small number of metrics clearly linked to safety outcomes, both organizations built employee buy-in, saved employee time, and drove real improvements.

Anticipate and prevent problems. Once managers have internalized the business case for safety and adopted reliable metrics for measuring success, they readily seek tools and adopt practices that help them anticipate and prevent safety problems. The nursing-home chain, for example, provided nursing assistants with wearable flashlights so that they could easily detect the onset of bedsores. The school district developed a smartphone-based system that allowed students to record and report safety incidents. It also trained its teachers and staff to identify signs of student distress and to proactively reach out.

The Harris County Sheriff’s Office, which runs one of the largest prison systems in Texas, provides another example. Improving safety—reducing inmates’ self-harm attempts, drug abuse, fighting, suicide attempts, and illness—is a key element of its overall strategy. The office has taken a multipronged approach to measuring and improving safety outcomes.

First, the guards conduct inspections of jail cells every 30 minutes, enabling them to identify and preemptively address inmates who are displaying aggressive or self-harming tendencies. Second, leadership has invested in technology to automate the monitoring of the dispensation of critical medications, especially for conditions such as diabetes, seizures, schizophrenia, depression, and bipolar disorder. By proactively identifying inmates who did not receive medicines on time and correcting the oversight, leadership has minimized the likelihood of harmful medical incidents. Finally, to reduce the smuggling of contraband such as drug-laced paper through the mail, the sheriff’s office has implemented technology to digitize and scan all incoming mail.

Safety investments are linked to increases in customer satisfaction, employee welfare, sales, margins, pricing power, market share, and long-term firm value.

Today, on-time cell-inspection rates exceed 99%, the inmate mortality rate is down 30% (and below the national and state averages), and use-of-force incidents by the staff have declined 23%. These safety improvements have helped drive a 24% drop in the attrition rate of detention officers in a span of three years.

Consider how McDonald’s and the Field Neurosciences Institute in Michigan worked together to encourage safety behaviors among neighboring schools. They created the “caught being safe” program at the institute. Teachers and staff members nominate students who are observed engaging in safe practices, such as wearing helmets or life jackets. Students who are “caught being safe” are recognized and receive a coupon for a prize at participating McDonald’s restaurants. By fostering a culture that normalizes and celebrates safe behaviors, the program helps to reduce the number of safety incidents among children.

Technology can be a useful aid in the pursuit of safety. Apache Industrial, a provider of labor, scaffolding, and other services for industrial facilities in the United States and Canada, developed in-house laser scanning and 3-D modeling capabilities to scan buildings and create digital 3-D designs that can prevent hazards and accidents. “Shorter project time means less exposure to hazards,” explains Spence Killian, Apache’s chief commercial officer. “We reduced the project time by 28% for one client—increasing safety and reducing the total cost of the project.”

Innovative companies are responding to the growing demand for safety-focused equipment. For instance, in 2019 3M developed a new line of smart personal protective equipment (PPE) that uses advanced sensors and wireless connectivity to both measure worker safety and track improvements in productivity. Similarly, Chevron is developing a wearable skin patch that will provide real-time, automated analysis of sweat and electrolyte loss, alerting wearers to potential heat strain and the need for a break to replenish fluids and electrolytes.

Target training. Safety training must be customized to achieve specific preventive behaviors, and it should prioritize employee convenience. Otherwise, training programs can waste employees’ time, sap their morale, and fail to achieve the desired results.

The nursing-home chain initially subjected employees to generic safety training, conducted during lunch, to explain the importance of safety. Perhaps unsurprisingly, no safety improvements materialized, so the chain redesigned its training, making it specific to bedsore reduction. It also began offering the training sessions online so that employees wouldn’t need to forgo lunch to attend them. In addition, each employee was incentivized with a cash reward and a certificate for completing the training. As a result, training completion rates increased to 96%, employees identified more bedsores in the pre-formation stage, and the incidence of bedsores among residents decreased from 23.1% to 9.3%—a 60% improvement in safety.

It’s a mistake to assume that more training is necessarily better. Consider the case of a major industrial company in Houston with more than $30 billion in annual sales. It initially required employees to take more than 70 safety trainings, each lasting more than 40 minutes. But a statistical analysis showed that only nine of those trainings were predictive of improved safety outcomes. When the company reduced its required safety trainings by 87%, it saved millions in employee time without sacrificing results.

What separates useful training from the rest is most likely its specificity. In our research, training that focuses on communicating the value of safety in the workplace is generally not closely tied to improvements in safety. Rather, companies should mandate training in behaviors that have been statistically shown to improve safety outcomes.

Dräger, a provider of fixed and portable gas-detection systems for preventing accidents in the oil, gas, and chemical industries, exemplifies the value of targeted training. Dräger’s training on the use of its gas-detection systems covers the technical aspects of operating the equipment, of course, but it also emphasizes how to interpret data and explains the response strategies for various scenarios of gas exposure. This approach ensures that employees are not just familiar with the equipment but also adept at reacting correctly under hazardous conditions, thereby significantly reducing the risk of accidents and enhancing overall safety.

Shell uses a similar approach to train contractors in safety. Its onboarding program uses real equipment, tools, and mannequins to demonstrate hazards and how to mitigate them, and it significantly improves the way new vendors are introduced to the company’s safety protocols. Participants acquire specific capabilities that prepare them for on-the-ground conditions and develop a proactive attitude toward safety and risk management.

Incentivize employees. Many companies incentivize financial performance, quality, and productivity; safety is a minor consideration, if mentioned at all. Worse, they make the mistake of drastically increasing safety incentives after an incident—without first putting a safety strategy in place. After the catastrophic Deepwater Horizon explosion, for example, BP pegged 100% of employee bonuses to safety in 2010—but only for a single quarter. Most viewed that action as a public relations stunt rather than a true commitment to safety.

Another common mistake companies make is to peg rewards to outcomes. In our view, outcomes are the responsibility of managers; they are ultimately the consequence of a managerial choice of what behaviors to encourage. When it comes to employees, companies should reward the preventive behaviors and practices that lead to safe outcomes. The behaviors themselves should be specific and measurable so that the incentives can be clearly linked to them.

The Pennsylvania nursing-home chain takes a two-pronged approach in this regard. First, certified nursing assistants receive $70 when they complete the online bedsore identification training. Second, the shift that detects the highest number of early-stage bedsores each month earns a group cash bonus of as much as $200. The combination of individual and team incentives, both tied to clear safety-leading behaviors, improved the rates of training completion and bedsore detection.

A commercial construction firm achieved similar results using a straightforward initiative. Employees who consistently wore all required PPE (helmets, glasses, harnesses) were entered in a monthly drawing for $200 gift cards. Participation was tracked through a smartphone app. Within six months PPE compliance had risen from 43% to more than 92%.

For their part, managers need to keep a close eye on behaviors and outcomes. For example, directors at the nursing-home chain regularly meet with shift leaders to review target safety metrics. The weekly meetings are brief—about 20 minutes—but they’re frequent enough to keep safety salient in employees’ minds without becoming burdensome.

What Success Looks Like

Let’s conclude by taking a look at a company that has put all these elements together to make safety a performance driver. When a new SVP of strategy and a new CEO took over a facilities management company with $1.7 billion in annual sales and 10,000 employees that manages more than 2,000 client sites, they initiated a project to uncover the drivers of customer value. They discovered that safety accounted for 10% of the total impact.

To define and align around the meaning of safety, the SVP visited some 200 client sites to gather feedback from site managers and clients. On the basis of those visits, the company defined safety as safe operations by employees (preventing lacerations from sharp tools such as kitchen knives and garden tools) and safe driving (no incidents of drunk driving or speeding infractions). It included three behaviors in its safety metrics: properly covering sharp tools during transport and storage, using sharp tools correctly on the job, and operating vehicles safely.

The company also introduced a number of practices tied to improved safety. For instance, it created a confidential hotline that employees could use to report safety violations without fear of retribution. Site managers began holding regular safety meetings with shift supervisors in order to focus them on specific behaviors and practices. Each site was given specialty double-canvas covers for sharp tools and access to an online training program for using them. Site managers were evaluated according to the percentage of times the tools were properly covered and the percentage of employees who completed the training. The company also proactively replaced older equipment with newer, safer models with features such as automatic shutoffs and safety guards. Finally, all vehicles were equipped with Breathalyzer ignition locks and remote camera monitors to prevent drunk or unsafe driving.

Within 18 months compliance with the sheathing and correct-usage behaviors rose from 17% to 31% to a consistent 84% to 98% across all sites. Equipment-related lacerations dropped by more than 70% and vehicular accidents by more than 90%. As a result, the company’s already excellent safety record saw a 15% improvement.

To further streamline the safety strategy, the SVP of strategy collaborated with the chief HR officer to improve the company’s approach to incident reporting and training. She learned that site managers felt burdened by too much training that they found ineffective. As a first step, therefore, senior leaders reviewed the company’s portfolio of training programs, ultimately reducing it from more than 40 mandatory trainings a year to only five trainings. Second, leaders reduced the number of safety metrics by 50% and invested in new technology that shortens the time it takes to gather safety metrics.

Finally, safety-related incentives, which had previously been for top management only, were extended to site managers. The managers’ incentives were linked to employee behaviors, not outcomes. Their bonuses were directly tied to the increased application of preventive behaviors and practices by site employees rather than the number of accidents.

Specifically, the company tied 20% of a site manager’s bonus to the sheathing of instruments and correct-handling indicators. It gave a $50 bonus to every employee who completed all five trainings. Each location had a $1,000 annual budget earmarked for recognizing employees’ safety behaviors at events or employee town halls. It’s important to note that the incentives focused on behaviors that prevent accidents; punitive responses to accidents don’t help prevent them. Regular audits were conducted to verify compliance with sharp-tools coverage and handling protocols. High-performing sites were spotlighted in newsletters and town halls, and their best practices were widely shared. Managers also worked with local teams to set realistic incremental targets, and they steadily raised the bar over time.

The VP of marketing developed a communications plan to recognize and promote the company’s strong safety performance to both internal and external stakeholders. That increased site managers’ satisfaction and further differentiated the service among corporate customers. Safety is now a key selling point in new-client proposals, and over the course of a year and a half, sales increased by 24%.

. . .

It’s imperative that we fundamentally rethink the entrenched view of safety. By reimagining it for the 21st century, not as a defensive necessity but as an offensive opportunity, companies can elevate safety from a siloed function to a shared mindset, from a cost center to a value accelerator. The task of improving safety while delivering value for customers, employees, and shareholders is one that executives need to embrace, but they must do so mindfully, systematically, and consistently. Then safety can become a formidable strategic advantage.

Copyright 2024 Harvard Business School Publishing Corporation. Distributed by The New York Times Syndicate.

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