Brian B. Bethel, CIH Sikorsky Aircraft

This presentation contains no technical data subject to EAR or

ITAR

Brian B. Bethel, CIHSikorsky Aircraft

This presentation contains no technical data subject to EAR or ITAR


Management commitment

Employee engagement• Making employees agents of change

not change responders Effective risk engineering• Recognition• Evaluation • Control

- The SCIENCE

- The ART

- The TRICK


Decisions to move forward with EHS projects are no longer based solely on sound technical judgment

Why Are We Here?


Our LanguageTheir Language


Decisions to move forward with EHS projects are no longer based solely on sound technical judgment

What do we need to Change?• It is time to start thinking more like businessmen and less like scientists


A measure used to describe the efficiency of an investment over a set period of time• Often 7 or 10 years • In may corporations the time frame is 3

years A tool used to compare the relative

efficiency of investment choices


Every organization emphasized their own set of financial metrics

Learn which financial metrics are important in your corporation

Common financial metrics include:• Return on Investment • Net Present Value • Internal Rate of Return• (Discounted) Payback Period

Meet with Finance / Cost Accounting / IE


Ratio of money gained to money invested An ROI of 100% would mean you

recovered all the money you invested An ROI >100% would mean you gained

MORE than you spent


Measures how long something takes to "pay for itself"

For example a $1000 investment which returned $500 per year would have a two year payback period

The time value of money is not taken into account

Payback period is widely used because of its ease of use despite recognized limitations


Similar to payback period in that it measures how long something takes to "pay for itself“… BUT:

Takes into account:• The time value of money (inflation)• The cost to borrow the money to make the

investment• The loss of income you would have had if you

invested in a very secure security (Think T bills)

DPP is a VERY common financial metric


IRR is an indicator of the efficiency, quality and yield of an investment

Used to measure and compare the profitability of investments

An IRR of 100% would mean you recovered all the money you invested

An ROI >100% would mean you gained MORE than you spent

IRR is a VERY common financial metric


NPV compares the value of a dollar today to the value of the same dollar in the future

Takes into account inflation and the increased revenue gained through the investment

Reduced by the financial benefit gained by investing that same money in a stable investment (like T Bills)

Reported in $


“Does your boss know those numbers”

“Which one of us wouldn’t invest in a 90% payback”

“That’s the case you have to make”

Jeff PinoPresident, Sikorsky

Aircraft2008 AIHce - Minneapolis


Learn how to mine cost data• Direct costs are importantBut• Indirect & hidden costs usually are the

make or break data


Cost that are easily identified• Injury costs (work comp loss data)• PPE Costs (Procurement)• Cost to purchase and install controls• Consultant fees • On and on


Medical costs • Medical Lab fees

Employee time Medical screening• Fit testing• Training

IH sampling costs • Labor (in house)• Lab


Time to administer a program Time to administer a medical program Time for supervisors to schedule medical

monitoring / training / fit testing Time of employee covering when employee is

undergoing medical screening• Often at overtime rates - Hidden costs in

spades!!!• Cost to operate local exhaust ventilation costs Power to run the fansEnergy to condition makeup and exhausted air

Labor for housekeeping


Quality & labor improvements? – Cost or benefit• Review process with Industrial engineeringCost accountingQuality engineering

Time study data Monitor material costs Cost of Poor Quality (COPQ) data Indirect time charging (DOI)

Rework reduction (quality engineering)


Learn how to calculate the financial metrics that are important to your organization


Incorporate a financial person on your teams• Buy them coffee• Order them plush “ergonomic” office

chairs ….Go to the internet


Various IH / EHS specific tools are availableROHSEI – ORC ProductAIHA Value Proposition ToolOr not!Chances are your organization has a

program or a tool to do these calculations for you

Enlist financial or IE resources


Two hearing conservation cases

Why hearing conservation case studies??

Because hearing conservation programs don’t work!


Machine shop environment Dosimetery Indicates That Exposures

Ranged From 84 – 87 dB(A) For A Majority Of The Employees • As A Result, This HEP Was Enrolled In The

Hearing Conservation Program Sound Mapping Indicated That Most Point

Noise Sources Were < 83 dB(A)


DO NOT UNDERESTIMATE THE CONTRIBUTION OF

COMPRESSED AIR NOISE TO THE NOISE PROFILE OF

A MACHINIST


Substitute low noise air nozzles where possible Reductions ranged from 8 – 15 dB(A) Average machinist used compressed air for 8 –

12 min a day Expect to remove 75 employees from the HCP Expect an initial investment of $12K for nozzles


$12K Cost Vs Value


Hearing testing service reduction • $1,200

Hearing loss awards • At risk of 2 cases @ $25K

Direct cost savings expected - $1.2K Cost avoidance - $50K Total savings expected ≈ 52.2K

?? Why no hearing protection costs savings??


Program administration annual costs savings• HCP Program Admin (IH) – 40 Hrs • Medical Admin (Medical) – 20 Hrs • Supervisors Time – 75 Hrs (1 Hr per employee )• Employee Time – 131.25 Hrs (1.75 Hrs for

exam)• STS Retests Labor – 9 Hrs

How do we convert hours saved into Dollars???

Simple… multiply by the labor rate…Right?


Hourly Rate That Includes Overhead Costs Burdened Rate Equals

Employee Salary+Cost Of Employee Benefits+Paid Time Off+ Insurance Costs+Taxes On Labor +Employees Share Of The Infrastructure Costs

• Obtain From Your IE Or Cost Accounting Organization • Not Uncommon That The Burdened Rate Is 3X Wage


Program administration annual costs savings• HCP Program Admin (IH) – 40 Hrs • Medical Admin (Medical) – 20 Hrs • Supervisors Time – 75 Hrs (1 Hr per employee )• Employee Time – 131.25 Hrs (1.75 Hrs for exam)• STS Retests Labor – 9 Hrs• Energy Savings ≈ $7600

Indirect Cost Savings Expected ≈ $40 K


Compressed air is the single highest cost utility used in a manufacturing setting• 7 – 1 energy ratio7 HP of electrical power to produce 1

HP of compressed air “work” Reducing compressed air use will result in• Lower noise levels• Lower energy costs

Use this as part of your value justification for noise control engineering


Annual saving• $41.2 K - HCP($1,200 Direct & 40,000 Indirect)• $549 Per employee

Expected cost avoidance• $50K - Hearing loss awards• $666 Per employee

Total savings expected - $91.2K• ($1,216 Per employee)


$12 K Initial Investment ROI – 176% DPP – 0.2 Months NPV – $429K IRR – 665%


Use Two Different Noise Abatement Techniques To Dampen Sound • Engineering And

Installation Expected To Be $47,970

Expect To Remove 150 Employees From The HCP


$48K Cost Vs Value


Hearing Testing Service Reduction • $7.5K

IH Support • $10K

Hearing Loss Awards – No Savings ? Hearing Protection Costs

Direct Cost Savings Expected - $17.5K


Program Administration Costs Savings• HCP Program Admin & Training (EHS) – 120 Hrs• Training Admin (EHS) – 40 Hrs • Supervisors Time – 150 Hrs • Employee Time – Testing 225 Hrs• Employee Time – Training 75 Hrs• STS Retests Labor – 9 Hrs

Indirect Cost Savings Expected - $62.9K


Annual Saving• $70.5K - HCP & Supporting IH Costs • $470 Per Employee

Expected Cost Avoidance• $0 - Hearing Loss Awards

Total Savings Expected - $70.5K• ($470 Per Employee)


$48 K Initial Investment ROI – 131% DPP – 1.6 Years NPV – $327K IRR – 78%


Two Different Scenarios• High Capital – Low Expense (Enclosure)• Lower Burdened Rate• No History Of Hearing Loss Claims

• Low Capital – High Expense (Nozzles)• Higher Burdened Rate• Moderate Hearing Loss Claim Potential

Brian B. Bethel, CIHSikorsky Aircraft

[email protected]

Brian B. Bethel, CIH Sikorsky Aircraft

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