The Economics of Ergonomics (Industrial & Office)
How to Calculate Financial Benefits From Office and Industrial Ergonomics
Ergonomics is perhaps one to the most widely abused, misunderstood, and underutilized words and concepts in today’s business lexicon. It is also seen as having difficult-to-measure benefits, and it is generally not regarded as a tool to increase profitability.
Applied comprehensively in a business, which it seldom is, ergonomics can be as important a business concept as strategic planning and quality control. It has a real and direct impact on productivity, performance, throughput, delivery of services, and most of all, the bottom line. It can affect an entire business by enhancing the most important business component–the ability of workers to do their work.
Ergonomics helps workers function better by humanizing their workstation and tools, stopping their pain, and improving their ability for task performance. Its prescriptions can be applied to both white and blue collar workstation environments. It reduces lost time, time loss, and absenteeism, and saves hard dollars that can be measured through standard management systems. Ergonomic applications allow workers to perform better, improve productivity, maximize quality, and maintain customer service, all real-world business principles and thus measurable by real dollars.
It is also now becoming well known that ergonomics applications can reduce workers’ compensation and medical costs. That’s easy to measure. But other than that, how do you measure the result of ergonomic applications, actual productivity, especially in the white collar area? Sure, ergonomic chairs make people feel better, but how do you measure that effect on the financial statement?
E.R. Tischauer, in his book “Biomechanical Basis of Ergonomics,” writes that a correct chair can add as much as 40 productive individuals. Easy to measure and tie to the bottom line. The widely quoted Etienne Granjean has stated that a simple 10-20 percent improvement results from ergonomic intervention. How did he come up with that figure? And what does it mean? Does he have an MBA and specific experience in business to knock heads with the Harvard MBAs who run major companies? How do the prominent ergonomists answer when asked, “How do you measure the financial gains?”
I’ve even heard prominent ergonomists give these textbook answers simply because they did not have the knowledge, tools, or wherewithal to give a “real world” answer.
Upper-level clients don’t want a quote out of a textbook. They want to see how you measured that, your methodology and reasoning, and finally your final figure or “bottom line.” That’s what hard-core business decisions are made on, even those involving ergonomics.
Another hurdle is the plethora of “voodoo” ergonomic equipment and “voodoo” ergonomist touting panaceas for all occupational injuries. Is their answer to financial gains still so much voodoo? I’m sure you know what the answer is. What is needed are real answers to real ergonomic interventions.
THE DOLLAR VALUE OF ERGONOMICS
Productivity increases and performance improves when employees keep their minds on their work and aren’t concerned about pain or the difficulty of the job. What is especially difficult to grasp is the concrete dollar value of benefits and productivity in the white collar computer environment. “Sure, ergonomic chairs will make them fell better, but am I getting my money’s worth?” says the skeptical manager. “Yes, our ergonomics program bought everyone new wrist rests, but I approved the purchase just to shut everyone up. I think it’s just a bunch of baloney,” says another. “I sure don’t see any direct impact on my bottom line.”
White collar industries such insurance companies have shown improvements by ergonomic interventions in worker performance and productivity. Improvements are illustrated by tracking such things as hours worked, units processed, quality audits made, number of analyst contracts, and amount of processable work activity. Ergonomic interventions in the workstations can be shown to impact these areas directly if baselines are established before and after interventions.
A key is to track productivity according to client methodology; then improvements can become clear. If tasks can be assigned a value and time/benefit ratio, they can be compared to management goals and can easily be tracked for dollar significance.
With a general measurement concept, you can measure any white collar activity, as easily as blue collar assembly line activity. You can even measure the oft-elusive concept of customer service in many different ways. But most importantly, you can measure “subjective” concepts in a hard and fast manner, assigning a real dollar value to them.
To really look at answers to financial statement impact, we must transcend the area of ergonomics and look into business operations. Business concepts such as productivity, cost savings, and performance can be easily measured and seen on an assembly line, such as in car manufacturing. Or even on (dis)assembly lines, such as chicken factories. Benefits of ergonomics that enhance these can be seen here within hours, even minutes. This can be translated into dollar by even a rookie accountant.
But how can you track cost savings and benefits in the white collar arena, where only paper is shuffled and no real goods are manufactured, where information is transferred instead of boxes, where it appears more difficult to measure the performance of someone sitting at a desk, talking on the phone, and working the computer all day?
With these concepts, you are measuring ways in which the workers produce things, like briefs, reports, or other paper deliverables. You can also measure the effectiveness of service to customers.
A simple standard business methodology (one type out of many) of performance and productivity measurement is a documented daily, weekly, monthly management operating system. Such a system can track the hours of employees (regardless of task) in a white collar computer environment. Measurement of hours and what workers accomplish during those hours can be used to determine the influence of occupational injuries.
Very simply, without broaching workers’ intellectual capability, management must determine specific and reasonable expectations of what can be accomplished during a time unit such as a man-hour, considering work tasks, workers’ skills/capabilities, workload, and deadlines. This attainment is established, and (earned) hours are measured against the goal as a percentage.
The results is a “lost time” concept. Like the workers’ compensation “time loss,” in which a worker is absent from the workplace and productivity for that individual is zero, lost time is a measurement of how a worker is negatively impacted by an occupational injury. Measurements before and after ergonomic interventions can definitely showcase improvements in individual performance, measured against attainment or management goals. A measurement system like this can bring the benefits of ergonomics from a purely subjective concept into one that can be measured in hard dollars.
These concepts are well known and can be applied to the use of ergonomics. Hundreds of books are available on measuring business activity. It is not my intent to describe business measurement, other than that it exists and is in use right now. Knowledge of good measurement techniques abounds in most business organizations and is taught in all business schools across the country. It is the unusual application of these standard business tools to ergonomic principles that is significant.
MEASURING THE SAVINGS
Back to the domain of business operations. If you can’t measure current productivity in your white collar environment, you certainly can’t measure improvements after ergonomic applications have been installed. Therefore, as in good business operations, a good tracking and measurement system must be in place and continuously updated to measure these benefits.
Usually teaming up with someone in senior management is the major ingredient in installing or using a standard business measurement system. Management systems measuring performance, productivity, and attainment are second nature to an operations manager in charge of productivity and needed corrective action. These are business concepts familiar to most MBA types.
We have seen banks improve customer service by 10-25 percent, measured in quality of service, customer retention, and new customers. We have seen accounting groups improve quality of work by up to 50 percent. We have seen customer service reps take on a new attitude and provide better service while effectively and efficiently handling more calls. Even computer programmers who stare at computers all day long can show improvement in development deliverables. They report a clearer mind, sharper thinking, and improved creative attitudes as a result of ergonomics.
Bill Brough, CPE, of Seattle’s Washington Ergonomics has had insurance industry projects measured by good management systems, quoting productivity benefits and cost savings at six figures a clip. You can’t get any more white collar than that.
The basic idea is teaming with a senior-level manager to determine the best way to measure ergonomic interventions. What many ergonomist fail to understand (not having been to business school) is that first of all, an all-important baseline is needed to measure against. This baseline shows where the organization is in terms of throughput. It shows how the organization is working now, before ergonomic changes. This measurement must be taken prior to intervention so improvements can be properly charted. Before making any modifications to workflow, methods, or workstations, you must have something to measure against–generally, the current level of productivity.
Second, you must establish a measure of attainment or goal. Good managers are very adept at determining these goals. The attainment is a measurement of how close to your goal the production or throughout is per day, week, month, or year. If the delta of this measurement is determined, it can be charted and the impact of your ergonomics applications have can be shown. Be careful here; the notorious Hawthorne principle comes into play and is a strong weapon for skeptics who would undermine your efforts because of turfitis or another political reason.
Throughput is a key. Most organizations are interested in higher production–more, faster, with fewer people, and with better quality. Ergonomics can help this. Real, not voodoo ergonomics are expert in helping client companies do this. However, ergonomics school and experience usually don’t prepare us for determining such aspects as the profitability of business. Better to team with someone who is an expert in these manners, who has the training, education, and experience in business measurement. It’s very difficult to do it all yourself.
Third, you must determine how you are going to measure this. You can’t depend on your rookie accountant to measure throughput in the white collar area like you can in the blue-collar craft area. Nuances are more subtle. However, indicators are available to measure ergonomics applications in all white collar areas. Sometimes it requires unbiased research into how well a computer operator is working, according to management decree and expectations. A measurement of quality or creativeness may be needed. Your senior manager will be able to help you determine how to measure this type of performance. Most work tasks and deliverables, no matter what they are, can be measured somehow.
You also must know how the client wants to measure what, and by which unique indicator, before installing a measurement methodology. You don’t want to measure your work in English when they already measure their productivity in Portuguese.
BOTTOM LINE BENEFITS
We have found that investments in ergonomics can be returned three to tenfold in improved performance, throughput, and corollary savings, although this is just the tip of the iceberg. Ergonomics also prevents future occupational injuries and productivity problems. Cost avoidance is another way to measure ROI.
Ergonomic solutions improve productivity, reduce lost time, time loss, and absenteeism and save hard dollars that are measurable through standard management systems. They can lead to lower workers’ compensation premiums and reduced medical costs. Understanding these concepts will also give you as an ergonomist a better way and higher level on which to strut your stuff. Everyone wants to hire someone who can track what he has done and prove its benefits because most businesses are run with an eye on the bottom line of the financial statement.
If you can improve that, then you are indeed on your way to becoming an ergonomist who understands business needs and who is better armed to help injured workers. And isn’t that what ergonomics is supposed to be all about?