Seven Types of Cost Estimates to Calculate Your ROSI
By Susen Trail | 10/27/2020
ROSI is Return on Safety Investment. Often even experienced Safety Managers don’t have a strong background in business or budgets. This can be a major handicap when trying to get needed safety equipment or changes to employee exposure conditions.
The initial and continuing concept behind Simple Safety Coach is to meet the Coaching needs of a Safety Managers with little experience and to meet the efficiency needs of a Safety Manager covering multiple sites or multiple Job Title. Therefore, we incorporated a Return On Safety Investment, ROSI, feature in the Safety Observations feature that is tied into safety activity metric tracking.
When an employee makes a Safety Observation, they are reporting a condition that can be reasonably expected to cause harm to employees and/or property. During the investigation necessary changes will be identified to abate the hazard and some of these may be costly. The ROSI allows the investigators to pit the cost of abatement against the cost that would be incurred if the accident happened.
There are entry points for the specific types of costs that may occur in the event of the accident identified within the (app, program?) but the entry point for the cost to abate the hazard is just for a total estimate. The first thing an astute business manager is going to ask is the basis for the dollar amount. Using a single total value created from separate component values is known in business as "Estimated Costs." No surprise there.
There are seven types of cost estimates:
- Useful for early evaluations, sometimes called a 'horseback estimate' or rough estimate
- The most accurate but requires a great deal of work and research.
- Often performed by identifying all of the purchases required as well as personnel hours for employees and contract fees, potential downtime of production lines, etc.
- Equation based
- There are apps with formulas specifically developed for cost estimates but if you are not able to see the values and constants used in the equations you may not get the number you are looking to calculate.
- This is similar to "Phone a friend" on a game show if the Safety Manager has not experienced a similar abatement process.
- Other terms for this type of estimate include analogous cost, budget, or engineer’s estimate.
- Similar to the experience estimate this is used to assess the cost of different size, capacity, or content equipment or materials compared to the same or similar installations or changes in the past.
- Cost estimates from manufacturers, suppliers, or contractors.
- Such as cost per hour, or per person. For example, number of respirators required would be per person. For ventilation it would be per cubic feet per minute of air.
The information for this blog came from a November 2019 Synergist magazine article by Jeff Burton who has also written Useful Equations: Practical Applications of OH&S Math, available here.