EHS Managers – Take Back the Power of Purchase

You’ve done your due diligence, explored vendors, and have decided that it is time to invest in an EHS management system. As the person in the field, you know the tremendous impact this can make not only to your daily work life – but to the safety of your workers. However, convincing your CEO, CFO or VP to sign off on the investment can be tricky. Here are three things you need to consider when making the case to purchase an EHS management software:

  1. Turn your personal pain into corporate impacts

While you may find endless stacks of paperwork a pain, they aren’t enough to make your CEO want to allocate budget. Mapping your personal pain points back to tangible corporate impacts is a powerful way to convince your executives why they need to act. To do so, try using a similar structure to a 5-why cause analysis. But, instead of asking “Why did this happen?” ask “Why does this matter?”

Here is an example for a construction Safety Manager:

  • Safety Manager pain point: “I spend too much time filing paperwork and doing data input”
  • Why it matters: Less time is spent in the field performing observations.
  • Why it matters: Fewer hazards are identified and corrected, causing more incidents.
  • Why it matters: Increased number of incidents drive up the cost of labor.
  • Why it matters: Higher costs of labor decrease the profitability of a project, driving up quote prices.
  • Why it matters: Higher quote prices result in loss of deals to competitors. Revenue is lost.

Wherever possible, quantify the impact. For example, estimate the cost of an incident to your organization (average insurance costs, lost time, training of new employees) and use that to quantify how much additional incidents can impact the cost of labor. If you are unable to estimate costs, available industry data can help (try OSHA’s statistics page).

  1. Set clear and quantified success metrics

Now that you’ve convinced your executive team of why EHS management software should be purchased, the next step is setting clear goals for success. For each of the corporate pain points you identified in Stage 1, set a target for how much you think this software investment can improve it, and then set the metrics you will use to measure it.

Here is an example of a target and metrics from the above example:

  • Target: Reduce incident rates by 20 percent
    • Metric: Incident rate
  • Target: Decrease labor costs by 10 percent
    • Metric: Labor cost per project
  • Target: Increase project bid win-rate by 10 percent
    • Metric: Project win rate

The software vendors you are working with should be supporting this process by providing case studies of realistic impacts they have made for similar companies, ROI tools, and other support.

Interested in learning more about building an EHS software business case?
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  1. Understand all costs and calculate the Payback & ROI

The last thing you will need to demonstrate is that you understand the investment required to purchase and implement an EHS management software solution, and can quantify how the benefits outweigh the costs. Knowing if you will require any integrations (such as for your HRIS system, asset management system, etc.) will help to get a comprehensive quote. When speaking to your vendor about a quote, have them break it down into one-time vs. annual costs. An example of one-time costs are implementation fees, consulting fees, etc. Examples of ongoing costs include annual fees and maintenance.

Once the costs are identified, two simple calculations can be completed:

ROI – How much benefit is generated per the amount spent over a selected period of time

Make sure you set a realistic timeframe for this investment – such as five years
5-Year ROI = (5-year benefit – 5-year recurring costs) / One-Time Investment

Example 5-year ROI:

5-year period

$30,000 expected annual benefit

$10,000 expected annual costs

$50,000 one-time implementation costs

[($30,000*5) – ($10,000*5)] / $50,000

($150,000 – $50,000) / $50,000

$100,000 / $50,000

= 200%

Payback Period – How long it takes to get your initial investment back

Payback = One-Time Investment / (Annual Benefit – Annual Costs)

Example: Payback Period

$30,000 expected annual benefit

$10,000 expected annual costs

$50,000 one-time implementation costs

$50,000 / ($30,000 – $10,000)

$50,000 / $20,000

= 2.5 years

In this example, the software will have a 200-percent ROI after five years. The initial investment will be paid back after 2.5 years!

Knowing the pain points you are solving, how to quantify the benefits, and calculating the return will give you the power you need to influence EHS management purchasing decisions. Don’t forget to use your selected software vendors to help guide you along the way!

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