What is 'overhead' anyway?

According to Investopedia, overhead is any expense incurred to support the business while not being directly related to a specific product or service.

I've heard the word overhead used a lot in my career.  I am sure many of us have.  What I have found interesting, however, is the difference in overall effectiveness and profitability of businesses or organizations who use it one way versus those who use it another.

What do I mean?

Let's start with the not-so-good.

There are many ways that an organization's safety culture can be indirectly measured.  One of those indirect observations I often make is if 'safety' is deemed overhead.  One could argue that, in the truest sense of the word according to Investopedia's definition above, it is.  But if you look further, those organizations that view safety as overhead are often correlated with a more overall negative safety culture atmosphere, negative views of safety, and an organization that implements safety through focusing only on compliance rather than people.  Unfortunately, when this happens, it is often a self-fulfilling negative feedback loop that destines that organization to view safety management as a necessary evil and, even worse, safety items are one of the first that are value engineered out.

Conversely, savvier organizations understand that safety management is a tool to create safer employees, contractors, worksites, and profitability.  They understand the need to manage their risk and integrate that risk management into the core of their operations.  Safety to them is by definition, overhead, but by practice, it is a central tenet of taking care of their employees and their dollars.  These organizations understand the potentially devastating impact a poor Experience Modification Factor, or e-Mod, can have on their business for years after the injuries occur.  

It is no wonder, then, that while overhead as a business term can be defined, in practice, one's approach to it yields wildly different results.

If your business is at a point of decreasing or hard to find profitability, then ensuring your employees stay safe can decrease insurance premiums, improve productivity, improve safety reputation (an often overlooked component), and propel you to a better, more profitable workplace.

​All of the above isn't necessarily a new idea, but I believe risk managers and safety professionals could do better to build the 'why' for the business case instead of focusing solely on the 'why' for compliance. Managing safety through compliance can work...to a point. Know what that point is. Business owners and managers, of course, need to know what their overhead is for accounting purposes. But they also need to know what it isn't for their management purposes. Understanding that difference can make all the difference.

Stay safe, 
​Trey