Stress kills. But not always in the way you might expect.
According to a recent study in the Journal of Accounting and Economics, increased pressure to meet business goals correlates with higher rates of worker illness and injury. The closer employees come to just barely making earning expectations, the more those employees are likely to sacrifice their personal safety and health. In fact, compared to companies that easily surpass financial projections (or, on the flipside, significantly miss the mark), at companies where profits comes down to the wire, workplace injury and illness are 5%–15% more common.
The study’s authors, Judson Caskey and N. Bugra Ozel, recently wrote about their findings in the Harvard Business Review. As professors of Accounting at the UCLA Anderson School of Management and the Jindal School of Management at the University of Texas at Dallas, respectively, Caskey and Ozel wondered how managers’ dogged pursuit of analyst forecasts impacts employees at mills, manufacturers, and other companies where people operate potentially hazardous machinery. The researchers were inspired by ongoing stories of grievous injury and loss of life:
At a steel mill in Seguin, Texas, an employee suffered burns to more than 60% of his body after hot liquid steel spilled onto him. He died in a hospital three days later.
A 21-year-old plastics worker was treated for severe burns to his hand and had to have four fingers amputated after he was injured on his first day on the job at a factory in Elyria, Ohio.
A flawed network of pipes and valves at a manufacturing plant in La Porte, Texas, led to the release of a poisonous pesticide that killed four workers.
These are just three examples of recent workplace injuries and fatalities. U.S. companies are facing pressure to meet earnings expectations, and research indicates that meeting analyst forecasts is a more important benchmark than meeting the prior year’s earnings or avoiding losses. While these issues may seem unrelated, we wondered whether there is a connection or correlation. Do workplace injuries occur more commonly in companies that are facing increased pressure to meet earnings expectations?
Caskey and Ozel found the answer to be “yes.” Additionally, they discovered that employees tended to suffer fewer injuries in highly unionized industries, states with higher workers’ compensation premiums, and companies that contracted with the federal government. Essentially, the more people looking out for workers—and the steeper the price for noncompliance—the safer everyone becomes as a result.
That may sound obvious, but it should come as a wake-up call for any manager or executive who thinks the needs of financial stakeholders stand in opposition to rules established by the Occupational Safety and Health Administration.
The study highlights the importance of balancing financial goals with regard for employees’ health and safety. In effect, you can’t have one without the other: Caskey and Ozel make the case that short-term gain at the cost of worker well-being can damage companies later on through regulatory fines, litigation, higher insurance premiums, and loss of investors.
It’s another way in which workforce compliance and business success go hand-in-hand.
For more news, research, and guidance about workplace safety and compliance, visit our blog.