Consider Intangible Costs When Calculating an Industrial Project

The following tip is from the ISA book by Greg McMillan and Hunter Vegas titled 101 Tips for a Successful Automation Career, inspired by the ISA Mentor Program. This is Tip #42.

If you are the optimistic sort who always sees the good in your fellow man and always takes people and companies at their word – skip to Tip #43 and save yourself the angst. However, if you are like most engineers and tend to be a bit more skeptical and jaded, then this tip is for you.Profit

Political correctness has never been my strong suit and for better or worse I call things as I see them. If I spot a gorilla in the room, I am usually the first to point it out so that everyone can quickly get past that distraction and work to address the issue at hand. I firmly believe that you cannot begin to resolve a problem until everyone agrees that a problem exists.

In that spirit let me introduce this tip…

Concept: While nearly every company trumpets people, safety, and environment as a higher priority than profitability, the fact is that MOST corporate decisions are driven by the bottom line.

Details: This concept flies in the face of practically every corporate sales and marketing campaign in existence. Their advertisements would have us believe that chemical companies champion the environment above all else, that the core value of pharmaceutical firms is the elimination of human suffering, and that all companies consider their employees to be their number one resource. This is all wonderful and fine, except that it is rarely true.

All companies champion money. They have to. No company can continue to operate while constantly losing money. Short-term revenue-negative decisions may be made, but ultimately the company must make a profit if it is to survive. All things being equal, a company will act to improve its profit.

So are safety and the environment REALLY a priority? Yes, because injuring people and getting caught dumping hazardous chemicals can be expensive. (BP certainly discovered this in the Gulf of Mexico in 2010!) However, if a company can cut corners, bypass safety interlocks, and modify procedures to get a unit in production quicker and the risk is deemed acceptable, then there is every likelihood that that is exactly what will happen. (BP and their affiliated companies are being accused of those very activities in the courts today.) So what is the point of this tip (other than to depress people)?

If you as an engineer understand this dynamic, you can use it to encourage the company to do the right thing if only because it makes financial sense. If the company is flouting (that is, willfully disregarding) a safety procedure or bending an environmental regulation, calling attention to it may fall on deaf ears. However, if you can quantify the financial loss of spilled product or lost production due to an EPA restraining order, suddenly the issue has significant financial ramifications and may be treated differently. Similarly, it may benefit the production numbers to allow a waste stream to be generated even if the environment is impacted. However, if the actual cost of the waste stream can be quantified and highlighted, it may behoove the company to reconsider their position. (See next tip for details.) In short, when you are faced with a situation where your company is acting in ways it should not, pull together a complete list of 101 Tips for a Successful Automation Careerreasons to stop that activity before you approach management. Your list should include safety reasons, environmental reasons, and most importantly, financial reasons. With such a list, your odds of redirecting the company’s actions will be greatly enhanced.

Watch-Outs: If your company seriously flouts a safety or environmental regulation and people’s lives are at stake, call immediate attention to it regardless of the financial impact. Start with your direct supervisor and if you are ignored, inform him or her that you are going to the next level and immediately do it. If you get no satisfaction at that level, continue until the issue has been resolved. Exhaust all levels within the company before turning to outside entities (such as the police, OSHA, EPA, etc.) Doing the right thing is not easy but living with the deaths of a couple of co-workers because you failed to act is not a walk in the park either.

Exceptions: Occasionally a company REALLY WILL do the right thing regardless of the cost. This is great to see and it is certainly a company worth working for. Unfortunately, this seems to happen much too infrequently, especially during hard economic times. People usually start off meaning well but the pressure to improve the bottom line tends to eliminate this type of behavior over time.

Insight: When calculating the cost of a project, a decision, or some other activity, do not fail to consider the intangible costs. Spilled chemicals may not cost the company much from a raw material perspective, but having a TV reporter broadcast the fact on national news certainly IS expensive. Similarly, eliminating a waste stream may not save much money in material costs, but if the waste reduction drops the company significantly lower on the EPA’s list of top polluters, the idea may seem much more attractive. Take the time to look at the bigger picture and determine other benefits that the company may not have considered.

Rule of Thumb: Follow the money. Historically, it has been an excellent predictor of corporate behavior.

 

Hunter VegasAbout the Author
Hunter Vegas, P.E., holds a B.S.E.E. degree from Tulane University and an M.B.A. from Wake Forest University. His job titles have included instrument engineer, production engineer, instrumentation group leader, principal automation engineer, and unit production manager. In 2001, he joined Avid Solutions, Inc., as an engineering manager and lead project engineer, where he works today. Vegas has executed nearly 2,000 instrumentation and control projects over his career, with budgets ranging from a few thousand to millions of dollars. He is proficient in field instrumentation sizing and selection, safety interlock design, electrical design, advanced control strategy, and numerous control system hardware and software platforms.
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