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How to Manage Aviation SMS Budget Expectations - for Safety Managers

Posted by Christopher Howell on Sep 29, 2018 3:00:00 PM Find me on:

Common Dilemma about Aviation Safety Budgets

How Safety Managers Get Bigger Budgets for Aviation SMS Program

We have heard it time and again. Upper management has allocated insufficient funds for the safety department. This is a universal challenge for all aviation safety managers.

"Do more with less" seems to be a worn-out phrase that safety departments continue to hear.

How was the safety budget last year? Sufficient? Barely enough to pay for salaries? No room for training budgets or tools to improve efficiencies?

Just imagine what you could do with a bigger safety budget?

  • Provide more SMS training;
  • Purchase better safety promotion materials;
  • Acquire SMS tools to manage SMS documentation requirements?

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Many safety managers feel entitled to having a bigger aviation safety budget. Many will feel there is an inequity between budget distributions among the safety department, operations, facilities, and administration. It is easy to see how operations gain access to larger budgets. They are the service providers, the core revenue generators. How can you put a dollar figure on accidents that have not yet happened?

Better yet, how do you put a dollar figure on prevented accidents?

How do you identify a prevented accident?

Are prevented accidents documented someplace? Or are they soon forgotten?

Or maybe close calls don't count as a prevented accident? How do you tell? How do you even start to calculate the value the organization saved from a close call?

Let's take a look at why safety managers have difficulties in acquiring adequate budgets.

Safety Managers Don't Know How to Speak to Upper Managers

Aviation safety managers know their business, which is managing safety. They speak aviation safety jargon. Safety managers understand:

  • Hazard risk management;
  • Hazard register;
  • Risk mitigation;
  • BARS, CARS, JARS, FARS;
  • Hazard analysis,
  • Safety risk profiles; and
  • Emergency response procedures.

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On the contrary, safety managers don't know how to speak this language:

  • ROI, GAAP, EPS;
  • Gross margin;
  • Capital expenditures;
  • Fixed vs variable costs;
  • Equity vs debt; and
  • Leverage.

In short, safety managers and top management remind me of the popular book from the 80s, Men Are From Mars, Women Are From Venus. That is right. Safety managers and upper management are from different planets.

Safety managers commonly come from operations, which is a very good thing. An understanding of operations is incredibly important when managing risk.

Upper management types are administrators, golf-players, pocket-protector warriors. Safety managers and upper management come from different backgrounds. Resistance from upper management is common among safety managers as the SMS directly competes with limited financial resources.

How does a safety manager show the benefits and financial value that an SMS can bring to the organization? It becomes easier when the operating certificate is in jeopardy. Loss of the operating certificate equates to loss of revenue to sustain the organization.

Yet how much "safety" is enough? This is a management decision and the answers are not always so clear to safety managers. Therefore, it becomes very important that both upper management and the safety team work together to determine the costs and benefits of managing the "appropriate level of SMS effort." You may be better off with a paper SMS.

Most aviation professionals are reluctant to admit that there are valid business cases to have a paper SMS. After all, how many customers will want to fly with an operator who says: we do the absolute minimum in SMS to keep our certificate?

Safety managers are still compelled to ask for funds to support the SMS, even though the SMS doesn't align with the organization's short term business strategy.

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Which Does Management Group Need to Change Tactics?

Upper management has no need to change in the scenario where the safety manager humbly asks for more resources. Upper management remains in the position of power. Their job is to satisfy stakeholders and to keep an eye on the bottom line. Upper management is being bombarded by all departments for BUDGET, and safety managers are just another group standing in line with their hands out.

Until recently, aviation safety was not considered a core business function. Now that the operating certificate depends on SMS compliance, upper management has been forced to rethink safety's role in operations. This does not mean that budgets are automatically allocated to safety and quality departments. There are two factors that safety manages must understand that other managers are keenly aware of: the finite limitations of:

  • available financial resources; and
  • ability to increase revenue to support for larger operating budgets.

Yet safety managers have their missions to fulfill, just like everyone else. They can either do it poorly using very little, or they can perform more effectively when they have an adequate budget. Safety managers require sufficient aviation SMS budgets for

  • regulatory compliance;
  • safety promotion activities;
  • accident investigations; and
  • risk management processes.

Since upper management is in the position of control, safety managers need to learn how to speak the same language as upper managers. This change is required in order to convince management that their safety department needs adequate budget.

Safety managers are not naive. Neither are they so innocent as to believe that management really cares about safety first. Upper management needs to weigh the amount of available resources to apply in order to achieve organizational goals. Don't expect management to blindly throw money at a problem without the expectation of a measurable benefit. So before you get ready to storm the castle and state your case, make sure you carefully analyze both:

  • organizational goals; and
  • available resources to implement the SMS.

It may be that the accountable executive is not proud to have a "paper SMS" where all you can do is "check the box." There are valid business reasons to have a paper SMS, such as:

  • Extremely tight budget;
  • No regulatory oversight (or very ineffective);
  • Short term business strategy (expect to be operating in region for two to four years); or
  • Lack of qualified, local resources to implement the SMS.

Score Your SMS Implementation Now!

Just because you have been hired to be the safety manager does not mean that management expects you to develop a best-in-class SMS. This is why it is incredibly important for safety managers to align their expectations with the accountable executive's goals. Otherwise, you may be sorely disillusioned as you begin to implement an SMS or you are taking over an existing SMS implementation.

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Safety Managers Need to Learn What Excites Upper Management

ALARP does not excite upper management, nor does risk exposure. ROI (return on investment) is what excites top management.

Safety managers need to learn how to make the business case. This is a requirement. Once safety managers learn how to adequately present their business case to upper managers, they can more effectively compete with the other departments for a budget.

As we stated earlier, upper management is not about to throw money around without being able to quantify the return on investment. This puts safety professionals at a distinct disadvantage.

How does one assess the value of an accident that was prevented?

How does one attribute SMS activities (which are quantifiable) to an incident that could have been much worse?

Performing a cost-benefit analysis is more difficult to justify in smaller operations that don't have many:

  • accidents;
  • incidents.

Yet there may be close calls and minor incidents that never go reported. How many close calls have you had that could have been fatal? How does one put a value on those incidents and close calls? And more importantly, how do you place a value on close calls that may have been prevented by throwing money at improving operational processes?

If you are going to perform a cost-benefit analysis, you need to collect data on:

  • SMS management costs; and
  • Organizational costs due to accidents and incidents.

There is a word of caution here. Do not sum these two final figures and tell management the amount that safety issues are costing the organization. SMS budget does not cover (or should not cover) the cost to repair or mitigate safety events that have occurred. These costs need to be "owned" by the operational department where these safety event occurred. Costs directly related to accidents and incidents should not be coming from SMS budgets.

Did you get that? Any costs to correct safety deficiencies, regardless of source, need to be owned by the responsible department. SMS costs are expenses need to manage the SMS, such as:

  • Safety personnel;
  • SMS training;
  • Quality department (apportions cost between safety and quality); and
  • SMS tools and safety promotion expenses.

Breaking out the financial figures this way more accurately allows safety managers to state their case and demonstrate return on investment. This practice also allows the safety manager to establish a baseline to compare historical losses with SMS implementation and SMS management costs to determine the return on investment.

A best practice is to engage upper management in considering the costs and benefits of managing safety. This is a big tip, as safety managers typically don't have "easy access" to historical loss data that is associated with past events, like:

  • Hangar rash;
  • FOD;
  • Vehicles contacting aircraft;
  • Employee medical expenses;
  • Increase in insurance premiums; or
  • Lost revenue due to equipment damage.

Whenever possible, calculate both direct and indirect costs to historical accidents and incidents. Indirect costs often exceed direct costs, as direct costs are largely covered by insurance.

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Final Thoughts on Securing Higher Safety Budgets

Safety managers need to educate themselves on "upper management speak."

Safety managers need to change their tactics in order to secure adequate budget.

Safety managers need to learn how to resort to the business case and focus on ROI when seeking larger budgets for the safety department.

Safety managers need to understand organizational goals and available resources to ensure the SMS complements, rather than detracts from the goals of competing budgets.

When you have your meeting to ask for bigger safety budgets, remember that upper management is busy. Make sure you:

  • Only offer information that is meaningful to THEM;
  • Get to the point and ask for a specific number or percent increase;
  • Be quick about it; and
  • Stop immediately when you get what you asked for.

These resources will help you prepare for your next budget meeting.

Access Free Budget Resources

Published August 2015. Last updated February 2019.

Topics: Risk Management Software

Site content provided by Northwest Data Solutions is meant for informational purposes only. Opinions presented here are not provided by any civil aviation authority or standards body.

 

 

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