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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, and was written by Hunter.

 

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.

 

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 reasons 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.

 

About the Author
Gregory K. McMillan, CAP, is a retired Senior Fellow from Solutia/Monsanto where he worked in engineering technology on process control improvement. Greg was also an affiliate professor for Washington University in Saint Louis. Greg is an ISA Fellow and received the ISA Kermit Fischer Environmental Award for pH control in 1991, the Control magazine Engineer of the Year award for the process industry in 1994, was inducted into the Control magazine Process Automation Hall of Fame in 2001, was honored by InTech magazine in 2003 as one of the most influential innovators in automation, and received the ISA Life Achievement Award in 2010. Greg is the author of numerous books on process control, including Advances in Reactor Measurement and Control and Essentials of Modern Measurements and Final Elements in the Process Industry. Greg has been the monthly "Control Talk" columnist for Control magazine since 2002. Presently, Greg is a part time modeling and control consultant in Technology for Process Simulation for Emerson Automation Solutions specializing in the use of the virtual plant for exploring new opportunities. He spends most of his time writing, teaching and leading the ISA Mentor Program he founded in 2011.

 

Connect with Greg
LinkedIn

 

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. Hunter 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.

 

Connect with Hunter
LinkedIn

 

Greg McMillan
Greg McMillan
Greg McMillan has more than 50 years of experience in industrial process automation, with an emphasis on the synergy of dynamic modeling and process control. He retired as a Senior Fellow from Solutia and a senior principal software engineer from Emerson Process Systems and Solutions. He was also an adjunct professor in the Washington University Saint Louis Chemical Engineering department from 2001 to 2004. Greg is the author of numerous ISA books and columns on process control, and he has been the monthly Control Talk columnist for Control magazine since 2002. He is the leader of the monthly ISA “Ask the Automation Pros” Q&A posts that began as a series of Mentor Program Q&A posts in 2014. He started and guided the ISA Standards and Practices committee on ISA-TR5.9-2023, PID Algorithms and Performance Technical Report, and he wrote “Annex A - Valve Response and Control Loop Performance, Sources, Consequences, Fixes, and Specifications” in ISA-TR75.25.02-2000 (R2023), Control Valve Response Measurement from Step Inputs. Greg’s achievements include the ISA Kermit Fischer Environmental Award for pH control in 1991, appointment to ISA Fellow in 1991, the Control magazine Engineer of the Year Award for the Process Industry in 1994, induction into the Control magazine Process Automation Hall of Fame in 2001, selection as one of InTech magazine’s 50 Most Influential Innovators in 2003, several ISA Raymond D. Molloy awards for bestselling books of the year, the ISA Life Achievement Award in 2010, the ISA Mentoring Excellence award in 2020, and the ISA Standards Achievement Award in 2023. He has a BS in engineering physics from Kansas University and an MS in control theory from Missouri University of Science and Technology, both with emphasis on industrial processes.

Books:

Advances in Reactor Measurement and Control
Good Tuning: A Pocket Guide, Fourth Edition
New Directions in Bioprocess Modeling and Control: Maximizing Process Analytical Technology Benefits, Second Edition
Essentials of Modern Measurements and Final Elements in the Process Industry: A Guide to Design, Configuration, Installation, and Maintenance
101 Tips for a Successful Automation Career
Advanced pH Measurement and Control: Digital Twin Synergy and Advances in Technology, Fourth Edition
The Funnier Side of Retirement for Engineers and People of the Technical Persuasion
The Life and Times of an Automation Professional - An Illustrated Guide
Advanced Temperature Measurement and Control, Second Edition
Models Unleashed: Virtual Plant and Model Predictive Control Applications

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