Improve vessel and human performance whilst getting a return on your investment!
Vessel and performance is extremely important to us as a company because we know that by ensuring that our vessels are operating at peak performance, environmentally, economically and operationally, that is going to keep our investors happy, our shareholders content. We're going to have an ongoing positive working relationship with our clients. The accountants are happy, the commercial departments are happy. All in all, everybody is happy. So if there's any way that we can improve that performance, all the better.
We like this idea of considering our ships, or teams, as a F1 team, as a professional sporting team. Because they go out and their objective is to win, their objective is to perform at their peak. We want to be able to perform just like them. We want to be able to go out and win, and be the company that everybody wants to work with. Attracting the best employees, ensuring that we have the best crew retention, that we don’t have a high churn rate of seafarers. Which is inevitably costing us money, which is affecting our bottom line, which is affecting the performance of our investors.
So we want to improve human performance because we see the value that that can bring to our company. But how do I sell this to my bosses? How do we sell it to the shareholders, to the investors, to the accountants, to the commercial teams, to the safety departments, to the recruiting teams? These are all very important question.
When we consider what is most important at the end of the day to the accountants, to the commercial teams, to the investors, it's not necessarily the people on board ship. It's not necessarily even the vessel. It's the return on the investment that they're getting. It's the commercial benefit to the company that that vessel is giving. So we need to have a clear understanding of what a return on an investment would look like by improving human performance at sea. A RAND study asked the question, do workplace wellness programs save employers money?
Workplace wellness is a $6 billion industry in the United States. Employers tend to do this, tend to invest in health and wellbeing of their employees because they understand that it's going to increase the productivity, it is going to reduce the risk of costly chronic diseases. And it's going to constantly improve the control of chronic conditions. In 2012 half of all employees with at least 50 employees offered programs, and nearly half of the employers without a program said they intended to introduce one. Let's remember that these programs are health and wellness programs rather than strictly performance programs. Now, these are to improve good health and wellbeing inside an organization. We're wanting to do far more than just simply improve the health and wellness of crew at sea. We want to improve the performance which will then have an intrinsic effect on our vessel's performance.
This RAND study looked at both disease management programs and lifestyle management programs. The short term effects of a disease management program was looking at heart disease, diabetes, emphysema, and with those interventions they were able to start to avoid heart attack, amputation and pneumonia. And likewise in a lifestyle management program, which is a longer term program. When they looked at poor eating habits, smoking and lack of exercise, they were able to start to prevent diabetes, cancer and hypertension.
Now, when we take this into consideration in a maritime setting. One, they're going to significantly reduce human performance and hence vessel performance, but also should there be a scenario where an individual has a diabetic attack, determines that they've got hypertension at sea or indeed they are having a heart attack. This is going to cost an organisation a substantial amount of money.
This is sort of soft touch. When we look at performance we're looking at tangible steps that we can make to improve their performance, which has a positive effect throughout the organization. In this RAND study, they calculated an overall return on investment for every dollar spent was $1.50. The combined return on investment, when you take into consideration both the medical and the lifestyle interventions. However, when you take into consideration that the individual returns on investment, the individual components, they differ strikingly. With a $3.80 return on investment for disease management, and a 50 cents for lifestyle management for every dollar invested.
These are just numbers and there's not been to date any understanding of how human performance proves a direct return on investment. However, when we take into consideration events that have happened today, we can start to predict future returns on investments or future savings, due to implementing a human performance plan. A system that can monitor, track and ensure that there's a return and how that works together with vessel operation.
So we're going to use an example, one that we've used many times before. One that did happen and probably happens more often than we care to admit. Where a individual at sea was carrying out day-to-day activities. Leading a fairly sedentary lifestyle. There wasn't any real initiative or drive to improve human performance at sea, and then in turn improve the vessel's performance on a day-to-day activity. This individual got ill, so ill that he had to stop work. That the vessel had to come off charter due to minimum manning. This individual had to be flown off by helicopter and a new individual flown back onto the vessel. Now it's our intel that tells us that that vessel was on charge for half million dollars a day. The vessel was off charter for three days, you're looking at immediately at a $1.5 million loss due to somebody on board a vessel becoming ill. And then you have all the medical repatriation costs, and yes, elements of this can be claimed through insurance. However, the effect that this then has on client relations is unmeasurable as of today. The impact that that had throughout the organization is again, not hugely determinable, especially considering we don't understand and we don't measure human performance at sea. When we look at the average day rate as of earlier this year of $11,415 per day (Clarkson platou, if that same vessel was on charter for that and an individual was deemed unfit and the vessel had to divert and repatriated and coming off charter, you're looking at an initial spend of $34,245 for coming off charter to repatriate an individual, to take that vessel back. That's excluding all the additional medical expenses and, yes, an element of this could be reclaimed by P&I, by insurance. However there is still a loss.
Now when we consider that for a Digital Maritime Business at the Maritime Wellness Institute, a membership cost per individual over a fleet of 20,000 crew, 450 ships, costs as little as, where you're looking at a cost of £0.11/$0.14 per person per day. And when you take into consideration the average day rate of $11,415, the initial saving by investing a small amount of money, you could see a considerable saving based off that initial investment per person per day. We use the day rates as that example, both for a performance system and a day rate, it's exactly just that. We operate as an industry, our vessels, on a day rate and daily expenses. Now with the joy of economies of scale, this number can fluctuate and and come down considerably. So rather than losing in excess of $30,000, by simply investing in a digital asset which is deployable across an entire fleet with a click of a button, to educate and increase performance onboard ship. We're able to start initially seeing a substantial saving. Operating scalable digital solution such as the one that we operate to improve human performance at sea. The tangible cost (value) per person equates to £582 per person per day. The value delivery per day. So there's an initial saving of £581.89.
Now, Yes, every organization is extremely different. And the return on investment is going to be different per vessel, per company, per team. And in order to ensure that your investors, your commercial teams, the accountants and the owners are happy with this return. It's imperative that we start to understand prehistoric data to understand how the organization, how the vessel has been performing on a daily basis, on a quarterly, annually basis too. And this is where we can start to embrace an element of technology should it be suitable. And use data analytics to measure a trend of vessel performance for the last three years. And using technology, we can use a similar baseline to understand how human performance at sea is being affected not only by a performance program, but also by the operation of the vessel.
And when you have that insight into human performance at sea, lifestyle at sea, we're able to unlock far more information, far more possibilities to improve human performance at sea. Once we understand, with far more detail, as to how the human performance is affecting vessel operation.
Wellness programs have been around in existence for a considerable period of time. We understand how, as an industry, wellness programs improve motivation, can provide a standard return on investment based on a number of factors. And we know that when we take into consideration historic data and compare it to new and evolving data, we can start to really analyse and prove a solid return on investment for an organization. And the tangible savings are quite significant for an organisation.
By Andrew Cowderoy