Incentive Programs Are Mixed Bag

February 20, 2006
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GRAND RAPIDS — One of the most controversial tools in the risk management catalog — safety incentive programs — have proven to be extremely effective at promoting clean and safe workplaces when deployed correctly, but disastrous when not.

When TMB Industries acquired what would become Fuel Systems LLC from BorgWarner Inc. in 2001, one of the problem areas the equity firm recognized in the Grand Rapids-based manufacturer was a disregard for safety and cleanliness.

The problem, according to president and CEO Keith Carpentier, was a culture that had no incentives for keeping facilities safe and clean. Workers were belittled for reporting unsafe conditions and penalized for lost-time accidents. As a result, workers didn’t report minor accidents like a scraped knee, or unsafe conditions like exposed wires or wet floors.

“We wanted them to report accidents and unsafe conditions so we could fix them,” Carpentier said. “If somebody were to fall and hurt their self, they could be out for a few days. That becomes a costly endeavor, and from a quality standpoint, we want to keep our employees working.”

So Fuel Systems turned to local firm Universal Insurance Services, which introduced “Safety Bingo.” The game ties incentives to preventing costly, lost-time accidents that hurt productivity and bloat premiums for workers’ compensation insurance.

Bingo cards are distributed to employees and a number is drawn each day there isn’t a lost-time accident. Meanwhile, the pot, which starts at $100, grows one dollar for each accident-free day. When an employee gets a bingo, the game starts over, but the pot continues to grow until an accident occurs, then resets at $100.

There is no penalty for “close calls” or for reporting unsafe conditions. In fact, reporting is an integral part of the program.

“At the end of the day, our goal was met,” said TMB Industries Chairman Tim Masek. “We had a safer, cleaner environment for our people to come to work every day. And we were able to give some financial incentive to our people.”

At one point in the past year, a plant was riding a streak of 500 consecutive days without a lost-time accident, while another had 350 days and another 200.

Since implementing the program, workers’ compensation costs have been reduced by 90 percent, a common result among Universal’s clients, according to program designer, Nathan Steffen.

“The whole intent of an incentive program is that you’re trying to encourage a certain behavior,” said Steffen, manager of Universal’s risk control solutions department.

He compared it to profit sharing, an incentive program indirectly tied to safety, where an employee is given a reward based on the company’s profitability. The safety programs come in a wide variety: Safety Bingo, drawings on a quarterly or monthly schedule, cash prizes, pizza parties and other prizes — one Universal client is giving away a new truck.

But the success of these programs has little to do with prizes, experts agree, and everything to do with whether fundamental changes can be influenced within a company culture.

“Usually it’s a company with a poor safety record … looking for ways to combat that,” said Larry Brennan, assistant vice president of risk management consultancy for Arthur J. Gallagher & Co. in Grand Rapids. “The problem is, instead of instituting written programs, conducting training and things of that nature, some companies will fall into the trap of an incentive program.

“Without those basic building blocks, it’s doomed to fail.”

The industry has experienced mixed support for safety incentive programs, said Richard Perry, a risk consultant at the Marsh USA office in Grand Rapids

“Some have been highly successful, others haven’t worked so well, and it doesn’t matter the type of game,” he said. “The question is whether they actually influence safe behavior or not.”

In the programs that fail, employees find more incentives in fudging results and hiding unsafe conditions. When someone does have an accident, coworkers typically resent that person for ruining their opportunity for cash, cars or cruises. This can lead to even greater workers’ compensation costs, as the injured worker prolongs returning to work and confronting his co-workers.

Supervisors in competing facilities may focus on winning a contest and lose sight of the intended behavior change. Employees overlook the underlying incentive of the program: not getting hurt. In some failed programs, employers end up paying higher workers’ compensation costs as well as paying for the incentive.

“When you’re setting up a program, it’s important that you’re leveraging peer pressure in a positive way,” said Universal’s Steffen.

For many companies with poor safety records, peer pressure takes a “macho” tone. Here, concern for safety is often a sign of weakness. Parallel to that, in the incentive programs that fail, the pressure is to keep the game alive rather than to focus on safety — the only accidents reported are ones that require medical attention.

“You have to be able to impact the outcome,” Steffen said.

Employees should see the importance in reporting unsafe conditions that may lead to game-ending accidents.

“You want to have every opportunity to investigate every near miss or accident, no matter how minor it is,” Steffen said. “You can learn lessons from that.”

Achieving these cultural changes takes much more than a game alone, emphasized Steffen. The importance of safety and cleanliness should be communicated often. At Fuel Systems, it is cited at the beginning of every shift.    

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