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Strategic Planning in Hard Times: Why Safety Incentive Programs Are a Budget Trimming Tool
Henry Ford famously once observed, "A man who stops advertising to save money is like a man who stops a watch to save time." His remark quite accurately was meant to communicate that Ford believed that the cost of advertising was less than the cost of not advertising. Nowadays, we refer to that concept as Return on Investment—what do I get out for what I put in?
Extending this conversation to Safety in the workplace is a reader-friendly concept in this magazine. It seems a sure bet that this readership can get behind the concept that, even in the short run and certainly in the long view, the cost of not having a well-thought-out safety program is more expensive than the cost of having one.
Because similarly well-thought-out and properly managed safety incentive programs improve the performance of safety agendas so effectively, the typical safety manager can typically make the jump to embracing that having such a safety incentive program produces a higher bottom line (savings created by program minus cost of program) than the net savings of not spending the cost of the program. Even the U.S. Congress agrees—safety is one of the only categories of incentive programs eligible for preferred tax treatment by both companies and their employees.
Without a twist, this would be a very short article, and so, here the twist is: The person to whom this should make the most sense, the one who most likely spent at least some time in college marveling at the genius of Henry Ford, is the one with the greatest difficulty accepting this minor bit of logical conclusion as self-evident when applied to safety incentives. Whether that person is the Chief Financial Officer, the Executive VP, or higher up the food chain, when budget-cutting time comes around, few budget items appear to fit better on the chopping block than the Safety Incentive program.
Whether it is a few thousand dollars or in the millions, rationalizations start almost at once. "We're not going to cut safety," they murmur. "We'll still insist that the staff not step off of a scaffold or walk into a trench filled with sulfur dioxide. Why should we pay someone for being safe when that's a part of their job and that one program budget is a third of the savings I'm supposed to find?"
If you're the person looking to produce the savings, that's a pretty seductive argument. Here are a few responses that will help keep the red pen away from your program.
1. It is the employee's job to be safe. It's our job to give them the best tools to accomplish that goal. This philosophy includes rules, standards, fire-resistant clothing, and head/foot protection. One of the most important techniques that an employer can use to maximize safety results and minimize dangerous missteps is to encourage employees to want to do things in a way that reduces the chance of those accidents occurring. This requires discouraging bad habits that increase risk and encouraging best practices that optimize the prospect of a safe and injury-free workplace. The challenge is, bad habits are hard to break and good ones are hard to make.
A well-designed incentive program creates near-term motivation to change behavioral habits. I like to say that I'm in the business of getting people to do the right thing for the wrong reason. If I can create a circumstance where a truck driver checks around his vehicle because he wants to earn a blender, I count on the fact that, when at some point in the future, that person discovers a child behind the vehicle, he will realize the value of the practice. Even without the child behind the vehicle. Once an employee gets used to walking around the car before he or she drives, it becomes, you guessed it, a habit.
Southwestern Bell (now AT&T) instituted a policy that every time their driver stopped the vehicle, they put out an orange cone behind the vehicle. Then they rewarded drivers when managers came upon a truck with the cone behind it. Most drivers never suspected that the goal was to get them to walk around the vehicle; they just did it because they wanted to put out the cone so that they would be rewarded with an incentive when a manager drove by and saw the cone. In the meantime, vehicle contact incidents went down dramatically.
When times are tough, doing something simple that keeps vehicles in service and cuts down on recordable incidents can have a significant, positive impact on the bottom line. The moral to point one is, Incentives can effectively replace bad habits with good ones.
2. Another point that some upper levels seem to miss is that incentives are not just motivational (change your behavior to earn the carrot), but also a vehicle for appreciation and engagement (I am so happy with what you are doing, I would like to give you this carrot). Recognition is important in hard times, where it is not uncommon for compensation to be cut or become unexpectedly static. During budget cuts, employees who have worked hard with a team to achieve great goals may find co-workers and confidants, even mentors and role models, cut from the team, leaving them to achieve the same goals without some of the partners who previously made those goals achievable. They are asked to climb to the same summit without the people who helped them find their way and protected them from falling off the cliff they were trying to climb.
The damning element in this conundrum is that even as the task becomes harder to achieve, the person not fired finds himself having to assume broader responsibility, and often for little or no change in compensation. So success is still measured by achieving the mountain summit, but the partners whom you have learned to depend on are no longer part of the climb—and while the danger of failure is still high, the rewards for success are not what they used to be. This is the point where an incentive program demonstrates why an act of appreciation and acknowledgement can work where the compensation offered may not communicate the motivation for a worker to do his or her best. The statement made when a safety incentive program continues through hard times is, "Even though we can't compensate you the way we want to right now, we still want you to know that we see what you are accomplishing and want to offer our gratitude and appreciation."
Robert Half Personnel conducted a study that showed that the number one reason given by employees for leaving a company where they believed they were being properly compensated was that those employees thought they were not appreciated. If you can get your head around that, consider how much more important appreciation and recognition is when dealing with employees who consider themselves under compensated!
3. Finally, there is the basic argument that "It doesn't matter how great the safety incentive program is. We just can't afford it." Study after study sourced from the Incentive Research Foundation, the Incentive Marketing Association (www.incentivemarketing.org) and major business schools, to Fortune 100 companies, all conclude that dollar-for-dollar, engagement is more efficient than compensation, incentives increase the bottom line and, to come back to Mr. Ford, it costs more not to incentivize safety than it does to implement a well-thought-out and dynamic program that communicates gratitude and promotes best practices.
The oil patch in Houston, Texas, is experiencing some tough times. Budgets that seemed fine with oil selling at $130 a barrel just don't fit a world where the income has dropped to as low as 20 percent of that number. I have had client companies go bankrupt and out of business and others that have slashed their safety incentive budgets. Having been in the business for a while, I know how this cycle finishes.
The unavoidable cost of not reinforcing best practices in a proactive, positive way is that avoidable mistakes begin to increase—some of them subtle, many of them costly. At some point, a board member will begin to wonder why accidents and injuries are up and, with them, very costly associated lawsuits, damages, hospital bills, and overtime costs. When that happens, the clever manager will analyze what has changed, and my office will get a call that there needs to be a discussion about beefing the safety incentive program back up. Alternatively, someone in HR may look at enough exit interviews to draw a line to a common comment that the dearly departed did not feel properly appreciated or acknowledged.
It's dreadful right now, waiting for these observations to become clear and for the right person to notice them, but I know that it will happen, and when it does, the clients who return will become dedicated, long-term assets in my book of business—and all because they came to the conclusion that you can't save time by stopping a watch.
This article originally appeared in the June 2016 issue of Occupational Health & Safety.