Monetary Safety Awards

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Executive Summary

Safety is the ability of a person to keep away from objects or equipments that have the capacity to cause injury, disease or death to the individual. Furthermore safety also refers to liberty from circumstances that can damage property. In most organizations safety priority is geared towards protecting the employees and the public in general. The safety programmes are also intended at reducing loses associated with damage of goods or highly valued machines and property. Employees are required to take all the measures required to ensure their safety and occupational health as they undertake their duties.

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Most companies have safety adherence rules that employees are required to follow. Furthermore, the government also has safety rules and regulations that employers are required to implement in the workplace. However, workplace injuries still occur even with implementation of the regulations and guidelines. The greatest challenge has always been to convince employees on the benefits of workplace safety and in the process nurture self actualization. According to the U.S Department of Labor, Bureau of Statistics (2010), the number of fatal injuries in the workplace totaled 5,071 in 2008. The number of non-fatal injuries was placed at 3.9% in the same year. Therefore work place injury is a factor that should be dealt with.

Workplace injuries have been known to cost organizations and even insurance companies billions of dollars annually either directly or indirectly. Strict labor laws geared towards advocating for the safety of employees require companies to offer compensation for a person injured at the workplace. The laws also require that companies buy insurance cover for their employees in case of injury. However one obvious fact is that these moves are geared towards treating the problem.

It became necessary for industries to come up with a way to prevent the problem altogether, instead of waiting for it to occur before responding. Initially most organizations tried training programmes some in house and other seeking the services of professional companies. However training, on its own was a total failure in most companies as the injuries continued to occur. (Hunter 2004). Furthermore the trainings failed convince workers to observe and adhere to safety programmes.

It was at this point of desperation that monetary safety awards came into the picture. Initially it seemed as if it was a way of bribing employees to observe their personal safety. It not only seemed absurd but also unethical. (Haig 1982). However, the level of success compelled researchers to find out more about the programme. For AOS and other companies reducing injury in the workplace would optimize production and even improve on the revenue gained. Furthermore if successful the programme would ensure that employee productivity is increased by avoiding constant abseentism by employees due to injuries at the work place.

Most companies have successfully managed to implement various incentives aimed at optimizing the performance of employees. For instance companies give rewards to employees after a successful financial year. Rewards come in terms of fully funded holidays, monetary awards, certification and other incentives. (Alavosius 2009). Extensive research to establish exactly how the rewards system worked realized the rewards, encouraged self actualization because they directly made sense to workers due to their practicality.

Furthermore it would improve employee satisfaction, compelling employees to reflect on the benefits of taking care not only of themselves but also their colleagues. It is therefore important that study is conducted to actually establish whether the programme has the capacity to reduce injuries significantly, the feasibility in terms of cost and time and the most appropriate methods of implementation. (Hall 2007).

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Introduction

Incentive programmes are always given to employees for motivational purposes. In most instances, incentives are given as rewards for excellence or as a way of recognizing exceptional performance. Companies have become more aware of the fact that employees constitute an important part of an organization’s success. Therefore most strategies currently being employed by most organizations are geared towards employee satisfaction.

The most fundamental economic perspective that has inspired many researchers to analyze the functioning of economic systems is the ability to manage resources. Resources are limited in supply and have a monetary value which makes it mandatory for any organization that values quality and business success to place it amongst top priorities. The most important resources in any organization are the human resources. (Stern 1982).

According to Heathfield (2002), “Managing human resources refers to the function that a manager performs relative to the organizations employees.” There have been many propositions both in theory and practice that have been put across as the best ways to manage human resources. Proper management of human resources requires that a company ensures that the employees work in secure conditions to reduce workplace injury. Most organizations have recently decided to offer employees with monetary safety awards as a way of ensuring that employees conform to safety guidelines of the company and consequently reduce work place injury. AOS has had a safety award program in place for 25 years. AOS spends approximately $60,000 per year providing safety awards to employees.

Research has not been conducted to determine how effective this program is. Safety programmes are processes that are implemented internally within an organization. However due to the fact that safety programmes are diverse, it is important that they are customized to suffice the employees needs and the objective of the company. (Laws 2005). Monetary safety awards also require a lot of money and it is important that adequate research is conducted, to ensure that the programme is cost effective. Incentive programmes are always geared towards building responsible teams in the work place and saving a company significant amount of money while at the same time improving safety in the company. (Tait 2000).

The programme is a convenient way of empowering employees especially when all other ways of ensuring safety have failed. It was only recently that it was realized how effectively monetary safety awards could be. Previously, it was only thought that they were expensive programmes that could only be implemented by huge companies. In most instances, small companies shied away from the strategy.

However extensive research established that monetary safety awards for employees, especially in sectors where safety is important, were significantly successful (Resnick 2009). Such sectors include the air transport industry and most manufacturing companies. Although it has become apparent that monetary safety awards are incentives to employees that has been used my many a company is has not been verified that the strategy may reduce significantly the number of injuries in the workplace. (Laws 2010).

The purpose of this research will be to evaluate safety award programs within other companies as well as AOS to determine if they are effective in reducing injuries. The result of the research will be important not only to AOS but also to other companies that may want to optimize their performance by reducing work place injury. Employee safety has everything to do with the management of human resource and should therefore be approached prudently based on facts before being implemented. (Resnick 2006).

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Literature Review

In a research article “Understanding reactions to safety Incentives” by Victor Y. Haines III, Gregoire Merrheim, and Mario Roy (200) studies were conducted to determine if safety incentives used by organizations improved health and safety results. The group began their studies by first conducting a literature review on the subject. The literature review revealed that some studies provided examples of positive outcomes in environments where safety incentives were provided. Other studies did not reveal the same results.

The second step in these studies was to analyze the direct and indirect relationship between supervisor and subordinate. At least two of the studies found a significant relationship between organization support and supervisor – subordinate relationships. In this type environment, where the employee perception is that organizations and supervisors care, the safety behavior is improved.

The third step in the studies was to describe the group functioning factors. This section indicates that a combination of high group cohesion and strong safety oriented norms is expected to provide an ideal context for more positive reactions to a safety incentive program.

This study was conducted in a high-technology aluminum production plant which employs 572 workers.” The safety incentive program that was investigated allocates monetary rewards on the basis of how well the plant meets its safety objectives.”

The results of this study indicate that “at the individual level of analysis, there was a path from locus of control to supervisor – subordinate relationships, to organizational support, to reactions to safety incentives.” This indicates there is a direct correlation between organizational support and recognizing safety behavior and improved safety performance. The study concluded that: , “Safety incentive programs should be considered in combination with situational factors.”

Furthermore, Couture (2008), outlines that apart from considering the situational factors, it is also important to put into perspective the: “leading and lagging indicators.” In this way a company can guarantee the success of the safety programme. Couture writes that lagging indicators can be used towards reducing the rates at which injuries occur, injury incident and near misses. The proper way to evaluate such as programme is to ensure that the metric used reconciles the reward and the achieved goal. According to Couture, sometimes employees may avoid reporting accidents so that they might be considered for reward and it is important that a company considers such aspect before totally passing the programme as successful. According to the article:

“lagging indicators tie the safety incentives to goals like injury rates, incidents, and near misses. The company would set a goal and base a percentage of the reward on whether or not the goal was achieved.”

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Leading indicators are therefore an imperative consideration in ensuring that the programme is effective and is foolproof against malpractices. In addition implementation also requires a great deal of employee understanding and involvement. It is important that employees are advised on the relevance of reporting all instances of injuries or any unsafe situations however small and minor they may seem. The results of the article in summary realized that:

“Keeping the incentive in a safety incentive program requires a good balance of both leading and lagging indicators. Leading indicators should be the heaviest weighting in the program.”

Another element which should be considered is the employees. For instance in a similar research, Juergens (2004), outlines that a company in the petrochemical sector was able to reduce the number of workplace injury from 94 to 98 during the first year that the programme was implemented. The article outlines that the company was able to:

“reduced their costs from $2.3 million to $1.3 million. The safety incentive program involved the following elements:

  1. employee input,
  2. behavior focus,
  3. problem solving,
  4. training, and
  5. rewards based on safety procedures.”

According to Jurgens (2004), recognition and appreciation, although mostly ignored are the most important aspects of reward. He goes on to outline that it is even possible to add value to a reward by giving it in front of peers. It works by motivating not only the recipient but also the other employees to work more careful just to receive the same recognition.

The sample for the research project was 50 professional and trade associations which offered safety awards, health and safety magazines, local newspapers, interviews with 24 health and safety professionals working in companies, and intermediary organizations.

Second, 24 health and safety professionals at companies were interviewed to identify if they offered health and safety awards. The paper does not identify how intermediary organizations were sampled. The paper also does not identify a specific number of health and safety professionals or intermediary organizations which remained in the sample. The paper states that this number is significantly fewer and activities may be spasmodic.

The authors generalize from the sample to a population in their finding or conclusions. The authors state that health and safety awards are of help to medium and large organizations and indicate that small organizations may not be helped by safety awards.

The authors generalize that health and safety awards are dependent on the views and opinions of the health and safety professional at each company. The authors also generalize that health and safety awards are motivation for employees in other companies.

Before the discovery of the extent of the benefits associated with giving incentives to employees, very few companies utilized strategies that were geared towards optimizing production with employees as the major target. However currently there are many books research findings and publications that outline the benefits of the employee towards ensuring that the company functions perfectly. (Chelius 1982). Therefore, the common business saying that human resource is the greatest resource for a company is emphasized. Previously, companies responded by cutting down on human resource or reducing employee compensations during hard business times.

Consequently, companies nurtured a workforce that was discontented and without the urge to work. The result was that companies spent a lot of money trying to deal with loses that resulted from non-efficient workforce. However, more recently the business industry has experienced an interesting turn around, that has seen the managerial and strategists of many companies turning to employees once more. It is these developments that have seen the use of employee based strategies such as use of monetary safety awards to employees. According to Ritzky (2008), the new compensation strategy has lifted the quality of work done in many companies and employees are also happy that they are considered important. Losses have also been significantly reduced as employees strive to reduce injury so as to qualify for the awards.

According to Ritzky, most in the steel manufacturing industry where some of the processes were risky, it was difficult convincing insurance companies to grant covers to employees. Furthermore, in the instances where the cover was granted, it was always too expensive to buy. Insurance companies were also adamant to provide cover for processes they knew very little about. Steel making companies therefore adopted employee performance incentives by providing safety compensation.

Steel spent approximately five years to come up with a programme that would both be cost effective and feasible. The first move towards implementation of the programme was to come up with a team that would train employees on issues concerning the programme. However the programme was not just limited to injury, but also emphasized on reducing loses through damages, by reducing accidents. The programme also encouraged team work by insisting that it had to be done as a team for the claim to the money to be considered valid. The programme was such that when the workforce survived one month with less than $7,000 in loses then they team would be eligible for payment.

The fact that the programme emphasized on team work made it more interesting to the workforce and more beneficial to the company. Later on the amount of the award given was increased and consequently significant changes regarding the number of injuries also reduced. The research reported that previously the number of loses per month due to injuries were placed at $ 10,000 per month. With implementation of the programme that company was able to keep down loses to $7,000 per month and the money saved was consequently used to reward employees.

However when the money recovered from reduced loses was used to reward employees employee satisfaction would also increase and employees would be more willing to observe safety regulations. The training of employees was not intense and was very cheap since only brochures were used. The brochure had 4 guidelines that were as follows:

  • Emphasis on personal safety of which personal injury would mean that the team would lose $300.
  • Emphasis on collective responsibility where workers were required to warn other if they were acting in a dangerous way that would cause injury.
  • Workers were advised not to take the programme personally but be aware safety was everyone’s responsibility.
  • Eventually when they worked as a team everybody would enjoy a share of the benefits.

Theorist in education Jean Piaget outlined that some people tended to learn concepts when they were direct in comparison to abstract and complex ideas. Some companies take their time and invest a lot of money in trying to improve work place safety by using complex ideas. The employees were encouraged to work towards the programme together so as to nurture the spirit of teamwork. The implementation of this programme successfully emphasizes on the fact that monetary safety compensation is an employee incentive that can be used to reduce workplace injuries by encouraging employees not only to be watchful at their own safety, but also to keep an eye on each other. (Glendenning 2004).

Furthermore the programme can also be customized according to the needs of a particular organization. For instance in this particular organization the monetary safety programme was implemented not only to reduce injury but also to nurture team work and reduce other loses. Furthermore the programme sought to empower the employees to come up with the most appropriate way as a group to ensure that they qualified for the compensation therefore empowering them to reflect on the benefits of observing safety. (Ritzy 2008).

Most companies have tried educating the employees on safety rules from time to time but the number of injuries seemed to be always going up. The money spent on employee training was expensive because in some instance, the company had to seek the services of a professions company. (Couture 2008). Furthermore the money had to go to waste because workplace injuries remained the same. Since the companies were making loses due to money spent treating employees and settling law suits associated with workplace injury, the government decided to set up a team that can do extensive research and come up with a way to reduce the injuries. (Harrington 2000).

The recommendations of the team proposed the implementation of monetary safety awards as an employee incentive to reduce workplace injury. Consequently, the team was also given an additional responsibility of researching the most appropriate way to implement the programme, come up with a time frame and the most efficient way of informing employees about the programme. Incidentally the proposals by the team avoided the inclusion of a training session for the employee, perhaps due to the previous failure of the trainings in this perspective. The induction session was brief and employees were only told the importance of team work and adhering to safety precautions.

It was the employees who were supposed to come with the most appropriate means of approach. Although this programme bears much similarity to the previous company discussed, the monetary awards were a little bit higher and increased with increase of safety adherence. (Rensick 2009). Perhaps it was because this company was more desperate. For a company involved in transportation of fragile goods, safety is a priority since it can save the company lots of revenue when adhered to. It is also important to note that in some cases, reduction in workplace injuries is directly associated with reduction in the number of goods damaged. (Rodriguez 2006).

In another research involving a production company, implementation of the programme was done as part of a research where controls were involved by implementing the programme only in certain areas. The research established that in areas where the programme was implemented, for every two dollars that was given to employees as safety compensation, the company had saved four dollars. Furthermore, the company’s liability and compensation to workers ratios had dropped significantly much to the surprise of the management. The company split the awards into two portions where one portion was paid to the employees at the end of every month that injuries were reduced, and the other portion at the end of the year.

The managerial greatly hailed this programme because the benefits to the company were immediately observable as the company registered reduced injuries and loses at the end of every month. Furthermore, employees due to self actualization also came up with ways to reduce injury in the place. The result is that the employees had been empowered and in the end of the day both parties were happy. This is unlike other safety programmes, where measuring success takes a long time and sometimes a company may invest a lot of money on a particular programme only to realize that it is ineffective when it is too late. (Goodrum 2004).

Another organization that has successfully implemented the monetary safety reward programme is the Kennedy Space Center. Kennedy Space Center has successfully applied inclusive safety and health management system, and has convincingly shown its commitment to providing and maintaining a safe workplace by successfully completing a thorough assessment process to realize acknowledgment by the According to NASA (National Aeronautics Space Administration) (2000):

Occupational Health and Safety Administration (OSHA) as a “Voluntary Protection Program (VPP) Star Worksite.” The VPP program endorses effective worksite-based safety and health, encourages employers and employees to reduce the number of occupational safety and health hazards at their places of employment, establishes cooperative relationships between management, labor, and OSHA, and serves to augment limited OSHA resources.

Figure 1 (Adapted from NASA 2000).

Hazard/
Violation
Regulatory Reference First Violation* Repeat Violation*
Personal Protective
Equipment
29 CFR 1926.95 $250 $500
Electrical/Equipment 29 CFR 1926 Subpart K $250 $500
KSC Emergency Procedures
(JHB 2000, Comprehensive Emergency
Management Plan;
KHB 1710.2, Kennedy
Space Center Safety
Practices Handbook;
QA-UG-0001, Employee
Safety & Health Guide)
N/A $500 $1000
Traffic Safety FDOT/
MUTCD
$500 $1000
Traffic Safety
(Imminent danger)
100% n/a
Lockout/ Tagout 29 CFR 1926 Subpart K
(1926.417)
29 CFR 1910 Subpart J
(1910.147)
50% 100%
Lockout/ Tagout
(Imminent danger)
100% n/a
Scaffolding 29 CFR 1926 Subpart L
(1926.450)
50% 100%
Scaffolding
(Imminent danger)
100% n/a
Fall Protection 29 CFR 1926 Subpart M (1926.500) 50% 100%
Fall Protection
(Imminent danger)
100% n/a
Excavation 29 CFR 1926 Subpart P (1926.650) 50% 100%
Excavation
(Imminent danger)
100% n/a

Research Methodology

Implementation of the monetary safety award requires increase performance not by one person but by the entire workforce as a team. These requires that either the while team receives compensation or no one is compensated at all. This concept will get rid of individualism. The monetary safety award is easy to evaluate because, it takes only a few months for enough data to be collected for analysis. The research will run for a period of three months after successful implementation and induction of the programme. There will be no start-up capital for the progamme because the money saved by reducing loses will go directly towards employee compensation. Organizational data for the previous three years containing records for the losses that have been incurred due to workplace injury will be collected.

It is against these loses that the success of the monetary safety award will be evaluated. Data will then be collected from the programme for a period of three months and eventually analyzed on the fourth month. Analysis will occur during a fiscal quarter of the company so that appropriate analysis can be undertaken against the financial reports. Data will also be collected using questionnaires to establish the general perception of employees and the managerial towards the programme. All damages and injuries will be evaluated in terms of monetary value, and will include money spent on treatment of injuries and the money lost as a result of abseentism resulting from workplace injury.

Expected Results

In line with literature review and the ability of the monetary safety awards to register success, when evaluated in other areas such as saving the company money, it is expected that the results registered will be positive. The association of safety and monetary gains will nurture self actualization among employees and thus compel them to adhere to safety rules. (Marken 2004).Since the programme in most instances, is implemented in a team work spirit, employees can be able to watch over each other because they will be aware that an injury of a colleague will result in lack of compensation for the whole team. In most instances, employee injury is associated with carelessness which also leads to damage to goods and equipment. (Justin 2004).

Therefore it is expected that with reduced injury cases, there will also be reduced cases of loss of goods and damage to equipments. Success of the programme also depends on the implementation and the strategy employed, therefore these aspects will also be put into consideration. (Harrington 2000).

References:

Alavosius, M., Getting, J., Dagen, J., Newsome, W., & Hopkins, B. (2009). Use of a Cooperative to Interlock Contingencies and Balance the Commonwealth. Journal of Organizational Behavior Management, 29(2), 193-211.

Bureau of Labor Statistics (2010). Injuries, Illnesses and Fatalities. Web.

Chelius, James R.,(1982). The Influence of Workers’ Compensation on Safety Incentives. Industrial and Labor Relations Review, vol. 35, no.2, p. 235-242.

Couture, G. (2008). SAFETY INCENTIVES. Industrial Safety & Hygiene News, 42(9), 80-81.

Daniel A. Rodriguez, Felipe Targa and Michael H. Belzer. (2006). Pay Incentives and Truck Driver Safety – A Case Study. Industrial and Labor Relations Review, Vol. 59, No. 2 p. 205 – 225.

Glendenning, P. (2001). Employee Safety Incentives: A Best Practices Survey of Human Resource Practitioners. Professional Safety, 46(2), 22.

Goodrum, P., & Gangwer, m. (2004). Safety Incentives. Professional Safety, 49(7), 24-34.

Haig, N., (2008). Work Place Injuries and What They Cost, Prentice-Hall. New York.

Haines, V.Y., Merrheim, G., Roy, M., (2000) Understanding reactions to safety incentives. Journal of Safety Research 32:17-30.

Hall, A. (2007). Incentives Done Right. Occupational Health & Safety, 76(6), 129-183.

Harrington, S., & Danzon, P. (2000). Rate Regulation, Safety Incentives, and Loss Growth in Workers’ Compensation Insurance. Journal of Business. 73(4), 569-595.

Heathfield, M. (2000), Managing Human Resources, About.

Hunter, P., (2009). Safety-Incentives Programs Questioned. ENR: Engineering News-Record, 2631.

Juergens, J. (2004). Safety First. Occupational Health & Safety, Retrieved from Academic Search Premier Database.

Justin Somaini, SC Magazine, New York; (2009). Vol 20, Iss. 9; 54, 1 pgs,The Use of economic incentives and public education to increase seat belt use in a community, Publisher – (Washington D.C.), U.S. Dept. of Transportation, General Note – “DOT-I-85-39”, “1984”, “Technology Sharing, a program of the U.S. Department of Transportation” – P.(4) of cover.

Laws, Jerry. (2005). Taking an Upstream Approach. Occupational Health & Safety. Web.

Laws, Jerry. (2010). New Frontiers for Safety Incentives. Occupational Health & Safety. Web.

Marken, A. (2004), The Effective Employee Incentive Programme, Innovative Leader Vol 13, Issue 2.

National Aeronautics and Space Administration (2000). Contract Safety Requirements at Kennedy Space Center and Marshall Space Flight Center. Web.

Rensick, M. (2006). Safety Incentive Programs: Rewarding Employers and Employees. (Cover story). Safety Compliance Letter, (2462), 1-15.

Resnick, M. (2009). Safety Incentive Programs. Professional Safety, 54(7), 46-48.

Ritzy, M., (2008). Safety Working Conditions in Steel Industries. Journal of Human Resource magazine, 10(3), 18-25.

Stern, D. (1982) Managing Human Resources: The Art of Full Employment, Auburn House, Boston. Pg 110-115.

Tait, R., Walker, D., (2000). Motivating the Workforce: The Value of External Health and Safety Awards. Journal of Safety Research. (31)4. 243-251. Steer Employee to Safe Practices. Web.

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