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Why Incentive Based Safety Programs Work

Why Incentive Based Safety Programs Work

Motivation Minute Blog

Accidents happen. When they happen in the workplace, they cost a company money, productivity and, in dire cases, permanent injury to an employee or loss of life.

Employers preach prevention and conduct hundreds of hours of safety training each year, but it takes the individual commitment of each employee to ensure the safety of his own life as well as the lives of co-workers. A safety program's success is based on changing participants' behavior by making them understand how even the smallest infraction can have an enormous repercussion.

How do many companies credited with creating a safe workplace environment manage to accomplish this important goal? They use incentives.

"Using an incentSafety Incentives Workive to motivate individuals has the same effect whether it's used for a safety program or a sales initiative," says Dave Bauer, president of Concept Sales in Lake Oswego, Ore., a premium incentive factory representative firm that provides merchandise for use in incentive programs. "People like to receive recognition and rewards for their efforts. They like getting a cooler or a jacket or a watch. The award is something they can be proud of in front of co-workers and family members."

Employers - especially those at high risk for accidents - are learning that implementing an incentive-based safety program pays off. These programs are viewed as investments not expenses. Companies are realizing and enjoying a tangible return on investment.

"As an example, a trucking company with 10,000 drivers is spending $25 million annually on safety training, workers compensation claims, health insurance premiums and rehabilitation," says Darryl Bach, distributor relations manager for Quality Incentive Company, a Memphis-based full service incentive company. "Plus, they spend another $30 million each year on employee turnover. If they would implement a safety program using incentives, they could reduce those costs by as much as 20 percent or more per year and realize a return on investment (ROI) of about 300 percent. For every dollar spent on a program, the company could save three dollars."

Every incentive dollar spent does not amount to cash paid directly to employees. "Cash as an incentive is not good. Recipients receiving cash view it as part of their paycheck. It takes $7 in cash for every $1 spent on non-cash incentives to get results," claims Bach.

Non-cash incentives include high-perceived value products across lifestyle categories such as outdoor recreation, home and garden, individual travel, computers and electronics. "Recipients want to receive items they might not buy on their own, say the latest in digital cameras or handheld televisions. Plus brand names are also very important to the recipient because of their high perceived value," says Jeff Sheridan, vice president of sales for Quality Incentive Company. "We want them to perceive the value and they want to receive products that they're proud to have."

Incentives payoff

Safety is always first for management and employees at Stinson Lumber, a 125-year-old privately held company with headquarters in Portland, Ore. The lumber manufacturing company has had an incentive-based safety program in place for its 2000-plus employees since 1989.

Dan Sweeney, vice president of human resources, explains that a new CEO back then believed in the philosophy of using incentives as after-the-fact recognition for rewarding performance - particularly in safety matters. Considered a high-risk-for-injuries company, an incentive-based safety program was initiated that reaped a hefty ROI from the start. Prior to the program, the company was paying out $1.3 million annually for workers compensation due to lost-time injuries. After three years, the company reduced that cost to $300,000.

One of Stinson Lumber's 13 divisions, which are sprinkled throughout Oregon, Washington, Idaho and Montana, is a sawmill that employs 80. For the past 15 years, the sawmill operation has not claimed one lost-time injury. "We believe this is the best record in the industry," Sweeney claims.

Another division, a lumber manufacturing facility with 200 employees located in Washington, has been without any lost-time injuries for more than two years.

Behind the record is a company-wide value system rooted in family. "Employees watch over each other and make sure all is well. Everyone deserves to go home to his family with all his fingers, and employees make sure everyone does."

The basis of the safety program is the CEO's philosophy of rewarding after-the-fact performance. "We believe in the use of incentives, but not when used as a dangling carrot. We reward safety performance after each quarter and then annually."

Each employee by division is eligible to receive an incentive award at the end of each quarter if no lost-time injuries have been reported. Annually, a company-wide barbecue for employees and their families is held in which "lots of prizes are handed out," says Sweeney. Prizes - or incentives - are selected by employee groups and include such products as name brand televisions, DVDs, barbecues, chainsaws, cameras and more. Children in attendance are treated to their ultimate dream prize - a dive into the coin pit.

The structure of the safety program includes monthly safety meetings at all divisions and nearly every division conducts weekly tailgate meetings during which topics such as near-miss accidents are discussed. "At every all-employee meeting, safety is always discussed and the company's monthly employee newsletter always contains safety information," explains Sweeney. "We consistently stress how important safety is for them and for the company."

Another industry considered as high-risk for injuries is transportation and trucking. Consolidated Personnel Corp., a nationwide truck driver contractor company based in Chesterfield, Mo., implemented an incentive-based safetysafety areas: vehicle accidents and on-the-job injuries. In the early years, the company's safe drivers were awarded a package developed by the American Trucking Association (ATA). The package included a pin, a patch and a cap. Consolidated began augmenting the reward with a personalized, framed certificate and then added its own safety incentive awards based on 10 annual levels of accomplishment. The first year, recipients receive a nylon jacket, the next a duffel bag and then a flashlight and so on. But that wasn't enough. As the company continued to expand its workforce through the acquisition of other companies, it also expanded its safety incentive award program.

"We strive to enhance our program each year and our safety committee reviews our entire program for the purpose of expanding our top award, Divisional Driver of the Year," says Dave McFarland, safety manager for Consolidated.

The company created four divisions throughout the United States, and from within each division, the safety injuries; a good driving record; and a good work record. Drivers of the year receive a custom designed ring, a crystal tractor -trailer on a marble base and a check for $1,000.

A committee nominates one driver of the year. Nominated drivers must have been chosen as a driver of the quarter plus meet all criteria within a year's time: no preventable accidents; no preventable

"We don't like awarding the check, but we've been doing it for so long, our drivers expect it," adds McFarland.

Presentation of the annual award is made in a safety meeting within each division as well as at the recipient's restaurant of choice with family members invited as special guests.

"Recognition in front of their peers and family is very important to these drivers," McFarland claims. "It reinforces the magnitude of their individual accomplishment." Recipients are also featured in the company's monthly newsletter.

Consolidated has also taken its safety program 1 million miles further. In November 2001, the company established a Million Mile Award safety recognition program. Long distance drivers who operate 1 million consecutive miles - the equivalent of driving around the globe 42 times - are eligible to receive a crystal tractor-trailer enclosed in a cherrywood, shadow-box frame. If a driver is involved in a preventable accident before achieving one million consecutive miles, the driver must start over. The same criteria holds true for the 2 million mile recognition.

At the beginning of this year, Consolidated awarded 15 One Million Mile and three Two Million Mile awards.

Justifying costs

So if the secret behind the success of a safety program is incentives, why isn't every company - especially those considered to be high-risk - implementing such a program?

"Incentive-based safety programs are usually not well funded," says Bill Wicklem, CEO of Paramax, a Red Bank, N.J.-based company that creates Web enabled software solutions for sales, marketing and incentive applications. "Safety programs are not like sales programs for which budgets are much bigger because they are viewed as revenue generating. So the companies who are in the business of creating and running performance improvement programs for clients typically have little interest in offering incentive-based safety programs."

But the Internet is changing that thinking, Wicklem claims. "We provide an online, turn-key program that a company can set up for a few thousand dollars. Based on the number of employees, an on-line incentive-based program can cost as little as $300 a year."

Paramax provides client companies a leased, customized site that can cost a few hundred dollars a month for the client's employees to use, he says. The customized sites can also include training programs complete with knowledge quizzes and results. "Employees log on individually, read the information, check the box that they've read it and then take the quiz. The employer can track who has had the training and which areas may need additional training."

Internet ease

Fulfillment of awards is another challenge for companies considering implementing an incentive-based safetyIncentive houses and independent sales representatives who typically carry comprehensive lines of products from various manufacturers, are good sources to partner with for fulfillment," says Karen Renk of the Incentive Marketing Association (IMA) in Chicago. "Many of these resources are switching over to Internet-based fulfillment, making it even easier."

program. "

Paramax partners with an incentive house for fulfillment of its clients' program awards. "We provide the technology, the incentive house provides fulfillment."

Quality Incentive Company is an incentive house. It warehouses 900 items from manufacturers such as Sony, Coach, John Deere and Magnavox.. The company also provides its clients with online fulfillment ease. "It's important that the recipient received their award quickly," says Quality Incentive Company's Jeff Sheridan. "We offer the traditional print catalog of items available to recipients as well as an online version. Online, we can fulfill much quicker. We also have a customer service toll-free number that client companies and recipients can both access. All merchandise we fulfill is guaranteed by us. If say a television we've shipped to the recipient doesn't work, we'll replace it."

Using an incentive house can also boost a company's safety program ROI. "Our client companies pay a small cost up front and then we bill only when we ship products. This way, the client doesn't pay for a program until fulfillment is needed," says Darryl Bach from Quality Incentive Company.

Tax advantage

The cost of an incentive-based safety program may also provide some tax advantages for the company. According to George Delta, counsel for the Incentive Federation, in his "Overview of the Federal Income Tax Treatment of Incentive Awards, "In order to qualify for this favorable tax treatment, an incentive award must be an 'employee achievement award.' That is, it must be an item of 'tangible personal property' transferred by an employer to an employee for safety achievement or for length of service.

"Moreover, the award must be given as part of a meaningful presentation and cannot be the payment of disguised compensation to the employee. Thus, for example, an incentive award will not qualify for favorable tax treatment if it is given at the same time that annual salary adjustments are made, or if it is used as a substitute for a program of awarding cash bonuses."

Incentives work

"The use of merchandise as incentives works well whether for safety programs or any other type of performance improvement program," says IMA's Renk. "Cash as a motivator is an unemotional award. While it could be used to purchase a lifestyle award, most likely it will be charged against a burgeoning pile of bills or deposited into a leaky checking account where it soon ceases to exist. With the demise of the cash award goes the memory of its origin."

This article was originally published in Occupational Health & Safety Magazine.

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