Could BP's Safety Incentives Backfire?

Oct. 21, 2010
Some experts suggest offering safety bonuses is a dangerous proposition.

BP PLC will base staff bonuses solely on safety performance in the last three months of 2010 as part of a plan CEO Bob Dudley initially announced in late July to review the company's reward policies.

The policy was explained in an internal memo Dudley sent to employees that was first reported in The Financial Times Oct. 18. During the fourth quarter, each of BP's operating businesses will be measured on safety, compliance, operational risk management and whether they're exhibiting and reinforcing behaviors consistent with these goals, says BP press officer Robert Wine. The operational units also will be measured on "silent running," which is a term often used to indicate a quiet, trouble-free operation with high productivity, according to BP.

The company's actions come after the April 20 Deepwater Horizon rig explosion that left 11 people dead and resulted in the worst offshore oil spill in U.S. history. BP was grappling with safety issues before the Gulf Coast oil spill, including a 2005 blast at its Texas City, Texas, refinery that killed 15 people and resulted in an OSHA record $87 million fine.

BP's move to tie incentives to safety sends "a very clear signal that nothing is more important than safety," Wine said.

But are monetary rewards the best way to encourage safety in a manufacturing operation? An organization that represents companies participating in the Occupational Safety and Health Administration's Voluntary Protection Program issued a statement on Oct. 11 supporting OSHA's position that incentive programs must not encourage underreporting of injuries or illnesses.

The nonprofit group, called the Voluntary Protection Programs Participants Association, said incentive programs should focus on positive reinforcement rather than incidence rates.

"If not designed properly, incentive programs can discourage employees from reporting injuries and illnesses on the job," says Davis Layne, VPPPA's executive director. "If that occurs, it can prevent an employer or safety and health committee from identifying unsafe working conditions."

Layne was reiterating comments made in August by Assistant Secretary of Labor for OSHA David Michaels, who said at VPPPA's annual conference that OSHA disapproves of health and safety incentive programs that offer rewards to workers or managers for driving down their injury rates.

The issue of incentives for low safety rates was highlighted in a November 2009 U.S. Government Accountability Office report that stated companies may be underreporting injuries or illnesses to the OSHA because they could lose rewards tied to low injury rates.

Basing incentives on final outcomes doesn't say much about safety anyways, says safety expert Aubrey Daniels, founder of Aubrey Daniels International. He cites as evidence BP executives celebrating seven years without an accident on the Deepwater Horizon rig the day of the disaster.

"The problem that we see in safety in general is that you can be unsafe and still not have an accident," says Daniels, author of a book scheduled for release Nov. 1 that addresses this topic called "Safe By Accident: Take the Luck Out of Safety."

Proactive Prizes

Virginia Tech professor Scott Geller says the idea that incentives could discourage employees from reporting injuries or near-misses is "old news." Companies that haven't caught on to the potential negative effects of incentive programs are behind the times, says Geller, director of the Center for Applied Behavior Systems in Virginia Tech's psychology department.

Geller prefers what he calls a behavior-based approach rather than an outcome-based system. A behavior-based approach recognizes employees for proactive measures that will improve safety. For instance, an employee might make a safety suggestion or implement an improvement that removes a potential hazard.

The E-Z-GO golf-cart plant in Augusta, Ga., recognized that paying employees to meet goals for recordable injury rates could send the wrong message.

"People don't intend to go out and get hurt," says Jay Johnson, the plant's environmental health and safety manager. "When you start talking about pay for performance, you want workers to respond in a proactive manner, not a reactive manner."

Safety has been a priority for the plant, especially since 2005 when an employee was killed as he attempted to dislodge a golf cart that was stuck at an unloading station. The plant decided to enhance its current safety program early this year by offering financial incentives to workers for meeting safety-audit requirements rather than basing them on reduced injury rates.

Each operation within the plant must average a 93% safety-compliance rate each quarter to receive the $190 per-person bonus, Johnson says. The plant measures each operation on a set of 23 to 25 safety-related items.

Employees now seem more engaged, says Johnson. They're now curious about their performance and whether they met all their obligations. The plant's injury rate is on track to be slightly lower than in 2009 when it reported five recordable injuries, he says.

Money Matters

But Geller says monetary rewards in any form can result in consequences.

"The worst thing you could offer as a reward is money because money is their salary, and money gives the impression of an 'if-then,'" he says.

An "if-then" scenario refers to when an employer tells a worker they'll receive a reward if they achieve a certain goal. "You set up this arrangement where people expect to get paid for doing something for safety," Geller says. "And that can be really problematic."

The problem, says Geller, is that employees could turn their backs on a safety program if they don't meet their financial incentive or the money is taken away for any reason.

Geller suggests recognizing employees by celebrating with an unannounced party or by offering mementos, such as hats or jackets.

"Giving a financial bonus is, quite frankly, a joke," he says. "They should be completely eliminated worldwide because they can do more harm than good."

Johnson disagrees. Self-inspection audits can be cumbersome and considered to be a chore by employees, he says.

"We consider pay for performance as part of a compensation package," Johnson says. "It's there for their taking, if they can get it. It's not an entitlement. It's something that's earned just like a wage every week."

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