It Doesn't Hurt as Much

Our safety program may have kept costs from doubling

I believe our family-run bag-manufacturing factory has one of the best industrial safety records around. Not one of our 100 employees has missed work because of an injury for over 850 days--twice our old record. Two years ago we tallied just six minor injuries. Last year we logged only 10. Perhaps no one is more grateful for this record than our worker's compensation insurance carrier. Back in 1999, we paid $160,000 in premiums while they shelled out only $5,000 in claims. That windfall profit margin repeated itself last year.

How did we do it? Incentives and training. Two years ago, after years of rising premiums, we rolled out a new safety program that offered bonuses and other rewards if we recorded fewer than four accidents and no lost time to injuries per quarter. We also started monthly bilingual safety classes that taught employees how to avoid injury by stretching before their shifts and properly lifting boxes, among other things. The combined carrot-and-stick approach worked so well it has become a permanent part of our factory life.

There was a time, however, when it didn't pay to insure Emerald Packaging's employees. As recently as 1997, more than 25% of our factory workforce reported injuries each year. Most of those hurt cited only minor scrapes and took a couple of days off. But at least three of the injured required extensive--and costly--medical treatment. They missed weeks of work, which forced our insurer to fork over disability pay. Year after year, our carrier paid out more than we paid in premiums, until by 1999 our annual insurance cost rose 30%.

By then, the injury situation commanded my attention. I decided to aim for a maximum of 12 accidents in 1999--with none causing lost time--because we had logged 24 accidents in each of the previous years.

A large number of minor injuries, I found, were caused by workers simply neglecting to follow basic safety measures. One employee, for instance, consistently failed to don safety glasses when using compressed air to clean waste plastic from under our bagmaking machines. During 1997 and 1998 he had logged three injuries thanks to flying plastic. Once our program was in place, his peers began pressuring him to wear the glasses. And thanks to that incentive-driven pressure, he hasn't had an eye injury in two years. Not that the training program hasn't been effective. By pounding the message of safety in classes month after month, we slowly but surely changed the culture of our factory.

I've learned some important lessons thanks to the program, too. Over $20,000 in bonuses later, I am convinced that money talks. The incentives did build peer pressure. One employee breathed a sigh of relief after an injury proved to be minor. "I don't want to be the one to wreck the program," he said. We also found that the oldest, most experienced employees are the likeliest to get injured. They're too comfortable with their bad habits. So we've focused our training to address things they were doing--like not using safety equipment--that could land them in the hospital.

What has the company gained for its efforts? Higher premiums. Our 2001 insurance costs jumped 40% thanks to California's insane worker's compensation market. Like electricity, it was deregulated in the mid-1990s. Insurance companies stormed in, dropped rates, lost money, and went bankrupt. Now the few that remain are jacking premiums sky-high. Without our safety program, I have no doubt our costs might have jumped 100%. Anyway, this is California. If you're a businessperson, you have to take comfort in the silver linings. And a sterling one for me is that we truly are a safer place to work today.

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By Kevin Kelly

Kelly is an officer of Emerald Packaging Inc. in Union City, Calif.

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