IRMI Update—Issue #120
An E-mail Newsletter for Risk and Insurance Professionals
ISSN: 1530-7948
September 14, 2005
In This Issue
Colleague,
Were you as horrified and embarrassed as I was as events unfolded following
Katrina? It has been 4 years since the wake up call of September 11, and our
federal, state, and local governments seem no more prepared for a catastrophic
event than they were in 2001—and they knew Katrina was coming! The lack of coordination
and preparedness for scenarios that had been predicted for years is inexcusable.
Are we supposed to believe a catastrophic terrorist attack in another American
city would be handled any better?
Katrina also exposed some personal and corporate risk management breakdowns.
For example, it is likely that less than half the businesses affected by Katrina
and the subsequent New Orleans flood had disaster recovery plans. The scale
of the devastation may have overwhelmed many plans, but at least those companies
with some form of plan wouldn't be starting from scratch. Additionally, one
can't help but wonder if the energy industry really needs to concentrate as
many facilities in one hurricane-prone area as it does. And what about all the
homeowners and businesses that didn't purchase flood insurance? Most of the
uninsured don't have professional risk managers on staff, but did their agents
and brokers properly advise them?
There will be many risk management lessons learned from this tragedy, both
from a public policy and corporate perspective. What have you learned? What
has the country learned? Also, I'm certain there are many risk management success
stories. Do you have one to share with our readers? [See reader comments]
My associates and I have friends, family, and customers in Louisiana, Mississippi,
and Alabama. We'd like you to know that you were in our thoughts when Katrina
came ashore as you are today. If you are a customer needing to reestablish your
IRMI publication services at another location, please contact our client services
group at cs1@irmi.com or call (800) 827-4242,
and they will gladly help you. Best wishes to you as you work to recover from
Katrina's wrath.
Sincerely,
Jack
Jack P. Gibson, CPCU, CRIS, ARM
President
IRMI
Win-Win Fire Safety Training—We're a medium-size
property management company handling mostly apartment complexes and senior housing.
Fire safety is one of our major concerns, especially with the senior housing.
We've arranged for the local fire departments in various communities to come
out to our locations and supervise a fire drill. While there, they also are
given an opportunity to demonstrate some of their equipment. They've shown our
tenants how to operate a fire extinguisher and explained what to do and what
not to do in case of a fire. On a couple of occasions, we've given them permission
to use our building for a practice ladder exercise.
These demonstrations are a tremendous benefit to our tenants and staff and
additionally, they're very entertaining. The fire crews love it as well as it
gives them an opportunity to promote fire safety and show off some of their
new equipment. It's also great for community relations. Our insurance underwriters
love it too.
We started this program with our senior housing in mind, but we're now expanding
it to all our multifamily units and even to our office building properties.
It's becoming an entertaining, educational, awareness developing, social event
at many of our properties.
By: Dennis Engstrom
The Newbury Companies
Des Moines, IA
dengstrom@thenewburycompanies.com
Suggest a Risk Tip. Send us a practical tip (less than 300 words) for identifying and managing risks,
buying insurance, managing claims, or filling gaps in insurance coverages. Submit your tips. We'll
acknowledge your contribution as we did for Dennis.
There are now 703 risk management and insurance articles on IRMI.com. Below
you'll find summaries of some recent additions with links to the articles.
We have recently updated a number of the reference manuals in the IRMI library
and published new issues of
The Risk Report and
Captive Insurance Company
Reports. To make sure you don't miss any of this new information
take 30 seconds to scan the "What's New" summary page.
For IRMI
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Sage subscribers.
In IRMI Update 119, Jack Gibson asked readers
about CEOs who have demonstrated a real commitment to establishing a safety
culture in their companies. How is it accomplished? And, more importantly, how
is it maintained? Some reader responses follow.
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I agree completely that the effectiveness of a safety program is directly
related to the involvement of upper management. Mid-level managers cannot
enforce safety requirements unless upper management has given them the authority
to reprimand unsafe behaviors. Too many companies have a "Safety Program"
but do nothing when someone violates it. When that happens, the "Program"
is rendered powerless, making them safety suggestions rather than a formal
policy. Employees must be held accountable to the rules set forth in all
areas of an organization, including safety. Several of our clients require
that the CEO or President be notified immediately on all on-the-job injuries.
They then either send a letter or call the injured worker to make sure they
know that upper management cares about their well being and that they take
safety seriously. This sends a strong message to the workforce.
I also believe that, the majority of the time, the ultimate responsibility
for safety really lies with the individual employee. They must pay attention
and abide by safety rules in order to prevent accidents from occurring.
If those rules are inadequate or are nonexistent, it is their responsibility
to bring it up to their superiors to get things changed. If that is not
effective, it is their responsibility to report the employer to the proper
authorities or seek safer employment. It's the company's job to make sure
the environment is safe, but it is the employee's job to make sure it stays
that way.
—Mike Rogers, AIC, Vice President/Claims Manager,
Rogers & Belding Insurance Agency, El Paso, TX
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Employees are an employer's most important asset, and safety is an important
initiative in the human capital business strategy. It always starts and
ends at the top. ... Most companies have safety programs, but they are separate
programs run by separate people (not the immediate supervisor) with separate
goals and incentives. Organizations that are exceptional make safety transparent
in the culture. Employees are taught from the first day the company values,
goals, expectations, policies and programs, and safety is built into every
part of the company fabric. It is part of every job every day, not driven
by a campaign, slogans, or incentives to keep costs down. Those programs
may be successful for a time, but not over time because they are not a day-to-day
fundamental part of performance management. Safety is a performance issue,
just like absenteeism, poor quality work, and low productivity.
The most successful companies treat employees as the most important asset
(rather than an expense) and build a performance-based culture around that
asset. Senior managers lead the way and build safety into each job, process,
and practice. Safety isn't treated separately but inclusively and without
special fanfare. Employees see through that pretty quickly. Employees that
believe the employer truly cares about them will outperform day-in-and-out.
Senior management must create that culture and expect that each employee
will live up to the cultural expectations.
—Craig Thummel, Houston
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I absolutely agree that safety culture is driven from the top down. Our
senior mgmt (CEO, COO) is actively engaged with the safety process. Senior
mgmt reviews trends and assists in establishing objectives for continuous
improvement, includes discussion of safety in all meetings, periodically
issues messages regarding lessons learned, and engages in discussions with
clients regarding safety issues in the construction workplace.
—Laura Latshaw, Risk Manager, Kinetic Systems, Inc.,
Union City, CA
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It is necessary that top management should have personal concerns regarding
the safety issues in any industry. The safety culture can be implemented
only if all personnel including the top management are practicing the safety
first environment. However, without strict observance it is not possible.
In Pakistan, many chemical industries are practicing the "safety first"
environment but with the passage of time and the gradual corrosion and erosion
of their units, the premises are more vulnerable to accidents. The middle
management is concerned over safety issues but top management has overlooked
the circumstances while sitting in air-conditioned offices. It is therefore,
necessary that every person from chairman to foreman should be able to practice
safety in the premises.
—Aamir Waqar, Deputy Manager—Risk Management Cell,
Adamjee Insurance Company Limited, Pakistan
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I previously was employed by a public entity risk pool, specializing
in parks and recreation. What made the pool so successful, in my opinion,
was a true dedication to loss control, evidenced by employing 3 times as
many loss control representatives as claims people. This certainly was evidenced
by virtual lack of serious recreational accidents among our membership,
and also enabled us to devote substantial resources to the burgeoning areas
of employment-related losses. Never did our members complain about high
expenses for the pool. Without the support of the membership and the Executive
Director, these loss control goals, which resulted in stable member contributions
for many years, have been possible.
—Patricia Gerrond, Assistant Vice President-Claims,
American RE, Chicago
-
In a high risk business such as BP, every level
of management should be responsible for safety, especially those who work
closest with the employees. My husband is a lineman for a nationally known
company. In addition to the weekly safety meetings, within each paycheck
stub is a formal written safety procedure. Even their paycheck stub reflects
wording such as, Safety First. Safety is not just about written procedures,
it is about training employees to incorporate the safety procedures into
their daily workflow.
—Janet Bordeau, Compliance Analyst, FCCI, Sarasota,
FL
-
The CEO and the executive management have supported implementing every
program related to safety that I have recommended. One event that we started
3 years ago was an annual Health & Safety Fair. Since then, we have identified
ergonomic needs that were causing workers compensation issues, and I recommended
hiring a specialist to manage workers comp. Not only has awareness increased
but employees are understanding how to prevent injuries from occurring in
the first place. I believe that without the support of executive management,
we would not be where we are now nor would we have the opportunity to go
where I would like to see us go in the future.
—Deborah Shulman, Director Corporate Risk Management,
SCAN Health Plan, Long Beach, CA
-
Noted author and leadership speaker John Maxwell has been quoted as saying
"everything rises and falls on leadership." Leadership is not only accountable
for results, but also for establishing a strong culture or allowing a default
culture to exist. Whenever an accident of this magnitude occurs one must
reexamine the underlying cultural issues surrounding the situation. The
business model for effective accident prevention is no different than any
other business model. It requires defined roles, specific upstream and downstream
measurements, and a reward system that recognizes (positively or negatively)
the process outcomes. Clear roles must be defined for each level of leadership
from top to bottom and they must be linked. Employees must be involved in
developing and sustaining the culture and it should be positive. Earlier
this year the National Safety Council featured a series on "CEOs Who Get
It." Several CEOs, from a variety of industries and company sizes discussed
their view of safety, culture, and the results they have generated. Safety
and/or risk management professionals alone cannot get the job done. They
generally don't have the organizational stature or control to drive results.
The creation of a proper safety culture begins with the executive team and
flows through the organization from that point.
—David Carothers, Sr. Vice President-Risk Management,
Advantce, Tampa, FL
-
A safety culture only infiltrates an organization when top management
makes it happen. Benchmarks on safety are a good start, but need to be regarded
as importantly as financial goals. A few years ago, the business world talked
about how to make IT security and integrity a priority. The answer was to
make the management of that goal a high level job, with measurable goals
and a budget that would reasonably allow the goals to be achieved. If management—from
top to bottom—is measuring safety goals along with their financial numbers,
making it part of performance reviews and bonus criteria, safety becomes
important to everyone. If management is enforcing safety practices, holding
people accountable for infractions, encouraging and rewarding safety suggestions,
and puts their money where their mouth is when it comes to a safe workplace,
safe practices, and personal protective equipment, safety becomes part of
the culture.
—Elizabeth Good, AVP, Underwriting Manager, Victor
O. Schinnerer & Companies, Inc., Chevy Chase, MD
-
Their spokesperson needs to learn the English language. Policies and
procedures have nothing to do with the culture. Culture arises from the
relationships between people and their expectations of each other. If other
executives consider policies to be the same as culture, it's no wonder we
can't get much done.
—Kathryn Wire, President, Kathryn Wire Risk Strategies,
St. Louis, MO
-
I spent 15 years as safety and risk manager for a mid-size truss manufacturer.
The top executives truly believed that they supported safety, and do to
this day. However, all the line managers and supervisors ever heard about
in meetings, and the only thing people got yelled at about, was Production,
Production, Production. What I came to realize was that people really did
listen to a peer-level manager's safety message, as long as it didn't conflict
with the Production imperative. However, when faced with a choice, they
would jettison safety in a second, in favor of whatever the boss was likely
to yell at them about. I worked within that system to deliver a message
of "Safety Equal," because I realized that Safety not only wasn't "First,"
it would never be first, and should never be first. After all, we were a
Truss Company, not a Safety Company, and my job was to make us a safer Truss
Company. The mission was to make trusses, safely if possible. It was not
to be safe, and make trusses if we still could.
It's important to be realistic, and align your goals with the CEO's as
much as you can. It's more effective, and being more effective allows you
to do more to manage risk.
—Susan Harrelson, Attorney, J. Michael McGroarty,
Chtd., Las Vegas
-
Safety is the CEO's & top management's responsibility, but they cannot
micromanage all activities. It appears the proper procedures were in place,
but were not being implemented or monitored. That's not a CEO's job or the
board of directors—that's what middle mgt. is suppose to do, and they didn't.
We are often too critical of our leaders when we don't agree with what
they do or say, especially of those that really "lead." This was an unfortunate
accident, but the "local, middle management" made the mistakes.
—Gene Cook, Sales, LVT Insurance, Paducah, KY
-
Responsibility of safety should rest among everyone, not just the CEO
and mid-level manager. The safety program should be designed as a CIRCLE
with a line in the middle. Consider senior management as the middle line,
mid-level manager as the end of this middle line, where the circle begins
and employees as the CIRCLE.
Senior management must set strong expectations/goals and mid-level managers
must execute those safety plans as they pursue their unit's productions
goals. Senior management must ask for solid improvements weather it is in
terms of bringing down the frequency or severity factors. This is where
the chain reactions starts as the mid-level managers will push their goals
down to their respective employees.
When there is a time for feedback, using the same CIRCLE strategy, mid-level
managers should be able to convey those feedbacks to the senior management,
hence another set of safety program and goals starts another CIRCLE.
—Adnan Pathan, Underwriting, Liberty Mutual, Boston
-
As someone who at one point in my career worked for a division of Amoco.
I feel that I can speak to their main issue. The CEO's comment is way off
base. Procedures are not culture. It is the last hand on the last wrench
before someone says oops. This last person has to be personally focused
to provide the desired safety result. No matter what approach a company
takes in trying to make safety awareness an issue for that last employee
(i.e.. awards, cash, incentives, training, etc.) it has to be checked with
truth. Too many accident reports focus on blame and cover-up.
The best defense for a company in avoiding a major loss like Texas City
is Three fold. 1.) A solid audit program that has impact and not just more
paperwork. 2.) Accident reports that honestly look for root-cause and focus
on correcting problems. 3.) Honest exchanges of information between all
parties both pre and post accident. (Contractors as well)
In the Whiting refinery the accident rate did not drop until each contractor
felt that they were safe from punishment if they brought up a safety issue.
This was accomplished by kicking BP representatives out of the second half
of the contractor safety committee meeting. During that time the contractors
openly discussed the areas of concern and placed those ideas on the next
week's agenda. In this case the contractors drove their accident rate down
and lead the host company in reduction of rates. (Caution: Some thought
this would be a gripe session stay focused!).
The bottom line is this safety is not correct politics. It needs to be
honest and open with the goal to keep people safe and secure. All of the
finical benefits and cost savings will come if this goal is clearly communicated
and practiced in a company.
—Don Wilson, Valparaiso University, Valparaiso, IN
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