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
here 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
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 Online and Print
Subscribers. For
SilverPlume 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.
-
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
-
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
-
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
-
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
-
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, IL
-
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, NV
-
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, MA
-
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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