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A strategic approach to Workers' Compensation

There's a wide spectrum in the way companies approach Workers' Compensation, ranging from those that are reactive, focusing on compliance and lagging indicators, to those that lead with a robust safety culture, driven by management involvement, accountability and leading indicators. Yet, regardless of where a company falls along the spectrum, smart companies recognize that health and safety management is a key risk factor affecting the bottom line, even in this time of extreme caution and controlled spending. "There's always room for improvement" is one management mantra that recognizes safety and health management requires a rigorous, on going process.

It's easy to develop a myopic view of Workers' Compensation since it's so claims driven. While there's value in this information, it can also mean that companies miss the "bigger picture." The Chemical Safety Board's preliminary report on BP's Deepwater Horizon oil rig disaster found that BP and Transocean Ltd. were overly focused on personal safety metrics - such as slips, trips and falls - and gave inadequate attention to process safety hazards.

It may be time to step back and gain an overall view of your Workers' Compensation program. Such an approach begins with the "big" areas of strategy, structure, processes, people and culture and then narrow down to specifics.

Strategy: This is the age of the strategist and safety is no exception. It's critical for stakeholders - managers, employees, insurance companies, medical providers and so on - to understand the company's strategic business objectives of health and safety management. If the goals and objectives are not carefully defined and an integral part of the overall business strategy, the Workers' Compensation program is without a compass and ultimately will flounder.

Structure: This is the formal organization of your program. Who has decision-making authority, who reports to them and how communication works. Communication channels must be working along several fronts to keep Workers' Compensation costs low and return employees to work. This includes communication from top management to supervisors, supervisors to employees, employees to doctors, return-to-work coordinators to doctors, return-to-work coordinators to employees, return-to-work coordinators to claim adjusters and so on.

Processes and systems: Depending upon the size of the company, this can be the most challenging aspect of successfully managing a Workers' Compensation program. It is the failure of processes that often lead to uncontrolled costs. Assessment can be broken down to three broad areas:

  1. Pre-loss: Proactive actions aimed at reducing risk and preventing injuries
  2. Time of loss: Immediate actions taken to prevent the injury costs from spiraling out of control such as timely reporting and proper medical care
  3. Post-loss: Managing the injury and Workers' Compensation process, including incident analysis, return to work, continued involvement in claims process, medical care coordination and actions taken to prevent reoccurrence

People: The proper protocols for hiring, promotion, training, education and development of employees are critical to managing Workers' Compensation costs.

Safety culture: Perhaps the most significant safety trend of the past decade is the concept of a safety culture that inspires workers to change behaviors and make safer choices on their own. Shared attitudes and perceptions are the basis of a culture; understanding if your desired culture lines up with reality is key.

A strategic framework provides the foundation to achieve more control of your Workers' Compensation program over the long term. Once you have identified the weak links in the "big" areas, you can drill down and identify key cost drivers.