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Cut costs, manage risk through a strategic approach

Woody Hill

Workplace fatalities in Nevada rose nearly 17 percent in 2010 compared to the prior year according to results from the Census of Fatal Occupational Injuries program conducted by the U.S. Bureau of Labor Statistics.

Employees are a company’s most valuable asset. Yet, in the course of meeting customer demands and managing unpredictable daily operations, many businesses overlook the importance of having a thoughtful risk management and workplace safety program in place to protect their employees. Taking a strategic approach to workplace safety not only helps make the workplace safer for employees, it also results in operational and cost benefits for the business.

As the economy continues to grind along, small businesses in Nevada and across the country remain concerned about controlling costs and minimizing risk. Now more than ever, small business decision-makers must continuously evaluate costs, and work to enhance operational efficiencies in the face of ongoing challenges: increasing costs, changes in healthcare legislation and economic uncertainty. These are issues small businesses have very little control over. But even during these challenging times, there are steps small business owners can take to control costs, which can help drive growth in the long-term. Some commonly overlooked costs impacting small businesses are those associated with risk management, workplace safety and workers’ compensation insurance.

The Occupational Safety & Health Administration estimates that direct workers’ compensation costs in the U.S. alone run nearly $1 billion per week, which includes workers’ compensation payments, medical expenses and costs for legal services. When indirect workers’ compensation costs, such as lost productivity, training replacement employees and equipment repairs are considered, the costs are multiplied exponentially.

For this reason, it is critical that Nevada businesses understand that a strategic approach to risk management and workers’ compensation is just as important to cost savings as smart tax planning. Small businesses should maintain a long-term workers’ compensation perspective focused on value, not just lowest cost. They should be sure they have access to resources and value-added services that both protect their businesses today and also position them to potentially lower their insurance rates in the future.

By taking a closer look at workers’ compensation, small businesses cannot only better manage risk, but also effectively manage costs, which is just smart business no matter what the economic climate.

At its core, workplace safety is about establishing a culture where employers actively care about their employees, and in return employees take responsibility for their own safety and the safety of others. It’s about doing the right thing and protecting the people who are integral to the long-term success of an organization. Successful workplace safety programs instill safety as a value, integrate it as a core business function, and target prevention as the primary means of reducing the frequency and severity of any potential accidents.

An effective workplace safety program will include certain common elements. The level of detail and complexity with which a program addresses each element varies from employer to employer, but all programs should include these five common elements:

1. Commitment from management and employee involvement

The most effective workplace safety programs start with an authentic commitment from management that makes safety a strategic imperative across the organization. Effective, comprehensive safety programs start with a management culture that keeps everyone accountable. Without leadership involvement and a commitment from the top, none of it works. And employee involvement provides the means through which workers develop and express their own commitment to safety and health protection for themselves and their fellow workers.

2. Worksite inspection and analysis

A variety of worksite examinations are vital to the program’s success. The purpose of these analyses is to identify not only existing hazards but also conditions and operations where changes might occur that would create hazards. Effective management actively analyzes the work and worksite to anticipate and prevent harmful occurrences and encourages employees to point out hazardous situations as they occur.

3. Hazard prevention and control

Once hazards or potential hazards have been identified as part of the worksite analysis, the company must consider prevention and control measures. Where feasible, hazards should be eliminated by effective design of the job site or job. Where it is not feasible to eliminate hazards they must be controlled to prevent unsafe and unhealthy exposures. Elimination or control should be accomplished promptly after a hazard or potential hazard is recognized.

4. Safety and health training

The safety and health responsibilities of all personnel are addressed through training. Safety and health training is most often effective when incorporated into other training about performance requirements and job practices. This prevents safety and health responsibilities from being viewed as separate, less-important requirements.

5. Long-term commitment

For a safety and health program to be effective, the employer must make a long-term commitment and employees must understand that unsafe acts are unacceptable. Management must use a series of progressive actions that reflects the company’s continuing concern. These actions might begin with verbal warnings and culminate in termination of the employee for continuous failure to comply with company safety rules. Management must make it clear that safety is taken seriously and policies will be backed up with action. Otherwise, the program is just another piece of paper.

Heading into 2012, mixed signs of recovery continue to emerge and many small business owners remain uncertain about how various new legislative policies will affect them. Regardless of the rate of economic recovery or pending legislative policy, small businesses should focus their energy on the variables they can control. Taking a smart, informed approach to workers’ compensation insurance not only will protect valued employees and minimize risk for the long term, it also protects small businesses from taking on new costs in a time of economic uncertainty.

Woody Hill is vice president of loss control at Employers, a Reno-based company that offers workers’ compensation insurance and services through Employers Insurance Company of Nevada, Employers Compensation Insurance Company, Employers Preferred Insurance Company and Employers Assurance Company. Contact him at whill@employers.com or http://www.employers.com.