Safety Incentive Plans

When examining your own safety reward program or when building one from scratch, consider the following guidelines:
1. Keep Rewards Small

Material rewards should not be perceived as the major payoff. The promise of incentives and rewards should only serve as reminders to work safely, and delivery of such rewards should be viewed by employees as a token of appreciation for performing the desired safe behaviors. If the focus is on the material reward, then the focus is not on working safely. A good rule of thumb is to try and equate the value of the safe behavior with the value of the reward. Therefore, giving away a $20 gift certificate to everyone who completed their observations for the month might be excessive.

2. Involve Workers

Include as many workers as possible in the construction, selection, and delivery of the reward system. By doing this, buy-in is generated up front and support or lack thereof will be evident early on so changes can be made prior to launching the program. Also, by involving workers, you are more likely to choose appropriate reinforcers rather than having management choose what they THINK workers would like. Here is a great link to an employee survey template.

3. Specify The Behaviors You Desire

Behaviors required to achieve a safety reward should be clearly spelled out and perceived as achievable by participants. If safe behaviors are not specified, then employees will not know what they need to do in order to receive the reward and interest will soon wane. Bad example: Receiving a reward if you haven’t had any accidents in the past year. Good example: Receiving a reward for achieving a percent safe goal for a behavior or set of behaviors on a checklist.

4. Collect Data And Post It

Progress toward achieving a safety reward should be systematically monitored using checklist data, and publicly posted for all participants. If safety performance is not monitored, then it will be impossible to accurately determine which employees deserve the reward.

5. Provide Meaningful Rewards

Carefully determine the rewards given as a part of your program. If employees do not find the rewards meaningful, then the reward program will not be an incentive to work safely. Some organizations have done plant-wide surveys to determine what types of social, tangible, and work process rewards are meaningful to employees.

6. Never Penalize All Group Members For Failure Of One Member

Groups of employees should not be penalized or lose their rewards/incentives for the failure of one group member. Group rewards should be tied to the overall performance of the group, but some control must be in place to assure that each member of the group who gets the reward actually earned it.

7. Give The Reward To Everyone Who Meets The Criteria

You should design a reward program with this principle in mind. If you can’t afford to reward everyone who meets your criteria, you should reinvestigate your criteria. Everyone who meets the behavioral criteria you have specified should be rewarded. Otherwise, some employees who have worked safely will not be rewarded. These employees will perceive they have been punished. Some guidelines to follow:

It is better for many participants to receive small rewards than for one person to receive a big reward. Example: An organization decides to use a lottery incentive program where there is a raffle for a television set, a stereo, or a vehicle; usually participants accumulate chances for the drawing and then at the end of a specified period of time, the drawing occurs. One person wins. The problems with this are:

• Everyone worked safely many times but was not rewarded.
• The person who won did so by chance.
• The focus might be on the big prize, not safety.

One group (or individual) should not be rewarded at the expense of another group (or individual). Everyone should have equal opportunity to achieve the reward. The process by which the incentive is given should not be a formal competition where one group "beats" another. Healthy competition can be very effective in generating high levels of safe performance but be careful not to set up a win-lose situation. Those employees who came close to winning will feel punished because they worked safely, but were not rewarded.

8. Keep The Program Rules Simple

The most successful reward programs are also usually the simplest. The less complicated the program, the better the chances that all workers will understand and participate in it, and that the safe behaviors will occur consistently. Launch the program with a special kick-off event or as part of your behavior-based safety program kick-off event to let everyone know the "rules," and to show that the program has the support of management.

9. Follow Through With Rewards

Nothing kills a reward program quicker than failure to deliver the promised rewards. Make a commitment to follow through with all aspects of the program. It may seem frivolous, but an effective Safe Performance Reward Program can play a very important role in workplace accident prevention.

All of these guidelines can be applied to safety programs that focus on automobile fleet safety, employee safety to control Workers’ Compensation costs and the WC Experience Mod, or customer/3rd party safety as it relates to General Liability.



About our Guest Author:

John Keller is a Certified Risk Manager and consultant with Praxiom Risk Management in Tampa, FL. Praxiom is a full-service outsourced Risk Management consulting firm specializing in Workers’ Compensation safety, loss prevention, claims management, insurance placement, and is comprised of veterans of the risk management and financial services industry. Praxiom works with clients nationwide. Comments and questions are welcome at jkeller@praxiom-rm.com. Click here for John's full bio.

Recruiters: making strong relationships

Getting the job filled with the right person may be the ultimate goal of a recruiter, but instilling trust and confidence in clients should always precede that target.

At the core of this challenging profession is the desire and skill to understand clients’ needs, specific industries and the geographical landscape of placement territory.

A “good recruiter” never rests on the laurels of past performance – its opening night every day for those in the recruitment business, and having more than a passing knowledge of the industry in which they specialize is paramount.

Many recruiters get into the business after enjoying a career in the industry for which they recruit – this rings true particularly in recent years within the high lay-off high technology realm. Having the ability to “speak” a client’s language cuts down on potential miscommunication and in due course the time it will take to make that working match. In addition, recruiters who have been personally involved in a specific industry understand how to best locate candidates for a particular geographical area.

Recruiters with the right stuff know the impact of trust. A client company should never have to worry about being left out in the cold if a new hire doesn’t work out. A dependable recruiter will be there with “replacement warranty” in hand to make sure that this bump in the road is smoothed out in the short distance.

Beyond building relationships with clients and candidates, recruiters must have integrity. They will never steal candidates from one client to “sell” to another and will always be available to clients to iron out problems.

And the cream of the recruiter crop will take the time to understand a client company’s corporate culture. It should never be about merely filling a position – it should always be about filling it with the right candidate, one who will meet the needs of a client and in turn make for a happy “marriage” between employer and employee.


About our Benefits Installment Author: James E. (Jim) Moniz, CEO of Northeast VisionLink, a Massachusetts firm that specializes in structuring executive compensation. James E. Moniz is a national speaker on the topic of wealth management and on executive compensation. Jim Moniz will be presenting at this years SHRM conference in Phoenx, be sure to check out our presentation: “Creating and Sustaining a Competitive Advantage, The Role and Impact of Effective Compensation and Rewards Strategies”

Establishing Incentive Plan Measures: Part 1

In order to appropriately establish measures for a comprehensive incentive plan and determine which core approach will be taken to develop a program, company executives must first understand and embrace a few foundational principles.

These foundational principals boil down to three goals – creation of an incentive plan that not only improves profits but is also drives results and is self-financing (paid for with results realized). These principals pilot two basic approaches that company executives should consider in the development of incentive plan indicators – Profit-Based Allocation and Targeted Key Performance Indicators.

We’ll concentrate on Profit-Based Allocation for this month’s posting, and have Targeted KPI’s to look forward to next time.

Under the Profit-Based Allocation method, a company decides that it will allocate a percentage of annual profits to employees; the award amount is divided among employees based on a pre-determined formula with payouts typically occurring at the end of the year.

A “best practices” framework for a Profit-Based Allocation should address the following issues:

-Define profits, be it net income or another measure
-Establish a baseline upon which contributions to the profit pool will be based
-Identify a threshold to ensure that a certain measure or series of measures will be achieved prior to payments being made
-Select a fixed or tiered percentage to share
-Select an allocation formula to determine how the value will be distributed to participating employees
-Establish a personal performance component to clarify the performance threshold that must be achieved to receive benefits

Keep in mind that since the single focus of Profit-Based Allocation is on annual profits, the value created can lead to some inherent drawbacks. Some examples might be: long term needs are overlooked, individual accomplishments are not recognized and it can be possible to “cook the books” shorterm to impact a bonus. Seeing that this approach has its anchor in company performance, the absence of a strong performance management system or an apathetic workforce can compromise the effort.

Next month we’ll examine Targeted KPIs and how they can lead to improvement in profits.



About our Benefits Installment Author:

James E. (Jim) Moniz, CEO of Northeast VisionLink, a Massachusetts firm that specializes in structuring executive compensation. James E. Moniz is a national speaker on the topic of wealth management and on executive compensation. Jim Moniz will be presenting at this years SHRM conference in Phoenx, be sure to check out our presentation: “Creating and Sustaining a Competitive Advantage, The Role and Impact of Effective Compensation and Rewards Strategies”

Creating a culture of employee “ownership mentality”: Part II

Last month we took a general look at measures to establish that all-important culture of employee “ownership mentality;” one that once created can help impel a business to greater success.

Now, let’s see how compensation structure impacts that desired ownership mentality, beginning with short-term incentives.

Essentially, short-term incentives are performance measured and typically paid out in 12 months or less. These incentives can play a large role in engendering an employee’s sense of “investment” in an organization if they are based on the achievement of certain departmental goals and/or hitting a profitability threshold.

Most companies utilizing short-term incentive components as part of an overall “ownership” approach will “weight” the incentive based upon a tier system. As such, tiers are established for different classes of employees in conjunction with their impact on various performance measures.

For example, incentive for Tier 1 or top level management is usually based on company performance, not department or individual contribution. Incentives for Tier 3 or 4 employees, however, are heavily weighted on team and individual performance, and hardly at all on overall company achievement. The objective with both tiers is to create focus and tie incentives to specific goals that the employee is best positioned to help meet – in other words, allowing an employee to feel engaged and invested in the workplace, which translates into that coveted ownership mentality.

Long-term incentives, which can include shares of stock, stock options, phantom stock, a profit pool or incentive deferred compensation, are designed for top talent retention.

Key among the intentions of long-term incentives is to create a focus on attaining the company’s long term financial goals and engender a sense of “investment” in those goals.

Long-term incentives provide a substantive reason for top talent to both join and stay with a company. Attractive inducements can “reel them in” and likewise maintain star employees.

Sustained growth and hitting those important goal milestones occurs when key employees are motivated to focus on performance, leading to execution and a pattern of continued achievement – in the long run, a win-win for both the company and its employees.

About our Benefits Installment Author:

James E. (Jim) Moniz, CEO of Northeast VisionLink, a Massachusetts firm that specializes in structuring executive compensation. James E. Moniz is a national speaker on the topic of wealth management and on executive compensation. Jim Moniz will be presenting at this years SHRM conference in Phoenx, be sure to check out our presentation: “Creating and Sustaining a Competitive Advantage, The Role and Impact of Effective Compensation and Rewards Strategies”

Creating a Culture That Encourages Employees to Think Like Owners: Part 1

January Installment by Jim Moniz:

Success now and in the future – let’s face it; that’s the ultimate goal of any business owner. But to achieve that vision of a “bigger and better” organization, you first have to identify a few key elements for success and then make sure that your staff possesses the appropriate ownership mentality to assist in both your short and long term objectives.

Fundamental to any growth strategy are three factors: fulfilling your original business plan (mission, values and company vision); the emergence of sustainable growth patterns (revenue development); and a suitable return in capital for company shareholders.

In order to best achieve those elements for growth, employees must be on board – and the most direct line to meet that aim is by fostering a culture of employee ownership. In other words, employees have to draw the same conclusions as you about what’s important, but for that to occur, ownership mentality must be personalized.

Most employees recognize the bottom line to a company’s success is well…the bottom line; but it’s also vital that they understand how their contribution will help to make that happen. Without this important engagement on the part of employees, their focus may be off center.

That engagement occurs when an employee not only appreciates the unique talents he brings to the organization but recognizes that those skills are also appreciated by management. And that is accomplished by utilizing and amplifying those special talents to allow the employee to find meaning in his work and create a framework for both his and the company’s success. The coveted ownership mentality occurs when the employee sees that connection between his and the company’s goals.

It all boils down to employees embracing the fundamental elements of understanding, importance, contribution and connection.

But a few well-placed “atta boys” aren’t going to fully engender ownership mentality. Motivation comes in many forms, including a regular and attainable incentive program designed not as an employee entitlement, but as a means to create engagement and ownership.

A sound incentive plan – which includes both short and long term motivations – always connects the dots between performance and results. It can best be described as a conditional payment in exchange for meeting specific performance standards.

Next month we’ll break down the differences between short and long term incentives and the role each plays in creating and maintaining that all important ownership mentality.


About our Benefits Installment Author:

James E. (Jim) Moniz, CEO of Northeast VisionLink, a Massachusetts firm that specializes in structuring executive compensation. James E. Moniz is a national speaker on the topic of wealth management and on executive compensation.

Jim Moniz will be presenting at this years SHRM conference in Phoenx, be sure to check out our presentation: “Creating and Sustaining a Competitive Advantage, The Role and Impact of Effective Compensation and Rewards Strategies”

Beyond the Cookie Cutter Approach: Customizing your Company’s Incentive Program

August Benefits Installment by Jim Moniz

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Vision, potential, communication and motivation – are the key elements to an effective company’s incentive program. But in the absence of well-defined indicators and a “best practices” framework, even the most comprehensive program can fall short.

The foundation of an incentive program is basic; it must project the potential that can be realized by the company if its purpose if fulfilled. It must also identify employees who are in a position to impact those outcomes. Moreover, it should standardize its benefits/rewards and determine how much of an increased shareholder value will be allocated to employees and how its value will be measured.

Indicators, sometimes referred to as measures and metrics in a company’s reward strategies, are pivotal to a well-oiled incentive program.

The role of indicators is straightforward – they should seek to improve performance, influence behavior and create focus. This is accomplished through communication and reinforcement to encourage a company wide culture of employee ownership mentality.

Indicators should not be confused with motivators. Motivation is an internal element, something that is encouraged by aligning employees with roles and tasks that are consistent with their abilities. This will encourage them to shine. Motivation is additionally stimulated by a mutual vision between the company and employees.

That said, if indicators are not properly nor thoroughly defined, employee motivation can collapse under an incentive program – this can happen when workforce members see a disconnection between their role in the company and how rewards are earned. This is why a “best practices” framework – a Profit Based Allocation – is a vital component to a company’s incentive program.

A “best practices” framework should address a number of issues, including how company growth is defined; the baseline upon which contributions to the profit pool will be based; payment threshold; percentage to be shared; an allocation formula; and a definition of the expected individual’s performance.

There is nothing “cookie cutter” about an effective incentive program– what may work for one company could be way off the mark for another. The most expedient way to achieve the ideal program for your company is to be fully aware of best practice standards and frameworks, and then work within that structure to customize indicators and measures specific to your organization.

Incentive programs that work best are based on a company’s culture, business model and goals. Communication and reinforcement of results on an ongoing basis is critical. A C- incentive program will outperform an A+ program without ongoing communication and reinforcement. Companies should match their incentive program to those crucial components and then stay the course.

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About our Benefits Installment Author:

James E. (Jim) Moniz, CEO of Northeast VisionLink, a Massachusetts firm that specializes in structuring executive compensation. James E. Moniz is a national speaker on the topic of wealth management and on executive compensation.

Steps to a Great Incentive Plan

July Benefits Installment by Jim Moniz

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A performance based incentive plan is one element of compensation that most companies recognize as vital to the remuneration mix, but developing such an effective program requires some thought and effort.

To get things moving, you first have to define the specific goals of an incentive plan – are you seeking increased sales, improved customer retention, certain margins? Before you put a rewards strategy in place understand what you’re trying to achieve.

Once key result areas have been determined, identify which employees are best positioned to make these results happen; not every employee will be able to fulfill these initiatives.

Next comes quantifying the value created if incentive objectives are met – in other words, what will be the financial result for shareholders? This process typically requires construction of a model that projects base, target and superior result thresholds.

Once the economic value has been determined, you have to figure out the amount you will share with those employees who helped create the upswing.

First determine an acceptable “target” pay-for-performance return and then earmark an achievable “superior” return. Once those two measures are identified you can better establish an incentive goal.

The next step is to determine a standard that defines the potential value in current terms. The potential reward, then, might be stated as a percentage of contributors’ current salary – of course, the big question is the percentage amount. Incentive plan targets that combine the short and long term will likely be in the 60% to 80% of salary range for top managers and between 40% and 80% for second tier managers.

Establishing tiers comes next. After all, not everyone had an equal part in creating increased value. A business needs to define tier levels and assign participating employees – by establishing different tiers you can assign greater potential value to those who will have the greatest impact.

Weighting – or determining how much of a reward should be assigned to the achievement of various categories of expectations – is the sidekick to the tier concept. Weighting should be based on how much of an employee’s role impacted categories.

Determining allocation is the next step. You need to decide when awards will be paid out…at the end of the quarter, end of year and/or sometime down the longer road. Typically, a percentage of total incentives are paid annually and a percentage rewarded in the future.

The final step deals with the long-term portion of the incentive plan. This could take any number of forms. For instance, it could be held in a pool; credited with interest or investment earnings; or treated as a stock or phantom stock incentive.

With this type of incentive program in place, shareholders know the precise value accrued before managers earn incentives; they know the percentage of future growth shared with the management team; and they also know managers will be rewarded for achieving specific and measurable results.

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About our Benefits Installment Author:

James E. (Jim) Moniz, CEO of Northeast VisionLink, a Massachusetts firm that specializes in structuring executive compensation. James E. Moniz is a national speaker on the topic of wealth management and on executive compensation.