Commentary

Creating a Culture of Safety—It Pays

Companies can reduce insurance costs by stepping up their safety programs

By Michael W. Mitchell

When trench walls collapsed and killed several Colorado workers a few years ago, the mid-sized construction company on the project faced multiple investigations and an unexpected aftermath: a tarnished reputation and the inability to procure work. The loss of revenue, along with rising insurance rates and overwhelming OSHA scrutiny and fines, eventually forced the company to shut its doors.

I’ve advised hundreds of construction firms on how to reduce risk and improve safety in my 28-year career and have found it is the CEO’s attitude toward safety that determines whether a company’s safety record is great—or just good enough. In great firms, CEOs are passionate about safety and consider it more than just a stand-alone program. In these companies, safety is ingrained throughout the company culture.

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Safety Cultures

A utility contractor I worked with several years ago faced a serious situation with OSHA—a willful violation on record. Correspondingly, the contractor’s Experience Modification Rate (also referred to as the e-mod) was outrageously high, which meant expensive insurance premiums.

But the CEO was committed to change. We worked hard over a 24-month period to introduce and promote a culture of safety. Today, the contractor’s e-mod factor is so good that the company participates in an elite insurance program that saved it a whopping $50,000 in insurance premiums last year.

Companies with good—but not great—safety programs can generate positive safety records; for example, 200,000 man-hours with no lost-time accidents. Sure, these executives want employees to be safe. But unfortunately, they don’t demonstrate regular involvement in safety efforts. You don’t see these CEOs in safety meetings or mentioning safety as a metric of company success alongside revenue figures. Seldom do they express safety as a company value.

On the other hand, companies that embody a true culture of safety generate consistent, exemplary results, such as 750,000 – 1 million man-hours with no lost-time accidents. In these companies, executives:

• share their passion about protecting company assets;



• articulate safety goals alongside goals for gross sales and profitability;



• include safety in employee evaluations;



• reward safe performance;



• are accountable and hold others accountable;



• regularly participate in safety meetings and activities;



• make difficult decisions, such as terminating staff who neglect safety;



• never compromise safety to finish a project on time or on budget;



• understand that risk management is a continually evolving process.

Heath Construction in Fort Collins, a 70-employee firm that recorded 850,000 man-hours through 2006 with no lost-time accidents, boasts an e-mod rating of .76. As a result, the company’s insurance premiums are nearly 25% lower than insurance premiums paid by similar-sized companies with an average e-mod rating. For Heath, the savings are in the tens of thousands of dollars.

Heath President Randy DeMario says his job is to stress to employees the company’s focus on safety. “People are our No. 1 asset,” he says. “We want everyone to work safely and go home each night.”

To DeMario, a culture of safety means always reminding staff of training opportunities, reiterating to superintendents that safety is their primary objective and stressing to employees that safety is a Heath expectation. “I don’t want this company to be just a good company; I want it to be great,” DeMario says. “Building quality buildings without compromising safety helps make us a great company.”

Besides regular safety training and certifications on such topics as first aid, working in confined spaces, scaffolding, hazardous materials, skid loaders and even safe operation of company trucks, Heath holds an annual Safety Rodeo that gives employees—including office staff—hands-on experience with tools and safety equipment. Heath mandates that all employees attend the daylong event each May, which has included fire and trauma training with Poudre Fire Authority.

Heath Safety Officer Ray Moutoux, who helped launch Heath’s comprehensive program 15 years ago, says, “Safety is our way of life. There are no options.” He estimates it took a solid five years to institute a strong culture of safety at Heath.

Managing Your E-mod

At Connell Resources, which experienced one million man-hours without a lost-time accident over two years, Mitch Little is the safety manager. He agrees with Heath’s Moutoux that a culture of safety isn’t built overnight. “It takes consistency. Our president and management team strongly believe safety is vital and are dedicated to communicating that company wide.”

Since Little was hired six years ago, Connell’s e-mod has dropped from 1.01 to just .67. “With a .67 e-mod, we’re essentially getting a 33% discount on our insurance premium.”

Little said President Ben Connell is ardent that the company’s 270 employees work hard to finish projects, but not at the expense of safety. “

“He never wants to hear that an employee has been seriously injured on the job. He’s the type of leader who will spend the money needed to get the right equipment and ensure all employees undergo serious, regular safety training.”

The company is so committed to safety and to keeping its e-mod low that every employee’s safety vest is inscribed with the question, “What’s your e-mod?” When it’s time to replace a vest, “I tell them they need to be able to answer the question,” Little says.

Insurance Advisers

Your insurance adviser can help build a culture of safety in your company. Heath Construction and Connell Resources regularly collaborate with risk managers at Flood & Peterson to implement safety programs, evaluate their effectiveness and keenly watch for any safety problems that could arise. The bottom line is to develop a risk-management partnership that works to protect the companies’ balance sheets, ensure consistent and profitable growth and continually improve safety.

Michael W. Mitchell is executive vice president of risk management for Flood & Peterson Insurance. E-mail at: mike.mitchell@fpinsurance.com

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