KING FAHAD UNIVERSITY OF PETROLEUM

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KING FAHAD UNIVERSITY OF PETROLEUM
MINERALSCollege of Environmental Design
Construction Engineering Management
CEM 517 - Construction Safety Management
Construction Safety Improvement Through Incentive
Compensation
By Neil D. Opfer Construction Management
Program University of Nevada , Las Vegas
AACE International Transactions 1998
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OUTLINE

• INTRODUCTION
• WHY HAVE SAFETY INCENTIVE
• SAFETY INCENTIVE PERSPECTIVE
• WAGE INCENTIVE VERSUS SAFETY INCENTIVE
• SAFETY INCENTIVE MEASUREMENT STRUCTURES
• SAFETY INCENTIVE REWARD LEVELS
• SAFETY INCENTIVE REWARD STRUCTURES
• SAFETY INCENTIVE PROGRAM IMPROVEMENT
• AVOIDING SAFETY DIRECTOR DELEGATION
• SUMMARY

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INTRODUCTION

• Construction ranks near the top of all industries
  regarding accidents.
• Total cost of accidents estimated to be over 17
  billion annually.
• Contractors try to improve safety performance
• Safety training
• Better safety practice
• Between years 1950s to 1990s accident rates
  dropped by more than 50 .
• Concentrated effort lead to improvement in safety
  performance.
• Knowing the fact that safety is everyone's best
  interest to work in a safe manner still Safety
  incentives have been used in some firms as a part
  of their safety program.
• Some construction organizations have safety
  incentives only for
• Managerial and supervisory personnel.
• Multiple-levels including first-line craft.
• Rewarding systems.

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WHY HAVE SAFETY INCENTIVE

• Objections
• Some firms implemented safety incentive
  compensation only to realize no improvement in
  safety.
• Construction firms fail to achieve results from
  safety incentive because of in effectiveness of
  their safety program.
• Safety incentives will not improve construction
  safety by themselves without a comprehensive
  safety program.
• Construction personnel should want to work in a
  safe manner and not have to be bribed for this.

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SAFETY INCENTIVE PERSPECTIVE

• In viewing Safety problems on a construction
  site, there are four perspectives
• 1. Enforcement approach.
• There are rules to follow and when the rules are
  broken.
• 2. Psychological approach.
• Employees can be rewarded for safe work habits.
• 3. Engineering approach.
• Should attempt to design out the hazard.
• 4. Analytical approach.
• Cost-benefit analysis method of eliminating
  hazards and their associated accidents.

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SAFETY INCENTIVE PERSPECTIVE

• Safety incentives perhaps best fit in the
  psychological approach category.
• The psychological approach to encouraging
  employees to work safely is obviously one aspect
  of the incentive approach, but in measuring
  incentives there will be aspects of enforcement.
• In addition, construction personnel exposed to
  hazards and safety conscious may request job
  changes that would be in the engineering approach
  category.
• In a sense, safety incentives can be a broader
  approach to safety improvement than any single of
  the above four cited approaches in the list.

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WAGE INCENTIVE VERSUS SAFETY INCENTIVE

• Wage incentives
• Increase worker output, by basing compensation
  all or in part on production output.
• Have a bad reputation amongst employees
• Tampering with a safety incentive program may
  cause feelings of abuse on the part of
  construction personnel.
• While in use in certain residential areas and
  other sectors of the construction industry, have
  failed due to the difficulties of overall project
  coordination and the quality issue.
• Safety incentives
• Safety incentive programs need to have objective
  criteria as their evaluation standard.
• safety incentive programs are based on a team
  concept in that the contractor workers and their
  environment are evaluated as a whole rather than
  individually.
• Since construction is a team process, safety
  incentive programs are more relevant to the
  construction environment than wage incentive
  plans.
• Team safety incentives are better as a
  compensation basis since it is often difficult to
  identify meaningful and measurable individual
  contributions to safety.

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SAFETY INCENTIVE MEASUREMENT STRUCTURES

• How to reward improved safety on a project?
• Project focus will provide an identification that
  those on the project can relate to for an
  incentive program.
• An overall safety incentive program that focuses
  on company-wide safety results will lose
  identification. Craft personnel will rightly
  complain that their best efforts will have no
  impact on other projects in which they do not
  have a role, therefore the project focus makes
  sense.
• question remains the issue of accident
  measurement or whether this is a criterion that
  makes sense?.
• effort to cover up or hide certain accidents.
• project manager for three projects two large and
  one small. An accident occurs on the large
  project while a carpenter was picking up his
  tools in preparation for being transferred to the
  small project. The project manager or others may
  be tempted to assign this accident report for the
  carpenter to the small project. This way they
  still protect their safety incentive bonus for
  the larger project.
• workers feel pressure from others or from
  themselves to not report an accident from fear
  that it will jeopardize rewards for the group.

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SAFETY INCENTIVE MEASUREMENT STRUCTURES

• What is the other measurements?
• A more effective way to measure safety may be on
  the basis of project safety characteristics.
  Accidents often happen due to unsafe acts by
  workers and unsafe practices, along with means
  that can include tools and equipment.
• Do accidents happen because workers want to work
  on an unsafe basis?
• the worker is not thinking about the work at
  hand. Due to this surface mental attention or in
  a rush to accomplish a task, shortcuts may be
  taken by the worker.
• Safety incentive program may encourage another
  worker viewing this unsafe behavior to step in
  and steer the worker away from unsafe behavior,
  or the secondary worker may observe a tool that
  is unsafe. Simple acts of observance by other
  workers and teamwork can help to improve safety
  performance.
• Fewer Accidents or a safer job?
• To measure the safety level of the job rather
  than accidents in setting incentive levels. A
  construction project with workers employing safe
  practices including their own acts and
  tools/equipment should result in less accident
  occurrences. Therefore, this seems the best
  course of action to be measured by the incentive
  program.

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SAFETY INCENTIVE REWARD LEVELS

• As broad as possible to achieve total involvement
  of project construction personnel.
• worker on the site safety improvement.
• Total involvement Management.
• Result to the incentive program should encompass
  all workers on site along with management/supervis
  ory personnel.

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SAFETY INCENTIVE REWARD STRUCTURES

• Failing area of reward structures.
• If safety is to be the concern of everyone on a
  project and this heightened concern in part is to
  be accomplished with incentives, the incentives
  should be meaningful.

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SAFETY INCENTIVE REWARD STRUCTURES

• On a project with a 1 million labor budget, the
  number, would look as follows between competitor
  A and competitor B

If the 1,000,000
50,000 workhours
_at_ wage rate 20 per hour
Competitor B is paying a workers premium of 1
an hour over competitor A.
The 50,000 w/hrs might represent a 6-month
project with 100 workers.
For improved safety performance, competitor B may
be willing to gain share half of the 50,000
25,000 with the workers on the project.
The employer's share of the 50,000 or 25,000 is
placed into improving their safety program.
Employee share 250,000 / 100 workers
250/worker.
The base wage total for a construction worker
during this 6-month project would be 20,000.
250 / 20,000 0.125 x 100 1.25 of the
worker pay.
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SAFETY INCENTIVE REWARD STRUCTURES
This 1.25 giving as a cash payment to the worker
seems insignificant
How about gift catalog.
The value of an improved safety record as a
competitive edge in hard bidding contracts is
essential.
They should find value as well in rewarding
employees for maintaining an outstanding safety
record.
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SAFETY INCENTIVE REWARD STRUCTURES
Indirect cost
Research has indicated that indirect accident
costs are about 4 times claims costs.
The indirect costs of interruption of supervisory
costs, re-scheduling costs, training losses,
productivity losses and others for a single
accident may be in excess of 20,000.
National Safety Council statistics show a
disabling injury rate of 50 per 1000 workers in
construction.
Scaling this statistic to the 100 worker project
model example, this would be 5 disabling injuries
per 100 workers, or 2.5 during the 6 month
project duration.
Avoiding a single 20,000 accident by rewarding
construction personnel for this potential savings
needs consideration.
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SAFETY INCENTIVE REWARD STRUCTURES
The level of incentive compensation should be
enough to be significant to the worker and should
be separated from normal compensation.
An incentive payment rolled into a standard
paycheck won't have the effect of a separate
payment or gift payment.
Many construction company owners have a natural
aversion to spending money, especially when they
are unsure of the results. However. the potential
benefits of improved safety benefit everyone,
including owners.
There are some owners that evaluate contractors
in part based upon their safety record. A
contractor with a safety record that is not above
the industry average will not be invited to work
on projects for these owners.
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SAFETY INCENTIVE REWARD STRUCTURES
Many experts in human motivation have found that
money is not a motivator. One management theorist
has held that money is not a motivator but rather
a hygiene factor that can dissatisfy employees
but not motivate them.
A properly-structured safety incentive does act
as a motivator in that by accomplishing the task
of earning the incentive, this provides
recognition to the employee.
A safety incentive can enhance the sense of
achievement and responsibility.
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SAFETY INCENTIVE PROGRAM IMPROVEMENT

• Periodically, on either a formal or informal
  basis, employee feedback should be sought on the
  incentive program and possible avenues for
  improvement also, safety incentives can become
  worn-out.
• Contractors need to monitor safety factor and
  ensure that incentives do not become tired, thus
  reducing the impact of incentives.

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AVOIDING SAFETY DIRECTOR DELEGATION

• "Safety is their job and not mine seems to be the
  mindset.
• safety should be the responsibility of all
  individuals on a project and not just one or a
  handful of people
• Safety incentives help to communicate that safety
  is everyone's business.
• Safety incentives can help to achieve buy-in by
  all participants in the workforce. Responsibility
  for safety should not be viewed as something that
  can just be delegated to the safety director.

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SUMMARY

• Safety incentive programs are not a one shot
  cure-all or quick fix for construction
  organizations with safety problems.
• Firms with poor in-place safety programs will
  experience minimal benefit, if any, by the
  implementation of incentives.
• Whether or not a safety incentive program is
  successful will depend upon the construction
  project environment.
• If construction personnel are on a project where
  they feel they are treated fairly, there are
  minimal labor problems, and the company has a
  strong safety program, safety incentives are
  likely to be successful
• The structure and composition of the safety
  incentive program need to be well planned and
  systematic in their application.
• Construction organizations with strong safety
  programs will find that the proper use of
  incentives can achieve additional benefits of
  improved safety records on a cost-effective
  basis.
• Structuring incentives to focus on unsafe
  practices and unsafe apparatus rather than
  accidents with independent measurement is another
  key idea in program implementation.

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THANK YOU