Mr. Johnston

Human Resources, Recruitment & Training

A Strategic Approach to Workplace Safety: Improve Performance and Decrease Costs

By Hale Johnston, Senior Vice President, Regional Manager, EMPLOYERS

As the hospitality industry prepares to close the books on another year, it likely will remember 2010 as a unique combination of improving fundamentals including revenue per available room (RevPAR) trends juxtaposed with continued economic uncertainty. Traditionally among the first industries to feel the adverse effects of economic downturn and recession, the hospitality sector also is among the first to show signs of stabilization and growth as the market reaches bottom and begins to recover.

Just as in past periods of economic recession, the latest downturn provided everyone in the business world with a stark reminder of how important it is to keep a keen eye on the fundamentals. And the hospitality sector is no different with regard to important fundamentals such as revenue management, cost control and customer service. Now, more than ever, hotel operators must continuously evaluate cost structures and work to enhance operational efficiencies amid a series of ongoing challenges.

Some commonly overlooked costs impacting hotel operators are those associated with workplace procedures and workers’ compensation insurance, which is often misunderstood and frequently thought of in the same terms as other insurance products. With workers’ compensation, businesses can implement practices that significantly reduce their costs, and create better operational efficiencies by improving workplace safety.

As background, workers’ compensation insurance covers employers for their statutory and legal obligations for employee expenses that are a direct result of work-related injuries or illness. While plans differ within and among states, workers’ compensation benefits can include weekly payments in place of wages and reimbursement for payment of medical and rehabilitation expenses. Depending upon the jurisdiction, hotel operators can obtain their workers’ compensation protection from private insurance companies, state insurance funds, self-insurance or self-insured groups.

The Occupational Safety & Health Administration (OSHA) estimates direct workers’ compensation costs alone run nearly $1 billion per week, which include workers' compensation payments, medical expenses and costs for legal services. And when indirect workers’ compensation costs such as lost productivity, training replacement employees and equipment repairs are considered, the costs are multiplied exponentially. Whether direct or indirect, businesses ultimately bear the burden of these costs in the form of increased insurance rates, rising premiums and productivity losses.

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

Taking a closer look at workers’ compensation can actually help hotel operators not only better manage their risk, but also effectively manage costs, which is just smart business no matter what the economic climate. By taking proactive, common sense measures toward workplace safety, hotel operators may greatly reduce their risk of workplace injury-related costs. When workplace incidents decrease, workers’ compensation premiums decrease, fewer overtime costs are accrued, workplace productivity increases, employee morale improves, and the organization’s public image is enhanced.

Cost is certainly an important factor when selecting an insurance provider in today’s market. Price logically serves as a deciding factor in many day-to-day business circumstances, but when it comes to insurance, a workers’ compensation carrier’s focus on safety, fraud prevention, managed care and claims management provides added value that better protects businesses for the future. It’s tempting in tough economic times to jump at the lowest rate, but hotel operators and owners who take a strategic approach to working with carriers that have a long history and provide a full array of services will see decreased costs and greater stability in the long-term.

In addition to carefully selecting a carrier, there are basic, day-to-day operational measures that hotel operators can take to mitigate the risk of workplace injury and related costs. Establishing policies, procedures and rules surrounding workplace safety in the form of a thoughtful risk management program provides employees with the necessary tools to do their jobs safely. Enforcing safety rules through the use of workplace audits, safety meetings and annual training are proven ways to reduce the risk of claims that can ultimately cost a business thousands of dollars.

The most effective risk management programs start with an authentic commitment from management that makes workplace safety a strategic imperative across the organization. This level of commitment requires management to provide the visible leadership in collaboration with employees to develop, implement and continuously improve the company’s workplace safety initiatives. Together, this collaborative team or safety committee should establish an annual safety goal with the associated objectives and workplace safety plan to reach this goal.

Prior to finalizing the risk management program, management should ensure that all company job descriptions include workplace safety responsibilities as it relates to achieving the company’s goal. It’s also important to make these responsibilities a standard component of employee performance reviews, which will clearly demonstrate the program’s importance across the company and include a necessary measure of accountability.

By following a four-step process that targets prevention as the primary means of reducing injury frequency and severity, hotel operators can create their own culture of safety that helps protect their most valuable assets – their employees.

Four Steps to Success:

1. Hazard Assessment & Evaluation: The first step establishes the foundation upon which a company’s injury and illness prevention efforts are based. The objective is to clearly identify opportunities to improve safety in the workplace.

2. Action Planning & Problem Solving: Based on the initial evaluation, an action plan should be developed that addresses workplace procedures.

3. Implementation: With the action plan in place, it’s time to engage employees in the process, instill accountability across the organization and implement an effective safety improvement plan.

4. Recordkeeping & Documentation: Diligent recordkeeping and documentation are important aspects of ensuring the successful administration of a comprehensive workplace safety program. Not only does it facilitate accountability and effective business management, it also documents the company’s results for possible OSHA inspections or insurance audits.

As we plan and prepare to take on 2011, the hospitality industry is seeing some positive market trends, including improved RevPAR metrics. Yet many hotel operators remain uncertain about how various new legislative policies concerning healthcare and taxes will affect their cost structures in the new year. Regardless of the rate of economic recovery or pending legislative policy, hotel operators should continue to 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 hotel operators from taking on new expenses in a time of economic uncertainty.

Questions Hotel Operators Need to Ask about Workers’ Compensation Coverage:

• What accident prevention or other value-added services do I receive from my carrier with my workers’ compensation insurance coverage?
• Does my workers' compensation carrier have sufficient experience in my industry?
• Does my carrier offer workplace safety, accident investigation and fraud prevention tools to easily implement in my business?
• Does my carrier offer access to an online safety library that I can use to build my own safety program?
• Is my carrier financially strong and dedicated to remaining in my state's insurance marketplace?
• Can I get a flexible payment plan from my workers' compensation carrier?
• How fairly and efficiently does my workers' compensation insurance carrier handle claims?
• Does my carrier offer a medical provider network that can help me manage the medical costs associated with an injured worker's claim?
• Does my workers' compensation insurer have multi-state capabilities to service my growing business?

Top five goals of promoting safety:

1. Bring safety out of the back room and into the boardroom
2. Change employee health and safety from reactive to proactive by establishing a culture of workplace safety
3. Implement safety as an enterprise value, not just a cost center
4. Use objective tools to quantify results
5. Compete successfully with limited budget dollars

T. Hale Johnston has held executive and senior executive positions for over 15 years within the specialized field of workers’ compensation. Currently, Mr. Johnston has been Senior Vice President, Regional Manager, Western Region since July 2010; prior to that he served as Senior Vice President, Regional Manager, Pacific Region since April 2006. He is responsible for management, profit and growth of traditional market business in the Western Region. Prior to joining EMPLOYERS®, Mr. Johnston was Vice President of Meadowbrook Insurance Group from December 2002 to November 2005 and President and Chief Operating Officer of Dodson Group from March 2001 to December 2002. Mr. Johnston can be contacted at to come or to come Extended Bio...

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