How should health & safety performance be incentivised?

Should health and safety performance be incentivised by a bonus?

I recently read a thought provoking book ’Risky Rewards’ by Andrew Hopkins and Sarah Maslen from The Australian National University. The book asks the question of how companies incentivise health and safety performance and explores the impact this has. The basis of the book is focused on evidence gathered from a study looking at the workings of 11 large and complex organisations in hazardous environments.

To be clear, the question posed is not ‘should health and safety professionals in these businesses receive a bonus?’ but examines how companywide health and safety performance is incentivised as part of an incentive package across the business. A fascinating question.

The book examines some fundamental challenges companies face when they have attempted to incentivise health and safety with a financial bonus. Central to this is the often, long term nature of particularly process safety failures against the often short term nature of business time horizons as demanded by the City and bonuses based on an annual basis. One solution discussed was to withhold a portion of the bonus, for the most senior individuals within a business, for a number of years and only pay this out if health and safety goals are reached over this time – however it seems unlikely this could be workable in the modern workplace.

The book also looks at the unintended consequences putting a bonus figure on health and safety can have. Namely, it points to evidence from the study that suggests numbers are ‘fudged’ and massaged to ensure health and safety performance sits within the bonus target range and hence bonuses paid. The book suggests that bonus targets need to have been carefully considered by organisations to try and avoid this happening, however, ultimately this is very tricky to get right.

Another element which is examined is the challenge of linking the overall performance of a large, global organisation to an individual who feels powerless to have a meaningful effect on this. This is particularly relevant for those middle management and below who are focused on the day to day operations rather than strategy. On the one hand a bonus set in this way evokes images of a whole complex organisation pulling together to achieve a common goal. However, the reality suggests otherwise and that this has little impact on an individual’s attitude towards health and safety as they feel as if they have such a small impact.

One really interesting element which came out of the study and offers some food for thought was too look at who in the business was incentivised to drive health and safety performance. One business decided to specifically focus on the bonus agreements of the finance and commercial managers of an organisation and include the health and safety element in their bonus. This was slightly unusual as in the business in question, it was typically those closer to ‘the coal face’ who had traditionally had this element as part of their bonus. The outcome saw the finance and commercial team act as intended by those setting the bonus and they indeed had a major focus on safety. This had the ripple effect throughout the business with the quote from one of the study participants summing this up –

‘One of the things I’ve learnt is that if a finance person says that safety comes first, people believe it, because their view is that finance controls the purse strings and if finance says that safety comes first then it must be true.’

Ultimately the book casts doubt over the impact on health and safety performance of many of the current bonus structures. They also stress the need for organisations to think very carefully about what they are incentivising, if anything, when putting these in place.

James Irwin is a Director at Irwin & Colton, a specialist health and safety recruitment company. Contact James on james.irwin@irwinandcolton.com or 01923 432 632.

Posted on Tuesday Jul 7