Grass roots cost-cutting.

When Hoffmann-La Roche discovered short-term workers' compensation injuries were driving up costs, the company asked employees, including a few skeptics, to devise a solution.

In 1992, workers' compensation costs at Hoffmann-La Roche Inc., a pharmaceutical company based in Nutley, N.J., were nearly $5 million. The Nutley site alone was responsible for $2 million of the total, with two-thirds coming from chemical operations, facility maintenance and pharmaceutical operations. On closer scrutiny, Roche discovered that most workers' compensation pay-outs stemmed from minor on-the-job accidents. Sprains and strains, not major accidents, were driving up costs.

But Roche's ability to contain the direct medical and insurance costs of short-term injuries was the tip of the workers' compensation iceberg. Indirect costs also had to be contained. There was the cost of sick day pay and compensation for replacements. Replacing workers with an occupational injury, even for a short time, required record-keeping, administration, and, in many instances, on-the-job training. Without a comprehensive system to manage these demands, productivity loss was inevitable. According to the National Council on Compensation Insurance, every direct dollar loss can add up to $2 to $4 in indirect costs.

Less measurable, but nevertheless an important concern, was employee morale. Roche employees who lost time because of short-term job injuries weren't a happy lot. Most had expectations that, at best, were met only occasionally. Employees wanted information. They wanted help, and for many, some sense of concern from their bosses. From the managers' perspective, the task of finding, training, and tracking replacements took time and sapped their energy.

Roche's immediate objective was to increase the percentage of injured employees in the pilot group who could resume work in one to four days. Before the company redesigned the system, 72 percent of injured employees in these three divisions returned to work within four days. Since establishing the system within this pilot group in 1994, that number hasn't fallen below 86.6 percent, and Roche has reduced its overall costs by 50 percent. In addition, because of increased safety awareness, the number of accidents decreased significantly. In 1994, there were 101 incidents that necessitated employee job restrictions. In 1995, that figure was only 30.

STAYING IN THE LOOP

Roche has reduced workers' compensation costs by establishing a return-to-work program as part of a new system for managing short-term cases of occupational injury. Originally a pilot program within three divisions, the system has now been rolled out to the entire Nutley site and is operating with great success. The system effectively links four key groups of people: the case manager; the employee; the supervisor and management; and the staff of Employee Health Services, the company's on-site medical facility.

The case manager's job is a new position with responsibility for coordinating the workers' compensation process, managing a job bank of alternative meaningful work for the employee within the company, and balancing the sometimes divergent needs of the company and its employees. In a sense, the case manager "owns" the return-to-work process; any breakdowns in the system demand her attention. She must also keep all parties - Employee Health Services staff, employee and supervisor - informed about an employee's status in the return-to-work program.

Managers and supervisors are now expected to stay in the communication loop when a member of their team is injured on the job. If an employee sustains an on-the-job injury that's beyond a simple bandage, supervisors are expected to immediately accompany the person to Employee Health Services. When this isn't feasible, the supervisor should at least report to Employee Health Services while the employee is there. If an employee is sent home, supervisors are expected to call at least once a week to see how he or she is doing.

While these expectations may not sound earth-shattering, they set a new standard of involvement for the company. Before the return-to-work system was established, no organizational expectation existed for a supervisor's role when a worker was injured on the job. Simply knowing their supervisors would call to see how they were doing made a tremendous difference to injured employees and their morale. In the past, injured employees often felt management had forgotten them.

Here's what the return-to-work process looks like, step by step. First, an employee injured on the job reports immediately to Employee Health Services, which notifies the case manager and supervisor. If appropriate, the case manager, employee, employee's supervisor and doctor discuss the possibility of the employee performing alternative duties until he or she is ready to assume regular duties again. This program is strictly voluntary; the decision to accept or refuse temporary work is the employee's. Regardless of where injured employees are working, they receive the same salary from their regular division. While on alternative duty, the employee receives regular visits from the case manager, who in turn updates the employee's supervisor on his or her recovery.

All temporary alternative jobs involve real work, such as bench-work calibration; assistant maintenance planning; inspecting, packaging and checking batch cards; doing clerical work for the travel department; working in the mailroom; reading meters; and providing technical support and documentation. The case manager regularly updates the job banks through her ongoing interaction with supervisors and managers.

The on-site Employee Health Services area upgraded its administrative system by shifting from paper and pencil to networked computers for its medical record-keeping, a significant improvement, considering the number of employees who visit EHS each year. In 1994, for example, EHS had 29,000 employee visits, 14 percent of which were occupational. Although many of the visits were follow-ups with the same employees, all visits before 1994 had to be recorded and updated manually on full-sized record cards. Switching to computers certainly streamlined this aspect of their work.

The return-to-work program also affected the way EHS handles cases of short-term occupational injury. Before the new system, employees with strains or sprains could expect an EHS physician to examine them, complete a form indicating what they couldn't do on the job and then send them home for an unspecified period of time. Today, the physician also considers what tasks employees are capable of doing while recuperating. The old form has been replaced by a new "functional capability form."

GETTING TO KNOW YOU

EHS physicians, who had never had an opportunity to really know people in the context of their jobs, now have a much deeper understanding. The doctors learned about workers' compensation through the educational efforts of the risk management department, in collaboration with Roche's broker and insurer.

And they got a first-hand look at working conditions by touring the plant, laboratories and other work sites. Accompanied by the case manager, the three full-time and two part-time doctors visited the entire Nutley site one at a time, spent time talking with supervisors and employees and watched people doing their actual work. When they were done, the job of operating a hydraulic lift, maintaining a plant with four flights of ladder-like stairs, or working a tablet and capsule line was no longer an abstraction. This helped the doctors make more informed recommendations about when and if employees should return to work, job restrictions and the possibility of alternative work.

Most important, when Roche designed the return-to-work plan, it didn't follow the "we know best, so let's just fix the problem" approach. Instead, senior management, led by the company's treasurer, commissioned a team of first-line supervisors to find the solution. The team met every criteria for success, on time and within budget. Here are some highlights of Roche's "grass roots" approach.

First, several members of senior management of the three divisions came on board as part of the steering committee, which also included managers in the risk management, safety and Employee Health Services area. The committee selected nine supervisors - three each from pharmaceutical operations, chemical operations and facilities maintenance - as members of the design team and gave it three months to design the return-to-work system and another month to get the pilot program off the ground. The design team had its own consultant to help facilitate meetings, coach the team and its leader and provide additional training, as necessary.

The first phase in the process was probably the most critical: identifying the project specifications; selecting the design team; specifying how the steering committee and design team would interact and communicate; preparing employees to work as a team and sink their teeth into the project; and finalizing the initiative process.

In selecting people for the design team, the steering committee had some unique criteria. On the one hand, the committee wanted individuals who were savvy, knew "how things get done around here" and would have the energy to meet the project specifications. But with an eye on the ultimate goal - to implement a new system, not just plan it - the steering committee decided to appoint some "hard-to-sell" people who could help the team overcome resistance once the new system was ready.

The premise was that organizations resist change. Getting the "rah-rah" employees on board is fairly easy. But convincing employees who "have seen it all" and are somewhat cynical about change to solve an important problem - well, that's not so easy but it's a good way to test the strength of the plan before rolling it out to the entire company.

PROVE IT TO ME

Although the "prove it to me" attitude of several team members was often frustrating and time-consuming, overall it forced the team to be very clear about its decisions. For example, during three weeks of debate on whether or not and to what degree supervisors should be involved when an employee gets injured on the job, some of the more easygoing team members were willing to go along with the others and readily agreed that supervisors should always accompany employees to Employee Health Services.

But the "prove it" members asked many "what if" questions and really helped the team find a flexible solution to the problem. The team decided that if the supervisor wasn't around or was unavailable, the case manager should be authorized to ask the supervisor's manager to accompany the employee, or even the person directly above the manager.

Having this type of in-depth discussion on the ins and outs of a particular solution was important, since the team had to present the plan to the Pharmaceutical Leadership Board (an internal body made up of the president and senior executives of the pharmaceutical business area) and get it accepted.

During this time, the steering committee decided to resist jumping in with their own solutions, since they'd empowered the design team to solve the problem. Instead they provided information (such as statistics on safety and data from Employee Health Services, as well as suggestions for companies to benchmark) and opened doors when asked. They also gave feedback and guidance at monthly project meetings with the team.

Next, the team focused on understanding what happens when an employee is injured on the job, and analyzing the causes of the problems. The risk management department provided background information, and the team members also talked with the head of Employee Health Services. Little by little, a pattern emerged: When an injury occurred, there was no standard process, other than an employee reporting to Employee Health Services.

The team also benchmarked AlliedSignal, which had already designed and established its own return-to-work system. The team members' visit to the company was eye-opening. They discovered Allied was using a similar flow chart to the one they'd just developed, so they knew it could work at Roche, too. And for the first time, they all saw the value of having a case manager coordinate the system. They saw how AlliedSignal had organized its system and, once it was piloted, how it prepared employees for the change.

In general, one of the biggest challenges for the team was developing the communication skills to complete the project, get approval from the steering committee and obtain final buy-in from the Pharmaceutical Leadership Board. When the team members were tapped for the project, some of their initial reactions ranged from "What do they want me to do about it?" to "I can fix this thing today. I'll tell you what's wrong!" When they started working together, these feelings had to be tempered with some hard facts. They could spend endless meeting time bellyaching about the issues, but the three-month deadline - not a lot of time to redesign the system and present it for approval - was non-negotiable.

Therefore, whenever anger, skepticism or wheel-spinning took hold, reminding other team members of the impending deadlines quickly brought everyone back to the business of solving the problem. Team members also received "just-in-time training" to learn to gather, process, analyze and integrate information. Instead of undergoing a one- to three-day training seminar at the start of the project, the team members received training in increments, as they needed it. That helped them better retain and apply what they learned.

STAMPING OUT THE MUSHROOM METHOD

Communication between the design team and steering committee was never taken for granted. The two groups met regularly to review an updated project plan. Had the design team members been left to their own devices, they probably would have kept the organization in the dark until the three months were up. The team didn't readily see any advantage to keeping peers and managers up-to-date. This perspective seemed part of the ambivalence some members brought to their participation in the project.

But over time, when the team members really began to work well together, they developed an appreciation of communicating with their peers and with management. As the project moved along, team members would report to one another whom they'd spoken to and what their reactions had been. Reactions were always very positive, which encouraged them even more. The team members needed to learn coalition building, and ultimately they did it well. In both informal and formal ways, they helped prepare the organization for the return-to-work initiative.

The team and senior management designed a two-pronged rollout for managers and employees. First, all managers in the three business areas participated in the training program.

Then employees learned about the new system through a series of company meetings, a video and printed materials. Today, all new employees at Hoffmann-La Roche learn about the return-to-work program at orientation.

The value of Roche's efforts is more than just the dollars saved on workers' compensation costs. The redesigned system for handling on-the-job injuries also addressed the soft issues that were eating away at employee morale. And this initiative drove decision-making down to the shop floor level. That sparked some real learning, both for the organization and the design team members, who now understand how to apply the skills they learned to help them control costs in other business processes. That knowledge can be tapped again and again to resolve other problems that will surely come along.

Dr. Hennrich is vice president and treasurer of Hoffmann-La Roche Inc. in Nutley, N.J. You can reach him at [phone]. Ms. Deitchman is a member of The Hudson Group, the consulting firm that guided the project. She can be reached at [phone].