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A ten-step strategy for loss prevention.

FOR EVERY BUSINESS, WORKERS' COMpensation costs become an enormous burden. In fact, with more than $30 billion spent every year on workers' compensation, these costs make up most corporate insurance dollar outlays. Many companies are desperately searching for ways to ease this burden, but few have succeeded in their quest.

One company that has succeeded is Chesebrough-Ponds, which initiated a loss prevention safety strategy that increased corporate value and reduced workers' compensation costs by more than 90 percentall in just three years. Unilever acquired Chesebrough-Ponds in 1987 and diverted some of the divisions. However, the loss prevention strategies described here are still being pursued successfully by these business units.

The company had strong impetus to initiate this strategy-over a threeyear period ChesebroughPonds workers' compensation costs rose from less than $3 million to more than $10 million. Consultants predicted that in another year the corporation would need to allocate $18.5 million to divisions to cover these expenses.

The second driving force was the company's desire to improve profitability. ChesebroughPonds had an effective tax rate of 30 percent to 35 percent and more than $100 million in corporate profits. Sales were responsible for about 7 percent of total profits. Management predicted that by reducing the projected $18.5 million in workers' compensation costs to a more reasonable $3 million to $5 million, about $10 million, or 10 percent, could be added to profits and stockholder dividends.

In order to achieve the same result in a different way, Chesebrough-Ponds would have needed to buy a company comparable in quality to the Chesebrough-Pond mix of businesses with sales of more than $200 million. Management determined that it was better for Chesebrough-Ponds to spend a few million dollars to stop the excessive losses, while maintaining the same profits and a better return on stockholder equity, than to buy a whole new company.

Chesebrough-Ponds was fortunate to have the foundations of a fundamentally sound safety program in place. The plan included personnel protective equipment, rules, safety committees, accident investigations, and a smattering of incentive programs. Over an eight-year period, the company also developed a safety procedures manual. A corporate safety committee, made up primarily of business manufacturing heads, directed the manual's development. Management also knew that most losses originated from two companies in two states-G.H. Bass, a shoe company in Maine, and Health-Tex, a children's clothing company in Rhode Island.

Knowing where the problems were and having a good safety program were not enough. The company had to develop a strategic plan for loss prevention. The plan involved hiring about 15 people-a team of key executives, consultants, and line and staff managers-while committing almost $3 million during the 1984 fiscal year to its success. Some of the money was devoted to capital changes to workstations and new software to better measure and manage cases, while the rest was devoted to numerous one-time expenses. Fewer than half of these expenses were recurring, and some could be eliminated entirely when the situation was under control.

Once the team was in place, ChesebroughPonds was on its way to implementing a fullfeatured loss prevention plan. In less than three years, the company cut workers' compensation costs to less than $5 million per year. To get to that point, however, Chesebrough-Ponds followed a 10-step strategic blueprint:

Hire a claims manager. Only a handful of corporations have in-house claims managers. These companies tend to be enlightened selfinsureds with very large claim volumes. Because workers' compensation is loss-sensitive, an outside claims examiner will pay claims with overhead added. A companyemployed claims manager, however, can save a business up to $10 million per year. There were times when the new Chesebrough-Ponds claims manager saved the company his salary's worth on a single case, and he paid for his own position at least ten times over each year.

Develop an in-house status report Claims status reports from insurance companies are designed to be used by their underwriters. They are somewhat helpful, but they usually do not give all of the information needed to manage claims.

Chesebrough-Ponds wrote its own software to translate the claims status reports used by its numerous insurers. The company received the reports on tape and converted them into one format.' The reports then were organized to help Chesebrough-Ponds facilitate claims control.

The status reports allowed the company to look at the entire history of an individual daim, or any month or months required. It ' could print all claims with reserves decreased or, more importantly, those with reserves increased during a particular time period. Reports for division heads and plants were made user-friendly by avoiding insurance company and medical jargon.

Improve site conditions. Ergonomics is becoming increasingly popular. Most practitioners, however, take too much of an academic approach and fail to integrate ergonomics with other cost-abatement activities. The result is costly and time consuming.

Chesebrough-Ponds surveyed working conditions and jobs, but did not complete extensive studies. Instead it employed a "quick fix" solution that identified the major ergonomics offenders and fixed them on-site. Simple footrests, tilted workstations, adjustable work platforms, and minor tool adaptations were among the most successful quick fixes. The company achieved 90 percent performance improvement for 10 percent of the cost in 5 percent of the time.

Without proper employee and supervisor indoctrination, however, these changes would not have worked. Employees will not use new devices or techniques unless they understand the fundamentals behind the change.

Chesebrough-Ponds devoted time to explaining the actions the company was taking, the components of the program, the role that employees would play and how both employees and the company would benefit. Training was a team effort involving union-supported videotapes, posters, and small and large meetings. Close cooperation with line management helped reflect progressive thinking. When Chesebrough-Ponds workers voiced comments and complaints, management monitored the situations and reported back with results. In addition to physical changes to the workplace, the company introduced behavioral techniques to reduce stress, such as training workers to modify their sitting positions or to avoid unnecessary reaching.

Recruit better legal representation. Despite protests from Chesebrough-Ponds' insurers, broker, and even its own risk manager and treasurer, the company hired the most successful and aggressive attorney it could find. The attorney visited the plant, communicated with management regularly, and was well prepared for union arbitration hearings. It is key that company executives attend hearings because their presence signals to the referee or judge that company executives are concerned, and it inhibits creative storytelling by the plaintiff.

In addition, the company held regular strategy sessions with its attorney, which helped to produce ideas such as videotapes on how to simplify job s previously labeled as being too hard, and job searches to demonstrate that positions were available for people with certain physical restrictions.

Improve diagnosis and treatment. Chesebrough-Ponds hired a corporate medical director even though most of its losses were soft-tissue injuries resulting from repetitivetask stress. These injuries make up a majority of all work-related injuries and usually are the most difficult to resolve. In addition, soft-tissue injuries are frequently misdiagnosed and almost always improperly treated. If symptoms reappear even after surgery, the employee is often declared disabled. The real cause may go unaddressed, and the cost in all respects is enormous.

Investigating the problem of misdiagnosis, Chesebrough-Ponds' executive team hired a consultant to detail histories on three typical cases of ordinary strain-type injury. In every case, workers were permanently and totally disabled because of mismanagement and misdiagnosis. These cases could have been resolved in a matter of weeks with proper diagnosis, care and treatment.

When graphically illustrated to Chesebrough-Ponds management, these cases showed what a lack of attention to loss prevention had caused, and how the company had unwittingly participated in the destruction of many lives and even whole families. As a result, together with the company's medical director, Chesebrough-Ponds used a board-certified occupational physician, a chiropractic consultant, and physical therapists to set up exercise and physical therapy programs for employee rehabilitation.

Provide alternate work. Recognizing that it is better for employees to work a little than not at all, Chesebrough-Ponds also designed a return-to-work program. A program such as this is geared to gradually readjust previously disabled workers to the demands of their regular jobs. Responsibilities are tailored to the injured employee' physical restrictions.

Yet one obstacles appears to be that many managers, who are most instrumental to the success of such a program, are not sold on the idea of alternate work. However, ChesebroughPonds persuaded supervisors that their longterm interests would best be served by constructive involvement in the "alternate work" program. The company taught supervisors everything from how injuries occur, to what is needed to resolve them, to how to deal with fellow employees upset over seeming inequality in the delegation of less work to previously disabled workers.

Involve employees. Employees were reluctant to go for diagnosis, treatment, or therapy on holidays or break time-a clear indication that their attitude was: "The company broke it, the company can fix it on its time." If the company could not instigate employee participation in its loss prevention program, it would not only be difficult to avoid recurring injuries, but it would also be impossible to get people healthier and back to work.

To combat this problem, ChesebroughPonds developed a communications program entitled "It's Your Body." The company also helped employees feel good about themselves by comparing them to successful professional athletes. The campaign suggested that, to prolong their work careers, employees practice some of the same warm-up and strength-building techniques used by athletes. The program also illustrated how stress, both physical and psychological, played a role in disabling injuries. The company also offered exercises that were custom designed for specific jobs.

Provide rehabilitation. ChesebroughPonds also went into the rehabilitation business. The company set up a program and management mind-set to react immediately to employee complaints of work-related injuries or illness. The program included a process of employee assistance, work adjustment, precise diagnosis and treatment.

Chesebrough-Ponds supervisors were taught to respond positively to the first complaint of pain or discomfort from an employee. They then adjust work, reduce hours, provide job rotation, or employ therapy accordingly. Generally, management was taught to listen a lot more, a lot sooner.

Improve employee selection and placement. As the company analyzed its failures, management recognized that in many cases the corporation set itself up for failure. For example, employees who had undergone surgery for bilateral carpal tunnel syndrome had illogically been placed in upper extremityspecific jobs that required a lot of force and repetition. In another case, Chesebrough-Ponds placed a person with a prosthetic device on her leg in a job that required standing. The movement on the job caused an ulcerated stump that required resection surgery costing almost $100,000. The National Institute for Occupational Safety and Health (NIOSH) provides effective testing processes for employee placement, which can be used as guidelines to help the company program. Institute better management controls. Chesebrough-Ponds instituted better measurement processes, such as monthly case reviews, and key indicator reviews at division and corporate staff meetings. Because most of the company's losses involved musculoskeletal injuries, Chesebrough-Ponds enhanced its accident investigation form with a "Strain Supplement" that was more appropriate for soft-tissue injuries.

The company also kept careful track of job and workstation modifications to ensure that the divisions maintained a low injury level. Finally, the company closely tracked cases involving employees being treated by physicians with high failure rates and those using attorneys associated with failed ChesebroughPonds compensation cases.

The failure of a company to protect its workers, property, or the environment can result in catastrophic events, iong-term health exposures, legal suits, and regulatory fines. Not only are employee and community relations affected, but also company profits, market value and stock. A loss-prevention strategy is one method to help guarantee corporate and employee safety. This type of investment is a lot less than the potential cost of compensation without a plan. Can you afford not to have one?
COPYRIGHT 1992 Risk Management Society Publishing, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Chesebrough-Ponds
Author:Eckenfelder, Donald J.
Publication:Risk Management
Date:May 1, 1992
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