Designing for Health and Safety

Christina Sutcliffe, Queen’s IRC Research Associate, chats with Prof. Nick Turner of Queen’s School of Business on the link between organizational design and health and safety

“You can’t direct people into perfection; you can only engage them enough so that they want to do perfect work” —Margaret Wheatley, consultant, author, and President of The Berkana Institute

The truth so aptly expressed by Margaret Wheatley was the crux of it. “It” was the epiphany I experienced in understanding the relationship between organization development and occupational safety, between an organization’s culture and people’s want and commitment to work safely.

Where did employees derive this ‘want’ to do their job well? Years ago sitting in my office on the plant floor where I worked as a health and safety specialist, I was visited by employees who wanted to vent about the company’s vacation policy, or the benefits policy, or the non-existent personal days. In the same visit, they would also show me pictures of their grandchildren, or describe the new recipe they found to cut calories because they did not have the time or the energy to go to the gym after working a physically demanding job.

Clearly most of these discussions were about their desire for a well-balanced life, which employees recognized as being heavily influenced by the quality of their work life. The issues they were most anxious to discuss related to the company’s organizational structure, leadership issues, and employee compensation. Even when health and safety was the focus of discussion, the conversation twisted and turned back towards these umbrella issues.

So why wasn’t I in HR creating ingenuous ways to enhance employee safety through strategic HR initiatives? For one, my thinking had not evolved to allow for the possibilities of integrating organizational strategies to benefit health and safety outcomes. For another, the HR manager was already juggling a varied assortment of portfolios: organization design, compensation management, organizational learning, recruitment, union organizing. To add the complexity of health and safety seemed too cruel.

While I am no longer working in health and safety, I am still interested in these issues. For fresh insights, I turned to Nick Turner, an assistant professor of organizational behaviour at Queen’s School of Business who specializes in the effects of work design and leadership on employee health and safety. Turner’s research suggests that employee commitment to the organization is a key marker of health and safety outcomes.

You talk about organization commitment being generated by “the presence of work characteristics and practices that enable employees to recognize and work toward organizational goals.” Based on your research, what have you found is the relationship between an employee’s commitment to the organization and workplace safety?

The research that Sharon Parker (Australian Graduate School of Management), Carolyn Axtell (University of Sheffield, UK), and I did suggests that if want to enhance compliance with safety rules, one way of doing it is to enhance employee commitment to the organization. Commitment seems to be enhanced through increasing job autonomy, providing supportive supervision, and enabling high quality communication. These work characteristics and practices have both an instrumental effect and a symbolic effect: If I have the freedom to choose the timing and methods of my job, a supervisor that cares about me, and I’m kept in the loop, then my employer had generated opportunity, motivation, and knowledge to help me work effectively towards the important organizational goal of safety. This sends an important message: it says we trust you, care about you, and believe you have the brains to get the job done. This is a very different approach than forcing me to work to safety rules just because they’re rules.

If one way of achieving commitment and therefore better safety outcomes can be achieved by the implementation of, say, team-based structures, what is the biggest factor that can prevent a team-based structure from taking hold throughout the organization?

I can think of at least two. The first is lack of sustained commitment on part of management to continue the effort and to involve employees in the process of redesigning work. It is very easy for companies to start [a team-based structure] because of fad or fashion but then run out of steam, move the project champion to another position in the company, or to ask employees for their ideas and then do nothing with them. At the beginning of any work redesign, many companies are all pumped up about it: they transfer people from different areas in the company to help, and there is a lot of energy in asking the workforce how best to redesign the work. But then as key people are moved into different positions and the priorities of the company change with the wind, there is a lot of process loss. Ideas are forgotten and momentum to change diminishes.

A second reason work redesign often doesn’t take hold is that a lot of the time team-based structures are perceived as ‘old wine in new bottles.’ Employees often say, “We’ve been working in teams for years, and now they [management] are labelling it as such and it’s supposed to take on some new special significant meaning for us.” Making the commitment in the longer term to ensure that a work redesign such as the introduction of self-managing teams is carried out effectively, as well making sure there is some substance to the redesign and not just managerial re-labelling, are both important for sustainable change.

Increasingly HR practitioners are taking on a more important role in the organization’s strategy. What would be your advice be to someone who experiences a stall in a strategy that is designed to enhance employee commitment?

Autonomous and challenging work, the presence of high-quality leadership, and encouraging information sharing are just a few organizational practices that help to establish trust and respect between management and employees. It is not surprising that these same practices also enhance and motivate people to perform better. We believe that the same practices also enhance safety.

There are two stumbling blocks that I see in the way that strategic HRM gets translated into practice is. First, it can seem like an overwhelming amount of work for an HR person to do, and second there’s little appreciation of the importance of consistency among HR practices. Imagine someone taking a strategic HRM course and thinking at the end “I have to implement all of Pfeffer’s high performing practices to get the benefit for my organization?”

One way of overcoming this stumbling block is to not be afraid to tackle change in small chunks. There is absolutely no way that you can build a high performing work system overnight. And remember to be consistent. By this I mean look carefully for the consistency among organizational practices that are used. For example, you can’t implement self-managing teams if you aren’t prepared to train those involved. Imagine the safety implications of having employees with high levels of autonomy, but no up-to-date knowledge of the equipment they are using. You’d be amazed how many companies treat these HR practices like they are independent pieces of some big pre-designed puzzle. At the end of the day, all of the practices need to be sending the same message: we care about you and we want to help you do great work.

Reference:

Pfeffer, J. (1998). The human equation: Building profits by putting people first. Cambridge, MA: Harvard Business School Press

Key Compensation Trends

Is your bonus plan feeling tired and run down? Is it stuck in a rut? If it’s any consolation, your plan is not alone. There appears to be an epidemic of company short-term incentive plans desperately in need of some first aid (and in some cases, major surgery). In this article we explore some of the common bonus plan ailments and how to diagnose them. Then we look at a number of steps you can take, depending on the condition of your plan, to get it back on its feet —or more importantly, back to helping drive and reinforce your business strategy.

Identify the Symptoms: Is Your Bonus Plan Sick?

While there are many different types and designs of short-term bonus plans, or annual incentives (STIPs), the symptoms of an ineffective plan are generally very similar. The signs that your STIP is performing sub-optimally include:

  • Lack of support or challenges from the Board or other key stakeholders;
  • The formula results in a proposed payout that the company cannot afford;
  • Tremendous “push-back” and surprise from employees upon distribution;
  • “Windfall” bonuses and/or “no bonus” situations resulting from environmental factors that the employees could not influence;
  • Perception by employees that bonuses are “just a part of base pay” (i.e. entitlement);
  • Failure of employees to shift their efforts to align with new business strategy;
  • Inordinate focus on a few, but not all, of your key business metrics;
  • Poor performers receiving too much and outstanding performers too little;
  • Employees not understanding the connection between their bonus payout and their individual performance;
  • Multiple or exclusive programs alienating some key groups of employees and/or reinforcing inappropriate hierarchical distinctions.

Diagnose the Severity of the Problem

There are seven key design features which determine, in large part, the potential effectiveness of the bonus plan.

1. Alignment with Business Strategy and Culture

Does your bonus plan support your current business strategy?

  • As obvious as this may seem, it is amazing how often STIPs can be reinforcing an “old message” to employees.

Is the incentive plan viewed as ONE driver of business strategy versus the cure for all organizational evils?

  • Oftentimes, executives believe that all they need to do is implement the incentive plan and business performance will take care of itself. In practice, quite the opposite situation can occur. Employees quickly realize that they are not able to earn their incentive awards because other critical strategies and processes haven’t been designed or implemented. The result can be frustration and deteriorating performance.

Has the culture of the organization been reflected in the STIP design?

  • A company that demonstrates trustworthiness, openness, and respect for employees stands a much better chance of reaping the organizational rewards of an effective incentive plan.

2. Economics of the Plan: Can You Afford It?

Has the plan funding been carefully calibrated?

  • Many incentive plan designers without a solid grounding in finance neglect to do the proper analysis to ensure the design can stand up to rigorous financial tests, such as self-funding. While often incentive plans are not self-funding “out of the gate,” all should aim to be after a certain length of time (usually two to three years)

3. Performance Metrics: Figuring Out What to Measure

There are many considerations when it comes to selecting performance measures for your plan. Are the following considerations reflected in the design of your program?

  • The use of a “balanced” group of performance measures: Regardless of whether a company uses a “balanced scorecard” or a more formula-based approach, it is critical that the incentive plan incorporate a variety of measures. Measures which encourage short-term profit (e.g., increased production volume) need to be “balanced” with those that ensure future value is simultaneously created (e.g., property rationalization).
  • Cascaded performance measures: Corporate goals are aligned to business unit goals, which are then linked to team goals, and are finally linked to individual goals. This way, employees at all levels of the organization are able to see how their job and their performance help to drive business strategy.
  • “Line of sight” Employees should be able to have some impact on the performance measures used in the bonus plan. While simplicity in design helps to illustrate “line of sight,” rather than targeting the bonus plan measures “down” to the lowest level of understanding, employees should be educated in the performance metrics and shown how their role can have an influence on the outcomes.

4. Formula/Scorecard: Keep it Simple

How complex is your current bonus formula?

  • The rule of thumb is to keep the plan design as simple as possible. Typically, everyone involved in the initial design process starts out with the objective to keep it simple. However, as the design process unfolds and details about the business strategy and objectives come to light, a desire to capture everything the business needs to accomplish emerges.
  • Using the balanced scorecard methodology as the foundation for incentive plan design can facilitate this process. The strategy map (or “story”) makes the linkages between performance measures much more clear to employees. Then, the incentive plan isn’t merely a compilation of measures, but rather another powerful vehicle for communicating business strategy.

Is there a high level of award differentiation between strong and weak performers?

  • Many managers continue to be uncomfortable with the concept of differentiating pay based on performance. Typically, this is because managers are not equipped with the skills or training required to coach an employee through the performance improvement process.
  • This situation is often exacerbated by the incentive plan design as many plans do not provide sufficient reward differentiation for superior versus poor performers. Even when incentive plans do incorporate the ability to differentiate rewards, many managers gravitate to the middle when assessing individual and/or team performance.
  • Research has shown that this reluctance to differentiate rewards based on performance can have an extremely negative impact on the ultimate success of the incentive plan.

5. Participation

Plan participation is an important consideration. Companies have been pushing their bonus plan participation further down into the organization. You will need to examine marketplace practices as well as organizational culture to determine whether your bonus plan participation or eligibility is appropriate. The degree of risk that employees can tolerate or desire is an important consideration when determining the organizational levels to include in the plan.

6. Leadership Commitment: Walk the Talk

Have your leaders “bought in” to the bonus plan measures and objectives?

  • Often, bonus plans end up being driven by the Human Resources department (or blamed on HR when they are not working). In order to utilize the bonus plan as a strategic business tool, it must be universally seen as ‘owned and valued’ by the leaders of the organization.

7. Communication and On-going Monitoring: Transparency is Important

Did employees receive communication before, during and after the incentive plan was implemented?

  • Many organizations employ a “black-box” approach to incentive plan design and then wonder why employees are not enthusiastic about the program when it is rolled out. By opening up the bonus plan process (e.g., measures, distribution process, link to individual performance) to employees, trust and support is built for the program.
  • Even if the STIP was not well communicated initially, there is still an opportunity to enhance the effectiveness of the program by establishing a communication process for tracking progress or illustrating the link to the business strategy. employees 0.6% shares financial information with employees 0.5%

Were challenges associated with gathering, tracking, and reporting potential performance measures recognized and addressed early in the implementation process?

  • Finance and systems people should be engaged early in the project so that they had sufficient time to put the necessary processes in place. Otherwise, the result may be disappointment, frustration, and failure of the plan rollout.

Prescribe a Treatment Plan Rx

Once you have completed your diagnosis and have identified the incentive plan design features that require attention, it is time to put the treatment plan in place. An effective design process encompasses four key features:

1. Use a bonus review committee comprised of managers and employees (where appropriate). This committee should:

  • Collect input on the effectiveness of the current program;
  • Retest the role of the bonus plan within the Total Compensation Strategy;
  • Review market data for competitive positioning;
  • Articulate how the incentive plan is changing to provide alignment with the business strategy;
  • Generate interest and excitement for the revised incentive plan;
  • Define the plan’s guiding principles;
  • Oversee and guide analysis, redesign and implementation; and
  • Review the ongoing effectiveness of the revised plan.

2. Involve employees in the process

Typically, one of the most important objectives in revising an incentive plan is to realign employee behaviour. Conducting employee focus groups as part of the redesign process can accomplish a number of important objectives, including gathering insight on employees’ understanding of business strategy and objectives, and gauging the likely impact of the updated incentive plan on employee behaviour and performance.

3. Develop a realistic roadmap for redesign and implementation of the revised incentive plan

The roadmap should identify the sequence of the redesign and implementation activities. There are a number of “moving parts” in any incentive plan design project, and a detailed project plan is critical to successful project completion.

4. Avoid getting “sent back to the drawing board”

Check in frequently with the group that will ultimately be responsible for approving the revised plan design. Too often, the redesign team proceeds on the assumption that the executive team and/or Board is “on the same page,” only to find out at the eleventh hour that there is disagreement on something as fundamental as the plan’s guiding principles.

Post-Mortem: How to Avoid a DaVinci’s Inquest

If your plan is exhibiting some of the symptoms outlined above, it is critically important to diagnose the severity of the situation. Whether your plan needs only a band-aid or a multiple bypass, it should be addressed as soon as possible. Overlooking bonus plan issues will not only minimize the return on your compensation investment but, more importantly, can work against the attainment of your business goals. Your plan may be reinforcing, or even rewarding, business efforts that are counter to your new business strategy and cultural change efforts. So “scrub up” and begin to diagnose your bonus plan to ensure that it operates as a strategic tool as a well-designed bonus plan should.

Jackie Goldman is senior consultant with Buck Consultants in Toronto. Jackie specializes in the design and implementation of reward strategies and programs.

Arden Dalik is a founding partner of RainTree Consulting in Calgary. Her areas of expertise include executive compensation, compensation strategy and design, and competency-based system development.

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