Because of a belief that its workforce is its No. 1 advantage,Kennametal Inc. refuses to compromise when it comes to protectingthem.

The company, which believes employees should go home in the samecondition in which they arrived, has initiated a “100% Safe”program with the goal of zero injuries to workers, says Michael P.Murphy, manager of global property and casualty insurance withKennametal, headquartered in Latrobe, Pa., where it was founded in1938.

Kennametal, a Fortune 1000company with 11,000 employees and $2.4 billion in sales,manufactures metal-product solutions for a wide range ofindustries, including aerospace, transportation, mining andconstruction.

The company's business culture and strategic decision making,Murphy explains, are founded upon six core values: People,Environment, Integrity, Innovation, Performance and Customers.

Kennametal's commitment to its people—the first of the sixvalues—is the foundation upon which its 100% Safe program wasbuilt, Murphy says.

He adds that the core values are demonstrated “across thecompany, from the very highest leadership level down throughout theranks,” beginning with CEO Carlos Cardoso, who is integrallyinvolved in the company's Environmental Health and Safetyprogram.

The relentless pursuit to achieve 100% Safe, he says, “hastransformed the company.”

This pursuit, as well as the company's loss prevention, claimshandling and other programs, have earned Kennametal an award in thefifth annual National Underwriter Award for Excellence inWorkers' Compensation Risk Management program, sponsored byNCCI.

AMBITIOUS AIM: CUT COSTS INHALF

In October 2007, Kennametal's risk-management team announced astretch goal of reducing workers' comp costs by 50 percent—from$2.8 million to $1.4 million—by 2010, while enhancing service toemployees. 

The two areas targeted for generating these savings were:

• Enhanced loss prevention.
• Improved claims handling, with claims management separatedfurther by “lost time” and “medical only.”  

The goal was realized—and surpassed—

a year early, by June 30, 2009. 

Significant loss-prevention efforts, coupled with improvedclaims management, resulted in workers' comp costs being reduced by59 percent in a three-year time period (2008-2010). 

Murphy has been able to accomplish all this with “one-and-a-halffull-time employees dedicated to risk management. So that makeshaving effective processes in place critical,” hesays. 

In fact, solid processes and a dedicated team of third-partyexperts helped the company go from 200 open workers' comp claimsdown to 48. Doing this has allowed Murphy to assume additionalresponsibilities “along with continuing to effectively manageworkers' comp costs,” he says.

DIVING INTO THEDETAILS

The initial focus of the cost-reduction initiative was reducinglag time—the time from occurrence of the injury to reporting to thecarrier. 

Lag time was ultimately reduced from about 30 days to 3.72 days.“I'm a firm believer that reducing lag time will help to reduceworkers' comp costs,” Murphy observes.

This was achieved by focusing onthe processes with a general initiative to build speed into theprogram all the way through to resolution.

Building speed into the program “sends a powerful message to theworkforce that there is a strong commitment here to make sure ouremployees are properly taken care of,” he says.

As an added bonus, while a very low percentage of workers' compclaims are fraudulent or questionable in nature, reducing lag time“also serves to send a message in these instances as well,” Murphysays.

The workforce understands that the company “takes this seriouslyand each incident is looked at carefully,” he explains.

Over the last couple of years, he adds, the majority of injurieshave been hand related; and beyond that, slips and falls. A numberof initiatives have been introduced to reduce hand injuries, “andthey have been effective,” he says. 

A large part of the management-based safety process is achecklist for reviewing the work area for hazards and to assurethat the proper protective equipment is worn.

Part of the message to employees is that “certain behaviorswon't be tolerated,” Murphy says. “Anyone who violates a “cardinalrule, defined within the company's policy, is subject todisciplinary action, up to and including termination. So that istaken very seriously.”

When the initial announcement was made about the expectation ofinjury reductions, a culture of accountability and consequences wasestablished, with facilities “feeling the pain for poor performancein the pocketbook,” Murphy notes.

But in addition to the stick, there is also a carrot, andfacilities have learned that keeping injuries down and reducingcosts pays. 

Each facility contributes to the workers' comp costs pool.However, over the last several years, “we've had such goodperformance that at year-end, they have received a reimbursement.Many of our locations received half of what they paid back—that'safter 20 percent reduction a year for the past three years.”

Murphy adds, “We encourage them to celebrate the success.” Themoney also gives the facilities “capital investment for improvementthat makes them more competitive on a global basis.”