With one in five of its employees being injured on the job and workers' compensation for nearly 5,000 claims accounting for a whopping 65 percent of the company's record-high cost of risk of $117 million in 2002, a new executive management team at ServiceMaster–facing a "significant moral and financial imperative," according to its risk manager–realized there was no choice but to launch a cultural revolution, backed by a multifaceted loss control and safety initiative.
"The light bulb finally went off for us as we looked at how we were living the foundation of our company objectives," said David Hopps, vice president of risk management operations, environment, health and safety. "How could we say we were a top-notch, preferred service employer if that many of our employees were getting injured on the job?"
The new emphasis on risk management has paid off, with total cost of risk down 41 percent since 2003 and the frequency of work-related claims down by one-third.
"We hit the trifecta," was how one regional vice president, Roger Christenson, put it in speaking to employees earlier this year–citing vast improvements in workers' comp frequency, severity and overall management of claims.
The impact of ServiceMaster's loss control program on employee health and safety, as well as the bottom line result, earned the company the coveted title of "2008 Champion" in the second annual National Underwriter Award For Excellence In Workers' Compensation Risk Management.
ServiceMaster and its brokers got the ball rolling with an assessment of the firm's structure, programs and systems from both a claims and safety perspective.
Recognizing the overwhelming challenges ahead of them, the executive team engaged stakeholders throughout the enterprise to develop a comprehensive plan implementing the recommendations prompted by the risk audit.
The results helped create a needed sense of urgency, leading to significant changes within the organization, explained Mr. Hopps, who was brought into the Memphis, Tenn.-based company in October 2002 as part of ServiceMaster's loss control initiative–which included elevating the risk manager position to a vice presidential level, as well as significantly expanding the risk management and safety department.
Beyond cutting loss costs, however, Mr. Hopps explained that taking better care of employees–"your most prized asset"–serves many objectives, not the least of which is lifting employee morale.
Founded as a moth-proofing company in 1929 in Chicago and incorporated in 1947, ServiceMaster has since matured into a mammoth organization generating $3.6 billion in revenue, with about 1,000 branches, 35,000 employees and a commercial fleet of 20,000 vehicles. The company's business units include:
o Terminix–handling pest control.
o InStar Services Group–specializing in disaster recovery and property restoration.
o TruGreen LawnCare–a lawn and landscaping outfit.
o Merry Maids–providing maid service.
o American Home Shield–a provider of home warranty plans.
o ServiceMaster Clean–a residential cleaning and restoration service.
o Furniture Medic–an on-site furniture restoration and repair service.
The company serves some 10.5 million homes and businesses each year through a network of more than 5,500 company-owned locations and franchised licensees.
Once the company was committed to change and Mr. Hopps was on board as head of risk management, positive developments were set in motion.
One of the most critical elements to be addressed was the company's basic attitude and approach toward safety, according to Mr. Hopps, relating another message given to employees by Mr. Christenson.
"He said [workers' comp risk management] not only improved the bottom line, but that the culture is now changed," reported Mr. Hopps. "He said the most significant change cannot be defined in numbers and metrics, but in the shared philosophy–that each and every day employees should leave the branch in the same condition as when they arrived."
What this means, according to Mr. Hopps, is that a manager's obligation is to go beyond just the bottom line–they need to "treat employees with the dignity and respect they deserve, and every single one of them that showed up for work that morning should return home safely."
To make sure this happens, he said, the company has adopted a "captain of the ship" philosophy, stating that any employer or driver has the right to say about a job site: "I don't feel safe, I am not going to do this," in any situation, without retribution.
The majority of the company's employees work at customer locations, where they have little control over the working environment. This presents unique challenges, as many of the accidents that take place are slips and falls on level ground, as well as falls from heights. These could result from:
o Stepping in a hole on a lawn.
o Slipping on a wet floor when cleaning a home.
o Falling after climbing a tree to be trimmed.
o Slipping or falling when climbing into a crawl space, attic or onto a roof.
What's more, with about 20,000 vehicles, a number of injuries were the result of collisions on the road.
In addition, because many of the jobs require manual labor and the use of heavy pieces of equipment, other injuries were occurring from sprains and strains.
"We've spent a lot of time on all of these safety issues–to prevent and to mitigate," Mr. Hopps noted.
The company developed a "Safety First Culture," requiring local managers to adopt and own safety and claims processes, and established a system to measure progress.
Since 2003, a number of accountability systems and incentive programs have been initiated. They include:
o Annual and multiyear safety improvement goals, which are established at all levels.
o Plans developed each year to address key items to drive further improvements.
o Fostering a culture of risk and safety awareness throughout the organization.
Each business unit holds regular claims accountability calls to discuss accidents and collaborate on ways to prevent them. The conference calls are mandatory and include the division leader, regional leader, branch leader, safety manager, workers' comp manager–as well as, whenever possible, the injured worker. The call provides a weekly forum for branch managers and branch safety coordinators to network and problem-solve any safety and claim challenges they may have.
Other initiatives include:
o Quarterly workers' comp claim reviews, to insure that all parties are informed on claim status, plans of action and reserving levels. Claim reviews provide a forum for stakeholders to collaborate on addressing return-to-work challenges and ultimately bring workers' comp claims to resolution, said Mr. Hopps.
o Performance reporting. A variety of reports track performance against enterprisewide metrics at the ServiceMaster business unit and location levels. Reports include frequency and severity of claims, timeliness of reporting, open claims and claims expense as a percentage of revenue.
o Deductibles. Per-claim workers' comp deductibles have been established at the branch level. The deductible is doubled if a claim is not reported within 24 hours. This has helped drive early reporting performance to the highest level ever. (In 2002, about 50 percent of claims were reported within 24 hours. By the end of 2007, this metric was about 85 percent.)
o Quarterly safety rebates. Deductibles collected are used to reward better-performing branches that attain specified improvement targets at year-end.
o Insurance allocation charge. Prior to 2005, the cost of insurance was shared equally among all branches. Now each branch's proportionate share of insurance is based on its historical performance. Like a safe-driver discount program, better-performing branches are rewarded with a lower percent of the company's insurance cost, while poor-performing branches are penalized with a higher percentage.
o Alternative risk management financing. The company established a captive insurer to finance a high-deductible workers' comp program. The captive writes deductible reimbursement policies to the insured business units. As claims are paid under the deductible, the captive makes offsetting reimbursements.
This arrangement allows for a single policy covering almost every state, lower third-party premium costs, certain tax advantages, and retention flexibility that permits adjustment of retained risks based on market conditions, Mr. Hopps explained.
In addition, the operating units have incentives to reduce claim costs, as the captive and third-party insurance costs are directly proportional to their safety efforts.
o Employee screening. In 2003, ServiceMaster enhanced its human resource program to include "in-depth background screening, drug tests and motor vehicle record checks for all new hires."
o New training and technology. The company trained over 40,000 employees in defensive driving and requires similar courses for all new hires that drive as part of their jobs. The firm also invested several million dollars in a variety of vehicle safety technologies.
Overall, Mr. Hopps said, the program has been "very rewarding" for the entire company. Previously, he said, safety was seen as "something they had to do." Now the entire company realizes that keeping accident rates low is "not only good for our employees, it's good for business, so it's a win-win."
He emphasized, however, that even with all its successes, it's important the company doesn't rest on its laurels.
"With the large employee base we have and the large fleet that we have, it's still an ongoing challenge that we can't let up on one iota, because we'll slip back," Mr. Hopps said.
"So the challenge now is to find unique and innovative ways to continue the communication and awareness, and to further drill down and find out the root causes of risk so that we can prevent them," he added.
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