Starwood Cuts Comp Losses In Half By Emphasizing Accountability For All

It might be described as a $21 million wakeup call when six years ago senior management at Starwood Hotels & Resorts Worldwide Inc. discovered that their workers' compensation claims had spiked dramatically.

“It was a shocker. It took us all by surprise,” said Starwood's director of claims, Cameron Shirley, recalling events of 2003.

That news was the spark for a remarkable turnaround tale, helping earn Starwood the coveted title of “2009 Champion” as one of three winners in the third annual National Underwriter Award For Excellence in Workers' Compensation Risk Management program, sponsored by NCCI.

The company learned in 2003 that because of huge losses, it would have to take $21 million from earnings to shore up depleted reserves at its captive insurance program for workers' comp.

“That was sort of the final straw… Management said: 'This can never happen again,'” related Stephen Truono, vice president for global risk management and insurance at the company, who joined Starwood in 2005.

In 2004, the company launched its three-phase “Be Safe” effort. Since then, the 53,000-employee corporation has seen:

o Claim frequency decrease 33 percent.

o Claim severity fall 41 percent.

o Ultimate loss experience fall 50 percent.

Starwood calculates the bottom-line impact has been $80 million in direct savings and cost avoidance since implementation of the “Be Safe” program began, rolled out in three phases.

o Phase one focused on management accountability, safety recognition programs, new hire safety training, annual retraining, daily observation, management walk-throughs and safety tips.

o Phase two focused on claim-reporting responsibility, accident investigations, rest-and-assess guidelines, return-to-work programs and communication with injured employees.

o The final element of the program, brought on line in 2006, was a focus on slips-and-trips incidents.

Mr. Truono, who works out of White Plains, N.Y., said when the company addressed this last problem, Starwood found that many housekeepers who “lacked height” would take a tumble when they stood on the edge of bathroom tubs to clean the top of shower walls.

To solve this problem, the company found a simple solution–it issued sponges on an extendable handle and focused on slip-resistant footwear and job safety training. “A lot of the [risk management] stuff is very basic fundamentals,” he noted.

For its banquet hall and restaurant employees, changes involved improved lighting in work areas, installation of slip-resistant mats, and a focus on keeping floor surfaces clean and slip-free.

Mr. Truono explained that one of the challenges Starwood deals with in doing safety training is that for a great majority of workers, English is their second language.

“We do the best we can in translating materials,” he said, noting that in some urban hotels, there may be up to five or six native languages spoken by employees.

Besides basic OSHA training for new hires, the hotels provide refresher training–generally to groups.

“We like to make it interactive and ask questions, and there is coaching and mentoring from supervisors,” Mr. Truono related.

Computer training is generally not an option, since most workers are not doing their jobs at computers and the programs that are available are limited to English, he explained.

Meanwhile, risk management materials often used by other businesses–such as power tools for lifting–are not available for housekeeping and other tasks. Also, there is no opportunity to have staff work at different tasks and vary the daily repetitive stress they endure on muscles, he noted.

Still, Starwood is maintaining a singularly effective program and the key, according to Mr. Truono and Mr. Shirley, is management attention and accountability.

The company has dashboard tracking reports that measure a hotel's performance compared with the previous year, as well as against other hotel locations in the chain.

“We rank the top-10 and the worst-10,” noted Mr. Truono, who said those at the bottom can expect an inquiry from the president's office.

Starwood employs the methodology known as Six Sigma developed by Motorola to minimize defects and negative outcomes.

Mr. Truono noted that the company, following the philosophy that what gets measured gets managed, employs performance indices and looks at such factors as claim frequency rates per 100 full-time employees and claim severity in terms of incurred claim dollars per thousand-dollars of payroll as benchmarks.

Starwood has also allocated a portion of the cost of claims directly to the individual hotels. Their financial responsibility for each claim is capped at $50,000 for all states (with the exception of California–capped at $100,000). Mr. Truono says that direct allocation of loss has made regional managers “keenly aware of claim costs.”

The chain pays particular attention to hotels where there is notable success to see what methods are bringing good results.

At hotels with good experience, according to Mr. Truono, the key is having general managers who make the issue of worker safety a priority. “It's about the tone from the top,” he said. Indeed, the firm has seen where the change of a general manager can have an impact and spur a turnaround within a few months, he added.

However, attention comes not just from the general managers–it starts with the president of the North American Division and filters down. “General managers take it seriously; HR people take it seriously,” said Mr. Truono, who reports to the chief operating officer.

Part of the incentive to pay attention is that workers' comp results are a factor in setting general manager bonuses, he noted.

However, the drive to decentralize responsibility for worker safety doesn't stop with local management, Mr. Truono emphasized, pointing to the fact that the workers' comp risk management program involves safety committees–the best of which are run by hotel workers themselves, with an executive committee facilitating.

The loss control effort, he explained, is “grass root, not top down.”

Mr. Shirley said that until the “Recovery and Return” portion of the risk management program was started, the company found that not everyone in the system understood that the key to handling injured employees was “care and concern.”

“Before that, hotels would just send them off to the doctor and not manage that whole step very well,” he recounted.

Now, noted Mr. Truono, if an employee feels they may have sustained an injury they are encouraged to rest and relax, and an associate may accompany them to a clinic.

If a worker needs to take time off for an injury to heal, Mr. Truono said the focus is then on keeping them engaged, with supervisors calling to show empathy and let them know they have not been forgotten.

He said there is limited opportunity to bring workers back with lighter or modified duties–particularly at locations with a union shop. “You are not taking someone from housekeeping and putting them at the front desk,” he noted.

However, Mr. Truono said the company has found some success in bringing back rehabilitating employees on a shorter work week to ease the strain of transition.

Starwood Hotels & Resorts Worldwide Inc., while listing Zurich as its workers' comp insurer, employs several alternative risk-transfer mechanisms–including self-insured retentions, a Vermont captive, qualified self-insured employer status in states where allowed, and deductibles at the operations level.

In general, Mr. Truono noted that good risk management is a barometer of overall management tone, adding that in his career he cannot ever recall “walking into a well-run operation with a horrible safety record.”

He does remember visiting one plant where the manager listened to his safety suggestions but indicated they would not be a priority because “it's not one of the items I'm held accountable for.”

That's not the case where he works now.

“At Starwood we made [safety] important. We said we're not going to accept the status quo, and we haven't,” he emphasized.