December 8, 2022

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Rewarding safety performance: Improving safety or maintaining beliefs?

Diane Chadwick-Jones, Director at Guildstone Advisory Services Ltd questions incentivising safety. Diane Chadwick-Jones

Many organisations link rewards to safety performance, but does it help or harm safety? And is it even money well spent?

Incentivising safety performance by linking output metrics to annual bonus is standard practice across industries. However, there are concerns as to the efficacy of this approach. There is inconsistent evidence of a positive relationship between financial rewards and performance, while there are indications of unintended consequences including:

  • the under-reporting of data since the reward is for the absence of incidents;
  • information misrepresentation such as reclassification to reduce severity;
  • selective attention where managers become fixated on short-term measures;
  • a sense of control where managers develop the belief that the metrics fully and accurately reflect reality.

Also, there is an increasing body of evidence suggesting a need to move away from the behavioural tradition in which it is assumed that an individual’s choices are influenced by reward and punishment, towards systems thinking where the frontline behaviours are generated by the workplace setup and organisational context.

Given these concerns being raised across industrial sectors and academia, a team gathered to look into this topic in more detail. An initial interview study of high-hazard industry sector senior leaders, including oil & gas, oilfield services, aviation and nuclear, showed that 26 out of the 27 companies represented described negative impacts of incentivising safety performance, particularly the under-reporting of incidents. The oil & gas sector was found to be an outlier in its high use of safety output metric linkage to bonus at 85% of the sample companies, while aviation and nuclear had only approximately 20% of companies with this policy.

Informed by these insights, the team decided to understand the way employees perceived the impact of this linkage upon safety in a multinational energy company that had a proportion of the annual bonus linked to a recordable injury metric and a process safety metric, which measured the release of hazardous material. Forty-eight employees representing all levels in the organisational hierarchy and geographic regions participated in semi-structured interviews in which they described their experiences of the effects of bonus on safety and what could be improved. Interviews were digitally recorded, transcribed and analysed using thematic analysis.

The perceptions were surprising and not-so-surprising. As expected, based on the interviews of high-hazard industry companies, many of the respondents in the energy company thought that the link between safety outputs and the annual cash bonus can lead to under-reporting of incidents, both reducing the likelihood of reporting and increasing the possibility of reclassifying incidents to less serious categories. Not only could this undermine safety performance by making risks less visible, but also by diverting resources away from safety activities towards reclassification efforts.

Remarkably, nearly all the interviewees in the energy company thought that the link between safety output metrics and bonus did not influence safety performance in a tangible way, with reasons given being:

  • an individuals’ contribution was unclear due to limited understanding of the bonus calculation and the link to individuals’ activities, despite extensive communications of the bonus structure;
  • peoples’ decisions related to site safety were not affected by the bonus since it tracked to output safety indicators that measured the absence of incidents, over which people felt little involvement;
  • safety was a value that could not be incentivised as the principle of keeping people safe from harm motivates for safety over and above any other incentive;
  • rather than rewarding the presence of local activities that supported safety, the result was diluted because the linkage was to performance across the organisation and therefore beyond the control of individuals and sites.

This begs the question if a sample of high-hazard industry leaders and company employees feel that linking output safety metrics to reward doesn’t improve safety, and can harm it, why is this practice still widespread? There are a number of possible explanations. A powerful driver could be that companies are holding onto the behavioural tradition where there should be carrots and sticks for workers, with the belief that this bonus structure gives an appearance of control and responsible corporate governance, despite concerns or evidence to the contrary. Another idea, which stems from messages in this study, is that the tactic may appear to be successful because annual output metric targets are achieved even though this could be an illusion, generated by a downward pressure upon incident reporting.

And we heard another reason from the energy company interviewees: there was quite some support for the inclusion of safety metrics in the cash bonus calculation because it signalled the importance of safety alongside profit and production. Indeed, there were comments that there is merit in linking rewards to safety input metrics to demonstrate the organisational priority of safety and recognise positive safety activities at sites.

Nevertheless, the study results suggest that the annual cash bonus practice related to output metrics should be discontinued in the long term because of the limited influence on safety behaviours and potential adverse effect on safety outcomes due to the negative effects upon on risk transparency and the diversion of effort.

The energy company took the decision to remove the recordable injury metric from the bonus calculation while retaining the process safety metric as part of the phasing out of this policy. At the same time, the company refreshed its successful safety leadership principles to be embedded consistently across the company to underpin decision-making to never compromise safety. The company continued to communicate its Code of Conduct and values, encouraging employees to speak-up confidentially and continued the recognition of employees for immediate awards (varying from a simple “thank you” to money vouchers for popular stores) with categories relating to the organisation’s values, one of which is safety.

Future reform?

In conclusion, it could be difficult to obtain support to modernise safety output metric-related incentive structures since it may not be acceptable to reject the beliefs that linking safety outputs to bonuses improves safety performance. However, this case study demonstrates that it is possible to implement reform, and further details can be found in the Safety Science paper Rewarding safety performance: Improving safety or maintaining beliefs?

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